Raw Material Price Cuts Gave Michelin 318 million euros Tailwind in 2H
Financial analysts responded positively to the results, describing second-half 2009 financial position as a “major positive.” However, some key coverage decided against giving forward-looking outlook advice, citing fluctuating raw material costs (specifically natural rubber) as their reasoning.
Writing in an investor’s note dated 12 February, Morgan Stanley representatives commented: “Operating profit was 5 per cent better than consensus, but 3 per cent below our estimate…Net debt was significantly better than expected, ending 2009 at 3.05 billion euros versus our 3.5 billion euros estimate (consensus at 3.6 billion euros).”
This was said to have been driven by sharply lower capital expenditure (3.7 per cent of sales in the second half of 2009) and another 350 million euros from working capital the second half. However, while still equating to a 318 million euro tailwind, raw materials price decreases were reportedly less helpful than expected. Morgan Stanley had predicted 550 million euros of benefit. However, the analysts report that this was “partially offset by a full-year price mix that was better than expected at 797 million euros versus our 683 million euro estimate.
Car tyres surprised positively with a 9.6 per cent margin (Morgan Stanley had predicted 9.5%, consensus was 8.5%). Truck tyres result was less positively with a 3.9 per cent margin (Morgan Stanley had said 3.2% and consensus 3.5%). Specialty tyres underperformed expectations with a 7.9 per cent margin, almost two points lower than Morgan Stanley’s 9.6 per cent estimate and nearly half the consensus figure of 14.1 per cent).