Groupe Michelin posted consolidated net sales of 3.65 billion euros in the first quarter of 2003, a 4.8% decrease compared to the previous year.
However, if 2002 net sales of 3.84 billion euros is restated using the 2003 exchange rates, the company increased its net sales by 5.7%.
Confusing? At constant exchange rates, net sales were down "primarily due to the 18% depreciation of the dollar against the average exchange rate of the euro in the first quarter of 2002," says Michelin.
Sales volumes expressed in tons are up 5.1% compared to the first quarter of 2002. Excluding the impact of currency fluctuations, net sales are up 5.7%, but significantly down (4.9%) at current exchange rates. There are a four main reasons behind this decrease.
1. A negative impact of exchange rates. As had been recorded in the last few months of 2002, the 10% decrease is mostly related to North and South American currencies.
2. A positive impact generated by higher sales volumes. This 4.3% increase is the result of inventories being rebuilt at tire dealerships, in particular in Europe, rather than of an increase in end user demand.
3. A positive price/mix effect of 1.3%, calculated at constant exchange rates.
4. No impact from the scope of activity. Why? Because there has been no change in Groupe Michelin's scope of consolidation compared to the first quarter of 2002 (the acquisition of the tire distribution activities of Viborg in Europe has been effective only since March 31, 2003).
In the first quarter, tire markets "were globally in line with Group expectations," according to the company. "They were very contrasted."
Here's how Michelin decribes its first-quarter 2003 performance in North America for both the replacement and OE segments.
"The Passenger car and light truck tire replacement market is down 5.4% year on year. This deterioration can be explained by the impact of the second Firestone recall on the first two months of 2002, and by the fact that, with the local economic environment, consumers are refraining from buying.
"The market’s product/mix improved again in the first quarter of 2003: The slower increase in the SUV segment is less pronounced than that of the market (-1.6%), while there is no change in trend in the mass market segment, which has been continuously falling for several years now (-10.9%).
"Flag brands are back to a level that is more in line with the long-term growth that became evident in the early 1990’s. Faced with the emergency situation and with the preoccupation brought about by the August 2000 Firestone tire recall, consumers who had previously been traditional buyers of private labels have looked for assurance and purchased 'flag’ branded tires. As expected, some customers are now progressively returning back to their former purchasing patterns.
"On the passenger car and light truck original equipment market, the sharp increase in new car sales of the previous several months has sustained tire markets. The double digit growth rate of the SUV and high performance segments continues to be higher than that of the market, like in replacement. Yet, as in Europe, car manufacturers have scheduled production cuts in the second quarter.
"In truck, the replacement market remained globally flat compared to the first quarter 2002, which itself had registered a 5% growth against 2001. The market remains, however, more than 10% below its Q1 2000 level.
"In original equipment, the market shows a cumulative 13% increase (it had dropped by the same order of magnitude in the first quarter 2002). While this growth is due to a recovery in the trailer market, the sales of tires for Class 8 trucks are stable compared to the first quarter of 2002."
Groupe Michelin will hold its annual ordinary and extraordinary general shareholders meeting on Friday, May 16, in Clermont-Ferrand, France.
First-half 2003 earnings will be made public on Tuesday, July 29, 2003, before the Paris stock market opens (at 8 am Paris time).
Michelin cautions against extrapolating net sales for the rest of the year based on its first-quarter results "because of uncertain tire markets and dull economies."
