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April 23, 2013 02:00 AM

Weak market demand contributes to Michelin sales slide

Tire Business Report
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    PARIS—Michelin reported an 8.1-percent falloff in first quarter sales to $6.34 billion as weak market demand in Europe and North America offset gains in developing regions, and the firm encountered deteriorating price/mix effects.

    Michelin, which didn't report its earnings—although it said it expects to report "stable operating income" for the year—attributed more than half of the decline to lower volumes and about a third to a shift in the price/mix effect. An appreciating euro also contributed to the decline.

    Michelin said falling raw materials prices is helping its earnings.

    Sales in all three reporting segments declined, Michelin said.

    Sales in the passenger/light truck tire and related distribution unit dropped 6.5 percent to $3.36 billion; truck tires and related distribution's sales fell 7.9 percent to $1.92 billion; and specialty businesses' sales plunged 13 percent to $1.06 billion.

    In the passenger/light truck tire business, replacement and original equipment unit sales dropped 2 and 1 percent, respectively, Michelin said, with gains in Asia and South America offset by declines in Europe and North America. Michelin cited a prolonged winter season in Europe for delaying the traditional winter-to-summer tire changeover as well as a steep increase in Asian imports in the U.S.

    The truck tire business reported no change in replacement units sold and a 1-percent drop in OE units shipped. Business was up in Europe, led by surging demand in Eastern Europe, and South America, where customs barriers throughout the region are easing.

    Michelin blamed sharply falling OE demand in Europe and North America, along with weaker demand generally for tires used in infrastructure and quarries in mature markets for the specialty tires segment sales drop.

    Commenting on the rest of fiscal 2013, Michelin said it expects falling raw materials prices to have a favorable impact on full-year operating income of about $715 million, which should more than offset the expected price-mix impact of $390 million.

    Michelin has budgeted $2.6 billion in capital expenditures this year to support its ambitious growth objectives by adding new production capacity in new markets, improving competitiveness in mature markets and driving technological innovation.

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