The French tire giant Michelin has announced its financial results for the first nine months of 2020 and for the July to September 2020 quarter. After falling steeply in the second quarter due to the global coronavirus pandemic, tire demand around the world rose more strongly than expected in the third quarter of this year, the tire manufacture said.
Michelin announced sales of 15 billion euro ($17.7 billion) for the first nine months of 2020, down 15% at constant exchange rates, with a fall of 5% in the third quarter reflecting an upturn in business.
Demand for passenger car and light truck tires fell by 17% over the January to September period, with a 6% fall in the July to September quarter, demonstrating a strong quarter-on-quarter upturn.
Demand for truck tires declined by 14% during the first nine months of this year, with strong OE demand in China limiting the decline to 6% during the third quarter.
Regarding specialty businesses, the Clermont-Ferrand company says markets remained in line with trends seen during the first half of 2020, with the recovery in Agricultural tire sales and the rebound in the Two-Wheel segment balancing out a slowdown in the Mining business, which felt the effects of the COVID-19 crisis with a lag of a few months.
Michelin said that over the first nine months of 2020, tire sales were down by 16.8%, compared to the same period of 2019 (of which a 1.7% decline from the currency effect). This decline was due to various factors, including a 17% fall in volumes, despite a stronger-than-expected third quarter, which saw volumes decline by 6.7%. While the Automotive (OE and Replacement) and Specialty businesses segments gained market share, the Road Transportation business was impacted by an unfavorable geographic mix. The 1.7% improvement in the price-mix, attributable to the strength of the Michelin brand in a crisis environment and the continued market share gains in the 18-inch and larger tire market, also factored in. The company cited its disciplined price management, notably in response to declines in certain currencies, which offset the negative impact of raw materials-based price indexation clauses, while the 0.3% increase from changes in the scope of consolidation also played a role.
Michelin’s financial strength enabled the refinancing of its syndicated credit line and having it raised to 2.5 billion euro ($2.96 billion). The actual cost will depend directly on the company’s ability to meet environmental and social objectives, confirming its commitment to “All Sustainable” growth.
Managing Chairman Mr. Florent Menegaux emphasized Michelin’s determination to consolidate its leadership in the tire businesses by becoming more structurally competitive while also investing in emerging industries, such as hydrogen mobility and biomaterials.
In its outlook for the full year 2020, the French tire major noted that given the still highly uncertain environment, and taking into account the recent change in tire demand, it expects Passenger car and Light truck tire markets to fall by 13% to 15% over the year, Truck tire markets by between 12% and 14% and the Specialty markets by 15% to 19%.
With these new forecasts and the cost reductions linked to the circumstances, the company is upwardly revising its guidance for 2020, with segment operating income in excess of 1.6 billion euro ($1.89 billion) at constant exchange rates and structural free cash flow in excess of 1.2 billion euro ($1.42 billion), barring any new systemic effect and restrictions on freedom of movement due to the coronavirus pandemic.