Michelin goes for growth leap with shock capital rise

September 28, 2010

, PARIS, Sept 28 – Global tyre manufacturer Michelin revealed a strategy on Tuesday to grow fast in emerging markets and raise sales by half with a big capital increase which shocked investors and hit its share price.

The surprise announcement that the France-based group would raise 1.2 billion euros (1.6 billion dollars) with a preference issue for shareholders drove Michelin shares down by 8.08 percent to 59.99 euros in mid-morning trading.

Michelin said its plan was to quadruple sales in developing markets, and chief executive Michel Rollier said the group intended to boost sales by a quarter within five years and by half in the next 10 years.

"The message, is to accelerate growth," Michelin\’s chief executive Michel Rollier told reporters. "The prospects for growth in world markets are considerable."

Michelin, known as a supplier of tyres for cars, trucks and aircraft around the world, and for its brand logo of a man made of tyres, said that the capital increase would enable it raise investment in 2011 to 1.6 billion euros from 1.2 billion euros.

The new capital would be used to drive up growth. In emerging markets, growth was expected to rocket from 2.0 to 2.5 percent per year now to 8.0-9.0 percent.

Sales would double in emerging markets, while in mature markets the group saw an increase of 25 percent by 2020, Rollier said.

The company said that the capital increase would strengthen its credit rating, and "in a general way, improve the group\’s financial flexibility."

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