The positive performance has been supported by strong truck replacement market sales. Truck replacement markets are reportedly up by a 14 per cent in Europe (+3 per cent year-to-date) and down 7 per cent in North America (-5 per cent year-to-date).
Michelin’s advantage here comes in the fact that it has a better country mix for this scenario with 50 per cent of sales being generated in Europe and only 35 per cent in North America (55 per cent of these are passenger car tyres, with 33 per cent truck tyres). Add to that the fact that selling prices are up to 50 per cent higher in Europe than in North America, and analysts expect strong first half EBIT increases.
Michelin reported that its European passenger car replacement volumes increase 2 per cent year-on-year and 2 per cent year-to-date, during the first four months of 2007. Volumes reportedly increased strongly in North America, up 14 per cent for the period following a weak result across the board in the US in 2006.
“Furthermore the group is still benefiting from a positive Price/Mix effect (which is entirely going to the bottom line), which is coming from the full effect of 2006 prices increases and…The only negative is coming from recent raw material price increases (natural rubber and oil derivative products),” the analysts explained.