PARIS - Europe's biggest tire maker Michelin is seen posting sturdy full year profits next week as inroads into top-end markets, price increases and job cuts help it resist a grim car and truck market and a weak U.S. dollar.
But analysts and investors will be eyeing guidance for 2003 for clues on whether a sagging U.S. dollar -- which hit its 2002 results -- and higher raw material prices will continue to weigh.
According to a consensus of 18 analysts polled by the French firm, Michelin is seen posting an operating profit up almost 9 percent to 1.13 billion euros versus 1.04 billion in 2001.
Michelin has remained profitable in spite of an industry downturn that has hurt its rivals, thanks to price increases, job cuts plus a strategy of focusing on more lucrative top-class tires and on selling more tires direct to individuals rather than carmakers.
Profits skidded in 2001 as floundering demand and high raw material prices took their toll, but the firm appeared to turn the corner when it posted upbeat first-half results and raised its 2002 operating margin target to between 7.0 and 7.4 percent.
Michelin, also famed for its upscale restaurant guides, said earlier this month full-year sales slipped 0.8 percent, slightly more than expected, as weak U.S. and Latin American currencies bit into revenues.
But sales by volume drove higher and Michelin cheered analysts and investors with reassurances that activity had been brisker in the final few months of the year than expected, and most expect the firm to hit its margin target.
"Given that world tire markets have developed as expected and fourth quarter activities progressed better than internal plans, we believe all the pieces are in place for Michelin to meet full-year guidance," said Morgan Stanley analyst Nicolas Hirth in a recent research note.
CLUES ON OUTLOOK
Analysts will be keen for guidance for 2003 and for any hints on whether it is confident of meeting a target for an operating margin of 10 percent in 2005.
Michelin took a hit earlier this month when Standard & Poor's rating agency said it may downgrade the firm's credit rating due to unfunded pension liabilities, along with the ratings of nine other companies.
The firm said S&P's decision was not based on new information but on a change in methodology, but analysts were nevertheless keen for more information when Michelin presents its results.
The results, which are due on Tuesday before the market opens, come after PSA Peugeot Citroen and Renault both posted robust full-year earnings but cautioned they expected little growth next year as the western European car market continues to shudder.
Volkswagen this week posted a 10 percent drop in 2002 profit but gave no outlook.
Japanese tire-making rival Bridgestone posted a 161 percent surge in net profit on Friday, confirming its comeback after a massive recall at its Firestone unit almost destroyed the U.S. brand.