AKRON-The first half of the year provided mixed results for tire and industry-related firms, with some showing either slow growth or operating losses.
Nokian Tyres P.L.C. was the only tire maker to report double-digit sales growth. Group Michelin's sales grew slightly but the company is forecasting lower earnings expectations during the second half due to weakened markets. Continental A.G.'s profits fell as its North American subsidiary suffered an operating loss, while Pirelli S.p.A.'s earnings and sales received a boost from its cable business.
Meanwhile, Snap-on Inc. plans to cut 4 percent of its workforce in response to lower first-half earnings.
Nokian Tyres P.L.C. reported operating earnings of $6.3 million for the January-June period, as both its manufacturing and retailing units were in the black. Sales grew 13 percent to $154.6 million as demand from the U.S, Eastern Europe and Russia picked up.
The Nokia, Finland-based tire maker attributed its rising earnings to price increases, an improved sales mix, lower than expected material costs and increased market shares in the Nordic markets.
Nokian said demand for its passenger tires in North America picked up ``considerably,'' whereas sales of forestry tires fell 40 percent. Sales of retread materials in North America developed favorably.
Regardless of the evident downward economic trend, Nokian Tyres said it expects its performance to improve in the second half, and particularly in the final quarter of the year. The company therefore will focus on the upcoming winter tire season, and hone its manufacturing business and tire chain for maximum performance.
The forecast is for 10-percent sales growth and improved earnings over fiscal 2000.
Continental Tire North America Inc. suffered an operating loss of $47.7 million in the first half of 2001, dragging Hannover, Germany-based Continental A.G.'s six-month operating profit down 19.1 percent to $194.5 million. Sales grew 12 percent to $4.95 billion, dropping the earnings ratio to 3.9 percent.
Conti blamed Continental Tire North America's loss on weakening demand for passenger and commercial tires in both original equipment and replacement markets, continuing pressure on prices, high energy costs and the cost of modifying its plants. Continental's sales in North America fell 6 percent in dollar terms, to $764 million. A year ago, Conti Tire North America reported operating earnings for the half-year of $18 million.
Despite the loss and drop in sales, Conti said it improved its market position for both passenger and commercial tires, but it did not elaborate.
Among Conti's other business units, the firm's commercial tire business in Europe suffered a loss, whereas the passenger tire and automotive systems units boosted earnings 29 and 5.5 percent, respectively. The ContiTech engineered rubber products unit, which is being divested, reported a slight dip in earnings.
Conti also reported non-recurring costs of nearly $53 million for reorganization measures related to the cessation of truck tire production in Herstal, Belgium, and of retreading operations in Bad Nauheim, Germany.
For full-year 2001, Continental anticipates the continuing improvement of the passenger tire business in Europe will help the company offset the drop in earnings related to tires in North America, and result in an increase in overall operating earnings.
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 fiscal 2001, Michelin's sales grew 4.5 percent to $6.95 billion, while operating earnings fell 9 percent, to $442.3 million. Net income, aided by the sale of shares in the 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 fell 10.4 percent.
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 global 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.
The situation in truck tires is particularly acute, according to a Morgan Stanley Dean Witter analysis, because Michelin traditionally has made a disproportionate amount of profits from truck tires; in fiscal 2000, for example, truck tires represented one-fourth of sales, but one-half of earnings.
In the U.S., Michelin told analysts it expects to garner about a third of the business to replace 13 million P-metric light truck tires for Ford Motor Co., which is recalling about 2.7 million of its Explorer sport utility vehicles and F-150 pick-ups to have their Firestone tires replaced.
Also in North America, Michelin is still formulating the exact nature of its restructuring program designed to save the company $125 million in overhead costs. The company is expected to announce details during August or September. Personnel cutbacks are expected to be part of the package.
Pirelli S.p.A. reported measurable gains in sales and earnings for the first six months of fiscal 2001, although the bulk of the gains can be chalked up to first time consolidation of acquisitions in Pirelli's cable business.
Pirelli said its tire business performed on par with the first six months of 2000, despite ``unfavorable market conditions.''
The Italian company reported operating earnings before interest and taxes of $218 million, a 14-percent increase over the 2000 period, and sales of $3.54 billion, a 9.7-percent rise.
For the remainder of 2001, Pirelli said it expects a soft third quarter before key markets rebound in the fourth quarter. Pirelli will publish detailed figures in early September.
Automotive service equipment maker Snap-on Inc. saw its second quarter earnings plummet fivefold to $8.9 million from $45.7 million in the same period a year ago, as the company experienced a decline in sales of big-ticket equipment and diagnostics products.
Sales for the Kenosha, Wis.-based company dropped 6.7 percent in the quarter to $525.6 million.
The second quarter results included a special after-tax charge of $14.4 million related to the costs for consolidation and closing of seven facilities (including two previously announced sites), elimination of 98 positions, management transition and the termination of a European equipment supplier arrangement, Snap-on said.
To reduce costs and improve operating performance, the company said it expects to cut its workforce of 14,000 by 4 percent, or 560 employees, and will take pre-tax charges totaling $65 million to $75 million for 2001, including the second quarter charges.
Much of the restructuring plan focuses on streamlining Snap-on's equipment and diagnostics operations in Europe and North America to improve profitability, the company said.
For the first half, Snap-on's earnings fell dramatically to $35.8 million, from $106.4 million in 2000. Sales for the period declined 4.9 percent to $1.05 billion.