Some tire manufacturers finished a tough 2002 profitably, and in some cases, exceeded earnings expectations.
Group Michelin was one such company, propelled largely by cost-cutting measures done in Europe and North America. Sumitomo Rubber Industries Ltd. returned to profitability with increased sales in Japan.
Nokian Tyres P.L.C. also enjoyed improved net earnings thanks to improved tire sales in North America. Meanwhile, Pirelli S.p.A. struggled with declines from its cable business.
Group Michelin reported double-digit gains in both operating and net earnings last year, exceeding the company's-and the financial community's-expectations.
Michelin specifically cited the cuts in operating costs achieved in Europe and North America in the past two years for the gain in operating profit, to $1.16 billion, or 7.8 percent of sales.
Net income nearly doubled to $579.2 million, or 3.9 percent of sales, in part because of gains on the sale of some distribution centers in the U.S. and Canada and of the Scottsville, Va., tire cord facility.
In addition, the company said it increased its free cash flow and was able to fund its respective employee pension funds adequately.
Michelin expects fiscal 2003 to be an improvement over 2002, but, citing uncertainties in the marketplace, the company declined to make specific predictions for the current year. Among the uncertainties cited are upwardly fluctuating raw materials costs, a softening U.S. dollar and rising operating costs such as transportation, energy and health care.
``We anticipate 2003 will be a year of uncertainties,'' said Michelin Chairman Edouard Michelin in Paris during the presentation of the firm's fiscal 2002 results.
``In such circumstances, we have to firmly hold our course and pursue the implementation of our strategy. The 2002 results comfort us in our intention to further improve our performance in 2003.''
Despite uncertain trends in the global economy and rising raw material prices, Nokian Tyres P.L.C. has set its sights this year on outperforming its 2002 net sales and profits, which were 13.2 percent and 29.5 percent ahead of 2001, respectively.
To do so, Nokian said it intends to focus on expanding its profitable winter and forestry tire product lines along with increasing its business presence in Eastern Europe and Russia.
For 2002, pre-tax earnings rose to $45.3 million while sales improved to $452.1 million, in part due to 27-percent growth in North America.
In 2003, Nokian anticipates added sales volume from off-take manufacturing agreements with Slovakia's Matador A.S. (100,000 units) and Russia's Amtel Holding Co. (900,000 units).
Nokian has budgeted nearly $50 million in investments this year, about double that spent in 2002, for overall improvements, new molds and the joint venture and off-take agreements, the company said.
Growth in the tire business during 2002 cushioned Pirelli S.p.A. from declines in its telecommunications and energy cables activities, the group's preliminary annual results show.
Pirelli's tire unit posted sales of $2.69 billion-about 9 percent higher than in 2001-while tire sector profitability posted strong growth, the company said without disclosing specifics.
By contrast, Pirelli reported a 10-percent dip in its Energy Cables and Systems sector and a massive 59-percent fall in Telecom Cables and Systems sector sales.
For the group as a whole, Pirelli reported consolidated pre-tax earnings down 60 percent to $110 million, on sales of $5.94 billion-11 percent lower than in 2001.
Sumitomo Rubber Industries Ltd. returned to the black last year, posting $65.8 million in net income on a 3.1-percent increase in sales, to $3.58 billion.
The sales increase was aided in large part by a 53.2-percent jump in export sales to North America.
The company, which markets the Sumitomo, Falken and Ohtsu brands in North America, reported a 40.6-percent gain in operating earnings, to $253.5 million, on a 27-percent improvement in Japan and a drastic reduction in losses by its overseas operations, Sumitomo said.
Sales in North America-which include some sporting goods revenue in addition to the tire business-grew to $290.5 million, and now represent 8.1 percent of Sumitomo's global revenues.
Sumitomo's tire sales increased 4.6 percent, to $2.64 billion, and operating earnings improved 16 percent to $224.6 million.