Group Michelin posted net income of 1.1 billion euros on net sales of 20.2 billion euros for its fiscal year ended Dec. 31, 2013. That compares to income of nearly 1.6 billion euros on sales of nearly 21.5 billion euros for fiscal 2012.
Based on the average exchange rate for 2013, Michelin recorded net income of $1.5 billion on net sales of $26.9 billion. The company’s income to sales ratio was 5.6% (compared to 7.3% in 2012).
Michelin’s operating income for fiscal 2013 was $2.2 billion euros, down 7.8% compared to 2012.
Profitability was hurt by an overall drop in demand for earthmover tires. “Demand for large mining tires rose slightly over the year, but fell sharply in the fourth quarter following inventory drawdowns by mining companies.
“Original equipment markets dropped precipitously in Europe and North America, dragged down by weak demand and deep manufacturer destocking, which is now coming to an end. Demand for tires used in infrastructure and quarries contracted noticeably in mature markets, particularly North America, due to lower equipment sales and sustained high dealer inventories (albeit tapering down at year-end).”
Here’s how Michelin performed segment by segment (in millions of euros).
Tires 2013 sales 2012 sales % chage
Consumer 10.7 11.1 down 3.6%
Truck 6.4 6.7 down 4.2%
Specialty 3.1 3.6 down 14%
Consumer tires: “Net sales in the passenger car and light truck tires and related distribution segment declined to 10,693 million euros from 11,098 million euros in 2012, due to the combined net impact of the pricing policy, the sustained improvement in the product mix and the slight 1% increase in volumes, all in an unfavorable currency environment. Lifted by the stronger performance by the Michelin brand, operating income before non-recurring items edged up to 1,086 million euros or 10.2% of net sales, compared with 1,033 million euros and 9.3% in 2012.”
Truck tires: “Net sales in the truck tires and related distribution segment stood at 6,425 million euros versus 6,736 million euros in 2012. The decline primarily reflected tight pricing management and the unfavorable currency effect at a time of modest volume growth (up 1%). Note, however, that volumes picked up in the final quarter, with a 5% gain. The focus on margins led to a significant improvement in operating income before non-recurring items, which rose to 503 million euros or 7.8% of net sales from 444 million euros or 6.6% the year before.
Specialty tires (earthmover, agricultural, two-wheel and aviation): “Net sales by the specialty businesses declined to 3,129 million euros from 3,640 million euros in 2012, due to price adjustments stemming from raw materials-based indexation clauses, the negative currency effect and the 7% fall-off in volumes caused by the contraction in the infrastructure and OE earthmover markets.”
Outlook for 2014
Michelin says tire demand is expected to continue expanding quickly in the new markets, while moving back in line with economic activity in the mature regions.
“In this environment, Michelin is committed to increasing its sales volumes by around 3% over the year, in line with growth in the global tire market. This performance will be driven by the successful launch of products like the Michelin Premier All Season or the Michelin X Multi range, the ongoing deployment of the premium strategy, the structural robustness of the specialty businesses, the Michilen’s brand’s stronger positions and the ramp-up of the new production plants.”
