BRDCY Bridgestone Corp (PK)

French tire maker Michelin (ML.FR) reported Wednesday an 11% increase in third-quarter revenue thanks to a 9.3% rise in sales volume in expanding markets, and to its aggressive policy of passing on to customers its increased raw materials costs.

Revenue for the three months ended Sept. 30 came in at EUR5.14 billion, up from EUR4.65 billion a year earlier, and was below an average estimate of EUR5.21 billion compiled from a company survey of 12 analysts. Sales for the first nine months were 17% higher at EUR15.25 billion.

Michelin reaffirmed that it expects sales volume to rise by 8% this year, and said it expects "substantially higher" operating profit in 2011 compared with 2010. That was a more robust projection than Michelin's outlook in July, when it omitted the adverb and reaffirmed its objective of reporting "higher" operating income for 2011 than the EUR1.7 billion reported for 2010.

Michelin managing partner Jean-Dominique Senard told analysts in a conference call that they shouldn't read anything into changes in language in the company's fiscal year guidance. "There's absolutely nothing to be changed compared to what we've been saying since July," he said.

The company had said in July it expected rising raw material prices to exert a drag of EUR1.8 billion in 2011, but said most of that pain would be passed on to customers through price increases. It said then that free cash flow for the full year would be "temporarily negative" in 2011 due to a EUR400 million-EUR500 million impact on working capital requirements from the raw materials effect, as well as an accelerated capital spending program as the company races to expand capacity in fast-growing emerging markets.

On Wednesday, Michelin reaffirmed this full-year cash flow guidance, and repeated the EUR1.8 billion raw material impact estimate in the conference call. The company has a medium-term objective of generating positive cash flow between 2011 and 2015.

Senard said Michelin expects the growth rate of global tire market volumes to moderate to a long-term annual pace of between 4% and 5% in 2012.

Michelin commented that markets expanded at a slower pace in the third quarter than earlier this year. It noted that, in line with slowing economic activity, tire markets--especially the truck tire segment--had turned downwards over the summer. Fourth-quarter replacement tire sales in Europe will depend on winter tire sales to end-customers it said, while the outlook for truck tire sales is uncertain, especially in Europe. However, demand for specialty tires is expected to remain very buoyant, it said.

Michelin, which vies with Japan's Bridgestone Corp (5108.TO) for the top spot among the world's tire makers, said exchange rate fluctuations had exerted a EUR228 million drag on revenue in the third quarter, chiefly due to the dollar's depreciation against the euro. For the first nine months currency movements shaved EUR378 million off revenue.

Valerie Magloire, head of investor relations, said on the conference call that Michelin expects its sales of original equipment and replacement tires in Thailand to be affected by the severe flooding there. "We of course will suffer," she said, and the company is expecting a negative impact on its sales to car manufacturers until the end of the year that could be "in the high double digits." Sales of replacement car and truck tires in Thailand could also be hit as well, she said. Michelin has five production facilities in Thailand, and two of them are in flood risk areas, she went on, adding that the company is shutting down some production at these plants.

Michelin's shares closed up 0.5% on Wednesday at EUR52.28, giving the company a market value of EUR9.36 billion, down 2.6% since Jan. 1.

-By David Pearson, Dow Jones Newswires; +331 4017 1740; david.pearson@dowjones.com

Bridgestone (PK) (USOTC:BRDCY)
Historical Stock Chart
From Dec 2024 to Jan 2025

Bridgestone (PK) (USOTC:BRDCY)
Historical Stock Chart
From Jan 2024 to Jan 2025