Michelin: 2013 Results on Track, but Net Income Down 64%

Upon announcing first half 2013 results, Michelin has voiced its expectation that mature markets will continue their recovery from last year’s weakness in the remainder of the year, while expansion should be seen in emerging markets. Should this trend play out, the tiremaker sees itself in good stead to achieve its projected full-year volumes.

“Michelin’s first-half performance was in line with the 2013 objectives and attests to the group’s continuous improvement as it moves forward in its ‘New Phase of Dynamic Growth,’” stated Jean Dominique Senard, CEO. “The group confirms its objectives for 2013, with the target of reporting stable operating income before non-recurring items, a more than 10% return on capital employed and positive free cash flow.”

Net sales amounted to €10,159 million in first six months of 2013, slightly down from the €10,706 million earned in the first half of last year.

Volumes decreased by 1.5% in weaker markets during the first quarter but showed signs of improvement in the second. The price-mix pushed net sales down by €242 million, or 2.3%. This reflected the €281 million negative impact from contractual price reductions based on raw materials indexation clauses and Michelin’s price repositioning efforts in certain tire sizes.

It also comprised a positive €39 million impact from the further improvement in sales mix led by Michelin’s premium strategy in the 17-inch and larger segment. The negative 1.4% currency effect, which reduced net sales by €143 million, resulted from the stronger euro.

In the second half, the impact of lower raw materials prices is expected to gain momentum, adding around €350 million to Michelin’s full-year operating income. As a result, and given that prices are likely to remain stable at first-half levels, Michelin said the second-half consolidated operating margin should benefit from the impact of lower raw materials costs, which are expected to offset the price-mix effect.

The tiremaker’s capital expenditure program, totaling some €2 billion, will support its growth objectives by adding new production capacity in the new market.

First Half Performance by Segment

Passenger Car and Light Truck Tires
OE: The North American market rose by 4% over the first-half, lifted by rising demand as car manufacturers introduced new models and buyers replaced aging cars.

Replacement: Demand in North America ended the first half unchanged, as an improving trend in the second quarter (up 1%) helped to offset the 2% decline in the first three months. High fuel prices weighed somewhat on average miles traveled, which fell back slightly. The U.S. market, impacted by the significant increase in Chinese imports after customs duties were lifted, was stable for the period. Car and light truck net sales came to €5.3 billion in the first six months of the year, 3.3% lower than in H1 2012. Operating income decreased 5.3% to €550 million Operating margin for car and light truck tires and distribution was 10.3%, down from 10.6% a year earlier.

Truck Tires
OE: In North America, economic uncertainty and the increase in new truck prices following application of a large number of new standards and regulations caused the OE market to drop 13% compared with a strong first-half 2012.

Replacement: In North America, demand eased back 2% over the period, albeit with a 2% upturn in the second quarter led by the improvement in the freight market. Net sales in the truck tire segment decreased 4.5% year-on-year to €3.1 billion, while operating income declined 2.9% to €203 million. Operating margin for truck tires and distribution rose 0.1% year-on-year to 6.5% in the first half of 2013.

Specialty Tires
Earthmover tires: In the mining sector, demand for large radial tires remains buoyant. OE demand dropped precipitously in Europe and North America, dragged down in particular by manufacturer destocking. The infrastructure and quarry tire segment also contracted sharply in mature markets. The fall-off was severe in North America, hurt by persistently high dealer inventory.

Agricultural tires: Global OE demand edged back somewhat over the first half, but sales of technical tires continued to expand. Replacement markets were down in North America and rose slightly in Europe.
Net specialty tire sales dropped 11.3% to €1.7 billion and operating income 24.5% to €400 million. Specialty tire operating margin was 23.3% in the first half of this year, down from 27.4% a year earlier. (Tyres & Accessories)

The Goodyear Tire & Rubber Company has named Ryan Waldron as president of the company's Americas business unit, reporting to Chief Executive Officer and President Mark Stewart. He succeeds Steven R. McClellan, who retired on April 1.

"At Goodyear, our customers are at the center of everything we do, and in Ryan Waldron, we have a customer-centric, execution-focused business leader with a deep understanding of both the marketplace and all aspects of our business, as well as a proven track record of delivering results," Stewart said. "I am thrilled to announce him as president of Goodyear's Americas business and have enormous confidence that under his leadership, both the company and our customers will reach even greater levels of success."