Michelin financial analysis

Résumé du document

Michelin is a tire producing company created in 1863 by the Michelin brothers. Originally based in Clermont Ferrand, the company is now located in more than 170 countries and owns 84 production site all around the world. Even if their core business is the production of tires they diversified their activities in 1900 with the first Michelin map & guides and extend their knowledge for special sector with new type of tires such as plane tire for instance. Michelin is the second leader of tire market after Bridgestone.In 2010, they had a turnover of 17 891 millions € with an increase of 20% from 2009.

Michelin is on the stock exchange market since 1951 which means the company can increase their equity thanks to investors and at the same time stay secure and independent. In 2010, Michelin launches its biggest increase of equity introducing 27.2 million of new shares for a total amount of 1.2 billion euros helping to finance its development cost estimated at 1.6 billion euros.

Extraits

[...] Production Michelin owned 84 production sites worldwide, mostly located in Europe. However, Michelin has started the construction of 3 production sites in India (Chennai), China (Shenyang) and Brazil (Pau Brasil) for a total investment of 2.75 billion euros. It should increase the production capacity in these countries by 80% until 2016 and offer tires at a competitive price according to the low purchase power of these countries. These will be affected through the low-cost brand of Michelin called Warrior, well known in Asia. [...]

[...] Bibliography Pierre Vernimmen, Finance d'Entreprise , French version - 2010 Michelin, "Michelin-Annual-Report-2008" Michelin, "2009-Annual-and-Sustainable-Development-Report" Michelin, "2010-Annual-and-Sustainable-Development-Report" Michelin, "First-Half-2008-Financial-Report" Michelin, "First-Half-2011-Financial-Report" Michelin, "2007-First-Half-Financial-Report" Pierre Vernimmen, Pascal Quiry, Maurizio Dallocchio, Yann Le Fur, Antonio Salvi, Corporate Finance-Theory and Practice Websites www.michelin.com/corporate www.bridgestone.com www.goodyear.eu www.conti-online.com www.sumitomotire.com www.global.hankooktire.com www.pirelli.com www.global.yokohamatire.net www.coopertire.com We can see from this graph that rubber accounts for the major part of Michelin's raw materials costs in total). [...]

[...] Michelin has given itself the means to be reactive, dynamic and ambitious while remaining, reliable and reassuring. CONCLUSION Michelin is a old company built on family operation standards, meaning that the aim is to steadily grow without taking too much risk. Expanding to the emerging markets now is essential to secure the future growth and to keep our position as 2nd largest worldwide tyre manufacturer. The main threats that the company faces are the raw material supply and possible future shortage. [...]

[...] In Michelin financial analysis, we can see that they have high profit margins therefore low asset turnover. Michelin pays its suppliers around 37 days after receiving the raw material and give 45 days to its clients to pay them the goods. In some case, the difference of 8 days between the days payables and receivables can be crucial. If Michelin is paid on time meaning at 45 days, it is fine but we can see on the balance sheet that they have a high amount of receivables waiting to be collected. [...]

[...] This market is less dangerous for Michelin as it is almost constant and represents of tires production market. Concerning the replacement market, products are distributed via dealerships and replacement service centers. This is done either via Michelin's own distribution brands (Euromaster in Europe and TCI in North America), but also using brand partnerships and franchises to be present in 27 countries all over the world. In 2010, the replacement market has increased by in the segment of tourism and van tires in Europe with the increase of the demand for special winter tire due to severe weather condition last winter. [...]