Many tire industry companies reported profits and showed improved financial performance from last year during the first half of 2004.
Bridgestone Corp., Continental A.G., Group Michelin, Midas Inc., Nokian Tyres P.L.C., Pirelli S.p.A. and Titan International Inc. all reported net profits for the second quarter and the half-year mark. Yokohama Rubber Co. Ltd., operating on a fiscal year that ends March 31, reported income gains for the fiscal first quarter ended June 30 but expects earnings to fall for the first half.
Bridgestone Corp. has boosted its net profit forecast for fiscal 2004 by 39 percent, citing continued sales growth, improved tire prices and a better product mix.
Bridgestone increased its forecast despite a ``challenging business environment'' expected throughout the rest of 2004, company management said in a prepared statement. Bridgestone now expects in 2004 a net profit of about $945 million (4.4 percent of sales) instead of the $680 million forecast six months ago. The revised figure would be 17 percent better than the $800 million profit recorded last year.
For the six months ended June 30, Tokyo-based Bridgestone reported its net profits rose 64 percent to $482 million while operating profit grew 29 percent to $848 million, exceeding the firm's revised forecasts in May.
First-half sales rose 3.7 percent to $10.6 billion, aided by a 4-percent increase in tire sales mainly on healthy demand outside Japan. Bridgestone cited a product line more skewed to larger sizes and performance specifications as well as enhanced productivity for its improved results.
Bridgestone reported a seven-fold jump in operating income and a nine-fold surge in net earnings in its operations in the Americas, to $159 million and $102 million, respectively, on 12 percent better sales of $4.35 billion.
Unit sales improved in both consumer and commercial tires, the company reported, and business in Latin America was particularly strong. Sales are expected to remain strong throughout 2004, the tire maker said.
Sales jumped 10 and 14 percent in Europe and other regions, respectively, while sales in Japan were up only 1 percent.
Continental A.G. anticipates 2004 operating earnings and sales will exceed the 2003 fiscal performance, despite having to take up to $144 million in charges against earnings to cover the costs of phasing out tire production at its Mayfield, Ky., plant.
For the first half of 2004, Hanover, Germany-based Continental's operating earnings climbed 21.4 percent to $594.4 million on 9-percent better sales of $6.93 billion, pushing the earnings/sales ratio up nearly a point to 7.9 percent.
Sales of passenger and light truck tires grew 8.3 percent during the six-month period to $2.36 billion despite declining sales in North America. Globally, original equipment sales were up 14 percent, Conti said.
Despite a $121 million charge against earnings taken to cover the phase-out of production at Mayfield, the passenger/light truck tire division reported a slight gain in operating earnings, up 1.2 percent to $148.1 million.
The commercial vehicle division saw operating earnings rise 29.6 percent to $53.1 million while organic sales-i.e., excluding exchange rate effects of the consolidation of the Sime Darby tire assets acquired in Malaysia-rose 10 percent. Overall commercial division sales were $876 million, with growth coming primarily from Europe; OE shipments in North America were up 2 percent but replacement market sales fell.
Group Michelin's net income for the first half of 2004 nearly doubled from last year as the tire maker improved its market position in supportive tire markets.
Michelin reported net income of $403.6 million, up 98.8 percent from last year. Net sales rose 6.4 percent to $9.6 billion, while operating income was up 20.1 percent to $852.5 million, raising the earnings/sales ratio to 8.9 percent. Excluding the impact of currency fluctuations, net sales were up 10.4 percent, Michelin said.
Factors affecting sales included negative impacts of exchange rates and raw material costs, while positive impacts included higher sales volume, a better price/mix effect and consolidation of the newly acquired Viborg distribution business in Europe.
In North America, Michelin said it gained replacement share in a market that was up 5.3 percent yet is plagued by low consumer confidence, fuel price increases and a ``lagging'' sport-utility vehicle tire replacement market.
Michelin achieved its gains despite some capacity shortages in the SUV market. The tire maker added that price increases from February and July are sticking.
In truck tires, Michelin said it posted a ``strong'' first half in North America, outgaining the market in new tires and retreads. The company said it expects to add 10 Michelin Retread Technologies plants throughout the rest of 2004.
Itasca, Ill.-based Midas Inc. reported net income of $2.6 million in the second quarter, its first quarterly net income since the third quarter of 2002.
Last year, the automotive service chain reported a second quarter loss of $32.7 million.
``The significant progress Midas has made over the past 18 months and these positive results demonstrate that our plan to transform Midas into a profitable franchise retail business is working,'' said Alan Feldman, president and CEO.
Midas also said more than 750 of its nearly 1,900 shops are now selling tires from Bridgestone/Firestone.
Midas officially launched its tire program with the tire maker during the quarter. Only 73 of Midas' shops are company-owned; the rest are franchises.
For the quarter, Midas reported sales of $52 million, down from $77.9 million last year. Midas said the decline is the result of the company's exiting its parts distribution business. The company had a comparable shop sales increase of 1.4 percent.
For the first half of the year, Midas posted sales of $98.9 million, down from $152.4 million a year ago. Earnings for the half were at break-even vs. a net loss of $39.1 million last year.
Nokia, Finland-based Nokian Tyres P.L.C. posted double-digit gains in both earnings and sales in the first half of 2004, prompting the firm to forecast improved sales and earnings for the whole year.
Nokian credited strong sales in the U.S.-up 50 percent-Russia and the Nordic countries for a 29.1-percent increase in manufacturing-related revenues during the period; the company's distribution network posted lower gains.
Operating earnings of $36.2 million were 76.6 percent ahead of a year earlier, while sales advanced 18.9 percent to $307.7 million. As a result, the earnings/sales ratio improved nearly two full points to 11.7 percent. Net earnings in the half rose 144 percent to $24.5 million
The company attributed its improved profits to price increases, an improved sales mix and better productivity than in the previous year.
Nokian indicated the results could have been even better, stating that raw material prices increased from the previous year, and the low value of the dollar had a negative effect on the profitability of tires sold in the U.S.
Nokian cited increased demand for high-speed summer and winter tires, forestry and special tractor tires and tread rubber from Nordic retreaders.
The company said it broke ground in June on a $64 million plant in Russia that will be turning out 1.5 million car tires a year by 2006.
Milan, Italy-based Pirelli S.p.A. reported 33-percent better operating income in the first half of 2004 on 8.3-percent better sales, as the tire division provided the bulk of the earnings.
Operating profit from tires grew 19.4 percent to $189 million, while tire unit sales improved 9 percent to $2 billion.
The results Pirelli published were unaudited and, therefore, the firm did not offer much in the way of explanation. Further details will be released later.
Titan International Inc. reported net income of $5.64 million for the second quarter, up substantially from a net loss of $8.19 million last year.
Quincy, Ill.-based Titan also reported net sales of $121.2 million, compared with $131 million last year. Excluding Titan Europe P.L.C.'s sales from the previous quarter, this year's sales are an increase of 28.9 percent from $94 million in 2003.
In April Titan Europe was admitted to trading as a separate public company on London's AIM market. Titan is the largest stockholder in the new company, retaining a 30-percent interest.
For the first six months of the year, Titan reported sales of $288.2 million, up from $260 million last year. Net income also rose to $10.9 million from a loss of $14.1 million in 2003.
``The first half of 2004 has shown solid progress for Titan, and the strength of our order book is evidence of our customers' preference for Titan products,'' said Maurice Taylor Jr., president and CEO. ``This was the right time to secure Titan's refinancing and position the company to take advantage of growth opportunities. The outlook through 2005 is positive, and Titan is prepared to meet these challenges.''
Recently, Titan secured a new $100 million revolving credit facility, terminating the former revolver and loan agreements. The company also sold 5.25-percent convertible senior unsecured notes due in 2009 for $115 million principal amount.
Yokohama Rubber Co. Ltd. reported a 7.5-percent jump in overall net sales as revenue in the Tire Group rose 8.6 percent for the fiscal first quarter ended June 30.
Yokohama's sales grew to $821.9 million in the quarter. Operating income was up 11.8 percent to $29.7 million, and net income rose 59.3 percent to $8.9 million.
In the Tire Group, sales hit $599.9 million as operating income increased 34.2 percent to $29.6 million. Yokohama said Tire Group sales were favorable mainly in Europe, Asia and North America.
For the first half of the fiscal year ending Sept. 30, Yokohama expects sales to rise 2.2 percent from the previous year while net income is expected to fall 66.4 percent.