Michelin: Pre-price rise buying drives Q1 sales
A desire to purchase before price increases took effect on 1 April buoyed sales of Michelin tyres during the first quarter of 2017. Increased sales volumes accounted for 7.3 per cent of the 9.9 per cent year-on-year rise in net sales during the period. Net sales amounted to €5.57 billion in the first three months of the year. While Michelin hasn’t published its operating result or margins for the quarter, it expressed a hope that margins will improve in the second half of the year.
Car and light truck tyres: The tyre maker reports that year-on-year sales volumes for its aftermarket passenger car and light truck tyres rose five per cent globally during the opening three months of the year, and demand for these products was “robust” in every region. Volumes in Europe (excluding Russia and CIS) rose five per cent. The original equipment market grew four per cent year-on-year, with volumes in Europe (excluding Russia and CIS) up five per cent. Net sales rose 10.5 per cent to €3.20 billion.
Truck tyres: Volumes of new original equipment and replacement truck tyres rose eight per cent during the quarter, with retread markets stabilising at a low level, particularly in Europe. Original equipment volumes increased nine per cent globally and in Europe (excluding Russia and CIS), while European replacement market growth of 13 per cent outstripped the eight per cent growth in volumes seen worldwide. First-quarter net sales amounted to €1.52 billion, up 6.1 per cent on a year earlier.
Specialty tyres: Net sales within the specialty businesses stood at €848 million in the first three months of 2017, up 14.9 per cent from the year-earlier period.
The mining tyre market saw a robust upturn as large accounts completed their inventory drawdowns, and original equipment demand also recovered in mature markets. The infrastructure and quarry tyre segments rose sharply, buoyed by early buying ahead of the price increases.
Sales volumes for original equipment agricultural tyres eased back slightly over the first quarter after dropping precipitously in second-half of 2016, but are expected to end 2017 more or less unchanged after a rebound in the second of the year. Replacement markets have been very volatile on the back of the announced price increases across the segment. Except for South America, where sugar prices are rising, the few favourable underlying factors seem to indicate that the market will remain stable over the full year.
Demand for two-wheel tyres in mature markets is being driven by early buying ahead of price increases, which means that it will likely cool in the months ahead and end the year relatively unchanged.
Within the commercial aircraft segment, demand for Michelin aviation tyres continued to grow, led by a rise in passenger traffic.
2017 guidance confirmed
Michelin states that tyre markets are expected to track the trends observed late in 2016 over the full year, in particular with the upturn in mining tyre sales. Early buying that took place ahead of price increases will concentrate most of Michelin’s growth within the first six months of the year, with the result being an improvement in margins in the second half of the year.
In order to hold unit margins firm in businesses not subject to indexation clauses in the face of higher raw materials costs, which according to current estimates will impact the company to the tune of €900 million over the full year, Michelin says it will “continue to agilely manage prices.” As part of this process, new price increases have been announced in certain markets.
For the full year, Michelin confirms its targets of volume growth in line with global market trends, operating income from recurring activities equal to or exceeding the 2016 figure at constant exchange rates, and structural free cash flow of more than €900 million. sg
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