Group Michelin recorded net income of 1.0 billion euros on net sales of 19.5 billion euros for its fiscal year ended Dec. 31, 2014. That compares to income of 1.1 billion euros on net sales of 20.2 billion euros for its fiscal 2013.
Based on the exchange rate on Dec. 31, 2014, Michelin recorded net income of $1.2 billion on net sales of $23.7 billion. The company’s income to sales ratio was 5.0% (compared to 5.6% in 2013).
Michelin’s operating income for fiscal 2014 was $2.2 billion euros, down 2.9% compared to 2013.
Profitability was hurt by “sluggish markets, except in North American and China.” Michelin says demand was weak for passenger car/light truck and truck tires, for winter tires in Europe and for original equipment in new markets, except China. A decline in demand for agricultural and mining sectors was softened by a recovery in the OE and infrastructure market in the earthmover tire segment. Growth was “robust” in North America and China, according to the company.
Here’s how Michelin performed segment by segment (in millions of euros):
| Tires | 2014 Sales | 2013 Sales | % change |
| Consumer | 10.5 | 10.7 | down 1.8% |
| Truck | 6.1 | 6.4 | down 4.7% |
| Specialty | 3.0 | 3.1 | down 3.2% |
Consumer tires: “Net sales in the passenger car/light truck tires and related distribution segment stood at 10,498 million euros, including a negative currency effect of 1.3%, compared with 10,693 million euros in 2013. Operating income before non-recurring items amounted to 1,101 million euros or 10.5% of net sales, compared with 1,086 million euros and 10.2% in 2013. Excluding the negative currency effect, the year-on-year increase primarily reflects the 2% growth in unit sales, despite the disappointing performance of mid-range brands, and a positive change in the price mix that was achieved on the back of lower raw materials prices, thanks to the Group’s price management strategy. The steady improvement in the mix was supported by the successful strategy in the 17-inches and over segment, and by well-received new products.”
The company's North American replacement market grew 6% due to "higher inventory building in tire imports from China ahead of the introduction of customs duties, as well as by sustained demand for winter tires in Canada and by the vibrant Mexican market.”
Truck tires: “Net sales in the truck tires and related distribution segment amounted to 6,082 million euros compared with 6,425 million euros in 2013. Unfavorable exchange rates had a negative impact of 2.2%. Operating income before non-recurring items came in at 495 million euros, representing 8.1% of net sales compared with 503 million euros and 7.8% the previous year. This performance, which was in line with the target of improving profitability, reflected effective price management in a highly competitive environment linked to the decline in raw materials prices. It also reflected a modest 1% increase in unit sales, tight management of production costs and overheads, and the currency effect.”
The company reported the North American replacement truck market grew 8%. “Macro-economic factors and transport industry trends remained favorable, while the market share of imported tires increased, particularly in Mexico.”
Specialty tires (earthmover, agricultural, two-wheel and aviation): “Net sales in the specialty businesses amounted to 2,973 million euros versus 3,129 million euros in 2013, after taking into account the negative currency effect and the decline in unit sales, which was limited to 1% despite tire inventory drawdowns by mining companies and lower demand in the agricultural tire segment. Operating income before non-recurring items amounted to 574 million euros or 19.3% of net sales compared with 645 million euros or 20.6% in 2013. The decline was due in part to negative volume and currency effects, and it also reflected price adjustments designed to pass on to customers the benefits of lower raw materials prices through the application of indexation clauses.”
Outlook for 2015
“In 2015, demand in the passenger car/light truck and truck segments should continue to grow in North America and China, and also in Europe albeit at a modest rate, while holding firm to last year’s trend in the new markets and rebounding in Southeast Asia. Mining tire customers are likely to make further inventory drawdowns and OE sales in the agricultural tire segment are expected to be lower, while in the earthmover segment, OE and infrastructure business should continue to grow at a modest rate. In this environment, Michelin is aiming to grow unit sales in line with global trends in the markets in which it operates.”
