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Michelin's 1H Sales Improve Despite Late Price Increase

Posted on July 26, 2017

Both net sales and tire volume were up for the first half of Groupe Michelin's 2017 fiscal year ended June 30. However, consumer and truck tire margins were down.

Michelin posted net income of 863 million euros on net sales of 11 billion euros for the first half of 2017. That compares to income of 769 million euros on sales of 10.3 billion euros for the same period last year.

Based on the currency exhange, Michelin recorded net sales of $755.3 million on net sales of more than $9.6 billion for 1H 2017. It's income-to-sales ratio was 7.8%.

Operating income decreased less than 1%, to nearly 1.4 billion euros ($1.2 billion).

Tire volumes were up 4.1%, dampened in Q2 by heavy buying in Q1 ahead of price increases. Passenger and light truck tire volume was up 3%; truck tire volume was stable; and specialty tires, aided by a sharp upturn in earthmover and agricultural OE tire demand, was up 16%.

Here is a comparison breakdown of Michelin's 1H 2017 financial results for the consumer and truck tire segments versus 1H 2016:

Segment     Margin  % change  Net sales    % change

PLT tire        12.8%    -7.2%         $5.5 billion   +5.8%

Truck tire        7.5%  -24.2%         $2.6 billion   +4.6%

"Michelin’s good performance, compared with a strong first-half 2016, is in line with our 2020 roadmap," said CEO Jean-Dominique Senard. "The main drivers of the period include an increase in volumes, tight pricing policy management, further improvements in our competitiveness and the commitment of our employees to serving customers. Today, we are confirming our guidance for 2017, with a second half that will benefit from the improved margins resulting from the price increases."

Outlook, per Michelin

"Over the second half of the year, regardless of prevailing winter weather conditions, replacement markets are expected to recover from their decline after the surge in early buying," said the company. "Demand for original equipment tires should remain on an upward trend in the truck, earthmover and agricultural segments, with growth slowing in the Passenger Car and Light Truck Segment. Sales of mining tires are expected to remain buoyant.

"Given the full-year impact of higher raw materials costs, which are currently estimated at 800 million euros, Michelin will continue to agilely manage prices, holding unit margins firm in businesses not subject to indexation clauses and applying those clauses in businesses that are. As a result, changes in the price mix and raw materials costs are expected to have a net positive impact in the second half of the year.

"For the full year, Michelin confirms its targets of volume growth in line with global market trends, operating income from recurring activities exceeding the 2016 figure at constant exchange rates, and structural free cash flow of more than 900 million euros," added the company.

Related Topics: Jean-Dominique Senard, Michelin financials, raw material costs, tire price increases

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