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Bridgestone: Cautious as Usual

Analysts were not surprised by Bridgestone’s recently posted operating profit increase of 7.9 per cent, according to a Deutsche Bank report. At the same time as posting its 2004 full year results, the company predicted a downturn in operating profit of 14 per cent in 2005. The analysts’ verdict? Cautious as usual.

“The numbers did not surprise, as usual beating the company targets. They were driven by higher volumes in Europe and the US and an improved product mix,” the report says. The Deutsche Bank representatives continued by commenting that Bridgestone’s projected full year profit dip has accounted for higher raw material costs, but not the effect of passing these on to costumers. According to the analysts Bridgestone’s conservative estimates reflect a desire to reinforce its negotiating position with synthetic rubber and chemical material suppliers; underscore how tough the earnings environment is in order to make a stronger case for its own price increases; and gives extra leverage for unresolved labour contract issues with North American unions.

22nd February 2005/by Tyrepress Editors

MEMA Reports Steel Cost Crisis

A new research report by the Motor & Equipment Manufacturers Association (MEMA) suggests that government intervention in the US steel market has caused a cost crisis that is hurting automotive and heavy-duty suppliers across the country, reports Tire Review. The MEMA report says that the result has been “unprecedented bankruptcies and job losses.”

The MEMA study, available online at www.mema.org, was written by economists Brian Becker and Kevin Hassett. The pair found that the steel crisis “triggered distortions in the steel market that have contributed to decreased availability, poorer quality and delayed deliveries of steel,” according to MEMA.

18th February 2005/by Tyrepress Editors

Sumitomo’s 2004 Results Beat Forecast

Sumitomo Rubber has released strong 2004 results, at the same time as announcing both the appointment of Tetsuji Mino as president.

Net sales were recorded at 3.41 billion euros. Operating income rested at 329.9 million euros, of which 238.4 million euros (equating to 72.3 per cent) came from tyres. This showed a decrease compared to 2003 where 82.6 per cent of operating income came from tyres. Net income was 138.9 million euros from 94.9 million in 2003 and net sales were 2.59 billion euros, or 76 per cent of overall sales.

18th February 2005/by Tyrepress Editors

Michelin Share Price Increase

Deutsche Bank analysts are expecting the price of Michelin shares to increase by over 20 per cent from their current value of 53 euros per share to 65 euros. The estimate follows Michelin’s recent financial activities such as its investment in Poland, its Q4 results and its announcement that it is disposing of its wheel business. These signals “show the management commitment to turnaround this business unit,” wrote Deutsche Bank.

“In our view this shows a great consistency with the management strategy and reinforces our confidence in the capability of Michelin to reach their mid-cycle target of 10 per cent as early as 2006,” it estimated. This translates into 6.5 euros EPS.

However a risk lies in further strong increases in raw material prices which Deutsche Bank fears will not be able to be passed on to the customer.

17th February 2005/by Tyrepress Editors

Cooper’s Results ‘Disappointing’

Cooper Tire’s fourth quarter 2004 results disappointed analysts, according to a Deutsche Bank report. For them, the “major disappointment” was volume, which decline 6 per cent year-on-year. Cooper also registered earnings per share of $0.04, less than half analysts’ estimate. As a result the bank cut its 2005 earnings per share estimate from $1.45 to $0.75. They also cut their 2006 estimate from $2.45 to $1.25. In spite of these criticisms, the analysts also noted that the result were not necessarily reflective of “normal” profitability. “We find it encouraging that CTB’s order fill rates are in the low 80 per cent range, which implies that demand is outstripping supply.”

17th February 2005/by Tyrepress Editors

Nokian Tyres Announces Directed Share Issue

Nokian Tyres has revealed that it will issue a maximum of 1.074 million new shares in a directed share issue to selected investors today. This corresponds to 9.9 per cent of shares outstanding. According to a Deutsche Bank analyst, the move could be an early indication of a possible acquisition. “Nokian only has a track record of acquiring and integrating tyre retail and distribution companies. It has not integrated tyre plants historically,” they add. Despite a large investment programme, the analysts still expect 117 million euros of positive cash flow.

17th February 2005/by Tyrepress Editors

Analysts Keep Cool About Michelin

While some newspapers reported analysts’ disappointment with Michelin’s weaker than expected fourth quarter sales, analysts from France, Morgan Stanley as well as Deutsche Bank do not see too much reason for concern. Although volumes were slightly negative, the positive effect of better product mix and prices has continued to be demonstrated from quarter to quarter. Obviously Michelin increased market share with winter tyres and truck tyres in the OE business. Analysts are also highlighting the fact that Michelin is to invest 500 million euros in its polish plant and is therefore ready for further expansion in Eastern Europe.

14th February 2005/by Tyrepress Editors

BERU Reduces Sales Growth Target to 10 per cent

Automotive supplier, Beru AG, has reduced its sales growth target, following lower than expected demand. The company now says that sales revenues should rise by at least 10 per cent in the current financial year with EBIT reaching at least 56 million euros. According to the company, an unusually warm winter, lower than expect demand for TPMS and lower sales in the field of diesel technology mean that its original 13 per cent sales goal will be unreachable.

11th February 2005/by Tyrepress Editors

BorgWarner: Continued Growth Expected in 2005

BorgWarner Inc has reported 2004 earnings of $3.86 per share on sales of $3.5 billion (£1.9 million). In the fourth quarter of 2004 the company also recorded sales of $889 million (£477 million) up 11 per cent compared with the same time in 2003. BorgWarner reports that this equates to an operating income margin of 10 per cent.

8th February 2005/by Tyrepress Editors

Analysts Raise Continental Target Price

Market analysts at Morgan Stanley, have raised Continental’s stock price target from 52 euros to 60 euros. The Morgan Stanley analysts clearly believe that the shares have more potential than they first thought: “We are raising our price target based on the expectation that our current earnings forecasts are likely too conservative and have significant risk to upward revisions following fourth quarter results.”

8th February 2005/by Tyrepress Editors

Michelin Shares Receive Sell Rating

The German Helaba Trust has changed its advice for Michelin shares to a sell rating. The announcement pre-empts Michelin’s quarterly sales results, which are due to be released on the 11 February. In the first nine months of 2004 Michelin’s turnover increased 4.6 per cent to 11.7 billion euros. The analysts believe that company will record fourth quarter sales of 4.3 billion, a one per cent increase. Their report suggests that this growth has been largely driven by the commercial vehicle sector, which it predicts will have been responsible for 1.1 billion euros of that total. The trust also suggests that the company’s passenger car sales remained virtually flat, with sales only increasing 0.3 per cent or 1.9 billion euros.

7th February 2005/by Tyrepress Editors

Goodyear Shares Lowered to Sell Rating

Deutsche Bank analysts have lowered Goodyear’s share advice rating from hold to sell. The announcement comes in spite of the fact that Goodyear’s shares have performed strongly since mid-October in response to positive news from the industry, stabilisation of market share losses, and increased optimism about a turnaround. However, now that the company’s share price has reached 21 times the analysts’ 2005 estimate, the bank believes the price growth will slow down. According to the analysts, “the bull case is more than fully reflected.”

4th February 2005/by Tyrepress Editors

Bandag Profits Increase 10 per cent

Bandag Inc experienced a 10 per cent increase in profits during 2004, Tire Review has reported. According to the magazine, Bandag 2004 results also showed a 5 per cent increase in net sales compared to its 2003 figures. During 2004 Bandag recorded sales of $854.2 million, compared with $816.4 million in 2003, and net profits of $66.9 million, compared with $60.2 million in 2003.

1st February 2005/by Tyrepress Editors

Indian Tyre Market Grows 8.3 per cent

The Indian tyre industry has grown at a rate of 8.3 per cent over the last decade, mainly fuelled by strong growth in the domestic car industry, according to research and markets. A new report from the analysts concludes that although the replacement market has driven the industry, the OE market has also seen robust growth over the last couple of years.

Confirming these findings, Apollo Tyres recently posted third quarter results showing a 7.74 per cent rise in net profits to £2,060,000 for the quarter ended 31 December. In response, Apollo shares were trading at 253.90 rupees, up 1.56 per cent.

The industry is highly capital intensive, requiring around 4 billion rupees to set up a radial plant with a capacity of 1.5 million tyres, and around 1.5 – 2 million to construct a crossply plant of the same capacity, research and markets reports. The Indian industry is dominated by a few main players. MRF, Apollo Tyres, JK Industries and Ceat all enjoy more than 70 per cent of the total market share.

28th January 2005/by Tyrepress Editors

Michelin Changes Accounting Standards

Michelin CFO, Michel Rollier has met with analysts in order to discuss the main effects of the Group’s transition to International Financial Reporting Standards or IFRS. The company previously used the French GAAP system. Michelin say its wishes, in line with French market authority recommendations, to provide the financial community with all available information. According to the company, adoption of IFRS standards has had consequences both in terms of measurement and presentation. Michel Rollier indicated that the main impact on Group consolidated accounts has been identified.

20th January 2005/by Tyrepress Editors