Michelin Sales ‘Stabilise’
Michelin has released fist quarter results that show the company’s net sales have “stabilised” in value terms. The weakening dollar is said to have contributed to the 0.2 per cent drop in sales to 3.61 billion euros against the same period last year.
At the same time Michelin reports that it experienced a strong 5.1 per cent increase in its price/mix effect against a 3.9 per cent decline in volumes, compared with the first quarter of 2004. Michelin explained that lower volumes were mainly due to European markets being below the “exceptional levels” of 2004.
According to the company, the strong price mix improvement offers evidence that the price increases passed in Spring and Autumn of 2004 and in the first quarter of 2005, are taking effect. Deutsche Bank analysts agree and report that the price/mix effect is more important than the volume effect because “100 per cent of the price/mix effect of the top line goes to the bottom line.” This is expected to fully offset the negative effects of increased raw material prices.
Overall, the analysts maintain that first half operating profit could be flat (10 per cent above consensus). Furthermore, the progressive retirement of 24,000 people in Western Europe (17,000) and in North America (7,000) is predicted to have a “significant positive impact on the bottom line.”
For now Michelin’s management is looking forward to re-attaining its natural growth, after what it calls a “rather unique quarter.”