Michelin & Cie. (ML), Europe’s largest tiremaker, reported first-half earnings that rose less than analysts forecast as pricing pressure sapped the benefits of lower raw materials costs.
Operating profit before one-time gains and charges edged up to 1.16 billion euros ($1.56 billion) from 1.15 billion euros a year ago, Clermont-Ferrand, France-based Michelin said in a statement today. Earnings missed the 1.19 billion-euro average of six analyst estimates compiled by Bloomberg.
“In a competitive environment that persisted through the first half, Michelin met its objective of delivering a further improvement in its performance,” Chief Executive Officer Jean-Dominique Senard said in the statement.
Michelin has added plants in countries such as Brazil, China and India, as well as the U.S., where demand for autos is forecast to rise. It’s cutting jobs in France as European carmakers struggle to recover from a six-year sales drop. The shift abroad has been hampered by decelerating economic growth, with Brazil’s expansion this year estimated at less than 1 percent and China’s foreseen at the slowest since 1990. Michelin said today that emerging markets aside from China face a “slowdown” in the second half.
Michelin shares fell as much as 3.1 percent to 80.29 euros and were down 2 percent at 9:08 a.m. in Paris trading. The stock has advanced 5.3 percent this year, valuing the company at 15.2 billion euros.
The overseas expansion has left the French manufacturer more exposed to foreign-exchange effects, which burdened first-half earnings by 173 million euros. The company also said pressure on pricing and sales of lower-value tires hurt profit by 169 million euros. Those headwinds largely offset a 351 million-euro gain from cheaper rubber and other raw materials.
The tiremaker stuck to its goal of increasing operating profit excluding one-time items and currency effects as sales volumes rise by about 3 percent in line with the overall market.
– Bloomberg
