MICHELIN sees rising sales, profit in 2011

French tyremaker Michelin sees sales volume and profit rising again in 2011 after
sharp improvements in 2010, as it hikes prices to offset rising raw material costs.
Michelin said on Friday (February 11) rising raw material costs would have a 1.5
billion euros ($2 billion) impact on operating income in 2011, but 75 percent of
that was offset by price increases already announced or implemented.
The tyremaker, which last year suffered a 544 million euro hit from raw material
price rises, had on Wednesday (February 9) said it would increase European tyre
prices by between 4 and 7.5 percent.
Michelin shares were up 0.7 percent higher by 0900 GMT, outpacing a 0.5
percent drop in European auto stocks.
Michelin said it aimed to boost unit sales by at least 6.5 percent in 2011 and
expected operating income to increase this year, "barring any major change in
the economic environment".
Managing Partner Jean-Dominique Senard, lined up to take over from Chief
Executive Michel Rollier when he leaves in the next few years, told a news
conference it was "entirely possible" rubber prices could fall in the second half of
2011.
"It's a possibility that might seem far-fetched today, but I urge you not to dismiss
it out of hand," he said.
Longer-term, new rubber producing capacity coming on stream would help to
calm rising prices, Senard said.
JP Morgan analyst Ranjit Unnithan pointed to a "mixed outlook" for Michelin in a
note, saying: "We suspect that if raw material prices continue to increase another
round of price increase would be required".
PRICE HIKES
Michelin's raw material impact forecast for the year is based on an average price
of $4.8/kg for natural rubber.
Rubber futures have recently spiked to record highs.
Nomura analyst Alexis Albert judged Michelin's outlook "realistic and cautious",
although better-than-expected results were more due to greater volumes,
currency effects and cost-cuts than the impact of price hikes in the second half,
he added.
Michelin, which competes with Japan's Bridgestone, said free cash flow would be
"temporarily negative" in 2011 because of capital expenditure and raw material
costs, but confirmed a target of positive free cash flow for 2011-2015.
Full-year net profit reached 1.05 billion euros ($1.4 billion), compared with 106
million in 2009, beating a Thomson Reuters I/B/E/S forecast of 938 million.
Operating income rose to 1.70 billion euros, leaving an operating margin of 9.5
percent, compared with 862 million last year and an I/B/E/S forecast of 1.59
billion.
Full-year revenue rose 20.8 percent to 17.9 billion euros.
Michelin said it was preparing the succession of Rollier, who turns 67 later this
year and intends to leave before the end of his mandate, which runs out when he
is 72.
Senard, who will take over from Rollier, will, in the meantime, have his functions
augmented to work in parallel with Rollier. "There will be a reasonable transition
period -- a year or two years for example, Rollier said.
Senard, 58, joined Michelin as chief financial officer in 2005 having previously
worked for Total, Saint-Gobain and Pechiney.
Michelin is run by a team of three managing partners -- Rollier, Senard and
Didier Miraton -- one of whom, currently Rollier, normally has the role of chief
executive.
Michelin also plans to change its corporate governance structure, bringing it
closer to that of other big companies. Managing partners' terms of office will in
future be limited to a renewable four years, while the supervisory board will take
on a greater role, approving salaries for future managing partners as well as their
removal or re-election.
(Reuters, February 11, 2011)