(Akron/Tire Review) While rescue efforts continue in the aftermath of Hurricane Katrina, which slammed into the US’s Gulf Coast near New Orleans and Biloxi, Missouri, Monday, government officials and business analysts are trying to piece together the impact that devastating storm will have on American industry and the global market – particularly oil prices.
Deutsche Bank analysts are convinced that Continental’s US passenger car division has made losses of up to 200 million euros last year. The closure of Conti’s Mayfield facility was expected to have cost up to 120 million euros alone. Financial experts have abandoned hope for a noticeable and continuous growth. During 2005 the tyre manufacturer is expected to come up with an annual loss of about 100 million euros, says Deutsche Bank, meaning that the shutdown of the Mayfield factory didn’t have its expected positive affect.
The price of natural rubber has decreased by15 per cent to US$1.58/kg after reaching its peak of US$1.84/kg at the end of July.
Analysts believe that tyre companies should be able to offset the raw material price surge, as they did in H1, due to a hike in tyre prices.
The fall of Slovakian economic minister Pavol Rusko has cast doubt on Hankook’s plan to invest 500 million euros into a new tyre factory. The so-called “enfant terrible” of the government in Bratislava always supported Hankook’s strategy and even offered public subsidies of up to 20 per cent of the overall investment, despite the criticism he received over this commitment.
Just one day before Rusko was sacked by the Slovakian president, the prime minister Mikuláš Dzurinda advised his minister to resign amongst allegations of “non-transparent credit transactions”, said a German media report. According to Slovakian analysts, it is likely that the policy of decreasing these incentives for foreign direct investments will continue under a new economic minister. Therefore, the Hankook deal does not appear to have a future. A decision was said to be due by 31 August.
Sumitomo figures for the half-year ended 30 June 2005 show that net sales amounted to 230.6 billion yen (£1.15 billion) as opposed to 216 billion last year. During the same period operating income increased from 17 billion yen (£87 million) in the first half of 2004 to 20.6 billion yen (£103 billion).
Market analysts from Deutsche Bank described the results as ‘firm’ and increased their sales forecasts. “We leave our operating forecast unchanged, as we believe the company can offset rising material prices through tyre price increases, product mix improvement, and expanded production volumes,” said Deutsche Bank representatives adding: “Management remained conservative, leaving its full-year forecasts unchanged, suggesting that an upward revision is probable at some stage. We forecast 10 per cent operating profit growth in the 2006 full year, as further price rises and output expansion offset a range of cost increases.”
(Akron/Tire Review) Goodyear Tire & Rubber Co. is looking to launch a number of new products by the end of this year that will be “more impactful” than its already popular Assurance and upgraded Fortera and Wrangler lines. So said Bob Keegan during a briefing with analysts after revealing the company’s first half results. While he would not elaborate, Keegan told analysts, “We have more impactful products that will be introduced later this year.” Goodyear said sales of its Assurance line are well ahead of last year’s, and its revised Fortera and Wrangle light truck/SUV tyres are selling faster than its Assurance tyres.
Analysts are predicting that Continental will record strong EBITA growth “in the magnitude of 30 – 35 per cent,” alongside “limited sales growth” when the company reports its second quarter figures tomorrow. “However, this will be nearer 2-3 per cent on a like for like basis due to a particularly strong second quarter in 2004 (i.e. passenger car sales went up 9 per cent in the second quarter of 2004). Due to higher Capex and the full payment of the dividend, we don’t expect any debt reduction in the second quarter. Debt reduction should accelerate in the the third and fourth quarters,” the Deutsche Bank analysts added.
Sumitomo Rubber has announced that it will raise domestic market tyre prices by between 4 and 4.5 per cent in September. The company’s move is said to be in response to the higher cost of synthetic rubber and other input materials.
Analysts have suggested that this is a positive step, which could result in a 2 billion yen boost in full year operation profit. As a result the company’s share went up 1.4 per cent to 1,130 yen. “We maintain our full-year earnings forecasts, as our figures are already above the company’s, and recent rises in materials costs could be negative,” the Deutsche Bank Analysts added.
Industry analysts Plimsoll Publishing asks, if the market suffers a recession this year, which companies in the Tyre Manufacturers and Distributors sector will be most affected and which couldn’t care less? It also asks which companies are already at risk and will use any talk of a slow down to bury bad news? The new publication (Plimsoll Portfolio Analysis, Tyre Manufacturers & distributors 3rd Edition 2005) examines the current financial state of the top 240 companies in the sector and the study has revealed four distinct profiles of company behaviour.
Natural Rubber Prices have reached a new high at $1.70/kg and resulting tyre prices increases could be on their way. The cost of natural rubber has increased 45 per cent since January and 30 per cent when compared with the average price in 2004. This price surge, reportedly +30 per cent in two months, will impact the tyre manufacturer’s balance sheets in four to six months, Deutsche Bank analysts predict. The analysts also suggested: “After two sets of price increases, both in 2005 and in 2006, we expect the industry to remain disciplined and would expect a further price increase in 2006.”
US tyre shipments rose 4.2 per cent year-on-year in June, possibly boosted by pre-buying ahead of June price increases. Deutsche Bank analysts, who also calculated the figures, found that shipments for the full quarter were in line with expectations, rising 1.5 per cent compared with the second quarter of 2004. As a result of the strike early in the second quarter, the analysts expect Cooper Tire to “underperform the industry during the quarter.”
In contrast the report suggests Goodyear and other tyre manufacturers outperformed the market in the same period. “We continue to expect an inflection point for Cooper Tire in the third and fourth quarters, as production and industry pricing levels continue to rise,” said the analysts.
In the last few days Michelin’s share price has fallen four per cent, prompting analysts to ask questions about the manufacturer’s cash flow. Deutsche Bank analysts discount suggestions that natural rubber price increases are the main reason for the drop in share price. Instead they agree with bearish predictions that despite 9.2 per cent operating profit margin in 2005, the company isn’t generating enough cash flow. However, future labour cost savings coupled with lower capital expenditure will boost free cash flow generation in the next 2-3 years, the analysts believe.
Australia’s Ansell Ltd has slashed the value of its tyre-making joint venture with Goodyear Tire & Rubber Co by more than half, citing the impact of an influx of cheaper imports and rising raw material costs. In a move largely factored into analysts’ estimates, Ansell said it plans to write down the carrying value of its investment in South Pacific Tyres, or SPT, by $80 million Australian dollars to about A$58 million.
Management company Tatneft-Neftekhim’s CEO Zagit Sharafeev announced that European tyre makers Michelin, Pirelli and Nokian have expressed their intention to invest 30 million euros in the expansion of agricultural machinery tyre production at Nizhnekamskshina. The investment will be in the form of technology transfers and equipment supplies. “In our view, Nizhnekamskshina should benefit from the cooperation with the global tyre majors,” Russian CentreInvest analysts reported. cja
Michelin is preparing to close a small truck tyre plant in France, Deutsche Bank analysts have reported. According to the analysts, the company will close its Poitiers plant (which employs some 500 people) and transfer truck tyre production to Tours. The larger Tours plant has 2000 employees.
”Since we expect 30 per cent of the group’s Western European workforce (or 17,000 people) to be retired by the next five years, this will underline a significant reorganisation of the group’s industrial organisation, involving their 31 European plants,” the analysts commented. 26 of Michelin’s European plants can be found in Western Europe, while the remaining five are in Central Europe.
If you would like the latest news from the Chinese tyre industry in Chinese, visit our partner site TyrepressChina.com. Or click below to continue on Tyrepress.
