But change afoot, as Camso deal boosts Michelin; while Sumitomo jumps to fifth slot
After nearly a decade of ‘status quo’ among the world’s largest tire makers, the pecking order at the top could be in for a shuffle in the coming year or two, depending on how well Group Michelin’s pending acquisition of OTR/industrial tire and wheel producer Camso Ltd pans out.
Michelin’s $1.45-billion offer to buy the former Camoplast Solideal could boost the French tire maker’s annual sales by $900 million or more, putting Bibendum in a position to challenge Bridgestone Corp.’s 10-year reign at the top of the global tire league.
For 2017, Bridgestone retained the title of No. 1 tire maker by roughly $800 million over Michelin – $24.4 billion versus $23.6 billion – as Bridgestone’s tire division reported 9.5% revenue growth versus 5% for Michelin.
The revenue from Magog, Quebec-based Camso would go a long way toward nullifying Bridgestone’s advantage.
Michelin said combining the Camso business with its own OTR tire assets will create a global leader in OTR mobility solutions, with 26 plants, roughly 12,000 employees and annual sales exceeding $2 billion.Other major players in the OTR field include Bridgestone, Titan International (sales of $1.2 billion), Trelleborg Wheel Systems ($985 million) and BKT ($692 million).
Goodyear remained a solid No. 3 in the rankings at $14.3 billion and maintained a $3-billion gap between it and No. 4 Continental AG, which reported growth in 2017 of nearly 6% versus Goodyear’s 1.4%.
New No 3
While Goodyear’s revenue gap to Continental is solid, London-based Astutus Research maintains Continental is on the verge of demoting Goodyear to No. 4 in terms of passenger tire capacity. Astutus contends that the scale of Conti’s capital spending on new capacity in the past few years – totaling close to 20 million units a year – has pulled the German company equal with Goodyear in the passenger/light truck tire realm.
One change did take place in the Top 10. Japan’s Sumitomo Rubber Industries Ltd (SRI) slipped ahead of Italy’s Pirelli & C. SpA into fifth after Pirelli completed the divestment of its commercial tire business – now operating independently as Prometeon Tyre Group Srl and earning a spot of its own in the rankings (No. 32 with estimated sales of $900 million).
Sumitomo aided its own cause with 16.7% higher tire business revenue – reflecting the enhanced business generated by the firm’s new business units established in late 2015 after the dissolution of its global alliance with Goodyear as well as greater sales of high-value-added products.
SRI’s sales in Europe nearly doubled thanks in large part to the acquisition of Micheldever Group, a UK wholesaler, and revenue in North America that grew 15.7% as the expanded Sumitomo Rubber North America hit its stride.
Since starting to divest its commercial business, Pirelli’s sales declined to $6 billion last year from $6.93 billion in 2015.
Another company that solidified its position in the Top 10 by acquisition is Yokohama Rubber Co. Ltd., whose purchase of Alliance Tire Group (ATG) in mid-2016 has bolstered the Japanese tire maker’s sales since then by nearly 20% to $4.9 billion.
The other major merger/acquisition of the past year – Qingdao Doublestar Group’s $607-million purchase of a 45% ownership stake in South Korea’s Kumho Tire Co. Inc. – has yet to have any bearing on either company’s financial results.
It’s uncertain at this time whether the two firms will publish consolidated results. Should that happen, however, the resulting corporate entity’s sales would be valued at more than $3.5 billion, or just outside the Top 10.
There’s precedent for this happening. Giti Tire Group, the Singapore-headquartered company, includes the results of Indonesia’s PT Gajah Tunggal in its fiscal financial reporting, even though it’s a minority (49.7%) owner. Michelin also owns a 10% stake in Gajah Tunggal, which produces some tires under contract for Michelin.
For the annual Top 75 ranking, Tire Business rates the tire makers on their revenue from the sale of tires they’ve manufactured in order to achieve a more equitable “apples to apples” comparison.
Excluded are items such as third-party sales of steel cord, synthetic rubber or carbon black, as well as estimates for non-tire items such as auto-service-related revenue at company-owned retail stores.
Bridgestone, Michelin, Goodyear and Continental, for example, report hundreds of millions or even billions of dollars in revenue from their respective captive retail networks. In addition, Bridgestone, Michelin and Goodyear derive a measurable amount of revenue from the sale of synthetic rubber or other raw or semi-processed materials to third parties.
Bridgestone’s position at the top of the ranking is solidified by minority ownership stakes it holds in two other Top 75 companies – a 43.6% stake in Turkey’s BRISA/Bridgestone-Sabanci Tire Mfg. (No. 42 with 2017 sales of $630.2 million) and a 14.6% stake in Finland’s Nokian Tyres PLC (No. 21 with $1.65 billion in tire manufacturing-related sales).
Further down the list, Toyo Tire & Rubber Co. Ltd claimed 12th ahead of Cooper Tire & Rubber Co. based on its growth of 7.9% versus a 2.9% sales drop by Cooper.
Besides Prometeon Tyre Group, there were just two other firms debuting in the ranking this year: Danang Rubber Co. of Danang, Vietnam – No. 71 with sales of $163.7 million; and Shandong Fengyuan Tyre Co. Ltd – No. 73 with sales of $156.1 million.
Nearly half, 33, of the companies in the top 75 are from China, including four among the top 20 – Zhongce Rubber Group Co. Ltd (No. 10), Linglong Group Co. Ltd (No. 17), Shandong Hengfeng Tyre Co. Ltd (No. 18) and Sailun Jinyu Tyre Co. Ltd (No. 19).
One of the 33, however – Shandong Yongtai Group – recently went under court-ordered administration.
Other countries represented in the ranking include India (seven companies), Taiwan (five), the US (five), Japan (four), Italy (three), South Korea (three), Russia (two), Turkey (two), Vietnam (two) and one each from Argentina, Belarus, Canada, Finland, France, Germany, Indonesia, Iran and Singapore.
Only two of the 24 publicly traded companies outlined in this report suffered tire business sales declines in 2017 versus 2016 – Cooper Tire and Triangle Group – while seven tire companies or tire divisions recorded double-digit growth, led by Trelleborg Wheel Systems (39.7%) and Brisa Bridgestone (29.9%).
Trelleborg’s growth reflects the full-year integration of Mitas AS’s tire business, while BRISA Bridgestone noted a strong Turkish market and a measurable increase in export sales of its Lassa brand.
Collectively, the top 10 tire companies accounted for slightly more than 62% of the world’s tire sales last year, based on Tire Business’ numbers – down 2 points from the 2016 ranking, the first time in four years the top tier has failed to defend or improve its position vis-à-vis the rest of the global competitors.
The divestment of Pirelli’s commercial tire business accounted for some of the decline.
The average operating earnings ratio among the 24 publicly traded companies that Tire Business monitors for this report was 10.3%, down a point and a half from the 11.8% recorded in 2016.
Fifteen of the 24 companies reported lower operating income in 2017 versus 2016 and two – Kumho Tire Co. and Titan – were in the red on an operating basis.
Finland’s Nokian Tyres and Indonesia’s PT Gajah Tunggal were the most profitable, percentage-wise, with 23.2% and 17.4% operating ratios, respectively, research shows.
The average net income ratio for the group of 24 was 6.1%, a 0.7 percentage-point drop from 2016. Some 14 of the 24 firms registered lower net income last year vs. 2016 and two – Titan and Kumho Tire – were in the red.
The average sales per employee for the 23 publicly traded companies that provided employment data was $203,847, up nearly 6% over 2016.
Nokian had the highest sales per employee at $382,894, ahead of Nexen Tire Corp. at $321,731; Cooper Tire at $310,158; Toyo Tire at $308,394, Hankook Tire at $274,295 and Kumho Tire at $241,648.