Pirelli has boosted its 2004 operating result to 380 million euros, a 42 per cent increase compared with the 268 million achieved in 2003. Last year’s figures show consolidated revenue of 7,130 million euros up 6.9 per cent on 2003’s results. The manufacturer’s net financial position settled at -1,475 million compared with -1,745 in 2003.
Bridgestone will report a 7.9 per cent rise in 2004 operating profit, Reuters has reported. This equates to operating profits of 197.7 billion yen (roughly £991 million), exceeding the company’s projection of 185 billion yen for the year ended 31 December. At the same time the company will forecast a 14 per cent drop in this year’s OP, due to pressures from higher raw material prices, the report continues. This means the company expects to achieve an operating profit of 170 billion yen in 2005.
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.
At the end of January point S, Germany’s largest cooperative, held its second annual meeting since it merged with competing buying group, VRG. Although more than two years have passed since the merger, the meeting revealed that the dust hasn’t settled yet, and, following a number of management changes, there is still plenty of strong feeling on the subject. Nevertheless, nearly 750 participants travelled to Leipzig’s Congress Center for the two-day meeting and heard about the organisation’s “courage for the future.”
Despite the challenges presented by raw material price inflation, Apollo Tyres has no intention to increase its own prices during the current quarter, India’s Hindu Business Line has reported. “I am not looking at this quarter for price increase. There are too many things happening in the market (budget, VAT etc) that have to be factored in before taking any decision,” Neeraj Kanwar, chief operating officer (COO), told the publication.
Kumho will launch initial public offerings (IPO) on both the South Korean and London stock exchanges at $15.58 per share, South Korea’s Dow Jones has reported. The tyre manufacturer expects to raise approximately $400 million (£210 million) in the sale. Kumho Tire Co. is said to be selling some 25 million shares in the simultaneous IPO. “A heavy flood of orders is expected to be placed before the offer close,” Dow Jones reported.
The news follows Cooper Tire & Rubber’s early January announcement that it would buy an 11 per cent share of the company, which amounts to 7.5 million shares.
The South Korea monopolies commission has said it will fine Hankook Tire and Kumho Tire 4.1 billion won (£2.1 million), Korean newspapers have reported. The Fair Trade Commission (FTC) said the two companies had raised the prices of products shipped to their distributors after consulting each other, violating the country’s fair trade act.
The fines break down to 2.2 billion won for Hankook and 1.9 billion won for Kumho. The ruling comes after both companies raised their prices by between five and 10 per cent in May 2004, on the pretext of higher international rubber prices. The FTC is reported to have said both companies have admitted to the violations and provided evidence, entitling them to reduced fines under the government’s leniency program.
Michelin has published its latest guide, this time to Great Britain and Ireland. Out tomorrow this year’s guide sees the addition of two new symbols, one indicating a good wine list and the other relaxation and well being facilities.
Bridgestone Australia is predicting that its 2005 results will suffer “significantly” because of a rise in raw material prices, reports Fairfax news site.
The manufacturer recorded a $10.86 million (£4 million) net profit in 2004, which was up 1.9 per cent on the previous year.
“As predicted in our October and December 2004 stock exchange releases, raw material prices increased significantly in the last quarter of 2004,” Bridgestone said.
Financial analysts are predicting that the US tyre market has performed better than expected in the month of December, increasing 9.5 per cent year-over-year. The news follows a six per cent increase in November and an 8 per cent decline in October. The market watchers from Deutsche Bank estimate that US tyre manufacturers are likely to have experienced a 2.5 per cent increase in replacement volume. In addition the analysts report that volumes this quarter are also better than expected. As a result Deutsche Bank predicts that Cooper and Goodyear will experience a positive modification in their share prices of $0.10 and $0.07 respectively.
Michelin SCA in France admitted yesterday that it wants to make Europe-wide prices increases of five per cent. Michelin justified the repeated round of price increases by the rise of raw material prices, which have added up to 40 per cent in the last five years.
Minekazu Fujimura, CEO of Bridgestone Europe has warned that China’s production explosion is causing a severe shortage of steel cord, natural rubber and other raw materials, essential to tyre production.
Mr Fujimara told the Financial Times that the shortage has already driven up tyre manufacturers’ raw material costs by between 10 and 15 per cent, adding that further increases were inevitable. But it isn’t all bad. In the short term, Mr Fujimura conceded, the supply problems were proving to be financially beneficial. So far this year, the leading tyre producers have been able to raise their prices three times in acknowledgment of the rising cost problem.
As a result the big producers have reported improved results. Bridgestone itself has just reported operating income of $983m on sales of $12.6bn in the first three quarters. Goodyear this week reported a profit of $36.1m for the third quarter, its second successive quarterly profit after a long period of losses.
But Mr Fujimara is not resting on his laurels. “The problem is global and there is no escape from it. We have no choice but to pay the premium,” he said adding that the increases are likely to have a wider impact. “They will be working their way through into higher car prices,” said Mr Fujimura.
Bridgestone Firestone North America and Bridgestone/Firestone Canada have jointly announced price increases. Prices are due to increase by 5 per cent on passenger and light truck tyres, 7 per cent on truck and bus tyres and 10 per cent or more on agricultural and off-the-road tyres. The companies say the increases will affect Bridgestone, Firestone, Dayton, associate and private brand tyres and will come into effect from 1 January 2005.
According to Mark Emkes, CEO and chairman of Bridgestone Americas Holding, parent company of BFNT and BFCA, “Our tyre companies are facing an unprecedented continuation of rising raw material prices on a number of different fronts. From steel to petroleum to rubber chemicals, we have seen cost increases that simply can not be offset by the increases in efficiencies and productivity that we have implemented at all levels of our company. The action we announced today is a necessary step in addressing these escalating costs.”
The growing raw material prices have now also affected Vredestein’s price structure in Germany. Passenger car summer tyres, light truck tyres as well as all-season tyres will be 2.5 per cent more expensive from January onwards. The prices for agricultural tyres will be even increased by four per cent.
According to the What Car? Price Index, new car prices have not altered for the last four months. After rises during the first half of 2004, prices are now back to virtually the same as 2003 and the average new car is now 0.1 per cent cheaper than a year ago.
The Index also reports that small cars are still leading the way. City cars are 2.8 per cent cheaper and supermini prices have fallen 1.7 per cent over the past year. Family cars are also down 0.1 per cent. The magazine reports that virtually every other class has become cheaper month-on-month.
A large price fall was recorded in the plate-change month of September, when prices traditionally rise compared with the quiet month of August. What Car? reports that this year, prices fell, despite a “healthy demand” among private buyers that was only six per cent below that shown in the previous September.
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