Michelin says sales are down, volume is up
Groupe Michelin posted net sales of 14.5 billion euros for the first nine months ended Sept. 30, 2014. That was a 4.7% decrease compared to the first nine months of 2013.
Based on the exchange rate on Sept. 30, 2014, Michelin recorded net sales of $18.4 billion year-to-date through Sept. 30. Michelin also posted a 1% rise in sales volume over the period.
Passenger and light truck tires make up more than half of total sales through nine months:
Tires Sales % of total
PLT: $9.8 billion 53.3%
Truck: $5.7 billion 31.0%
Specialty: $2.9 billion 15.7%
Michelin says the market slowdown observed since the second quarter continued into the third. Some of the issues positively and negatively affecting the results were as follows:
* weakening demand in Europe, especially in truck tires.
* contraction in original equipment demand in new markets, except China.
* sustained solid growth in North America.
* growth in the OE earthmover and infrastructure businesses, "which cushioned the impact of sustained inventory drawdowns in mining tires."
* a negative 2% price-mix effect.
* application of contractual indexation clauses and price repositionings at a time of declining raw materials costs.
* a favorable mix effect thanks to "sustained execution of the premium strategy." (The currency effect was negative over the nine months, but turned positive in September.)
"In a global environment shaped by economic uncertainty and geopolitical difficulties, demand for passenger car and light truck and truck tires should remain buoyant in North America and China and stable in Europe," says Michelin. "In the new markets other than China, the slowdown observed, particularly in the original equipment segment, is expected to continue, while replacement tire demand should remain robust in the passenger car and light truck segment and ease back somewhat in the truck segment.
"Given this environment, Michelin has lowered its outlook for volume growth, in line with the market, to a range of 1% to 2% for the entire year. Specialty tire tonnages should end the year on a par with 2013, with favorable prior-year comparatives in the fourth quarter for mining tires.
"In the final quarter, Michelin expects to adjust its cost management process in response to changing market conditions, while enjoying a more favorable currency environment. Michelin’s competitiveness plan, with 169 million euros in savings over nine months, attests to its industrial efficiency. The Groupe confirms its objective of reporting higher operating income before non-recurring items and at constant exchange rates.
"Michelin also confirms its objective of delivering a more than 11% return on capital employed and generating structural free cash flow of more than 500 million euros. The capital expenditure program is maintained at around 2 billion euros in 2014 and will be revised downwards in 2015 and 2016."