Raw Materials
Michelin has released its financial results for the first half of the year, confirming the disappointing message given earlier. Turnover was 7,377 m Euro (first half of 1999: 6,488) and operating profit 540 m Euro (596). Increased raw material costs and a weak Euro were blamed as contributing factors, but Michelin says that the results do not fully reflect progress made in increasing competitiveness.
After Continental and Goodyear, Michelin is now planning a price increase of 3%, which would be equivalent to absorbing an increase in raw materials (Rubber, Oil) of about 12%. Due to the fact that raw material prices are continuing to grow it seems unlikely that much of the price increase will benefit the manufacturers.
Nokian Tyres has released figures for the first nine months of the year. Sales rose 29.9% to 258.6 million Euro (199 m for the same period 1999) and operating profit fell to 11.9 million Euro (18.4 m). Net profit was 2.7 million Euro (9.9 m).
An article in the newspaper Handelsblatt suggested that Continental is about to open a tyre factory in Moscow and that negotiations were close to final agreement. An investment in the region of 30 million Euros was reported. In September last year, Neue Reifenzeitung reported on negotiations between Continental and Moskauer Reifenwerke, which was very close to bankruptcy, although the financial situation may have improved as the main shareholder Yukos has sold its stake in the company. NEUE REIFENZEITUNG asked Continental for more details, but the company said it was not in a position to comment and could not confirm the figures quoted. Continental is only one of the tyre companies involved in negotiations in this area, with Michelin being another.
Goodyear reported a net loss for the third quarter of $6.6 million and a net income of $109.1 m (Q3 1999: $3.3 bn). High raw material and energy costs were contributory factors. World-wide Q3 sales were $3.5 bn and sales for the first nine months of the year were $10.5 bn (1999: $9.3 bn). Before these figures were revealed, analysts – following a statement towards the end of September by Samir Gibara, describing a “difficult outlook” for the tyre industry – had widely expected Goodyear to break even at best.
There are rumours in the market that the industry will raise tyre prices – maybe even this week – to cover increases in raw materials (rubber, oil, carbon black). As production capacities have been expanded during the last 24 months, it is doubted whether any increase will stick due to market pressure.
Continental spokesman Peter Schwerdtmann has denied reports that Continental and Michelin are planning to re-arrange or discontinue their two-year-old joint venture which includes combined purchasing of raw materials and Michelin’s share of Barum. The teamwork between both companies is excellent, he said, and the joint venture will continue. Terms to form the basis of a new settlement would have caused problems because of the brand rights for Uniroyal, owned by Michelin, but produced in Europe by Continental, under licence.
Evolution for sure, revolution not at all. That’s Michelin’s opinion regarding the B2B E-Commerce initiative of leading global tyre producers which was announced recently.
Six of the largest tyre manufacturers have announced their intention to develop a global e-business purchasing company. Rubbernetwork.com is an independent company which will host a global exchange, including Conti, Cooper, Goodyear, Michelin, Pirelli and Sumitomo Rubber. Confidentiality is assured and the exchange will be open to all manufacturers and suppliers. It will be operating by the year end. ‘Significant’ savings and efficiencies in purchasing are predicted.
Bridgestone Corporation, the world’s largest rubber company, wants to join the electronic marketplace RubberNetwork.com as the seventh member of the group.
Following Goodyear and Michelin, Nokian Tyres has released its half year figures. Sales rose 25% over the same period last year to reach 152.2 m Euro but operating profit fell from 5 m Euro to a loss of 1.5 m Euro. Net profit was also negative at -4.1 m Euro. One cause was increased raw material prices (rubber, oil, carbon black) up 8% over last year. Despite the loss, Nokian is broadly on track because, as a Scandinavian company, it generally makes huge profits in the second half of the year.
In a telephone conference on 28th July, following an earlier profits warning and subsequent fall in Michelin shares of around 10%, the management tried to explain the reasons for the profits warning. June was a bad month but there is still hope that the company will achieve an EBIT comparable to that of the first half of 1999. Exact figures will not be available until September. The problems are in the USA, where it was not possible to obtain better prices for truck tyres. On the other hand, the increase in raw materials prices (rubber, oil, carbon black), forecast to be about 3%, will now, it seems, be more like 4 or 5%.
In the past few days, oil prices have risen US$4.20 to US$26 per barrel. This has caused concern among tyre manufacturers as raw materials comprise about 40-50% of the cost of sales.
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.
