Following the news that Bridgestone is investing in the construction of a passenger car tyre plant in Russia, market analysts have shared various views on the impact this move will have on the local market. For its part Deutsche Bank took the opportunity to situate the news in the context of wider domestic market development.
On 20 February, Goodyear Tire & Rubber announced that a public offering of its 8-year senior notes had commenced and will close on 25 February, subject to market and other customary conditions. The notes will be senior unsecured obligations and Goodyear says the offering has an aggregate value of US$900 million. They will be sold at 100 per cent of the principal amount and will bear interest at a rate of 6.5 per cent.
Financial analysts has spoken of Cooper’s confidence in its continuing business outlook following presentations to investors at a Detroit roadshow.
Explaining their renewed confidence, the analysts put this down to “notably improved” product mix, cost competitiveness and recent pricing activity. As far as the import question of how Cooper will fair post import tariff, the Deutsche Bank analysts highlighted that since the tariff was implemented, “the cost of producing tyres in China has increased faster than other regions (the cost gap was 30 per cent at the time of tariff implementation but has declined to a 10-15 per cent).
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.
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.
Commenting on Bridgestone’s second quarter financials, particularly the operating profit of 133.8 billion yen outstripping guidance of 118 billion yen and expectations of 50 per cent year-on-year growth, Deutsche Bank analyst Takashi Moriwaki says the bank sees “risk for a guidance overshoot as profitability is on an uptrend thanks to stable selling prices and declining raw material costs.”
Deutsche Bank analysts have raised their target price for Cooper Tire & Rubber shares to US$19.00. In an investors’ note published 3 May, the analysts stated that Cooper Tire “reported stronger than expected Q1 earnings of $0.34 versus our $0.27 estimate. Margins were significantly higher than we expected (operating margin was 4.8 per cent versus our 3.9 per cent estimate). All of the upside versus our estimates was derived from lower than expected raw material inflation. Nonetheless, the results were impressive considering that they were achieved despite $0.32 of strike related costs. This reinforces our view that tyre companies are becoming more profitable at any volume. We maintain our Hold based on uncertainty surrounding structural industry changes.”
The Goodyear Tire & Rubber Company has announced that it has commenced a public offering of $700 million aggregate principal amount of 10-year senior notes, subject to market and other customary conditions. The notes will be senior unsecured obligations of the company.
The Goodyear Tire & Rubber Company has announced that it will webcast its presentation at the 2012 Deutsche Bank Global Auto Industry Conference in Detroit, Michigan, on 10 January. Darren R. Wells, executive vice president and chief financial officer, will provide a business overview and discuss the company’s strategies for approximately 40 minutes.
Natural rubber prices should average $5/kg, $5.10/kg and $4.50/kg in 2011, 2012, 2013, respectively, according to a recent Deutsche Bank report. The stabilisation of prices that have been skyrocketing for the last few years is predicted as the Association of Natural Rubber Producing Countries, whose members produce 92 per cent of the world's supply, is expected to expand production by about 6.3 per cent in 2011. Production will grow another 6 per cent in 2012. Global production was about 10.4 million metric tonnes in 2010.
In their daily automotive sector report, analysts at Deutsche Bank observe that while most tyre companies budget a natural rubber price of US$5.00 per kilogram for 2011, the current price for the commodity is, at $4.20 per kilogram, 15 per cent below this planned-for figure. As natural rubber purchasing costs account for between 13 and 18 per cent of sales, they posit that recent declines in the price of natural rubber could “have a meaningful impact” on next year’s tyre maker earnings, assuming – the analysts add, that the industry retains similar discipline to that it has demonstrated in the last few years.
The latest data from the US shows that shipments, what we might call sell-in sales, of light vehicle replacement tyres fell 12 per cent for RMA members and 10 per cent for the overall industry in July. This follows falls of 8.6 per cent in June and 10.7 per cent in May. Commenting on the figures, Deutsche Bank analysts pointed out that “the weakness was significantly more pronounced for broadline (economy) tyres,” with volumes down more than 20 per cent year-on-year in this segment.
On July 12 Compagnie Financière Michelin, a fully-owned Michelin subsidiary, signed a new credit facility to be used for general corporate purposes. This 1.5 billion euro multi-currency revolving credit facility, signed with a group of 21 banks, is intended to replace Michelin’s 2005-2012 1.5 billion euro syndicated line. Michelin states the new facility is “in line with the Group’s debt refinancing strategy.”
The Goodyear Tire & Rubber Company will broadcast its Deutsche Bank Securities Inc. Global Industrials and Basic Materials Conference on its investor relations website. The conference takes place in Chicago on Thursday, 16 June, where Darren R Wells, executive vice president and chief financial officer, will discuss the company’s strategies and field questions from analysts and investors.
Indonesia’s Gajah Tunggal has reported a net profit of Rp 332 billion (£23.4 million) in the first quarter of 2011, a 35 per cent year-on-year and 182 per cent quarter-on-quarter increase. This result is “well above” Deutsche Bank’s consensus (the bank’s equity research analysts comments that it is equal to 40 per cent of consensus and 43 per cent of its full year 2011 forecast). Much of this growth was, however, from foreign exchange gains and associates. Core net profit, excluding foreign exchange and associates, was Rp 181 billion (£12.8 million) – relatively unchanged from the first quarter of 2010 and a quarter-on-quarter increase of 60 per cent.
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