"Trends observed in the first half are expected to continue in the second part of the year," say Groupe Michelin officials. "North American replacement markets should remain depressed."
However, in Europe, Michelin officials believe that the market will be "relatively robust, supported, in particular, by Eastern Europe."
The bright spot in North America will be original equipment truck tires, they say, "in anticipation of the implementation of new emission standards."
However, continued escalation of raw material costs "could further deteriorate the Groupe's accounts in the second half, with the increase totaling 23% for 2006 -- representing an additional cost of 800 million euros.
"New price increases have been announced to become effective in the second semester in order to limit, as much as possible, the negative effects of these head winds."
Michelin's operating margin before non-recurring items should be close to 8% for fiscal 2006.
Last week, Michelin announced that its consolidated net sales for the first half of 2006 totaled 8 billion, a 7.1% increase over the same period last year.
However, Michelin's operating income fell 29.4% during the half, while its net income dropped 28.2%.
"The massive increase in raw material costs -- up 21% compared to the first half of 2005, representing an additional cost of 352 million euros -- weighed on Michelin's operating performance," said Michelin officials.
