Michelin Foresees A Slight Decline In 2020 Revenue, Raises Coronavirus Insecurity
Published On 25-Mar-2020 18:16:38
Tyre maker sees a dip of 1.2% in volumes in line with the overall markets, reopens China factories
A four per cent fall in the shares was witnessed on 11th Feb (Tuesday). This impact was recorded just after Michelin said in a statement that the operating profit and cash flow for 2020 would be less than its earlier predictions.
Europe’s largest tyre manufacturer asserted that due to the outbreak of coronavirus in China the sales will see a decline this month. This is another setback to the French tyre giant after unfavourable market outlook leading to cut in its profit forecast for the ongoing year.
On Monday morning, Michelin resumed the operations of its three production facilities in China. It predicted free cash flow of more than 1.5 billion euros, without accounting for the coronavirus effects.
The infectious disease spread of coronavirus has taken the lives of more than 1000 people and has severely affected China’s manufacturing capacity. After the Chinese administration relieved some restrictions on work and travel, Monday saw employees getting back to work in their respective factories and offices across China.
Owing to which, many international automotive giants in China are forced to shut down their operations temporarily, which includes Fiat Chrysler Automobiles NV, Cie. Generale des Etablissements Michelin, and others. Moreover, in view of the epidemic spread a Chinese car-parts supplier to the PSA Group has declared ‘force majeure’ meaning ‘chance occurrence, or unavoidable accident’.
According to Michelin, the segment operating income will see a downfall from 3.01 billion Euros (USD 3.3 billion) in 2019, as per the earnings statement. Moreover, the free cash flow will be more than 1.5 billion Euros, excluding the coronavirus effects. Earlier, for the ongoing year, Michelin had set an operating income target of 3.7 billion Euros exclusive of currency swings and more than 1.7 billion Euros in free cash flow.
"In 2019, in a highly unstable environment, Michelin successfully maintained its market share and improved its earnings," said Managing Chairman Florent Menegaux.
As per the Paris-based tyre maker, a minor decline will be witnessed in its passenger car and light truck tyre markets this year.