In our October edition Tyres & Accessories looked at Tyre Wholesaling and the latest developments in Online Branding and E-Commerce in particular detail. This is now available to view online in our e-paper format. Subscribers can simply click more to browse this edition, which also includes all our regular news and analysis.
There is a governance battle going on at the upper echelons of Italian tyremaker Pirelli, according to various news sources. According to the Financial Times, Marco Tronchetti Provera, chairman and chief executive of Pirelli has invited two private equity groups to buy out competing shareholders in what is being described as “an effort to shorten the chain of command at the group.”
Toyota has recalled 2.8 million cars in order to fix faulty steering columns and water pumps on nine models worldwide. In the UK, the recall is estimated to affect 75,000 cars, including Avensis, Corolla and Prius models. Around 496,000 vehicles are estimated to be affected across Europe.
Financial analysts have stated their concern that tyre manufacturer Pirelli reduced its performance projections in several key areas when publishing its 9-month results recently. However, at the same time Morgan Stanley market watchers in particular reassured investors that the reductions were unlikely to results in any “material downgrades” but did warn that the stock could be impacted by the lowered premium volume guidance.
Online tyre dealer Delticom has published its 9-monthly report for 2012. In a troubled market environment the company recognised revenues of €280.4 million in 9M 12, a fall of -5.8 per cent year-on year.
Earnings before interest and taxes (EBIT) decreased in the reporting period by 37.9 per cent to €17.5 million (9M 11: €28.2 million), primarily due to higher fix costs. This translates into an EBIT margin (EBIT in percent of revenues) of 6.2 per cent (9M 11: 9.5 per cent). Third quarter EBIT saw a decline of 55.0 per cent, from prior-year's €9.5 million to €4.3 million. The quarterly EBIT margin was 4.9 per cent (Q3 11: 9.5 per cent).
Recent rises in fuel costs may hit the revenues of tyre, brakes and automotive spares suppliers, according to Moody's Investors Service comments published today (7 November 2012). According to the report, the potential loss of revenue is “credit negative” for rated automotive spare parts suppliers.
The biggest downside risk from a 5 per cent aftermarket contraction in Europe is seen at brake manufacturer TMD friction, which could feel a 3 per cent hit to its revenues in this scenario and Michelin which is expected to see revenues drop 1.8 per cent if this were to happen. However it is not just an aftermarket problem, Moody's expects that higher fuel prices could also affect suppliers that focus on automotive manufacturers.
While financial analysts were not more than satisfied with what they characterised as an “in-line” set of third quarter financial results from Continental AG, a spell of cold weather could be just the tonic for the German tyre maker which is strong in winter tyre sales.
Financial analysts welcomed the relative good news of Michelin’s third quarter/nine-month results, which saw sales rise despite lower volumes and followed profit warnings from Nokian and Delticom respectively in the week before. As a result Deustche Bank upgraded its operating profit expectations to 2.55 billion euros, 9 per cent above consensus.
Michelin has reported sales of 16.142 billion euros in the first nine months. The figure, which represents a 6 per cent increase compared with the same period last year, comes despite slow demand and continued pressure in the economic environment especially in mature markets. However, despite the increase, sales volumes were down 6.7 per cent, with the overall improvement being explained by product mix and raw materials-related price increases.
Delticom has reported revenues of 280.4 million euros in the first three quarters of 2012, down some 5.8 per cent compared with the previous year. The preliminary results show that pre-tax profits (EBIT) amounted to 17.5 million euros, which suggests this figure fell by around a third compared with last eyar. By comparison, in the first nine months of 2011 revenues increased by 15.8 per cent to 297.7 million euros and EBIT by 23.3 per cent to 28.2 million euros. As a result of the “challenging market environment” Delticom warned investors that it is scaling back its EBIT goal for the current financial year to 7 – 8 per cent.
On 31 October Continental AG will host a conference call and tyre division investor day to coincide with the release of the company’s third quarter results. Analysts at Deutsche Bank anticipate that Continental will report revenues of 8.1 billion euros for the quarter, a five per cent year-on-year increase. Other expected results include an adjusted EBIT of 844 million euros – the analysts note that this projected 13 per cent year-on-year growth is driven by Conti’s tyre business – and a net profit of 401 million euros, up 90 per cent on a year earlier.
Since the start of trading today, the Continental AG share has again been listed in the top Deutsche Börse segment, having returned to the list of top German companies after an absence of almost four years. The company is the first to succeed in being promoted back to the DAX 30 twice.
Some financial analysts have stated their faith in Continental AG’s continuing strong financial performance ahead of the company’s third quarter results.
Upgrading their estimates for the company’s shares performance, Morgan Stanley market watchers said they predict “10 per cent upside to 2012 consensus and circa 20 per cent in 2013-2014,” continuing: “We think valuation and third quarter catalyst make Continental the most attractive investment in the auto industry.”
The latest figures from the US light vehicle replacement tyre wholesale markets suggest shipments declined 1.9 per cent in August, according to the RMA. However, financial analysts from Deutsche Bank believe there are “several factors contributing to temporary weakness in the market” and that wholesalers are currently inclined towards de-stocking (due to recent raw material cost declines, and the nearing end of Chinese tyre import tariffs. As a result many anticipate lower prices in the months ahead.
Continental has placed US dollar-denominated bonds worth US$950 million with institutional investors in Germany and abroad. According to the company, the bonds have a seven year term and are being issued by Continental Rubber of America, Corp., USA, and guaranteed by Continental AG and selected subsidiaries. The annual interest rate will be 4.5 per cent and is substantially lower than the interest rate on the bonds issued by Continental in 2010. Interest will be payable semi-annually in arrears. The proceeds will be used for the early repayment of part of the debts scheduled to mature in April 2014.
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