Michelin Net Profits Slip
The Michelin Group’s turnover rose to 13.76 bn Euros (1998: 12.48 bn Euros).
Business in the USA was excellent and also good in developing areas such as Asia and Latin America. The EBIT of 154,4 million Euros is because of a provision for restructuring costs of 353 m Euros. Investments totalled 1.
13 bn Euros – around 8% of sales – mainly for a C3M plant in Brazil, more production capacity of commercial tyres in Europe and more production capacity for high performance tyres. Edouard Michelin sounds very optimistic; he is expecting an increase in sales this year of 4% and an increase in operating profit of around 10%. Analysts point out that the group faced an increase in debts last year of more than 1 bn Euros and there is doubt whether Michelin will be able to win a higher market share in Europe.
The group would have to lower prices but would have to cover increased raw material costs (rubber, oil, carbon black) at the same time. Most analysts do not recommend the shares now, but advise people to wait a little bit longer..