Michelin reports bounce back to robust profit
French tyre maker Michelin reported a bounce back into profit in the first half, forecast robust margins for the year and said its markets should continue to recover.
Michelin said that it was benefiting from an extraordinarily strong recovery of the market for tyres, and would respond to rises in raw material prices by hiking the prices of its tyres to maintain and strengthen margins.
The company's view of strong demand fits with results from carmakers in Germany and France, and from truckmakers in Sweden, which have recently reported strong to very strong demand for their products.
This contrasts with the situation at the height of the economic downturn when the auto industry was hit hard and fast by a slump in demand. Many governments introduced state subsidies to encourage people to scrap old cars for new, but these have been, or are being, phased out.
There had been concern that the removal of subsidies would cause a hole in sales, but automakers report strong demand from emerging markets.
In the first half of the year, Michelin made a net profit of 503 million euros (659 million dollars) compared to a loss of 119 million euros at the same time last year.
The operating margin, excluding exceptional items, was a record high 9.8 percent from 4.0 percent last time, the group said. The operating profit rose threefold to 822 million euros.
Michelin attributed the rebound in its performance to a strong rise in the volume of tyres sold and a strong operating performance by its factories.
Sales rose by 17.0 percent to 8.349 billion euros. The volume of tyres sold rose by 15.3 percent, on rising demand in all regions of the world where it sells tyres.
Sales of tyres for trucks were particularly strong, surging by 24.0 percent.
The division making tyres for trucks pulled out of loss, and turned in an operating margin of 4.0 percent from a negative figure of 7.9 percent.
The joint chief executive Jean-Dominique Senard told a press conference that the strategy and restructuring put in place before the crisis, and which had been maintained thoughout, was giving good results.
Senhard said that debt was under control and that the ratio of debt to shareholders' funds had fallen from 75.0 percent to 53.0 percent in the space of 12 months.
Michelin was optimistic about the outlook, he said.
Despite the effect of rises in the price of rubber and oil, and a fall of the euro, the group intended to achieve an operating margin approaching 9.0 percent from 5.6 percent in 2009, mainly by raising prices.
© 2010 AFP