Michelin Q1 sales fall 8% as volumes decline

Clermont-Ferrand, France — Group Michelin's revenue for the first three months of 2020 fell 8.3% to €5.32 billion, as unit sales dropped 11.7% due to the Covid-19 pandemic-induced economic downturn.

Michelin did not disclose earnings for the period, but stressed in its first-quarter results that it has taken a number of measures to "mitigate the financial impact of the impending deep recession."

While volumes were off by nearly 12% for the quarter, Michelin said the decline reflected an "even steeper drop" in March, especially in the last two weeks of the month.

The automotive & related distribution segment, which includes the production of the passenger car and light truck tries, saw revenues fall 6.9% to €2.6 billion, based on a 10.5% drop in unit volumes. 

The decline in volumes, Michelin said, were partially offset by a "favourable" price-mix effect and the consolidation of Indonesian tire maker PT Multistrada.

Sales in the commercial tires unit – road transportation & related distribution – declined 12.3% to €1.36 billion, due to a 14.9% drop in unit volumes. 

Segment revenue was "cushioned" by what Michelin described as “favourable geographic mix”, “the resilience of its services and solutions offering” and a "robust" price-mix effect.

The speciality businesses, including farm, industrial, aviation, and two-wheeler tires, posted a 6.9% decline in revenue to €1.37 billion, due to a 9.9% drop in volume.

Here, Michelin said certain markets were impacted by the health crisis. While surface mining tires remained "resilient", sales of other OTR tires declined steeply as markets collapsed.

Demand for two-wheeler tires fell slightly, reflecting market share gains in a "sharply contracting" market.

Sales of aircraft tires remained "somewhat firm," supported by the strong demand in the commercial aircraft tire segment early in the year and the resilience of the military segment.

In terms of volumes, the consumer tire OE sales fell 23% and aftermarket demand was off 12%. Within this sector, Asia fared the worst, with OE demand down 32% and replacement 20%. In Europe, including Russia & CIS, OE demand declined 15% while replacement market fell 11%. 

In the commercial tire area, OE sales dropped 24% and replacement sales were off 15%. As with the consumer segment, Asia showed the largest declines, with OE unit sales fell 28% and replacement was down 30%.

Michelin declined to publish an outlook for the remainder of 2020, saying the "direction of the pandemic and its economic impacts remain too uncertain to issue any reliable market forecasts and a related profit scenario.

The group however noted “steeply declining raw material prices” and said it expected to see a more positive net price-mix/raw materials effect which will offset the lower volumes.