Michelin's net profit declines during 2014

Net sales fall 3.4% year on year

Michelin has announced that its profits have declined on weaker sales revenues during 2014. For the 12 months ending 31 December 2014, its net sales fell 3.4% year on year (y/y) to EUR19,553 million (USD22,143 million). Operating income before non-recurring items fell EUR2,170 million, down by 2.9% y/y. Non-recurring restructuring charges amounted to EUR179 million, while currency exchange rates were an EUR145 million charge as well as feeling a EUR449-million impact from a negative product mix. This was offset by a EUR567-million positive effect from lower raw material costs, EUR118 million from the managing of its price mix, a positive EUR51-million benefit from a modest increase in unit sales and a EUR238-million benefit from its competitiveness plan which also offset production and other cost inflation of EUR256 million. However, the company added that its operating margin at this level was slightly higher at 11.1% versus 11% a year ago. Net income has also fallen by 8.5% y/y to EUR1,031 million. Significance: Michelin's Passenger Car and Light Truck Tire business remained a key category. Although there was a 1.8% y/y decline in sales revenues of this business during the year, operating income rose 1.4% y/y to EUR1,101 million, helping to lift its operating margin from 10.2% to 10.5%, despite a weaker performance from its mid-range brands. It also improved the margin in its Truck Tires unit, as although its sales revenues sank by 5.3% y/y to EUR6,082 million, its operating income only slid by 1.6% y/y to EUR495 million. However, its Specialty Business struggled with sales revenues falling by 5.0% y/y to EUR2,973 million and operating income falling by 11.0% y/y. Looking towards 2015, Michelin said that that light-vehicle and truck tyre demand should continue to grow in North America, China and to some degree in Europe, with a rebound expected to be seen in Southeast Asia. However, pressure will remain in the Specialty Business. Michelin said that in this environment it is aiming to grow in line with global trends in the markets in which it operates. In addition, the Group has set a 2015 target of delivering an increase in operating income before non-recurring income, beyond exchange rate effect, a return on capital employed in excess of 11%, and structural free cash flow of approximately EUR700 million after EUR722 million in 2014 before its EUR400 million in Sascar, with capital expenditure of between EUR1.7 billion and EUR1.8 billion having reached EUR1,883 million. Jean-Dominique Senard, chief executive officer (CEO) has also said that "the competitiveness plan will also be accelerated and now aims to achieve cumulative savings of EUR1,200 million over the period 2012-2016, versus EUR1,000 million previously."