PARIS-Groupe Michelin is banking on its expanding global presence to help offset slowing sales growth in North America and Europe in its drive to improve profitability and reduce indebtedness. The company reported a 117-percent rise in net profits for fiscal 1995, to $604.3 million, while sales fell slightly to $13.5 billion, primarily because of unfavorable currency translation swings. The pretax ``trading profit'' rose 19.9 percent from 1994 to $1.16 billion.
Michelin's earnings were slightly higher than analysts anticipated. The market reacted with a measurable boost in the share price, which is considered undervalued by the financial community. Barclays de Zoete Wedd is forecasting further earnings growth in 1996 and 1997 that would push the earnings/sales ratio to nearly 6 percent from 4.5 percent last year.
When translation differences are factored out, Michelin said, sales rose 6.2 percent, reflecting a double-digit swing in the value of the French franc vs. the U.S. dollar. Sales volume advanced 0.6 percent to a record level, the company said, without specifying the tonnage or units sold. This figure increased 4.2 percent after the first half, reflecting the second half slowdown.
Average selling prices climbed 5.6 percent throughout the year, partly through price increases instituted to offset higher raw materials prices and through increased sales of higher-margin performance tires, Michelin said. The company had some difficulty meeting demand in the first half of the year, particularly for truck tires, but brought supply into line with demand in the second half.
Based on historical reporting trends, Michelin will retain the crown as the world's largest tire maker, although the gap with No. 2 Bridgestone Corp. narrowed.
``Business activity in the world tire markets in 1996 should, overall, be at a slightly higher level than last year,'' Michelin said, taking into consideration a slowing of business activity in its two largest markets, Europe and North America.
``In these conditions of modest growth, Michelin should maintain the pattern it has established in the two previous years: continuing to reduce costs and indebtedness, improving profitability and its financial position,'' the firm said.
Michelin increased capital investments 48 percent last year to $632.2 million, with the acquisition of Poland's Stomil-Olsztyn S.A. accounting for the bulk of the increase.
Ordinary cash flow stood at $1.47 billion, or nearly 11 percent of sales. This figure was inflated measurably by the decision to take care of an underfunded pension liability in North America, which called for a one-time payment of $380 million.
The managing partners are recommending payments of about 55 or 57 cents per share, depending on the type of share.