At a fixed exchange rate, the Michelin Group’s net sales in 2008 increased by 1.1%, and the operating profit margin before non-recurring items reached 5.6%.
In 2009, Michelin will focus on cash management by optimizing its production plan management, significantly reducing capital expenditures.
§ Sales fell by 2.9% in 2008 (due to rapid contraction in demand, sales fell 16% in the fourth quarter)
§ The price and product mix is ​​still very positive (+4.2%), reflecting the advantages of the Michelin brand and the effectiveness of the price increase actions implemented in 2008
§ Operating profit before non-recurring items decreased by 44% due to falling sales, rising raw material prices, and idle production costs
§ Maintained mid-term competitiveness enhancement targets and expansion projects in high growth potential markets
§ The dividend proposal of 1 Euro per share has been submitted to the shareholders meeting to be held on May 15, 2009 for consideration and approval
International Financial Reporting Standards (Million Euros) | December 31, 2008 | 2008/2007 changes |
Net sales | 16,408 | -2.7% |
   Calculated with fixed caliber and exchange rate | +1.1% | |
Sales volume | -2.9% | |
Excluding operating profit before non-recurring items | 920 | -44.1% |
Operating profit before deducting non-recurring items | 5.6% | -4.2 % |
Cars and Light Trucks and Related Distribution Business | 4.3% | -4.9 % |
Cards and buses and related distribution business | 2.5% | -5.1 percentage points |
Special tire business | 17.9% | +0.1 percentage points |
Operating profit | 843 | -36.1% |
Operating profit margin | 5.1% | -2.7 percentage points |
Net profit | 357 | -53.8% |
Net financial liabilities | 4,273 | +15.1% |
Debt ratio | 84% | +14 percentage points |
Free cash flow * | -359 | -792 |
The consolidated financial statements as of December 31, 2008 are calculated in accordance with the principles and methods set out in the International Financial Reporting Standards (IFRS).
* Free Cash Flow: Operating Cash Flow - Investment Business Cash Flow
Michel Rollier, Managing Partner of the Michelin Group, said: “Michelin is strengthening our production planning management to increase the flexibility of the plant, strengthen inventory management, and optimize cash flow to meet the generally bearish market in the coming months. It has been decided to significantly reduce capital expenditures in 2009 while maintaining the company’s mid-term development strategy.We will further strengthen Michelin’s competitiveness, strengthen our leading edge without sacrificing product value, and expand our growth area. Business, so that once the market improves, we will resume growth."
Outlook
At this stage, Michelin's business is expected to be as follows:
§ The tire market will continue to be well below the level of the previous year in the first half of 2009. Then, as the replacement tire market gradually replenish stocks, business will begin to recover.
§ In 2009, the factors supporting Michelin's profitability were the combined effects of the price increase actions in 2008 and the declining prices of raw materials (especially natural rubber and petroleum derivatives) throughout the year.
§ The factory will increase flexibility while reducing capital expenditures to approximately 700 million euros, focusing on the company’s expansion in the new high growth potential market.
Therefore, Michelin will focus on improving company profitability and maintaining a sound financial position.
2008 Michelin Group Global Operations and Performance
Changes in the Tire Market in 2008
Europe | North America | Asia | South America | Africa / Middle East | total | |
Original car and light truck tires | -7.2% | -16.5% | +1.9% | +8.2% | +13.8% | -4.0% |
Replacement of cars and light trucks | -4.0% | -5.3% | +2.7% | +2.4% | +3.2% | -2.2% |
Trucks and buses * Original tires | -0.9% | -16.5% | -1.8% | +10.2% | +3.0% | -3.9% |
Car passenger car * replacement tire | -9.7% | -8.2% | +5.7% | +11.9% | +5.1% | -0.2% |
* Refers only to radial tires
§ In the Asian market, despite the rapid turnaround at the end of 2008, the market is still strongly driven by the Chinese and Indian markets. Japan’s market demand weakened, and other markets in Asia remained stable year-on-year.
Group's net sales decreased by 2.7% year-on-year (at a constant exchange rate, it increased by 1.1%)
1, sales fell 2.9%
As of September 2008, sales volume increased by 1.4% year-on-year, but then it was affected by the following:
Rapid decline in demand for replacement tires in mature and emerging markets
In the fourth quarter, due to the discontinuation of production by automakers, the original tire business was sluggish
Sales of passenger cars and light truck tires decreased significantly in 2008, reflecting the overall market trend and the proliferation effect of distributors reducing inventory. However, the Michelin brand remains dynamic and has strengthened its position in all regional markets.
Sales of truck and bus tires have dropped slightly. The Michelin Group announced its market share increase in passenger car replacements in Asia and North America. Sales volume stems from the success of Michelin Durable Technologies tires and sales growth in China.
The annual sales of specialty tires have made progress in various market segments, although the demand for original tyres has been weak in the fourth quarter.
2. Calculated at a fixed exchange rate, the price and product mix effect has a positive impact of 4.2%
In each market, the price increase action has had a significant impact, making up for the impact of a new round of price increases in raw materials in 2008.
As customers began to value the total cost of tire purchase, maintenance and repair, the Michelin brand showed a positive effect.
3. The negative impact of 3.8% on exchange rate changes
Based on the average exchange rate, the euro appreciated 6.8% against the dollar, 14.1% against the pound, and 5.8% against the Canadian dollar.
4, subdivided product line information
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