PARIS (Feb. 13, 2009)— Michelin suffered double-digit drops in operating and net income last year primarily because of the increased costs of raw materials, energy and transportation and declining sales in the fourth quarter.
Anticipating continued low demand through the first half, Michelin has slashed its capital investment budget and will focus short term on manufacturing flexibility, inventory management and cash management.
For the year, Michelin's pre-tax operating income fell 44.1 percent to $1.35 billion and net income plunged 53.8 percent to $522.7 million. Sales were off 2.7 percent to $24 billion; sales volume fell 16 percent in the fourth quarter as a result of the steep fall-off in demand.
Tire markets will remain well below prior-year levels in the first half, before firming up as replacement market inventories are replenished and business activity begins to recover, Michelin said.
In addition to the higher raw materials and energy/transportation costs—up $1.18 billion and $240 million, respectively, over 2007—Michelin incurred more than $325 million in one-time expenses related to temporary idling of manufacturing capacity, primarily in the fourth quarter.
Michelin said sales volumes in passenger/light truck tires declined “sharply,” but at the same time the firm claimed market share gains for the Michelin brand in all regions. Sales were down 4.1 percent to $12.7 billion.
Truck tire sales volumes were down slightly, with share gains reported in Asia and North America. Sales fell 3.6 percent to $7.95 billion.
Business in specialty tires (OTR, motorcycle, agricultural, etc.) was up in all segments, although original equipment demand fell off in the fourth quarter. Sales grew 5.5 percent to $3.38 billion.
Michelin said business in North America represented 31 percent of global sales, or $7.45 billion.