Research, Charts & Company Announcements
Research Tree provides access to ongoing research coverage, media content and regulatory news on MICHELIN (CGDE). We currently have 9 research reports from 1 professional analysts.
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We are too optimistic for 2016
20 Oct 16
Instead of a marginal revenue growth of 1% to €5.35bn, Michelin’s sales fell by another 2.4% to €5.18bn and the ytd number now stands at €15.47bn (-2.1%). To reach our full-year projection of €21.18bn, Q4 revenue needs to increase by almost 6% to €5.7bn. This is probably unrealistic.
Superb operating profits in a toughening environment
26 Jul 16
Consolidated revenue fell by 4.5% to €5.23bn in Q2 16 which brought the H1 number to €10.29bn, a decrease of 2.0%. In spite of this, H1 EBIT increased by 11% to just above €1.4bn. Michelin’s revenue number is lower than our expectation (€10.7bn) whereas the profit number is higher (€1.26bn). However, we had expected a significantly higher net profit number of €853m whereas the company’s number is only €769m. We need to see the accounts before we can make a judgment on this discrepancy.
Michelin builds its 21st North American factory in Mexico
04 Jul 16
Construction will begin in the current half year and is expected to be finalised in late 2018. First tyre deliveries will commence in Q4 18. The plant will have an initial capacity of four to five million high-end tyres for both passenger cars and light trucks. Clients will overwhelmingly be the OEMs which produce in Mexico. Michelin currently operates 68 tyre production plants around the world, i.e. North America makes up around 30% of the plants and Asia another 20%.
Cost reduction programme is increased
06 Jun 16
Management now expects being in a position to reduce annual costs by up to €1.2bn from 2017 to 2020. However, this number is not an annual cost saving number but an accumulated one, i.e. annual costs are believed to being reduced by another €300m or a good 1% of annual turnover. Management intends not to replace some of the retiring employees. In addition, lower inventories are believed to reduce costs by some €250m and lower other costs contribute another €200m. Finally, raw material costs are believed to fall by between €150m and €200m as a result of the ongoing optimisation process and the trend for lighter tyres. However, the latter will also reduce the ASP and, hence, revenue. The ongoing cost reduction programme concentrates on capacity expansion in Asia, North and South America. A growing proportion of production goes to plants that are already producing over 100,000 tyres a year. Finally, unit investment costs can be reduced by up to 30%, i.e. capex will fall in relative terms. As long as replacement tyre prices do not come under pressure, Michelin’s profit margin is expected to benefit from this. However, first indications from other market participants (i.e. Nokian Renkaat) suggest, that some price pressure has emerged during the course of 2015. For the time being, we do not see this trend intensifying as replacement tyre demand for both car and truck tyres is still good and growing. However, the situation is clearly different for truck tyres from the OEMs, except for Europe.
Price mix and currencies put pressure on revenue growth
21 Apr 16
Michelin’s Q1 16 revenue was up by a very modest 0.9% to €5.07bn although revenue growth was already moderate in Q1 15 (+5.5%), whereas it had increased by 8% or more in all subsequent quarters. Whereas volume growth contributed +3.7% to sales growth, the price mix (-1.3%) and currencies (-1.9%) both had negative impacts. Consolidation changes had a marginally positive impact of +0.4% as the group acquired more tyre retailers in both Germany and the UK. In spite of this, management maintains its vague full-year guidance of volume growth outpacing the global market’s growth and EBIT before non-recurring items and at constant exchange rates increasing.
09 Dec 16
Ideagen* (IDEA): Acquisition of IPI Solutions (CORP) | Lombard Risk Management* (LRM): Atos deal improves routes to German market (CORP) | Photo-Me* (PHTM): Upgrade to FY forecasts (CORP) In other news… Frontier Developments* (FDEV): ED coming to Xbox and Planet Coaster update (CORP) | LiDCO* (LID): Analyst interview (CORP) | Rude Health: Analyst interview
Product quality and management depth
07 Dec 16
Yesterday Focusrite held a capital markets day, designed to showcase the range and quality of products and introduce operational management, which shares a passion for music-making and has deep knowledge of the products. This contributes to excellent product support, software innovation and thus customer loyalty, which should sustain the company’s brand leadership.
Joy of Techs
21 Nov 16
ICT evolution is driven by technological development as advances are made which both meet and shape customer requirements. Our 2011 note No such thing as a telco described the modern reality in that former ‘telcos’ now deliver varying elements of a range of managed services. We built on this theme last year, exploring in further detail their evolutionary paths, operating fundamentals, and cashflow yield similarities. In the consumer environment, demand for bundles of technology is complemented by demand for content. Across the pond, the mooted combination of AT&T and Time Warner typifies the bundled need of ‘pipe’ and content, since unbundled alternatives such as FaceTime and WhatsApp can be easier and clearer to chat over, and Amazon and Netflix are easier to watch anywhere. In the UK, BT’s defensive actions cover delivery, content and capabilities, acquiring EE yet also buying football rights. While TV was long ago added to triple play to become quad play, voice is now merely an app, and fixed and mobile seen as just dumb pipes: it's the content that will influence consumer choices. Growth of TV and film as well as music and gaming over IP leads to UK small cap opportunities. In context of the drive to maximise value from pipes and access by offering content and data, we look at some amongst the potential tech small cap beneficiaries: Amino*, Keyword Studios, ZOO Digital*, 7digital*, KCOM* and CityFibre*.
Civil: No Reflation here, only a Race to the Bottom
05 Dec 16
The strengthening of the US dollar since the election of Trump is adding to the headwinds in the airline industry: over-capacity and falling yields. The airline industry, which is expected to generate $8bn of free cashflow in 2016 on $600bn of capital employed, needs to spend $120bn annually to maintain current delivery rates. Deferrals and down-gauging is now spreading to narrow-bodies as more and more airlines review their capex plans. We expect acceleration of seat densification as airlines look to sweat their existing fleets. We now expect deliveries to fall by 5% over 2015-18 as opposed to our previous forecast of flat growth. Aftermarket may also suffer as seat densification helps cut number of flights. This leads to reduction in our EPS forecasts for key Civil Aerospace names: Rolls-Royce, Meggitt, GKN and Senior.