Michelin posts profit jump but shares slump

15th March 2005, Comments 0 comments

PARIS, March 15 (AFP) - The French tyre maker Michelin unveiled Tuesday a 60 percent jump in 2004 net profit but disappointed investors with a tempered outlook for this year owing to higher raw material prices.

PARIS, March 15 (AFP) - The French tyre maker Michelin unveiled Tuesday a 60 percent jump in 2004 net profit but disappointed investors with a tempered outlook for this year owing to higher raw material prices.

The company said net profit rose to EUR 527 million (USD 700 million), well below an average market forecast compiled by Jacques Chahine Finances in Paris of EUR 624.95 million.

Michelin shares fell by 3.96 percent to EUR 52.20 in midday trade on the Paris stock exchange, while the CAC 40 index of leading shares had gained 0.61 percent overall.

The net result included a EUR 206 million non-recurring charge, Michelin said in a statement, half of which was a provision against losses from its planned exit from the wheels business.

Operating profit rose by 13.7 percent to EUR 1.299 billion on previously reported sales of EUR 15.698 billion, an increase of 2.1 percent.

The company gave 2005 guidance for operating profit comparable to or higher than that in 2004.

But, Michelin added: "It is worth stressing that, compared with an exceptional first semester in 2004, the first half of 2005 will be less robust."

Michelin co-chairman Edouard Michelin later said the group expected raw material costs to gradually stabilise "at a high level" in 2006 or 2007.

Michelin forecast a progressive stabilisation of raw material prices, though "this will be in 2006, 2007, It's hard to say," he told a news conference.

"We have entered a universe of more expensive resources. There's no point dreaming. Raw material costs won't go back to levels seen five years ago," he warned.

"Raw material costs will increase again in 2005, even more sharply than in 2004. This massive increase is continuing," he said.

In an effort to counter such a sharp rise, the group intended to raise prices further this year.

Michelin said that for 2005, it expected sales in mature markets to grow in line with their annual long-term trends at two-three percent, while emerging markets such as China, Eastern Europe and South America would grow between eight to 10 percent.

The company said it would pay a dividend of EUR 1.25 for 2004, an increase of 35 percent.

Net debt fell 6.3 percent last year to EUR 3.22 billion, it added.

Michelin also noted that its geographical breadth had served to lessen the negative impact of a weaker dollar over the year to EUR 38 million.

© AFP

Subject: French News

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