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Michelin Reports Increased Sales in Q3, Revises 2019 Forecasts

In weaker than expected markets, the Michelin Group reported a 1.3% increase in sales like-for-like in the first nine months of 2019, according to the company’s third quarter financial report.

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In weaker than expected markets, the Michelin Group reported a 1.3% increase in sales like-for-like in the first nine months of 2019, according to the company’s third quarter financial report. It also reported that its contributions from its acquisitions was +7.1% in line with its expectations.

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In the report, the company reported its volumes declined by 0.8% in the first nine months of 2019 due to: a contraction in automotive tire volumes, in line with the markets and sustained growth in the 18-in. and larger segment; a decline in truck tire volumes in increasingly difficult markets; growth in the mining tire business, in line with expectations; and a steeper than expected drop in the agricultural and construction tire markets.

It also reported a 2.1% improvement in the price-mix effect, attributable to disciplined price management, in particular with price increases in the third quarter, as well as a strong mix effect, shaped by a favorable business-mix and a firm product-mix in the automotive segment, Michelin reported.

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“In response to a market downturn that was sharper than expected, particularly in the truck segment, the Group is continuing to improve the competitiveness of its operations, carefully manage its prices and strengthen its positions in the fastest-growing segments and businesses,” said Florent Menegaux, Michelin CEO. “In these challenging times, I would above all like to commend all our teams for their engagement and hard work in limiting the impact of this unfavorable environment.”

During the third quarter, the company reported that its North American replacement tire business climbed 3% over the first nine months, with a much faster 7.5% gain in the first quarter. Demand is being driven by Asian tire imports, with the pool market up slightly for the first nine months, the company said.

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Michelin also edited its fourth-quarter forecasts and 2019 guidance, which included:

  • In 2019, the passenger car and light truck tire markets are expected to decline by 1%, as the modest 1% growth in the replacement segment fails to offset the steep 6% contraction in the original equipment segment;
  • Truck tire markets are expected to weaken more quickly in the fourth quarter to end the year down 4%. Specialty tire markets will probably remain stable over the full year, as sustained demand for mining and aircraft tires helps to cushion the sharp contraction in the agricultural and construction markets;
  • The full-year impact of raw materials costs and customs duties is estimated at around a negative €100 million.

In this scenario, Michelin confirms its guidance for 2019, with volume growth in line with global market trends; segment operating income exceeding the 2018 figure at constant exchange rates and before the estimated €150 million ($166 million) contribution from Fenner and Camso; and structural free cash flow of more than €1.45 billion ($1.61 billion).

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