Michelin couv courteGB

The following table describes the Group’s third party listed security investment portfolio:
In € million Gross Value Provisions Net Value Market Dec. 31, 2004 Value Spread
Appolo Tyres Ltd 25.1 2.4 22.7 22.7 –
PT Gajah Tunggal Tbk 21.1 4.9 16.2 16.2 –
Miscellaneous 35.4 30.8 4.6 4.6 –
Sub-total partly provisioned shares 81.6 38.1 43.5 43.5 –
Peugeot SA 20.8 – 20.8 132.0 111.2
Hankook Tire Company Limited 18.6 – 18.6 27.0 8.4
Miscellaneous 4.0 – 4.0 6.7 2.7
Sub-total shares with unrealized potential gain 43.4 – 43.4 165.7 122.2
Total third-party listed securities 125.0 38.1 86.9 209.1 122.2
Loss on security price paid on acquisition gives rise to provisions in a corresponding amount and gains are not recognized. As a result,
and in view of the level of potential unrealized gains, a 10% across the board change in stock prices would have a €4.4 million impact
on Group earnings.
Counterparty Risk
The Group chooses its banks extremely carefully and even more
so with respect to liquidity investment. Indeed, considering it to
be inappropriate to add financial risk to industrial and trade risk
that are associated with its operations, Michelin insists on safety
and liquidity of all cash investment. This is invested in the shortterm
(under three months) with blue chip banks and on
investment-type financial instruments (deposit certificate type).
Credit Risk
The Credit Department, which forms part of the Financial
Department, sets the maximum payment terms and customer
credit limits to be applied by the operating entities. In 2004,
it concentrated on monitoring large account risk, avoiding
collection delays and on revamping systems and processes.
During the financial year, it concentrated on reducing collection
delays monitoring large account risk, and revamping systems and
processes and on credit manager qualification.
At December 31, 2004 the Group’s total trade receivables
amounted to €2.92 billion, corresponding to OE and replacement
customers. This total includes receivables that have been
sold and securitized through consolidated special purpose vehicles
(including ad hoc entities). Receivables from the Group’s ten
largest customers, each accounting for 10% of total or more,
amounted to €566 million. Thirty five customers enjoyed credit
ceilings in excess of €10 million at end December 2004.
Bad debt write-offs for the Group as a whole amounted
to €31.44 million in 2004, or 0.20% of sales. For the period covering
1995 to 2004, average annual losses on receivables stood
at 0.14%, of average prior year sales and the annual volatility rate,
calculated semi-monthly, was 0.20%.
Breakdown of bad debt for the year compared to
average sales of the previous year (1995-2004)
33%
26%
17%
6%
4%
2% 2%
0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 2%
7%
2%
-- 0.10%
-- 0.05%
0%
0.06%
0.11%
0.17%
0.22%
0.27%
0.33%
0.38%
0.44%
0.49%
0.55%
0.60%
0.65%
0.71%
0.76%
0.82%
0.87%
0.92%
0.98%
1.03%
1.09%
1.14%
1.20%
1.25%
Industrial Hazards
40%
30%
25%
20%
15%
10%
5%
0%
Industrial hazards control is key to our operations over the longterm,
and to the safety of our teams and management of our
assets and the environment. In the 2003/2004 period, we mapped
out our industrial hazards in order to identify them better and draw
up adequate action plans. We therefore classified hazards
according to their seriousness and whether there existed adequate
measures to address them. We also extended the responsibilities
of teams in charge of fire control and of major hazards, to
individual safety as well as the protection of goods and IT systems.
Additionally, the relevant expert know-how was pooled as
part of an Asset Protection Department.