Currency impact hits Michelin first half results

Clermont-Ferrand, France – Groupe Michelin has reported a decline both in sales and operating income for the first half of 2018, due in part to ‘unfavourable prior-year comparatives’ and currency impact.

The French group posted a 4% decline in sales at €10.6 billion for the first six months of the year compared to €11 billion for the same period the previous year.

This is despite a 6% increase in net sales and the fact that volumes were generally stable over the first half.

The decline in revenue, according to Michelin, was due to a €735-million decrease from currency effect, primarily stemming from the US dollar.

Operating income for recurring activities also declined over 4.7% to €1.32 billion over the period.

Here, the €331-million positive impact from the price-mix effect was almost entirely offset by a €67-million raw materials costs effect and a negative €218 million currency effect.

Michelin rolled out a new “closer to the customer” organisational structure at the beginning of the year.

This, according to chief executive officer Jean-Dominique Senard, delivered a €152 million improvement in operating income at constant exchange rates.

Another highlight of the period was the successful takeover of UK-based engineering group Fenner Plc and the creation of a North American wholesaler in partnership with Sumitomo Corp.

“And the projected acquisition of Camso, which will create the world leader in off-the-road mobility,” Senard added.

Over the half-year period, Michelin reported sustained strong growth in the ‘specialty businesses’, which includes off-road, airplane and motorbike tires. The growth, said the French group, was led by the buoyant mining, agricultural and construction tire markets.

Additionally, the tire-maker posted a 14% rise in 18” and larger passenger car tire sales in the second quarter.

Volume for OE passenger car and light truck tires rose 1% in the first half of 2018 despite a 1% drop in the first quarter.

In Western Europe, demand was stable over the first half, with a 4% decline in the first quarter offset by a 3% rebound in the second.

According to Michelin, the recovery in Eastern Europe “is gaining momentum” quarter after quarter.

The replacement market in Europe also rebounded to an overall 4% growth, with strong demand for 18-inch tires and all-season tires in Western Europe.

In North America, the downward trend for OE demand, which began in second-half 2017, continued in the first six months of 2018, with a 5% decline tracking the fall-off in vehicle production.

Demand for replacement tires in North America varied, with a 1% drop in the first quarter followed by a 3% gain in the second. d

Markets in South America continued to expand at a robust pace throughout the period, despite the region’s prevailing political uncertainty.

OE demand in Asia, excluding India, ended the first half up 1% overall. It rose by 3% in China, reflecting a sharp 9% rebound in the second quarter. The replacement tire market shrank 1% due to declines in Japan and South Korea, despite a rebound in Chinese demand.

Over the second half of the year, Michelin expects replacement markets to remain on an upward trend, regardless of prevailing winter weather conditions.

Demand for original equipment tires should also remain strong in the Earthmover segment, but lose momentum in the passenger car and truck segments.