Michelin Warning Drags Down Tire Makers

Date : 10/19/2018 @ 4:31PM
Source : Dow Jones News

Michelin Warning Drags Down Tire Makers

Michelin CGDEB (EU:ML)
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1 Year : From Jul 2018 to Jul 2019

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   By Nathan Allen 
 

Shares in European tire manufacturers trade lower Friday morning after Compagnie Generale des Etablissements Michelin (ML.FR) lowered its outlook for the year, warning that a decline in European and Chinese sales would continue into the fourth quarter.

In western Europe, Michelin said demand from original equipment manufacturers dropped 5% following the introduction of new EU emissions standards, while Chinese demand also fell 5%, which Michelin attributed partly to dealers using up existing stocks amid an uncertain economic environment.

For the rest of the year Michelin expects a slight increase in volumes and an increase of at least 200 million euros in operating income from recurring activities, which equates to roughly 5% lower than consensus estimates, according to Jefferies analyst Ashik Kurian.

Mr. Kurian said the warning reflects Michelin's poor communication with the market and failure to monitor consensus estimates, rather than any issues with execution. The company still has better price discipline and better potential to deliver cost savings than its peers, he said.

Analysts at Banca IMI note the drop in Pirelli's share price should be seen as a buying opportunity, as the Italian company's business model somewhat insulates it from the headwinds affecting Michelin and Continental.

At 0752 GMT Michelin was trading 7.2% lower, while Pirelli & C. SpA (PIRC.MI) was down 1.9% and Continental AG (CON.XE) was around 3.1% lower.

 

Write to Nathan Allen at nathan.allen@dowjones.com

 

(END) Dow Jones Newswires

October 19, 2018 04:16 ET (08:16 GMT)

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