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July 31, 2001 02:00 AM

Group Michelin reduces earnings expectations

Bruce Davis
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    PARIS (July 31, 2001)—Based on the continued weakness of the North American marketplace and emerging signs of weakness in other key global markets, Group Michelin has downgraded its operating earnings expectations for 2001 by about 15 percent, to between 6.2 and 6.8 percent of sales.

    During the first half of the year, Michelin's sales grew 4.5 percent to $6.95 billion, while operating earnings slipped 0.9 percent, to $442.3 million. Net income, aided in large part by the sale in early June of stock in French car maker Peugeot S.A., rose 57 percent to $333.3 million.

    In North America, Michelin reported 0.2 percent growth in passenger/light truck tires, as replacement sales grew 4.6 percent—including 12.8 percent growth of the Michelin brand—and original equipment sales down 10.4 percent—and a 30.7-percent drop in truck tire sales.

    Despite the relatively low growth, Michelin gained market share in North America as the replacement market declined 2.3 percent and OE sales were down 12.5 percent during the period, Michelin said. In truck tires, though, Michelin's replacement market sales drop was nearly twice that of the 11-percent market drop. From April on, however, the company started to regain share as it reviewed price increases announced in December 2000.

    In North American truck OE, Michelin's sales drop mimicked the overall OE demand decline of 42 percent.

    Michelin attributed its net sales gain in part to better pricing and product mix; its sales in tons actually fell, by 2.2 percent during the period. Michelin is counting on its next round of price increases—of up to 5 percent starting Aug. 1 in North America and Europe—to help bolster second half results.

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