PARIS (July 29, 2003) — Despite tough market conditions in its major European and North American markets, Group Michelin reported slightly improved operating profits for the first half of 2003 on better Asian and Latin American business and a richer product mix.
Sales volume increased 2.4 percent, but a strengthening euro/dollar exchange rate left sales revenue 6.1 percent behind 2002 at $8.21 billion. The operating income/sales ratio improved to 7.9 from 7.3 percent.
Net income fell 34.9 percent to $182.1 million due primarily to restructuring charges at Michelin's Spanish operations. Higher raw materials costs also ate into the profit margin.
Globally, Michelin reported a 9.1-percent drop in its passenger car/light truck tire business, to $4 billion, as replacement sales in North America fell 3.9 percent shy of the 2002 volume and European sales lagged the overall market increase, the company said.
Michelin attributed its sales decline in North America in part to the skewed comparison with 2002's first half, when shipments were artificially high because of Ford Motor Co.'s replacement program for 13 million Firestone tires on customers' Explorer sport-utility vehicles (SUVs); Michelin supplied “in excess of 30 percent” of these tires.
Michelin also attributed part of the revenue decline to a resurgent consumer demand for “value” brands and away from a preference for “premium” brands that surfaced in the wake of the Firestone recalls of 2000/2001.
“Consistent with (our) expectations,” Michelin said, “…customers are now progressively returning to their initial buying patterns. This phenomenon is temporarily amplified by a greater price sensitivity, as consumers are worried by the current uncertainties prevailing in the American economy.”
On the original equipment side, Michelin said it gained market share and improved its product mix with more performance and SUV fitments.
Replacement truck tire sales in North America were up 8 percent over the 2002 period, but the volume was still less than that shipped in 2000, Michelin noted. OE truck tire sales were down slightly.
Michelin gave no specific guidance for the second half of 2003, other than to say it would “continue to improve its performances and global competitiveness” based on “stable” tire markets and raw material costs.