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Goodyear Stock Plummets following CFO’s Operating Income Q4 Prediction

Shares in Goodyear Tire & Rubber Co experienced the sharpest fall in New York trading for 22 years following chief financial officer Darren Wells’ prediction that income in North America will decline between $75 million and $125 million compared to third quarter results in the period October-December 2009. The company therefore forecasts an operating loss in North America during the fourth quarter. Wells made the statement during a conference call with analysts today discussing the results of 2009’s third quarter.

28th October 2009/by Tyrepress Editors

Reports: Continental May Sell Bonds in Refinancing Move

Continental AG, is reportedly planning to sell bonds to refinance its debt. Bloomberg quoted two people “familiar with the situation” as saying the move follows HeidelbergCement AG’s so-called junk-bond sale. In this case demand outstripped supply and HeidelbergCement raised 2.5 billion euros selling its bonds. At the same time, Morgan Stanley made “large upward adjustments” to its earnings for Continental, its 2010 earnings per share predictions by 128 per cent to 2.74 euros. The analysts also raised their 2011 and 2012 estimates to 5.14 and 6.35 euros (up 52 and 32 per cent respectively). The bank’s new price target is now 37 euros, up 131 per cent from its previous position of 16 euros.

19th October 2009/by Tyrepress Editors

US Tyre Demand 'Improving'

US replacement tyre demand increased 4 per cent year-on-year in September, according to RMA data. Analysts equated this to a 1 per cent growth in the third quarter 2009. Nevertheless sources report that 2009 demand (at 174 million consumer tyres) is still down 14.4 per cent in the year September. During the same period US truck tyre volumes fell 23.6 per cent to 10.8 million units.

Based on last year’s figures, Deutsche Bank analysts predicted that this trend would increase towards the end of the year: “Two of the past three months have posted positive year-on-year results and year-on-year comparisons also become much easier in the months ahead.” Replacement demand fell -15.8, -17.1 and -15.5 per cent in October to December 2008.

12th October 2009/by Tyrepress Editors

Goodyear to Invest $600 million in US Union Plants Over 4 Years

Goodyear Tire & Rubber Company has announced that its four-year labour contract with the United Steelworkers union (ratified on 18 September) could save the company as much as $555 million in savings before a potential profit sharing impact. The company also committed to investing $600 million in its USW facilities over the next four years. The seven plants covered by the master agreement are in: Akron, Ohio; Buffalo, New York; Danville, Va.; Fayetteville, N.C.; Gadsden, Alabama; Topeka, Kansas; and Union City, Tennessee.

According to a Goodyear statement, these changes are expected to provide Goodyear with cost savings of approximately $215 million over the term of the contract. Combined with savings realized through “pre-bargain agreements to reduce staffing levels at five plants,” the company expects to realize $555 million in total savings over the term of the agreements. However, financial analysts at Deutsche Bank estimated that the agreement will result in $155 million of gross annual savings by 2013. Their response was to raise their share price estimates for 2010 and 2011 to $1.85 and $2.45 from $1.70 and $2.20 respectively.

30th September 2009/by Tyrepress Editors

Analysts Predict Michelin to Benefit Most from Market Recovery

Financial analysts are predicting that Michelin will benefit most from a margin recovery effect set to hit premium tyre manufacturers in 2010. According to Deutsche Bank, despite a significant negative volume effect, the leading tyre companies have been “very resilient” in 2009. This means they have benefitted form pricing discipline, raw material tailwinds (in the second half) and a positive OE/replacement mix. The analysts believe that next year’s volumes should rebound strongly from their low current level and, coupled with a leftover raw material tailwind and with restructuring paybacks, margins should rebound strongly. “Michelin should benefit the most followed by Pirelli. While Continental should benefit the least [proportionately] since tyres represent only 30 per cent of the group's revenues,” the investor’s note explained.

28th September 2009/by Tyrepress Editors

French Government to Phase Out Scrappage Incentives

After pioneering the so-called “cash for clunkers” scrappage incentive model in 2008, which was then mirrored in all the major European markets, the French government has announced that it is phasing out its 1000 euros for a 10 year-old car stimulus package. According to financial analysts, this measure had a net positive impact on demand of approximately 200,000 units, or 10 per cent of the market against a gross market impact of 400 units.

The developments in the French market follow the rather more abrupt end of a similar scheme in the German market, where demand for cars purchased under the scheme exceeded supply on 2 September. According to a Deutsche bank report published at the time, the scheme was responsible for 9000 unit sales a day since its introduction.

To avoid a free fall of the market next year, Germany’s car market for example is expected to be 25 per cent down in 2010, the French government has decided to reduce its scheme progressively. Next January the incentive will drop to 700 euros before dropping to 500 euros next July and hitting zero in January 2011. As a result, Deutsche Bank analysts are predicting “a limited decline of French registrations in 2010 of around 1.9 million units, -5 per cent.”

28th September 2009/by Tyrepress Editors

Tyres & Accessories August 2009

August's issue features Winter Tyres and a full preview of this year's TAFF Awards.

25th September 2009/by Tyrepress Editors

Analysts: Continental Can’t Afford Emerging Market Investment

International News

Within 24 hours of Continental AG confirming it is partnering with Modi Tyres to make bias truck tyres in India, and after a month of local speculation that the company will now buy a stake in the Indian tyre maker, financial analysts are reporting that the company “can’t afford making any acquisitions or expansion projects in emerging markets which are growing fast.”

Rather “all free cash flow generated by the rubber business should be used to reimburse the group’s high net debt of 10 billion,” Deutsche Bank analysts wrote in an investor’s note published today (23 September). Continental’s tyre business reportedly generates 500 million euros of annual free cash flow.

23rd September 2009/by Tyrepress Editors

Chinese Tyre Tariff Leaves Cooper Better Off

While opinions are divided about the perceived fairness of the US government’s 35 per cent Chinese tyre import levy, the repercussions on the global market are undeniable. After the initial fluctuations in tyre manufacturers share prices (down for those producing mainly in the Far East; up for the North American tyre makers), the latest effect has been for banks to raise their earnings estimates for Cooper Tire & Rubber. The decision comes on the back of an investor’s note which suggests Cooper Tire, which has opposed the tax, appears to benefit from the system overall.

Writing today (21 September) Deutsche Bank analysts said the US tariffs “have the potential to provide a significant net benefit to Cooper’s profitability over the intermediate term.” As a result the company raised its earnings estimates for the company to $1.61, $2.25 and $2.50 for 2009, 2010, and 2011, respectively, from $1.50, $1.40 and $1.48.

21st September 2009/by Tyrepress Editors

Analysts: Conti Doing Extremely Well in Tyre Operations

Continental AG’s tyre operations are “doing extremely well,” according to financial analysts. Writing in an investor’s note, Deutsche Bank analysts reported that the tyre business' 11 per cent (combined truck and passenger) operating margin in the first half of 2009 outperformed its rivals.

“Even if the group enjoyed a small 45 million euro positive impact from raw material (compared with a small negative of 19 million euros at Pirelli and a bigger negative of 117 million euros at Michelin), they enjoyed a double digit operating profit margin despite a high 20 per cent volume decline,” the analysts wrote.

Looking forward, Deutsche Bank predicted that the tyre operations will benefit from a positive raw material effect of (200 million euros) and from a volume recovery.

The analysts pointed out that tyre operations produce 48 per cent of Continental AG’s group revenues.

21st September 2009/by Tyrepress Editors

Analysts Praise Delticom's Performance

Financial analysts have given Delticom AG a “Buy” rating and a set 24 euro target price, above the company’s current level of around 20 euros. The Deutsche Bank analysts described Delticom as “a very attractive business model in the fragmented tyre replacement market” and were clearly impressed with their performance to date. “In 2009, one of the worst years ever in the tyre industry, Delticom targets 10 per cent revenue growth and increased its EBIT-margin outlook from 6 to 7 per cent. We think Delticom's eCommerce focus will lead to further market share gains and allows for annual revenue growth of 13.4 per cent and earnings per share growth of 18.4 per cent (estimated company annual growth rate from 2008-2011).”

14th September 2009/by Tyrepress Editors

Report: July Sell-in Market ‘Stabilising’

European and worldwide tyre markets are finally stabilising, according to a report released today (3 September). Writing in response to the latest round of market figures issued by leading French tyre manufacturer, Michelin, market analysts at Morgan Stanley described their view of the current market conditions as “slightly better than our expectations.” Despite highlighting the fact that the data continues to show negative year-to-date growth rates in almost every market, the analysts focused on the fact that the pace of the decline “showed material improvements compared to year-to-date trends and it looks on track to exceed our volume forecast for the quarter.

3rd September 2009/by Tyrepress Editors

German Scrappage Scheme Ends

Market analysts are predicting that the German market scrappage scheme is likely to have come to end today as demand for cars purchased under the scheme now exceeds supply. According to a Deutsche bank report published today the scheme has been responsible for 9000 unit sales a day since its introduction and – as of today – only 5000 applications remain.

2nd September 2009/by Tyrepress Editors

Michelin: Global Replacement Tyre Demand Improving, OE Remains Weak

Global OE tyre demand remained week in July, according to figures released by Michelin. However, the data also shows that, while global OE tyre demand continues to take a beating, there are signs of recovery in most replacement segments. However, Some of the least improved figures are in the European truck replacement market, where analysts described the status quo as “very poor.” Here July’s sales were -17 per cent down (-29 per cent year-to-date).

2nd September 2009/by Tyrepress Editors

Rubber Prices No Longer a ‘Tailwind’ for Tyre Makers

The fact that natural rubber prices have rebounded 25 per cent to US$2.1/kg for RSS3 in the last month means raw material prices that had been assisting tyre manufacturers are no longer a “tailwind.” The news is forcing analysts such as Deutsche Bank revise their earnings estimates as they had mostly factored in the possibility that that tyre companies would pass a portion of this raw material price benefit onto their vehicle making customers. However, with the current boost in rubber prices behind them the 33 – 50 per cent of the so-called rubber tailwind they may have pencilled to share with the OEMs is not likely to be erased.

28th August 2009/by Tyrepress Editors