PARIS — Group Michelin is forecasting a slight drop in earnings for fiscal 2020 after reporting strong fiscal 2019 sales and profitability, despite what the firm described as "a deteriorated environment and shrinking markets."
Michelin's forecast takes into account negative outlooks for original equipment demand in both the consumer and commercial sectors worldwide, Michelin CFO Yves Chapot told analysts during the firm's fiscal earnings conference call earlier this month.
For the year ended Dec. 31, Michelin reported 8.4% and 4.2% improvement in operating and net income to $3.37 billion and $1.94 billion, respectively, on 9.6% higher sales of $26.9 billion. Michelin cited gains associated with recent acquisition for helping improve the operating income.
The company said its performance was enhanced by "tight production management," which included $125 million in reduced inventories at constant scope of consolidation.
While volumes were down 1.2%, Michelin said the price/mix effect and lower raw materials costs added over $360 million to the bottom line.
"In a highly unstable environment, Michelin successfully maintained its market share and improved its earnings," Florent Menegaux, managing chairman, said.
Net sales of passenger/light truck tires rose 5% to $13.2 billion over the course of 2019, despite volume declines in "steeply falling markets."
Global demand volume for OE passenger and light truck tires declined 6%, although signs of improvement were observed in China where the company registered 1% growth in the final quarter of the year.
Replacement volumes for the segment, Michelin said, are "trending upwards" in North America, led by imports, and declining in Europe, due to structural inventory adjustments and a warm winter.
The market for replacement passenger car tires remained robust in China, with a 4% growth.
In the truck and bus segment, sales were up 1% year-on-year to $7.17 billion, while OE volumes fell in every region; North America posting a "faster drop" in the final quarter of the year.
Replacement volumes also registered a "steep plunge" in North America, mainly due to imports. The European market, Michelin said, was lifted by imports.
Michelin's specialties segment, which includes mining, off-road, aircraft and two-wheeler tires, continued strong performance with a 35% increase in sales to $6.46 billion, aided by the addition of Camso starting in mid-2018.
Overall volumes remained flat for the segment despite a 3% increase in demand in the mining sector.
Off-road volumes saw a sharp fall in OE demand in construction and farm tires, while the replacement market was down slightly due to "unfavorable weather conditions."
Michelin did not disclose a specific sales/revenue forecast for 2020, but did share its expectations for the various markets: consumer OE down 3%; consumer replacement stable; commercial down 2%-3% (based on OE being down, but replacement up); declining demand in the mining sector due to inventory adjustment; and a deep drop in OE demand on the agricultural and industrials sectors.