PARIS—Among Group Michelin's financial priorities for the current fiscal year is cutting the debt/equity ratio to 1:1, the firm's chief financial officer told financial analysts and journalists recently. Michelin also is evaluating the need for and ramifications of listing the firm's stock in the U.S., according to Eric Bourdais de Charbonniere.
The company achieves about a third of its global sales in North America, and supporters of a U.S. stock listing feel it would raise the company's profile in the key North American markets.
Michelin traditionally has shied away from a U.S. listing because it would require the firm to publish more detailed financial information than is usual under French regulations.
Michelin has been reducing its debt steadily over the past three years, dropping it from 440 percent of equity at the end of 1993 to 202 percent in 1995 and down to perhaps as low as 135 percent currently, according to an analysis of Michelin figures by Merrill Lynch, Pierce, Fenner & Smith Ltd.
The firm intends to keep paring debt through cash flow, Mr. de Charbonniere said, and would consider a capital increase only to support an acquisition or ``ambitious expansion.'' Michelin currently has investment commitments of more than $1 billion over the next four years, primarily in the U.S., and has expansion plans throughout Asia.
Michelin traditionally has carried more debt than its key competitors—Goodyear's stood at 39 percent at the end of 1995; Bridgestone Corp.'s stood at 69 percent. But brokers who follow the company have not been overly alarmed by the firm's indebtedness because it has balanced this with sufficient cash flow.
The company raised more than $150 million (804 million French francs) in cash late last year by selling 40 percent of its shareholding in France's PSA Peugeot-Citroen SA car maker.
At mid-1996, Michelin's net debt stood at $4.38 billion (23.2 billion francs).
Michelin's stock price on the Paris exchange has risen 22 percent this year to 341.6 francs (closing price on Feb. 14), after gaining 43 percent in value throughout 1995. Nonetheless, stock analysts still rate the stock as undervalued, considering Michelin's earnings potential in the coming few years.