Michelin 2010 market recovery ‘much stronger than envisioned’ – Senard
At the Michelin Annual Shareholders’ Meeting on May 13, the French manufacturer reported its position strengthened in every geography during 2010 and particularly in mature markets. “Last year at this same time we were observing how the exceptional crisis of 2009 had had an impact on our business,” observed Michelin managing general partner Jean-Dominique Senard. “I think that this year we need to admit that the 2010 context is different and it was a buoyant situation. We had a much stronger market recovery than we could have envisioned at the time.”
Globally, the passenger car and light truck original equipment market grew 25 per cent year-on-year in the 12 months to December 31, 2010, while the replacement market grew nine per cent. The European market, Senard noted, benefitted from a very strong winter market; the market for original equipment passenger car and light truck tyres in Europe and the CIS grew 15 per cent year-on-year, while the replacement market grew nine per cent. In North America the original equipment grew a very respectable 39 per cent year-on-year – 10 percentage points more than in Asia and 16 more than South America – while its replacement market grew a more modest four per cent.
Even stronger growth was observed in the global truck tyre market, which increased 33 per cent in the original equipment sector and 17 per cent in replacement. “Again the figures are astounding. Looking at Europe and North America, we can truly speak of a recovery,” Senard commented. The original equipment truck tyre market in Europe and the CIS shot up 54 per cent – the greatest increase in any region – while the replacement truck tyre market was up 24 per cent year-on-year. The North American OE and replacement truck tyre markets grew 25 and 20 per cent respectively, while growth of 26 and 13 per cent was recorded in Asia, 47 and 41 per cent in South America and eight and two per cent in Africa and the Middle East.
As for the off-road tyre market, Senard reported the trend in the earthmover tyre market continues to be an upwards one and the agricultural market, the last to emerge from the crisis, is also experiencing an upturn in demand with a 16.6 year-on-year growth.
This market growth translated to net sales of 17.891 billion euros, a year-on-year increase of 20.8 per cent. “If you look at the sales figures you see a +20 per cent increase in sales,” Senard commented. “And volume was very important here. The price-mix is an effect that illustrates how the Group is able to enhance the value of its products and its prices in the market.” Volume growth accounted for 13.4 per cent of the total increase, price-mix a further 1.7 per cent and currency 4.8 per cent.
Operating income, which was 1.695 billion euros, is said to have reached a historic high in 2010. “Here again you see the volume effect. Last year I was showing you more or less the same figures, but last year it was negative,” the managing general partner pointed out. Operating income was 1.695 billion euros in 2010, up from 450 million euros a year earlier, while operating margins for Michelin’s original equipment and aftermarket businesses came to 5.8 per cent and 9.5 per cent respectively. Net income during 2010 reached 1.049 billion euros, a year-on-year increase of 945 per cent.
During the meeting Senard confirmed Michelin’s aim of increasing its volumes 25 per cent by 2015 (giving an operating income in excess of 2 billion euros and a more than nine per cent return on capital) and 50 per cent by 2020. “These are not figures that have been pulled out of a hat,” he stated. “No, these are based on market growth and this is because of the successes registered.” The 2011 volume growth of more than 6.5 per cent projected at the start of the year may need to be changed “in a few weeks’ time,” he added.
Speaking about current Michelin projects, Senard assured that the company’s sites in Brazil, China and India, now under construction, will “come online on time.” Mature markets will also benefit from future investment: “Let us not forget the mature markets. Michelin as a group has constantly strived to maintain the production tool in mature countries. We have done this on a consistent basis and will continue to do so because growth does exist in the mature markets and we have to supply tyres to customers.” Investments in mature markets include $200 million for passenger car tyres at its Lexington, US factory plus in Cholet (France), Cuneo (Italy) and Valladolid (Spain).
Senard’s final comments to the assembled shareholders centred on the agreement signed with Double Coin regarding production of Warrior-brand tyres for the Chinese market. “The Warrior brand is in fact not a premium brand like Michelin,” he stated. “But we have to be present there because it will help us to increase our distribution network and guarantee us a market position in this country. If we succeed here, this will be a second step. This is not automatic, but this will obviously enable the Michelin strategy to continue to grow and guarantee the group’s survival on a long-term basis.”