Michelin sales contract 20.6% in first half of 2020
Michelin sales contracted more than 20 per cent in the first half of 2020 due to coronavirus affected markets. The 20.6 per cent contraction in sales resulted in an operating result of 310 million euros – 3.3 per cent of sales – 78.5 per cent less than in 2019 (1,438 billion euros). Volumes fell by 22.4 per cent. Operating income went from 1.381 billion to 177 million euros, while net income fell from 844 million to a loss of 137 million, with earnings per share going from 4.74 euros to a loss of 0.75 euros.
Despite all this, ratings agencies show Michelin’s financial position is solid, and there is some other good news too. Michelin managed to achieve a 0.3 per cent improvement in operating profit thanks to the pricing policy, at a time of falling commodity prices, and a 1.6 per cent gain from the price mix, which reflects the improvement market share in the 18-inch segment and resilience in special segments. The exchange rate effect was negative for 0.5 per cent, while there was a positive impact of 0.4 per cent deriving from the changes in the consolidation area, following the acquisitions of Masternaut and Multistrada in 2019 and the transfer of Bookatable.
Florent Menegaux, CEO, said: “After these unprecedented months of crisis, I want to express my immense pride in the remarkable commitment of our teams, which has allowed Michelin to fulfill its commitments towards its customers, of its communities and partners. With this same determination, the Group has taken all the necessary measures to ensure the sustainability of its operations and to mitigate the financial impact caused by the economic slowdown. In this still very uncertain context, the Group pursues its competitiveness initiatives to maintain its leadership in the tire sector and guide the spread of its growth strategy.”
Following the first half of the year characterised by the restriction of movement and other effects of the coronavirus pandemic, Michelin expects that global demand in the second half of 2020 will be affected by economic recession. It expects passenger car and light truck tyre markets to decrease by between 15 and 20 per cent over the year and the truck tyre market between 13 and 17 per cent. In speciality tyre markets, noting that certain sectors have been more resilient than others, Michelin expects contraction of a similar order between 13 and 17 per cent.
Michelin adds that the market remains very uncertain, saying that its current objectives are to obtain a segment operating result for the whole year of 1.2 billion euros given constant exchange rates, and a structural free cash flow of over 500 million euros, notwithstanding fresh impacts due to Covid-19.