Michelin drives into profit

30th July 2004, Comments 0 comments

PARIS, July 30 (AFP) - French tyre manufacturer Michelin doubled net profit in the first half of the year and forecast on Friday a rise of operating profits over the full year.

PARIS, July 30 (AFP) - French tyre manufacturer Michelin doubled net profit in the first half of the year and forecast on Friday a rise of operating profits over the full year.

But it bemoaned hikes in raw materials prices while reporting that efficiency gains had helped offset this factor and it expected to continue to improve performance this year.

The group said that in the second half it expected to see the market for replacement tyres gradually return to long-term growth rates of 2.0-3.0 percent per year, "or by far less".

Analysts interpreted the company's results statement as being cautious and investors took profits, causing the share to fall by 1.54 percent to EUR 46.57.

Earlier this week the share had gained 4.0 percent, and since January 1 it had risen by 28.5 percent.

One analyst, who declined to be named, commented: "It has been a good week for auto shares and Michelin is suffering from profit taking."

The group said that net profit in the first half had doubled from the equivalent figure last year to EUR 318.9 million (USD 384 million dollars) despite increases in prices of raw materials.

It expected raw materials prices, notably of rubber and steel, to continue rising in the second half by 6.0-7.0 percent.

This meant that it might face rises in the costs of raw materials exceeding a rise of sales, notably in North America.

There was a delay of four to six months between the rise of raw materials prices and a rise of costs of the finished product, it said.

But Michelin said that efficiency gains had helped offset this factor and it was confident it could improve operating performance in the whole of 2004.

The six-month result, which exceeded analysts' forecasts slightly, was driven mainly by a 20-percent increase in operating profits to EUR 694.8 million owing to exceptional items in the form of strong final demand and the purchasing of supplies in anticipation of price rises.

Sales rose by 6.4 percent to EUR 7.821 billion. On a comparable asset base and at constant exchange rates, they increased by 10.4 percent.

First-half profits in 2003 had been weakened by restructuring costs in France and Spain.

Operating margins firmed to 8.9 percent from 7.9 percent.

© AFP

Subject: French news

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