Michelin reports strong profits in 2010

Michelin reports strong profits in 2010
11 February 2011

Paris -- Michelin has reported strong growth in sales and profits for the 12 months ended December 2010. The company demonstrates its confidence int he recovery by committing euro 1600 million to capital projects in 2011, sending its cashflow temporarily negativethis year.

Net sales jumped by over 20 percent to euro 17 891 million from euro 14 807 million. Operating income doubled to euro 1695 million from euro 862 million, raising the operating margin to 9.5 percent, compared with 5.8 percent a year ago.

Net income increased 10-fold, to euro 1049 million, compared with euro 104 million a year ago. Debt also fell sharply, with gearing falling to 20 percent, rather than 53 percent a year ago.

In the consumer tyre segment, Michelin said original equipment markets rebounded more quickly than expected but remained below 2007 levels in Europe and North America. In Asia, the 33% expansion in the Chinese market was sustained by ongoing strong demand for motor vehicles, while growth in the Japanese and South Korean markets was export-driven.

The unit improved margins significantly reporting operating income of euro 1014 million on sales of 9790 million, bringing operating margins to 10.4 perent from 8.0 percent. The company said the increase in margins was due to a sharp rise in volumes, especially in winter tires, and an amply positive price-mix in the face of higher raw materials costs and the improvement in manufacturing costs at a time of high capacity utilization.

Iin the truck tyre segment, Michelin reversed last year's loss, with sales amounting to €5,680 million for the year, up 26.3% on 2009. Sales volumes rose sharply against the previous year, especially toward the end of tthe year. This growth, said Michelin, led to certain supply issues in mature markets. Despite an unfavorable OE/replacement market mix, the price-mix improved quarter after quarter, thanks to the gradual application of price increases to pass on rising raw materials prices.,

At a time of sharply rising raw materials costs, operating income before nonrecurring income and expenses came to €249 million, compared with a loss of euro 69 million reported in 2009, thanks to higher volumes, the segment’s improved competitiveness and the responsive pricing policy.

Net sales from the Specialty Businesses came to €2,421 million, a gain of 19.2% on 2009. Growth was led by Michelin’s powerful momentum in every tire market, as well as by the application of contractual clauses indexing prices to raw materials costs.

Operating margin before non-recurring income and expenses stood at a structurally high 17.8%, compared with 13.3% in 2009. The improvement was due to i) the increase in tonnages sold in each of the Specialty tire businesses, with a significant contribution from the Earthmover segment and ii) the favorable impact in the second half of the increase in prices indexed to raw materials costs.

Michelin noted the dramatic increase in natural rubber prices, saying The full-year impact of raw materials costs on operating income is estimated at €1,500 million, assuming Michelin’s cost of natural rubber averages $4.8/kg. €850 million of this additional raw materials cost has already been offset by the fullyear impact of the 2010 price increases and the 2011 implementation of the raw materials-based price indexation clauses. The new price increases already announced in 2011 are designed to cover €300 million.