Michelin revises up outlook on strong first half

Clermont-Ferrand, France – Michelin has revised up its full-year financial outlook following a strong first half performance and despite a "softer" market environment.

Segment operating income is now expected to come in at €3.4 billion, up from an earlier forecast of €3.2 billion, Michelin said 26 July – without giving an update on its sales outlook.

Revenue for the first six months were up 5.9% year-on-year to €14.1 billion, lifted by a strong price-mix and the “fast-growing” non-tire business, the French group reported.

Meanwhile, segment operating income rose 11.4% to €1.7 billion as ‘value management’ offset cost inflation and a decline in sales volumes.

Business results "were good in the first half, in a context of accelerated market transformation to which we are constantly adapting," said CEO Florent Menegaux.

"Quality products and services" and "the right pricing and mix", noted Menegaux, helped to generate 'value' though segments such as truck and bus faced "a persistently difficult environment."

Revenue growth was achieved despite a 3.7% decline in tire volumes, and a negative 1% currency effect, due to the depreciation of most currencies against the euro.

The volume drop, said Michelin, reflected the uncertain economic environment and increased interest rates, which prompted major dealers to curtail inventories.

Furthermore, the group's termination of sales in Russia weighed on the first-half volumes, Michelin also pointed out.

Negative factors were, however, offset by a 9.4% positive impact of tire price-mix effect, reflecting a 12.3% impact in the first quarter and 6.7% in the second.

This translated to a €1.1-billion positive price effect, and €124-million positive mix effect, which helped to offset higher costs for raw materials, freight, energy and payroll.

In terms of business environment, Michelin said tire markets were flat in the passenger car tire segment and declining in truck & bus.

While supported by OE, the markets were dampened particularly by a sustained destocking of distributors and B2B fleets.

Sales at Michelin's non-tire business grew 16.6% year-on-year, led by conveyors, belts and sealing businesses and in services to fleets.

We will report further on Michelin's first half results, both online and in the Sept/Oct issue of ERJ magazine, which includes our annual European Tire Report.