Michelin income grows 32 percent in first half

ERJ staff report (DS)

Paris - Consolidated net sales for Michelin amounted to €10,105 million, up 21 percent at current exchange rates compared with first-half 2010. Sales volumes rose 12.6 percent, but prices rose by around 9 percent on averae. Michelin said it did not see significant benefit from its mix of products.

Operating income rose to euro 971 million from euro 822 million a year ago. The €149-million increase in operating income before non-recurring income and expenses,

mainly reflected the favorable impact of higher volumes (€407 million) and the price mix (€829 million), including €842 million from higher prices, which totally offset at the end of June the increase in raw material prices (€848 million).

Michelin is diligently pursuing its pricing policy, which is intended to pass on the increase in raw

material prices. Together, the price increases announced or implemented to date are expected to

offset estimated additional full-year costs of around €1,800 million.

In first-half 2011, said Michelin, worldwide demand for tyres rose substantially in all regions. Following a sharp

increase in the first quarter, growth slowed to a pace closer to long-term trends. During the first

half, the market saw ongoing price increases by all tyre manufacturers in an environment shaped

by sharply higher raw material prices and high capacity utilization rates.

Car tyres

On the OE passenger car side, In Western Europe, the market was impacted in the second quarter by the consequences of

the natural disaster in Japan, while demand in Eastern Europe continued to rise sharply.

Demand in North America, which returned to growth in the first quarter in line with the

upswing in new vehicle sales, was adversely affected in the second quarter by the impact of

a lack of parts and components from Japan for carmakers.

In Asia (excluding India), demand contracted by 5 percent overall. In China, the market remained

buoyant, expanding by 3 percent, despite the impact of the Japanese tsunami and the termination

of government-sponsored carbuying incentives.

In South America, the OE tire market increased by 8 percent, lifted by a record number of car

registrations.

On the replacement side, In Europe, demand was up 9 percent in the first half. It was supported by partial dealer inventory

rebuilding ahead of the announced early-year price increases and by very strong demand for

winter tyres.

In North America, demand was up 1 percent for the half, following a record number of tyre sales

in the first quarter. Higher fuel prices in the second quarter and the resulting decrease in

distances driven by US motorists weighed on demand at the end of the half. Market growth

was driven by the recreational and commercial segments as well as by the high-performance

tyre segment (V and Z speed rating).

In Asia (excluding India), markets rose 14 percent overall during the period. Demand in China

increased by 20 percent for the half, although more slowly late in the period due to

i) the fact that

early-year demand was lifted by dealer purchases ahead of price increases

and ii) a slowdown

in the economy and in consumer spending. The Japanese market expanded by a robust 15 percent,

led by restocking to replace tyres lost during the natural disaster.

In South America, replacement tyre markets continued to expand, increasing by 10 percent overall.

The Brazilian market widened further, growing by 7 percent, despite higher interest rates introduced

by the government to combat inflationary trends.

truck tyres

On the truck side, Demand for radial truck tyres recovered sharply during the year in every region. In mature markets,

the gains came off of low prior-period comparatives, particularly in the OE segment (up 17 percent).

In Europe, the market expanded by a strong 61 percent, lifted by favorable prior-period comparatives

in the first quarter and sustained exports of new trucks.

In North America, the market saw robust 66 percent growth, reflecting new vehicle purchases

needed because of the high average age of tractor trucks (nine years).

In Asia (excluding India), demand fell by 10 percent, due mainly to a 12 percent contraction in the Chinese

market. The decline in China resulted in particular from a slowdown in construction-related

businesses and tighter credit controls.

In South America, market expansion was driven by rising sales in advance of the introduction

of new truck standards and by infrastructure development projects for the 2016 Olympic

Games in Brazil.

In Europe, the market grew by 18 percent, exceeding the increase in freight demand, which rises by

approximately 2 percent a year. Growth was led by dealer inventory rebuilding in an environment

shaped by the steady round of tyre maker price increases and by emerging shortages that

encouraged dealers to restock. Note that while the overall market expanded, demand for

freight transport was greater in Northern than in Southern Europe.

In North America, demand increased by 14 percent compared with the prior-year period. Freight

tonnage returned to 2007 levels, while sales to dealers generally kept pace with sales to

end-users.

In Asia (excluding India), the market continued to grow, expanding by 9 percent, although

performance varied from one country to another. In China, the market widened by 10 percent in

the first half although growth slowed considerably in the second quarter due to a slowdown

in construction-related businesses and credit-tightening measures.

In South America, demand rose by a strong 17 percent although at a slower pace in the second

quarter owing to an increase in Brazilian interest rates and other inflation-control initiatives.

Speciality tyres

Earthmover tyres: The mining segment continued to expand, growing by more than 10 percent,

led by renewed work on major projects and healthy demand for ore and energy. Supply

chain constrictions are beginning to resurface. The original equipment segment experienced a

strong recovery that nonetheless fell short of the exceptional levels seen in 2008. The market

for tyres used in infrastructure projects and quarries pursued its growth path, in both North

America and Europe.

Agricultural tyres: Global demand in the original equipment market recovered strongly during

the first half in North America and Europe, especially in the high-powered farm machinery

segment. Sales in the replacement market increased sharply in North America and continued

to rise in Europe.

Two-wheel tyres: The motorized segments made gains in the first half, especially in North

and South America.

Aircraft tyres: In the commercial aviation segment, the number of passengers carried

continued to increase as did aircraft load factors. The general aviation segment saw a sharp

upturn while demand in the military segment remained on a par with 2010.

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Press release from Michelin