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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Spekulatius who wrote (40248)	11/23/2010 6:47:50 PM
From: gcrispin	Read Replies (1) \| Respond to of 78958

You mentioned one of the negatives in the tire business. Increased capital expenditures appears to be the main reason Michelin had negative cash flow for the first half of the year. Another negative is the increased; commodity costs, though Michelin was able to increase prices. Although they're focusing on emerging markets for continued growth, they won't be alone. The following quote is from Tire Review, a industry source for news and commentary. "For their part Morgan Stanley’s analysts wrote that Michelin is now position to “turn round its poor history of growth,” adding: “Michelin’s capital expenditure averaged 7.3% of sales in 2000-10 versus a revenue compound annual growth rate of just 1.1% over the same period, in nominal terms.” The bank’s view is that too much money was spent on fuelling “marginal productivity increases of old European and North American plants” which reportedly average 90% of capital expenditure averaged over the 2004-2009 period. With competitors Continental and Pirelli signaling that they are targeting significant investments in emerging markets over the next 5 years (Pirelli is aiming at a 20% capacity increase by 2012, doubling China car tire capacity as it goes and Continental has announced it has made 500 million euros available for this purpose) Michelin’s management is making it increasingly clear the emerging markets are the key focus from now on. In addition to the competing European tire majors, Bridgestone has expansion plans in six countries, Hankook is focusing on China and Indonesia, Cheng Shin Rubber is heavily investing in China. Referring to these plans, market watchers don’t expect increased output to flood the Asian manufacturers’ domestic markets. (Tyres & Accessories)" It should also be noted that the Chinese have increased their production. marketpublishers.com The growth story might be not appreciated, but certainly there is a great deal of production ramping up to fill the need. mynewsdesk.com