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Analysts See Oliver Acquisition as Positive Move for Michelin

Financial analysts are predicting Michelin will continue to grow its retread business following the purchase of Cooper Tire & Rubber subsidiary, Oliver Rubber Company. “This would mean that Michelin is growing in the tyre retread business,” Deutsche Bank analysts wrote, adding: “The group has currently approximately 700 million euros of revenues in retread. This is potentially a very interesting market which should grow (penetration rate of only 37 per cent in Europe versus 85 per cent in North America, and should be highly profitable [with] significantly less capital expenditure and raw material costs. We believe that this strategic move will give vertically integrated tyre Co a significant competitive advantage.

1st August 2007/by Tyrepress Editors

Analysts: Michelin H1 Results “Good”

Despite reporting first half operating profits below analysts’ estimates, (860 million euros, up 34 per cent instead of 910 million euros, up 41 per cent), Deutsche Bank has described Michelin’s first half financials as “good.” They see the difference as mostly attributable to adverse raw material price fluctuations between semesters and as a result are predicting a better than expected second half. Therefore the bank has left its full-year operating profit projections for the company at 1.72 billion euros, up 30 per cent, which equates to a high 10 per cent of sales.

Looking further ahead, the analysts pointed to the 19 per cent margin achieved by Michelin’s specialty tyres division, which was loss making four years ago. According to the analysts, this is a “good indication of what truck tyres can achieve in the future.”

30th July 2007/by Tyrepress Editors

Analysts Expect 41 per cent 1H EBIT Increase

Financial analysts have predicted that Michelin will give details of a 41 per cent EBIT increase (to 910 million) when it publishes details of its first half reslts on 27 July. According to the Deutsche Bank analysis, this corresponds to 10.8 per cent of sales. Net debt is expected to be up by approximately 100 million euros compared with December.

“We expect a net profit of 465 million euros. Our estimates are respectively 6 and 7 per cent above consensus,” the analysts commented, adding: “The second half should show a further improvement, however, we expect the positive pricing effect to be less significant in the second half. This is why after a 41 per cent EBIT increase in H1, we expect only +17 per cent in the second half.” Michelin management is expected to point out that the high rate of profits growth cannot be extrapolated out to a full-year result.

24th July 2007/by Tyrepress Editors

Pirelli First Half EBIT Predicted to be Up on Strong Tyre Result

Pirelli & C SpA’s first half EBIT profit, due to be announced on Thursday, analysts said, citing the real estate and tyre operations as key to the growth. According to the AFX news agency, EBIT is seen at 235-250 million, up from 216 million in the first half of 2006, while EBITDA will rise to 344-374 million euros, from 324 million, they said, adding that the net figure will only be announced in September. In comments specifically on the second quarter, Deutsche Bank said in a note it sees tyre operations EBITDA up 4.5 per cent. For the first half, a Milan analyst said she sees tyre activities contributing an EBIT of 201 million euros, up 3.1 per cent year-on-year, in her overall first half EBIT estimate for 250 million.

Analysts said they don’t expect the first half results to include any comment on a possible buy-back of a 39 per cent stake in Pirelli’s tyre unit that was sold to banks last year. Deutsche Bank said it favours a buy-back of the tyre unit, followed by a spin-off of the unit to Pirelli shareholders, giving them a pure tyre sector investment play, plus a holding company.

23rd July 2007/by Tyrepress Editors

Cooper Appoints New Investor Relations Director

Cooper Tire & Rubber has named Curtis Schneekloth as the company’s new investor relations director. Scheekloth’s main role is to be that of spokesman on financial issues, communicating with stock market analysts and investors. Employed by Cooper since 2003, Schneekloth has most recently held the position of lead accountant in Strategic Planning, a role he has performed since January 2006. Prior to joining Cooper Schneekloth held a number of financial roles in both the US and the Czech Republic.

Speaking of the appointment, Chief Financial Officer Phil Weaver said, “Curtis Schneekloth shows a keen understanding of Cooper’s operations, as well as offering a mix of international and entrepreneurial experiences.”

12th July 2007/by Tyrepress Editors

Business Booming for Kirkby Tyres & Wheels

In the last five years Kirkby Tyres & Wheels has grown rapidly. After impressive sales growth of 20 per cent (by value) in 2005, the company repeated this performance in 2006 with sales growing 18 per cent. And, at the end of the first quarter of 2007 sales are again up roughly a fifth. Speaking to Tyres & Accessories, managing director Dave Dorrity puts the companies success down to its increasingly successful imported lines including Double Coin, Alliance and Protector; the growth of its wheel and wheel and tyre assembly business; and the rationalisation of its warehousing operations.

Financial analysts at Plimsoll publishing have picked up on the company’s growth too – ranking Kirkby as a UK Top 50 leader in efficiency and also one of the 50 most cash rich company’s in the UK tyre trade. See the forthcoming issues of T&A for more details on the growth of this import/export, commercial, industrial and agricultural tyre specialist.

11th July 2007/by Tyrepress Editors

Strong Truck Tyre Demand Means Short Supply in Europe

Truck manufacturers (Volvo and MAN) are reporting that supplies of truck tyres are running thin. This suggestion was confirmed, according to Deutsche Bank analysts report, following conversations with Michelin and Continental. The reason for the short supply is much stronger than anticipated demand, with OE and replacement sales up 12 per cent and 10 per cent respectively across Europe in the first four months of the year. The analysts characterise this as “good news for Continental since European truck sales represent approximately 7 per cent of group’ sales. It is said to be an especially good development for Michelin as European truck sales represent 18 per cent of group sales.

22nd June 2007/by Tyrepress Editors

Michelin to Ride Truck Tyre Shortage in 2008?

Steadying raw material prices, Michelin’s productivity improvements and increased truck tyre demand could lead to a “favourable price environment” for the company, according to Deutsche Bank analysts. The theory relies on demand increases in the North American market. If this was to happen in 2008, say the analysts, there is a risk of an imbalance between global supply (set to increase by 5.0 million units) and demand (which could rise by 8.0 million units). According to the analysts, truck tyre sales represent 34 per cent of Michelin revenues versus 10 per cent at Continental, for example.

21st June 2007/by Tyrepress Editors

May Shipments Meet Expectations

RMA data indicates that replacement tyre shipments to dealers in May were up 1.1 per cent year-on-year (they were down 3.6 per cent in May 2006). According to Deutsche Bank analysts product mix was better in the month, as light truck tyre shipments were up 4 per cent, while passenger tyres were up 0.6 per cent.

As a result the financial analysts supported their earlier assertions that 2007 replacement tyre demand could track “well ahead of 2 per cent,” adding: “We continue to believe our 2007 Goodyear (Buy) and Cooper Tire (Hold) North American volume assumptions are conservative. Cooper is best positioned in our view to beat volume expectations, given over 40 million units of reduced capacity in the low-end tyre market.”

19th June 2007/by Tyrepress Editors

Plimsoll: Rising Interest Rates Have “Silver Lining”

Rising interest rates are bad news for homeowners – but they could be a lifesaver for some businesses, according to commercial analysts at Plimsoll Publishing. “Our research shows more than a quarter of UK Tyres, Exhausts & Batteries companies are in more debt than they have been at any time in their history, “ said David Pattison, senior analyst at Plimsoll. “Rising rates are a useful wake-up call. Many of the companies in question have been enticed by low interest rates and the lure of easy debt secured on rapidly rising property prices, and so have been able to cover up flaws in their business strategies – effectively buying time. There is just enough time left for these firms to look seriously at their balance sheets and change direction.”

If companies reduce their level of debt and streamline their business models, they may have a future, according to Plimsoll. Plimsoll, which has conducted independent assessments of private and publicly quoted companies for the past 20 years, has an established track record of spotting the warning signs for businesses. Nearly nine out of 10 failed companies in the UK had earned a “danger” or “caution” rating from Plimsoll in the two years before their demise.

19th June 2007/by Tyrepress Editors

China Becomes Second Largest Exporter of Auto Parts to U.S.

(Akron/Tire Review) China overtook Germany in the first quarter to become the second largest exporter of automotive parts to the U.S., Shanghai Securities News reported. China exported $1.936 billion worth of auto parts to the U.S. in the first quarter this year, just topping Germany which notched up $1.934 billion U.S. dollars, according to statistics from the U.S. Commerce Department cited by the newspaper. Japan is way out in front with a substantially higher $3.57 billion.

During the same period last year, China exported $1.52 billion worth of auto parts to the U.S., less than the $1.73 billion attributed to Germany. Statistics from the China Association of Automobile Manufacturers show that China’s exports of auto parts grew at 54 per cent annually from 2000 to 2005, far outpacing the 29.5 per cent rise in imports.

13th June 2007/by Tyrepress Editors

Rollier Gives Details of Michelin Cost Saving Plans

Speaking in an interview with French daily, Le Figaro, Michelin managing partner, Michel Rollier gave details of how less than 50 per cent of the 20,000 people who will retire from Michelin will be replaced. Michelin’s intention is close the labour cost/sales ratio gap between itself and its main competitors. While Michelin had a labour cost/sales ratio of 29 per cent last year, Pirelli’s and Continental’s labour cost/sales ratio were 21 per cent, according to Deutsche Bank figures.
“In our 2010 estimates we have assumed that only one third of the 1.5 billion gross cost savings (700 million from labour costs, 500 million from purchasing and 300 million from others areas like logistics) will be saved,” said the analysts. Instead 70 per cent is expected to be given back to dealers “mostly through higher gross margins.”

13th June 2007/by Tyrepress Editors

Michelin’s Future Productivity Gains Will Be ‘Huge’

Analysts are predicting huge productivity gains after Michelin announced the restructuring of its Japanese plant, involving the lay-off of 550 people (following Canada, Nigeria and France last year). More cuts are expected in the next quarters, with annual restructuring charges to involve approximately 1,500 people per annum. This is in addition to the attrition of approximately 4,000 people per annum (of which less than 50 per cent being replaced). Thus, the net reduction of the workforce will reach approx 4,000 people per annum (5,500 gross).

“This will lead to significant Labour cost savings. We expect the group’s labour cost sales ratio to reach 22 per cent by 2010 (ie closing the gap with peer group) or equivalent to an improvement of almost 200 basis points per annum. Management targets a 30 per cent productivity gain by 2010, of which only one third will come from the volume effect,” the Deutsche Bank analysts explained. While Michelin had a labour cost/sales ratio of 29 per cent last year, Pirelli’s and Continental’s labour cost/sales ratio were 21 per cent, according to Deutsche Bank.

13th June 2007/by Tyrepress Editors

Michelin Enjoying Strong European Truck Volumes

Michelin could report a pre-tax profit (EBIT) increase of up to 40 per cent for the first half of 2007, according to Deutsche Bank analysts. The positive performance has been supported by strong truck replacement market sales. Truck replacement markets are reportedly up by a 14 per cent in Europe (+3 per cent year-to-date) and down 7 per cent in North America (-5 per cent year-to-date).

Michelin’s advantage here comes in the fact that it has a better country mix for this scenario with 50 per cent of sales being generated in Europe and only 35 per cent in North America (55 per cent of these are passenger car tyres, with 33 per cent truck tyres). Add to that the fact that selling prices are up to 50 per cent higher in Europe than in North America, and analysts expect strong first half EBIT increases.

30th May 2007/by Tyrepress Editors

Plimsoll Produces Tyre Prosperity League Table

A new league table from leading financial analysts Plimsoll Publishing aims to provide an answer to that age-old question in the Tyres, Exhausts & Batteries market: Why do some companies fail and others prosper?

The equation is not as simple as strong sales equals survival. Nor is the success rate of a firm automatically affected by market conditions. Instead, they say, it depends on the ingredients in a finely-balanced recipe that includes good margins, low borrowing, responsible management and foresight.

Plimsoll’s new analysis of the market weighs all these ingredients and turns them into a unique one-page snapshot of each company’s prospects. From that, it establishes a league table based on 1000 leading firms that looks like this: 278 companies are in a strong position, with a pre-tax margin of 10 per cent; 116 are in the good sector, on 4 per cent margins; 160 are rated as mediocre, on 3 per cent; 272 are in the “caution” category and 174 are in the “danger” range.

25th May 2007/by Tyrepress Editors