Michelin: 7.3% income-to-sales ratio!

Posted on February 12, 2013
Michelin's volumes were down, but its sales and profitability were up.

Michelin's volumes were down, but its sales and profitability were up.

Groupe Michelin posted net income of more than 1.5 billion euros on net sales of close to 21.5 billion euros for its fiscal year ended Dec. 31, 2012. That compares to income of more than 1.4 billion euros on sales of 20.7 billion euros for fiscal 2011.

Based on the average exchange rate for 2012, Michelin recorded net income of $2 billion on net sales of $27.6 billion last year. Its income-to-sales ratio was 7.3% (compared to 7% in 2011).

Michelin's operating income for fiscal 2012 was 2.5 billion euros, up 27% compared to 2011.

Here is how Michelin performed segment by segment (in millions of euros), and what it had to say about the results.

Tires 2012 sales 2011 sales % change

Consumer: 11.1 10.8 up 2.9%

Truck: 6.7 6.7 flat

Specialty: 3.6 3.2 up 13%

Consumer tires: "The sustained firm pricing policy and ongoing improvement in the product mix, led by the Michelin brand’s premium positioning, helped to offset the 5.5% decline in volumes."

Truck tires: "In a depressed market, volumes fell 10.8% as the Groupe focused on turning the truck tire business around and restoring its margins. This strategy, along with the wide array of market launches and the decline in raw materials costs, drove a sharp increase in operating income before non-recurring items (from 233 million euros to 444 million euros)."

Specialty tires (earthmover, agricultural, two-wheel and aviation): "At 946 million euros, or 26% of net sales, operating income before non-recurring items confirmed these businesses’ structurally high profitability."

Outlook for 2013

Given its global footprint, Michelin says it expects to hold volumes steady in 2013, in a market environment that is uncertain in mature markets but still expanding in the new ones.

"Raw materials prices are expected to remain stable in the first half, adding a further 350 million to 400 million euros to operating income. This will be partly offset, however, by the impact of indexation clauses on the original equipment and earthmover businesses."

The 2 billion euro capital expenditure program will support Michelin’s growth ambitions by bringing new production capacity on stream in the growth regions, whose start-up will weigh on costs. Michelin says the program is also designed "to improve competitiveness in mature markets and drive technological innovation."

Bottom line: Michelin expects to report stable operating income before non-recurring items at constant exchange rates, a more than 10% return on capital employed and positive free cash flow.

Related Topics: Michelin financials, raw material costs

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