Michelin 1Q sales up 5.5%

April 23, 2015

Groupe Michelin recorded net sales of 5 billion euros in the first quarter of 2015, up 5.5% from net sales of almost 4.8 billion euros a year ago.

Based on the exchange rate the day the quarter ended, March 31, 2015, Michelin recorded net sales of $5.4 billion.

Here’s a breakdown of first quarter sales by segment. Figures are in billions.

Tire sales 1Q 2015 1Q 2014 % Change
Passenger/light truck 2.78 2.52 10.1
Truck 1.47 1.46 .8
Specialty .771 .775 -.6

Among the factors that contributed to the quarterly results, Michelin says it experienced a 1.5% growth in volumes compared to the first quarter of 2014. Additionally, a 5.4% negative change in price mix, of which 2.4% was due to price cuts, was only slightly offset by a .3% favorable change in product mix, led by both the Michelin brand and “a strong upturn in sales volumes for the group’s other brands.” A decline in the value of the euro also resulted in a 9.7% favorable currency effect.

The sales increase in passenger and light truck tires was led by sales volumes which Michelin says outperformed the market. Michelin brand sales rose 5%, and BFGoodrich brand sales in North America were boosted with the launch of the All Terrain KO2 tires.

Specifically in North America, Michelin says the first quarter of 2015 showed a 2% increase in the number of OE tires shipped compared to the same period a year ago. Replacement tires were down 6% in the same time period.

For truck tires, sales volumes were down 4%, “with good performances recorded in the OE segment in mature markets and higher exports from Europe to meet North American demand.”

That North American demand included a jump of 21% for OE tires in the first quarter, and an increase of 3% for replacement tires compared to same-quarter figures from 2014.

In the specialty business, Michelin says the 4% contraction in volumes was partially offset by the favorable currency effect. Net sales decreased in both earthmover and agricultural tires, while sales increased in aviation and two-wheel tire applications.

During its presentation to investors, Michelin highlighted its recent announcement that it was acquiring a 40% stake in France’s leading internet tire retailer, Allopneus. (Read: Michelin buys into online tire retailer) Michelin also noted it is exploring other acquisition opportunities, including Tier 2 and Tier 3 Asian tire companies.

2015 guidance, with additional details from Michelin

“Lower raw materials prices are now expected to have a favorable impact of around 600 million euros over the year, the aim being to ensure that changes in price mix and raw materials prices have a net positive effect in 2015, with the second half offsetting the negative first-half effect.

“The currency effect is now expected to add more than 350 million euros to operating income for the year.

“Michelin confirms its objectives of growing unit sales in line with global trends in its markets, delivering an increase in operating income before non-recurring items beyond the currency effect, reporting a return on capital employed in excess of 11%, and generating structural free cash flow of approximately 700 million euros, with around 1.8 billion euros in capital expenditure.”

In terms of its use of cash, “Michelin will pursue its policy of value-creating investment, focusing on the growing passenger car/light truck tire businesses, as well as on innovation, truck fleet operator services, the digital strategy, raw materials and semi-finished products and customer service.

“A 750 million euros share buyback program will be carried out over a period of 18 to 24 months.”