European News

30, Jul 2010.

Michelin & Cie., the world’s second- largest tiremaker, posted a first-half profit that beat analysts’ estimates as the global economic recovery fuelled a gain in sales to truckmakers and logistics companies.

Net income was 504 million euros ($659 million), compared with a 122 million-euro loss a year earlier, the French company said in a statement distributed to journalists in Paris today. Analysts had expected profit of 369.4 million euros, based on the average of estimates compiled by Bloomberg. Sales rose 17 percent to 8.35 billion euros.

Michelin, based in the town of Clermont-Ferrand in central France, has pledged to defend profitability by passing on rising raw-material costs to consumers through price hikes. Natural rubber prices have risen by half over the past 12 months, while crude oil, used to make its synthetic alternative, has advanced 24 percent.

“While rising raw material costs will have a negative impact on second-half consolidated results, Michelin will benefit from the price increases introduced in the first half,” the company said in today’s statement. Rising commodity prices will trim at least 600 million euros from full-year earnings, Michelin said.

First-half operating profit before one-time items nearly tripled to 822 million euros from 282 million euros a year earlier, the company said.

Targets Reaffirmed

“Michelin reaffirms its full-year 2010 target of driving a 10 percent-plus growth in sales volumes, maintains its objective of generating positive free cash flow” and plans an operating margin of 9 percent excluding non-recurring costs, it said.

Chief Executive Officer Michel Rollier had pledged last year to set a date for meeting the company’s postponed 10 percent margin goal when it published 2009 results.

The CEO later backtracked, saying in February there was “too much volatility” to restore the objective, which was originally set for this year and dropped in 2008. Michelin also said at the time it expected to achieve only two-thirds of the 1.5 billion euros in savings promised between 2007 and 2010.

Michelin ranks behind Bridgestone Corp. of Japan in global tire production.