CLERMONT-FERRAND, France (Oct. 25, 2002) — Group Michelin reported a 3.2-percent drop in third quarter sales, to $3.58 billion, but the company insists it still is on track to achieve its targeted operating margin of 7.0-7.4 percent for 2002. Market conditions during the period were difficult but in line with forecasts, the company said.
Sales for the nine months ended Sept. 30 were up 2.7 percent, to $10.8 billion. Earnings were not disclosed at this time.
Declining U.S. and South American currency values diluted sales by 2.7 percent, offsetting a 2.1-percent rise in sales volumes, the company said.
Michelin added that its efforts to increase the level of higher-value products in its sales mix were offset by growth in the lower value OE market. This effect was most marked in North America where the OE market for passenger car/light truck tires grew by 7.1, while replacement tire sales fell 2.9 percent.
In North America, the company's sales fell 4.8 percent in the quarter but still outperformed the market overall, Michelin said. The sales decline was magnified, Michelin said, because of the effects of the Ford Motor Co. recall of 13 million Firestone sport-utility vehicle tires a year ago.
This market anomaly resulted in a 21.7-percent industrywide drop in replacement SUV tire shipments in the quarter, and 11.6-percent for the nine months.
Michelin said it supplied more than 30 percent of the tires replaced in Ford's action—higher than its normal market share in this segment—meaning the effect on its sales were amplified even more.
Michelin's truck tire business in North America grew 4.3 percent in the quarter, but the growth must be viewed in perspective, as Michelin is still recapturing the “significant market share drop” it incurred in the first quarter of 2001, when it tried to hold the line on falling prices.
On the cost side, Michelin downplayed the impact of rises in raw materials costs, which represent 21.4 percent of its net sales. Despite a 75-percent rise in natural rubber prices—expressed in Singaporean dollars—Michelin said it paid only 15 percent more for the commodity over the first nine months of 2002.
Natural rubber represents 19 percent of the group's raw materials costs compared to synthetic rubber, 26 percent; and carbon black, 19 percent, Michelin noted. Price rises for the latter two materials will impact most on the group's results in the first half of 2003, the company said.