Although Groupe Michelin managing partner Michel Rollier has expressed doubt that the tire major’s revenues will increase in 2010, other expert opinions differ.
Morgan Stanley Research Europe stated on Nov. 24 that, “we expect revenue growth of 7% far more optimistic than Michelin management’s recent outlook of no growth.”
This prediction is even more optimistic than the Bloomberg survey of analysts that netted an average estimate of revenues rising by 4.3% to 15.4 billion euros. To expand on the Morgan Stanley projection, an expected 10% volume growth should be partially offset by a 3% decline in price/mix.
A 7% revenue growth, notes Morgan Stanley, leaves Michelin with a 6.1% EBIT margin, compared with a long-term average of 7.5% in a market environment that is still difficult. Morgan Stanley also forecasts tire prices to decline 1% year-on-year during 2010, which it believes still implies “pretty healthy pricing” after the increases put through over the previous two years.
“Recent declines in raw material prices appear to be a relief, but falling volume and excess capacity likely precipitate a negative pricing trend. Inventory reduction created the illusion of pricing discipline that we expect will be eroded away over the next 6 to 12 months.” (Tyres & Accessories)