Michelin FY2013 net profits down 28 per cent…

…but improving truck tyre sales, cash flow and revenue balance all positives

Michelin has reported full year 2013 net sales of 20.247 billion euros, down 5.7 per cent (or 1.2 billion euros) on last year. Meanwhile operating income was fell roughly 10 per cent to 2.234 billion euros and net income plummeted some 23 per cent to 1.127 billion euros. According to Dow Jones analysts’ consensus was that this figure would fall less – by 22.0 per cent, and operating profit to retreat by 5.8 per cent.

However while Michelin could not ignore that these figures look less than positive, executives were at pains to point out a number of key strengths. Despite the strong economic environment Michelin reported that it remains “very strong” in terms of free cash flow with this figure totalling 1.154 billion euros in 2013. Also 2013 was the fourth straight year that return on capital expenditure (ROCE) was a double digit figure (11.9 per cent) and therefore above the company’s 9 per cent “value creation” target.

Pointing that out that exchange rates had a particular effect on Michelin in 2013 – something that is unavoidable with a global company like the French manufacturer and something that is accentuated by the fact the company is well representatives in currency volatile emerging markets – executives explained that despite the absolute operating income figure being below 2012 levels the company actually achieved higher operating income before non-recurring items (up 41 million euros) at a constant scope of consolidation and exchange rates. Therefore the company’s operating margin remained relatively static at 11 per cent (2012:11.3 per cent).

Key figures

 Income margin by segment

Source: Michelin 

Despite the varied results Jean-Dominique Senard, Michelin’s chief executive officer, was positive: “Michelin’s good results in 2013, achieved in an uneven market environment, confirm our objective of delivering a business performance in line with our 2015 ambition.”

Looking forward Michelin said it expects tyre demand to continue expanding quickly in the new markets, while moving back in line with economic activity in the mature regions. Nevertheless Michelin affirmed that it is committed to increasing its sales volumes by around 3 per cent over the year, in line with growth in the global tyre market.

Financially Michelin’s objective for 2014 is to achieve a more than 11 per cent ROCE and generate structural free cash flow exceeding 500 million euros, all while maintaining its capital expenditure program at around 2 billion euros.