Magazine for the professional tire industry
Issue link: https://mtd.epubxp.com/i/714120
MTD August 2016 Are sales up, or down? It depends Ultra-high performance tires help the balance sheet Three of the world's largest tire manufacturers reported half-year earnings during the month of July. (Others will follow suit this month.) But the figures pro- vide a glimpse of the industry at the year's midpoint. The short story: sales are down. A fourth tire company, Nexen Corp., offered a bright spot in the sales category. More on that later. Here's a look at the net sales and net income figures for three of the top five tire-selling companies in the world so far this year. These companies also rank among the top 10 of new tire sales in the U.S. and Canada. Figures are shown in the company's native curren- cies, and then the appropriate conversion rate was applied from the final dates of the period, June 30, 2016, and June 30, 2015, respectively. The income report was mixed. Goodyear and Pirelli both recorded less profit, while Michelin's net income increased almost 8.8%. (Since 2014 Michelin's net income has jumped 23.3%.) Goodyear attributed its net income drop of 7.2% to a one-time gain of $155 million ($99 after tax) on the recognition of deferred royalty income in 2015. Pirelli's significant drop of more than 95% was caused in part by financial charges of 167.4 million euros resulting from its merger with China National Chemical Corp. In terms of sales, Nexen is the standout thus far in 2016. Net sales are up 4.4% in the first six months, from 911 billion won in 2015 to 951.2 billion won this year. And the driver of the company's sales is clear — ultra-high performance tires. In the second quarter UHP tire sales in North America actually were down compared to the same period in 2015, 62.1 billion won compared to 68 billion won. But at the same time sales in North America nearly matched the combined 63.1 billion won of UHP tire sales totals in Korea, Europe and China. Sales increased in each of those regions, but most drastically in Europe — by 34%. Monro stores face a tough start The third-largest independent tire dealer in the U.S. offers a different vantage point of the industry. The publicly traded Monro Muffler Brake Inc. operates 548 tire stores in 21 states. And Monro maintains an aggressive acquisition plan and expects to grow even larger. Already its 2016 acquisition of McGee Tire Stores Inc. in Florida has done two significant things: it has quickly expanded the company's presence in Florida, spe- cifically in the Tampa Bay, Fort Myers, Daytona and Tallahassee markets. It's also given Monro an entrance into the com- mercial tire market. But there are critics of Monro's growth-by-acquisition strategy, especially given the performance of its existing stores. In its first quarter report for fiscal year 2017 (the period ended June 25, 2016) sales in each of these six categories dropped compared to the same quarter a year ago: tires -3%, maintenance services -6%, alignments -7%, brakes -13%, front end/shocks -15%, and exhaust -16%. Those figures don't include any of the 140 stores Monro has acquired since June 2014. The company doesn't include newly acquired stores in comp store totals until after the two year mark. Still, CEO and President John Van Heel told investors in July he's not satisfied with its comparable-store numbers, and the company has implemented initiatives to improve. "We believe we are maintaining our market share and driving more to the bottom line than our competitors." — Joy Kopcha News/views Tire company Net sales 1H 2016 Net sales 1H 2015 Net income 1H 2016 Net income 1H 2015 Income- to-sales ratio 2016 Income- to-sales ratio 2015 Goodyear Tire & Rubber Co. $7.6 billion $8.2 billion $386 million $416 million 5% 5.1% Groupe Michelin 10.3 bil- lion euros ($11.5 billion) 10.5 billion euros ($11.8 billion) 769 mil- lion euros ($855.7 million) 707 million euros ($793.5 million) 7.5% 6.7% Pirelli & Cie SpA 2.9 billion euros ($3.2 billion) 3 billion euros ($3.4 billion) 8.1 million euros ($9 million) 196.5 million euros ($220.5 million) 0.2% 6.6% 8