|
(29/07/2003) In a trading environment as difficult as ever, MICHELIN grows further. Theoperating margin improve
July 29, 2003
Net sales are up 4.4%, excluding the impact of currency fluctuations. The highly
unfavourable evolution of exchange rates led, however, to a 6% drop in net sales.
This evolution took place in an environment marked by the overall stability of the tire
markets, in line with the Group's expectations for the 1
st
half. The Group's high level of
activity and its cost control largely absorbed the sharp increase in raw materials
procurement costs.
Cash flow gains two percentage points as a percentage of net sales, that is 10% against
8.1% a year ago.
Various exceptional elements have led to the 35% decline in net income of the first half
2003.
Michelin maintains its assumption of tire markets that will be stable at best for the
whole year. In the second half, raw material consumption costs will remain as high as in
the first semester.
Furthermore, following the acquisition of Viborg, which is aimed at strengthening in
Northern Europe, Euromaster, Europe's largest tire distribution group, Michelin will
amortize the corresponding goodwill over one single year, in the second half. This will
weigh in a significant manner on 2003 net income.
Confronted with an environment that has been challenging for two years now, and
which provides no evidence of easing in the foreseeable future, Michelin will continue
to improve its performances and its global competitiveness.
| In millions of Euros | June 30, 2003 | Variation 2003 / 2002 | June 30, 2002 | | Net sales | 7 348.2 | -6.1% | 7 821.0 | | Operating income | 578.3 | +1.5% | 569.6 | | Operating margin as a % of net sales | 7.9% | | 7.3% | | Net income | 165.5 | -34.9% | 254.1 |
The rules and methods applied for the establishment of the consolidated accounts at June 30 2003 are in
accordance with the accounting rule 99-02 of the French Comité de la Réglementation Comptable.
* * *
Net sales evolved in an environment marked by contrasted markets and by very adverse currency
fluctuations.
The 6.0% decline in net sales compared to the first half 2002 can be analyzed as follows:
. A -10% negative impact linked to exchange rate variations. As it had already been noted over the
last months of 2002, this impact is mainly attributable to North and South American currencies. The US
dollar lost 19% against the euro.
. A 2.4% positive impact linked to an increase in sales volumes. This trend is more the effect of
inventories being rebuilt at dealers, especially in Europe, than of an actual increase in end user demand.
The increase in sales volumes reflects contrasted tire markets. While they have been relatively stable in
the 1st half, they remain below their 2000 levels.
In Passenger Car / Light Truck, in Europe, the increase in sales volumes on the replacement market
(+3.8% in the semester under review) is lower than that of the market of which improvement has been
mostly fuelled by certain promotional sales campaigns launched by competitors. Furthermore, in
Eastern Europe, the Group has deliberately decided to favour constant euro denominated revenues by
increasing prices in order to compensate for the depreciation of local currencies vis-à-vis the euro.
The Group's categories and product mixes have further improved, in line with the achievements of the
past years. In this respect, the strong progression of VZ and 4x4 sales is worth mentioning.
In North America, a particular feature of the first half is the 3.1% decline in the replacement market
compared to the first half 2002. Its origin lies in multiple factors: deterioration in consumer confidence,
especially during the March-May period that corresponded to the war in Iraq; sharp hike in gas prices in
the first quarter, unfavourable basis for comparison due to the end of the second Firestone tire recall in
January and in February 2002, delayed recovery in the market as a whole and in the SUV segment.
In this environment, Group sales are down 3.9% compared to the same period a year ago, leading to a
slight softening in the Group's market share over the semester. There are two primary reasons to this
phenomenon, that are closely linked to the various Firestone recalls: first, the impact in January and in
February of the very sharp hike in SUV tires sales generated by the second Firestone recall organized by
Ford from June 2001 onwards. Michelin's contribution to this recall was in excess of 30%. Second, the
temporary contraction of ‘premium' brands market share to the benefit of ‘value' brands. Michelin has
a significant portion of its sales in the ‘premium' brand market. Back in 2000, given the sense of
emergency and the worries triggered by the August 2000 Firestone, certain consumers have gone away
from their usual purchasing habits and looked for reassurance through the purchase of ‘flag' brands,
mostly ‘premium' ones. Consistent with the Group's expectations, part of these customers are now
progressively returning to their initial buying patterns. This phenomenon is temporarily amplified by a
greater price sensitivity, as consumers are worried by the current uncertainties prevailing in the
American economy.
In Asia, the Group is maintaining its focused growth policy by putting emphasis on the high added
value segments. In Japan, the implementation of this program on the replacement markets is now
completed and is bearing its first fruits. In China, once again, Group sales progressed faster than the
market in the 1st half, for Michelin as well as for Warrior branded tires, the product range of which has
just been modernized.
In South America, the Group's performances benefit from the modest recovery in the Brazilian
markets, but continue to suffer from the difficulties at hand in the Spanish-speaking markets. As had
been the case in 2002, the numerous price increases implemented in local currencies have made it
possible to limit the decline in sales.
In the Middle-East / Africa area, remarkable commercial performances in Turkey and in the Persian
Gulf have helped sales expansion.
In Original Equipment, in Europe, the Passenger Car / Light Truck market is down 5.1% in the 1
st half. The effort to achieve a better balance of sales between original equipment and replacement, the
improvement of the quality of the mix, and the consequences of the non-renewal, effective from
August 2002 on, of the supply contract with General Motors Europe have led to a close to 17% decline
in sales volumes. This evolution is consistent with Michelin's expectations, while the Group's
category/product mix got richer in the 1st half, and specifically so in the top of the range (VZ, 4x4)
Similarly, in North America, in a down market, Michelin‘s sales momentum was again more positive
than that of the market. The Group further improved its product mix through market share gains in the
performance and SUV segments.
On the Asian original equipment market, the Group's market share with the Japanese car makers is
up. In China, the Group benefits from the strong increase in car sales and the noteworthy expansion of
its market shares.
In Truck, in Europe, the Group's replacement sales (new tires) grow again faster than the market.
This growth in the 'sell in' sales can be mostly attributed to specific circumstances, such as the
delivery, early 2003, of end of 2002 back-orders, which could not have been fulfilled, because of the
lack of products. Price increases in the average of 3% that the Group implemented at the end of the
second quarter have led to advance purchases by certain tire dealers and therefore also impacted
positively this trend.
In replacement, in North America, in a challenging macro economic environment marked by a sharp
increase in diesel prices that penalized the transportation industry, the Group records an 8% increase in
its replacement sales. Noteworthy to mention is the fact the Group's sales volumes and market share
remain lower than in 2000.
In South America, Group sales went up in Brazil, in a replacement market that was down 4.5%
compared to the same period in 2002. The price increases that were implemented in 2002 and at the
beginning of 2003 are sticking.
In Asia, Michelin saw higher sales of radial tires, especially in China, in line with the performances
achieved in 2001 and in 2002. It is worth stating that the SARS epidemic has had no significant impact
on this strong growth momentum.
In the Middle-East Africa area, truck sales volumes are up in the 1st half 2003. Taking advantage of
the reopening of its plant in Algeria, Michelin is penetrating the North African markets further. Sales
trends are also positive in the Middle-East and in South Africa.
In Truck original equipment, in Europe, in the 1st half, Michelin made occasional switches, in order
to free up capacities on the power unit segment to better serve demand on the replacement markets.
On the trailer segment, Group sales have been in line with the sharp slide recorded by the market itself.
These two factors combined explain the slower Group performance compared to the power unit
market.
In North America, the Group's global market share in the original equipment market is slightly down.
This slowdown can be explained by an unfavourable mix effect for the Group within the market. It
turns out that the market growth is pulled by the strength of the trailer segment, where the Group is
less active than in the technically more challenging power unit segment.
. A 2.0% positive price / mix effect, at constant exchange rates. This progression can be explained by
the continuous improvement in the product-mix, the price increases implemented in 2002 and in 2003,
especially in South America. It has also benefited from a favourable market mix, as Replacement sales
have grown faster than Original equipment.
. Finally, there was no scope effect as there was no change in the Group's scope of consolidation,
compared to the 1st half 2002. The acquisition of Viborg's tire distribution activities in Europe was
definitively signed on March 31, 2002. These activities will be consolidated as of April 1; and will
appear in the Group's consolidated financial statements in the second half, upon completion of the due
diligence that is currently underway.
In a trading environment as difficult as ever, the operating margin improved in the 1
st half 2003 from 7.3% to 7.9%
Operating income improved, whereas net sales are down 6.0%. This is one of the most tangible illustrations
of the Group's efforts to improve on its 'clearance' and its 'all terrain' performances.
This 0.6 point progress compared to the first 6 months of 2002, although genuine and lasting, should not
mask the persistence of a difficult trading environment. It therefore needs to be precisely analyzed in light
of the following elements:
- A strong progression of sales volumes compared to 2002.
This progression has been particularly sharp in the 1st quarter and in Truck. Sales in Asia recorded
further strong progress, in Passenger Car / Light Truck.
- A very negative impact of the raw material procurement costs on the change in operating
income.
Indeed, in the 1st half, the Group has suffered from the consequences of the increase registered in the
second half 2002 (+13% in US$, ¾ of the raw materials being invoiced in this currency or in related
currencies). This is due to the well identified time lag of about 4 to 6 months, between the purchase of
the raw materials and their actual consumption in the production process.
- The improvement in average pricing and in the mix.
This trend has been amplified by a better original equipment / replacement mix compared to 2002 and
by the continuing progress in the category mix, especially in Passenger Car / Light Truck. Supported by
market evolutions and by Michelin's policy, Replacement sales have gone up 3.4% , in volumes (tons),
whereas sales are up 2.4% in Original Equipment.
- A positive impact on operating income from the change in inventories.
The seasonal structure of the tire business typically generates a build up in the inventories of finished
products in the 1st half of the year, and, on the contrary, leads to their destocking in the second
semester.
In this respect, the 1
st
half 2002 was atypical, as had been indicated at the time: there had been no
increase in inventories.
On the contrary, the 1st half 2003 is back to the normal seasonal pattern in terms of change in the
Group's inventories of finished products. As a consequence, this trend results in a 1.1 percentage point
improvement in the operating margin in the 1
st half, compared to the same period in 2002. The decline
in inventories in the second part of the year should be of the same order of magnitude as that of the
second half 2002. It will thus eliminate this positive impact on the operating income of the full year.
- The planned increase in benefits costs
This increase is due to:
. Higher annual amortisation charge (accounted for as payroll costs), further to the
increase in unrecognised actuarial gains and losses seen at December 31, 2002,
. Downward revision of the assumptions relating to the expected long-term rate of
return of plan assets factored in for the calculation of the 2003 cost.
However, and in line with the previous semesters over the past three years, the actions implemented by
Michelin to improve its ‘all terrain' capabilities have all contributed to the increase in the operating income.
A set of exceptional items have led to the 35% decline in the 1st half 2003 net income.
Most of the net non-recurring income and expense which is a 178 million euros loss, that is 165 million
euros, stems from the cost of restructuring measures that have been announced, in particular within the
framework of the Group's industrial evolution program in Spain made public earlier this year (140 million
euros before tax) and measures made public in June in France (13 million euros).
As a consequence, net income is significantly down in the first half 2003.
Michelin's balance sheet is strong
In spite of trading conditions that show no sign of easing, the Group has preserved its cash flow
generation. It is 738 million euros. Expressed as a percentage of sales, it gains 2 percentage points
compared to the first half 2002, or 10% against 8.1%.
It was more than sufficient to meet the 69 million euros contribution to Michelin pension funds in the first
half 2003. Furthermore, the relatively good performance of financial markets made it possible to achieve
real returns of 8% for plan assets in the US, 3% for the assets in the United Kingdom (against, respectively,
-1.5% and -5% in the 1st half 2002) and 6% for the total assets under management compared to the
' measurement dates '.
The combination of these two movements is reflected in the fact that the value of the assets under
management is, as of June 30, 2003, above what it was at the end of 2002, in constant currency.
The cash flow continues to largely cover the cash-out related to the unfunded benefit obligations such as
retirement, medicare... These payments amounted to 110 million euros in the 1st half 2003
In addition to the above, cash flow has also been used for:
- Net investments (669 million euros). This amount includes net investments in tangible and in intangible
assets (372 million euros), as well as 297 million euros of net financial investments, primarily related to
the acquisition of minority interest in certain subsidiaries and to financings linked to the acquisition of
the Viborg Group.
- Inventory build up in the first half.
The uses of cash related to the inventory build up and to the financings related to the acquisition of Viborg
are specific to the 1st half.
Thus, free cash flow is momentarily, a negative -195 million euros;
The ensuing increase in net financial debt is, however, limited by the 19% hike in the US dollar vs the euro.
Compared to December 31, 2002, the gearing ratio (net financial debt / stockholders' equity) stabilized
below 90%, well below the 102% recorded at June 30, 2002.
Segment information
| | Net sales | Net sales | Net sales | | | 1st half 2003 | 1st half 2003 | 1st half 2003 | | | M Euros | % of total | 2003/2002 | | Pass. Car / Light Truck | 3,633.0 | 49.4% | - 9.1% | | Truck | 1,903.5 | 25.9% | - 1.6% | | Other businesses | 2,177.4 | 29.6% | - 5.5% | | Inter-segment eliminations | (365.7) | | | | Group | 7,348.2 | 100% | - 6.0% |
| | Operating income | Operating income | | | 1st half 2003 | 1st half 2003 | | | M Euros | % of total | | Pass. Car / Light Truck | 339.4 | 58.7% | | Truck | 248.4 | 43.0% | | Other businesses | -9.5 | -1.7% | | Inter-segment eliminations | | - | | Group | 578.3 | 100% |
| | Operating margin | Operating margin | | | H1 2003 | H1 2002 | | Pass. Car / Light Truck | 9.3% | 8.9% | | Truck | 13.1% | 11.1% | | Other businesses | -0.4% | -0.1% | | Inter-segment eliminations | - | - | | Group | 7.9% | 7.3% |
Passenger Car / Light Truck
During the 1st half, the Passenger Car / Light Truck activity was confronted with a decline in the North
American replacement market as well as in original equipment markets. Net sales of this activity are down
9.1% for the period. Excluding currency fluctuations, it is up 2.3%, compared to the 1
st
half 2002.
At 9.3%, the operating margin follows the same upward trend of the past three years. A sharp drop in the
North American replacement market has marked the 1st half, as well as unusual growth in European
replacement and higher raw materials costs. Under these circumstances, the improvement in this activity's
operating margin can be mainly attributed to:
- Richer category mix, in replacement as well as in original equipment;
- Modest increase in sales volumes;
- Better profitability of the Asian operations;
- Recovery of the South American businesses.
Truck
The slight softening in sales is due to a highly unfavourable impact from currency fluctuations. Excluding
these, higher sales volumes (+4.3% in number of new truck tires) and better unit prices translated into a
+10.5% increase in this activity's sales.
At 13.1%, operating margin is 2 percentage points about its level in the 1
st
half 2002, whereas sales are
actually down 1.6% in constant currencies.
The truck activity has been particularly hit, in the 1
st
half by currency fluctuations, and by the rise in raw
material costs that has been constant throughout the semester. The fact that European and North
American replacement markets have held up relatively well, the improvement in the original equipment /
replacement mix and the control over industrial costs have more than compensated for these unfavourable
elements.
Other businesses
The 19% depreciation of the US dollar against the euro is most hardly felt in the dollar denominated sales
of this segment: TCI's sales are impacted by the translation effect; sales of earthmover tires - predominantly
expressed in dollars - or of aircraft tires, where the US dollar is generally the currency of reference for
commercial transactions.
The operating profitability of the other businesses, at -0.4%, is down 0.3 percentage point compared to
June 30, 2002. Operating income is close to a negative 10 million euros. This decline is essentially linked to
a lower profitability of the specialty tire business compared to the 1
st
half a year ago.
It should nonetheless be mentioned that, in constant currencies, the economic performance of the specialty
tire business is improving, in spite of the preoccupying evolution of certain markets, such as aircraft and
agricultural tires (drought in Western Europe and difficulties in the Eastern Europe agricultures).
Confronted with an environment that has been challenging for two years now, and
which provides no evidence of easing in the foreseeable future, Michelin will continue
to improve its performances and its global competitiveness.
The trends in the tire markets since the beginning of the year lend credit to the assumptions provided by
Michelin last February 25. The Group continues to believe that markets will be stable, without ruling out the
risk of a decline. Furthermore, the raw material consumption costs will continue to rise, even if this will be
attenuated by the depreciation of the dollar. Lastly, other additional expenses will slow down the pace of
performances, such as freight, energy, insurances, and benefits costs, on top of the consequences of the
consolidation of Viborg over a 9-month period.
The first results of the in-depth post-acquisition due diligence initiated in April 1
st
, 2003, and not yet
completed, should lead Michelin to record a goodwill of about 300 million euros in 2003. (It will be noted
that, according to the Group's principles of consolidation for trading activities, the goodwill will be
amortized over one year, in the 2003 accounts).
The financial situation of the distribution group in Northern Europe that Michelin acquired last spring,
significantly deteriorated in the second half of 2002 and in the first quarter of 2003, especially in Germany.
In addition, numerous dysfunctions have been recorded which make it necessary to implement restructuring
measures. Some of them have already been enacted since April 1. The initial results, with the refocusing of
Viborg on its core business, the full integration in the Euromaster network with a unified management, are
encouraging. They should reach their stated goal: to contribute by 2005 to the improvement of the
profitability of the Group's distribution activities.
Michelin considers that the acquisition of Viborg is a strategic operation as it offers the opportunity to build
Europe's largest tire distribution group, active on all of Western Europe's major markets, and able to
provide customers with a significantly better service.
Confronted with an environment that has been challenging for two years now, and which provides no
evidence of easing in the foreseeable future, the Group will maintain on a high level of priority its efforts in
terms of cost reduction and of optimizing its industrial structure. Michelin is watchful and determined to
further improve its performances and its global competitiveness.
* * *
Net sales for the third quarter 2003 will be released on October 22, after the Paris market close.
Main events in the first half 2003
Acquisitions- Partnerships
Successful takeover bid on Stomil-Olzstyn shares
Following the offering period, from April 15 to April 30, 2003, 28.74% of the equity of Stomil-Olzstyn
were purchased. With the shares already held prior to this offer, the Compagnie Générale
des Etablissements Michelin (CGEM) now controls, through its affiliate Compagnie Financière
Michelin, 98.99% of the capital and of the voting rights of Stomil-Olzstyn and has launched a tender
offer for the remaining shares, which ended on July 11, 2003.
The total cost of the shares acquired by the Group amounts to approximately 84.8 million euros. This
operation is part of the process for optimizing and streamlining the Group's structures, initiated in
October 2002 with the Exchange Tender Offer launched on the shares of the Compagnie Financière
Michelin
Partnership agreement between Hankook and Michelin
On January 28, 2003, Hankook and Michelin signed a partnership agreement with a view to jointly
exploit synergies in a search for common opportunities to develop their respective positions in the
tire market. This co-operation agreement concerns manufacturing. Starting September 2004,
Hankook will manufacture passenger car tire brands belonging to the Michelin Group (excluding the
Michelin brand). The agreement will allow joint purchasing of products, services and equipment,
along with enhanced co-operation in RubberNetwork.com, the online business-to-business site set
up by 9 tire makers. Finally in the field of distribution, Hankook and Michelin have agreed to enter
into a commercial co-operation in several sectors of activity in their respective markets.
Signing of the official acquisition of Viborg by Euromaster
In accordance with the preliminary agreement signed on December 18, 2002 by Group Michelin
subsidiary Euromaster, and Viborg, the purchase of Viborg's tire distribution activities in Europe by
Euromaster was officially signed on March 31, 2003. This operation, which was approved by the
European competition regulators, will allow Michelin Group to strengthen its presence in distribution
and service in Northern Europe, especially in Germany.
Mobility assistance
Michelin's mission is to contribute to the progress of the mobility of goods and people by facilitating
freedom, safety, efficiency and travel enjoyment.
PAX System is the most complete solution available allowing to meet these expectations. Indeed,
PAX System is the only rolling system that offers simultaneously added performances (handling,
comfort and rolling resistance), more safety as the tire cannot roll off the rim, and extended mobility
as it allows to run-flat thus eliminating the need for a spare tire.
On May 15, 2003, Michelin was presented with the Gold Medal in the Siemens Innovation
Awards for PAX System. The jury was made up of scientists, experts, researchers, managers and
personalities. Every year, the Siemens Prize for Innovation rewards companies established in France
for their efforts devoted to research and improving people's daily lives. PAX System is now
recognized as a major innovation for the future and has everything it takes to establish a position as
the new standard in the tire industry. PAX System gives the motorist the possibility of driving 200km
at 80km/h after a puncture.
PAX System has furthermore strengthened its presence by equipping new vehicles as an option or as
a standard feature:
. the new Rolls-Royce Phantom (introduced at the Detroit Motor Show in January 2003) is fitted with
PAX System as standard equipment, especially for PAX System's performances in terms of confort.
. since May 1, 2003, in Europe, the Quattro version of the Audi top-of-the range A6 model is
available with a PAX System option thus joining the top-of-the range sporting sedan A8.
Furthermore, the Bugatti 16/4 Veyron'supercar', fitted with the new Michelin Pilot Sport PAX
System on all four wheels, was unveiled in Monaco last June 7 and 8. This passenger car tire,
developed specifically for the Bugatti Veyron, is the widest ever approved tire for a sports vehicle
(365 mm). It is specially designed to handle the'supercar's extraordinary power (1001CV) which is a
sign of the revival of the brand within the Volkswagen group.
Kleber Protectis, the anti-puncture tire, launched in mid-April in Poland and early May in France is
made up of a normal tire inside which Kleber has added a layer of Kleber patented self-sealing
rubber, which hermetically closes off the perforating object to prevent pressure loss. The Kleber
Protectis offers the same road-holding performance and comfort as a standard tire. Just as the
Uniroyal Nailguard tire in the United-States, it contributes to the safety of motorists as it considerably
reduces the risk of punctures.
Pilot Road Assistance is an offer designed to meet the expectations of motorcyclists in case of a
puncture. Owners of a motorcycle equipped with at least one Michelin Pilot Road purchased
between May 1 and August 31, 2003 can, in case of puncture, take advantage of free road
assistance between May 1 and December 31, 2003. The road assistance comprises transportation of
the motorcycle to the nearest Michelin dealer, transfer of the beneficiary to the dealer's site, a hotel
room should the vehicle be immobilized more than 12 hours. This road assistance program is valid in
all countries covered by the insurance Green Card, does not entail a mileage franchise and is
activated through a simple phone call.
Innovations/Products
Truck : the anti-splash deflector : a road safety innovation
From April 14 to 17, 2003, Michelin invited European journalists in Berlin for the world-premiere of
their latest innovation in terms of road safety: the anti-splash front tire for heavy trucks.
The anti-splash deflector, integrated on the new XFA 2 Energy truck tire, is a patented device. It is a
circular piece of rubber placed at the junction of the tread and sidewall allowing to reduce by four
the height of water projections produced by truck tires on wet roads. This offers two major
advantages: improved visibility for motorists overtaking or passing a truck in rainy weather conditions
and improved vision out of the rear-view mirror for the truck driver.
X One truck tire: fuel saving and larger payload
Tested in June 2003 by two European reference organizations, the German TÜV and the French
UTAC, X One proved that it allowed a 4.20% fuel saving on articulated city buses. Moreover, as it is
extremely compact, this extra-large tire intended to replace twin fittings enables to gain space for
passengers.
In Europe, production of the first MAN vehicles equipped with X One XDA 2 Energy fitted assemblies
has started in May 2003. This fitting meets the expectations of Original Equipment Makers and user
customers who are permanently seeking larger payload, reduced fuel consumption, without
compromising safety.
For two years now, the X One has been successfully commercialized in North America, both in
Original Equipment and Replacement.
Launch of the new passenger car tire Warrior R28 in China
Warrior, the flagship brand on the Chinese market, had not renewed its range for some years. The
launch of 17 sizes, compared with 21 previously, and the higher performances offered are the result
of two years' work since the acquisition by Michelin of the radial passenger car and light truck
factory in Shanghai, in April 2001.
After the launch of the MXV8 in March (new passenger car under the Michelin brand), the Warrior
R28 further broadens the Group's multi-brand offering in China. This is an important asset for the
development of the brand and a major event for the deployment of the Michelin Group on an ever-growing
market.
Michelin tops JD Power's OE customer satisfaction survey in Japan
JD Power carried out its first survey in Japan with user customers to measure their satisfaction with
the original equipment tires on their vehicles. Michelin topped the ranking which was published in
March 2003. Michelin achieved the highest scores, in particular for grip and tire design.
Launching of a range of car accessories
On March 13, 2003, the new range of car accessories designed by Michelin Lifestyle was presented
to the press. For more than a century, Michelin has placed emphasis on innovative solutions to help
motorists find varied solutions on a daily basis. Michelin is restating this ambition with the launch of
a range of car accessories that are practical, efficient and stylish: digital pressure gauges, electric air
compressor, foot pumps, car mats, wheel trims, warning triangles or first aid kits, available in the
main European countries.
Michelin-Babolat partnership for cutting-edge tennis shoes
Leaders in their respective markets, Michelin and Babolat, -the world leader in racket strings-, have
combined their know-how and innovative abilities to develop the first range of tennis shoes with a
Michelin sole.
Babolat performed precise analyses of tennis players' movements and their needs on different types
of playing surfaces. The company then turned to Michelin to partner together the development of a
special sole delivering top performance.
This new range of footwear, which includes models for men, women and children, is available since
July 2003 in specialty tennis stores in the main European countries.
Airbus 380 and the Falcon 7X equipped with Michelin Radial NZG tires
During the Paris Air Show, which took place this year from June 15 to 22, 2003,the Aviation Product
Line presented the latest Radial NZG technology tires. This Michelin innovation, which allowed
Concorde to fly again, combines radial technology with new high damage resistance materials. These
tires are scheduled for early 2004 delivery for the Airbus A380 wide-body jet and the Falcon 7X
business jet.
Radial technology is gaining increasingly more ground on the aircraft tire market. In 2001, just 46%
of the commercial aircraft to leave the production lines could be equipped with radial tires. In 2003,
Michelin estimates show that 60% of new aircraft will be able to use this technology.
Competition
Formula 1
Michelin returned on the circuits in 2001. In 2003, BMW-Williams, McLaren-Mercedes, Renault F1,
Jaguar-Cosworth and Toyota are all equipped with Michelin tires. On July 6, at the French Grand
Prix, Michelin and BMW Williams F1 scored their second Formula One World Championship double in
7 days. This result presents Bibendum with a 70th win in Formula 1 and a 5th victory since the
beginning of the season.
Le Mans 24H (June15, 2003): Bentley-Michelin triumph in Le Mans
Qualifying in pole position, fastest race lap and its two cars in first and second places. Bentley was
on top of the 71st edition of the Le Mans 24H , capturing its 6th win on this circuit. Its new partner,
Michelin, posted its 12th win in Le Mans (its 6th running) and dominated all categories.
300th victory in Moto GP
For the past 30 years, Michelin has dominated the highest level of motorbike sports. On June 28 at
Assen, during the Dutch Grand Prix, Michelin captured its 300th premier-class win : the 77th
consecutive win for Michelin and the 12th running in premier-class. In 2003, Michelin riders won
every race, taken every pole position and filled every podium
World Rally Championship
The Cyprus Rally which was held on June 21 -22 , marks the end of the first half of the 2003 World
Rally Championship. Michelin's partners hold the first places in the ranking for Constructor and Driver Championships. From the wintry asphalt in Monte-Carlo and ice in Sweden, to the gravel
boulevards in New Zealand and the punishing terrains of Turkey, from Argentina to Greece, Michelin
tires dominated in six out of seven events organized during the first half with four drivers and three
different vehicles.
Michelin and its shareholders
In 2002, Michelin announced the creation of a Shareholder's Advisory Committee, comprised of
12 members. The Committee held its opening meeting on February 3, 2003 and its first working
session on April 28, 2003. In the context of its mission, the Shareholder's Advisory Committee freely
determines the agenda of its meetings. The Committee's main mission is to better adapt the Group's
financial communications to the expectations of individual shareholders. The presence of the
Committee was publicly acknowledged by Mr. E. Michelin during the Mixed Shareholders General
Meeting on May 16, 2003. During the General Meeting, the Committee put forth three oral
questions: one question concerned Group strategy, the other pertained to shareholder loyalty
development and the last question concerned sustainable development.
916 shareholders, of which 266 employees, attended the Mixed General Shareholder Meeting
which took place on May 16, 2003 in Clermont-Ferrand. For the second year running, the quorums
attained exceeded 55%, one of the highest for a CAC40-listed company. This active participation of
shareholders, both individual and corporate, is the proof of the interest taken in Michelin.
On January 21 2003, close to 500 shareholders and individual investors were gathered in Brussels,
to listen to and talk with the Group's senior managers in context of regular meetings with
shareholders. The next meeting will take place in Lyons on October 7, 2003.
Financial rating
Moody's confirms its rating : on July 14, 2003, Moody's confirmed its Long Term and Short Term
rating to the CGEM (Baa2 et P-2) and the CFM (Baa1 et P-2).
On April 7, 2003, Standard & Poors removes Michelin from its watchlist and reaffirms its BBB+/
A/2 rating on Compagnie Générale des Etablissements Michelin and its subsidiaries. The outlook
was changed from ' stable ' to ' negative '.
Michelin and its personnel
The second phase of the Group's Employee Shareholding Plan is now completed: substantial
subscription rates were noted in several countries including Algeria [73 %], Turkey [88 %], Poland
[85 %], Thailand [79 %], Colombia [73 %]. All in all, for the two phases of the Michelin Employee
Shareholding Plan, 69 % of the employees concerned out of the 113 000 eligible employees in
69 countries have chosen to become CGEM shareholders. This participation rate is one of the highest
in the French industrial sector. The corresponding capital increase was approved on June 30.
Including the capital increase linked to the 'squeeze out' of CFM shares, the total number of
CGEM shares is currently 143,387,025.
In 2003, Michelin expects to recruit more than 1,100 people in France, of which at least 600
managers, employees, technicians, first-line supervisors ('agents de maîtrise') and 500 workers. This
decision is continuing the policy of recruitment required to meet the Group's development needs. It
also anticipates the replacement of the personnel set to retire in the next few years. A total of 3,100
new recruits will have joined the Company between 2001 and the end of 2003.
The evolutions of the tire market has led the Company to rethink the set-up of its sites in Poitiers
and Bourges. Given retirement and early retirement plans already decided upon, around 210 people
will be offered reintegration on other sites on a voluntary basis. There will be no layoffs.
* * *
Compagnie Financière Michelin
At June 30, 2003, Compagnie Financière Michelin (CFM) ‘s net sales were 7.47 billion euros, down 5.9%
compared to the prior year. At constant exchange rates, on the contrary, net sales are up 4.4% when
stated in Euros. Operating income is 552.9 million euros, which translates into a 7.4% operating margin.
Because Compagnie Générale des Etablissements Michelin has almost the same scope of sales as the
Compagnie Financière Michelin, the qualitative comments made on net sales apply to the latter as well.
* * *
A more detailed report on the first half accounts is available upon written request to the Investors Relations
Department, or on internet at the following address www.michelin.com, or by calling this Toll Free Number
0 800 000 222 (France).
The earnings presentation (in French and in English) that will be made in Paris on July 29, as well as the
conference call for the financial community (in English only) will be available on Michelin's web site from
July 30, 2003 8:00am. The institutional investors who have subscribed to the RAW Communications
network, will have access via this service to the English presentations.
Contacts
Investor relations
Eric Le Corre : + (33)1.45.66.10.04/ 4.73.32.77.92
Laurent Cavard : +(33)4.73.32.18.02/ 1.45.66.16.15
Press
Fabienne de Brébisson : + (33) 1.45.66.10.72 / + (33) 6.08.86.18.15
Individual shareholders relations
Jacques Thonier : + (33) 4.73.98.59.00
* * *
For more information, see the 'investor relations' pages on www.michelin.com
To download the financial tables, click here or go to http://www.prline.be
(C) Companynews
|
