Michelin claims strategic validation in 2011 financial report
Michelin announced its full financial year report for 2011 today, its board claiming a vindication of its strategy in the process. The company produced “extraordinary results” according to chief financial officer Marc Henry, who presented the results in a conference call with managing partners, Michel Rollier and Jean-Dominique Senard. Alongside increased sales volume (up 6.7 per cent) and a 39 per cent increase in net income, the manufacturer’s management set its sights on a 2.5 billion euro profit goal by 2015. Michelin said it would capitalise on its competitive strength in speciality tyres, including “world leadership” of the earthmover segment and European leader in Agricultural tyres, with a new 40,000-tonne EMOTR plant in the near future, though a location has yet to be decided. Rollier also announced details of the completion of Senard’s succession, announced last year and due to be completed at the Annual Meeting on 11 May.
In the company’s financial statement, Michelin said its net income had increased 39 per cent to 1.462 billion euros in 2011 from 2010’s 1.049 billion. Analysts had predicted net income to be around 1.32 billion. Its overall net sales hit 20.719 billion euros, up 16 per cent from 2012’s 17.891 billion. Michelin said it had combated the “volatility of the market” and the “huge impact” of rising raw materials prices successfully, allowing it “fully” to absorb the additional coasts. The price hikes the company introduced on products last year, while maintaining sales volumes, allowed Michelin to increase its earnings above the extra 1.75 billion euro raw materials costs. It predicts 2012 raw materials costs will eat into 2012 earnings by 300-350 million euros.
During the conference call, the company’s representatives said that the “extraordinary results” had come on the back of continued strength in the premium tyre segment, with around 70 per cent of production carrying the Michelin brand name. In addition to this fact, increasing original equipment sales to truck manufacturers in Europe and USA have increased by over a third and a half respectively, while US vehicle manufacturers continued to show signs of strong recovery in the passenger car segment too towards the end of 2011.
However, with raw materials taking a chunk out of the margins in these two segments, Michelin’s management explained that the company’s specialty tyre operations – including earthmover, agricultural and aircraft – had increased their profitability sharply during 2011. While European (including Russia and Turkey) and North American demand continued to rise, the company has plans for continued growth in specialty tyres around the world’s emerging economies, where “double-digit growth” was “led by strong demand for ore, oil and gas”.