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Michelin reports sales increases for first half

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Michelin Group has announced an increase in sales volumes of 15.3% for the first half of 2010.

Consolidated net sales amounted to 8,349 million euros, up 17% compared with the prior-year period which totaled 7,134 million euros. Nets sales rose 17% in the first half, to 4,621 million eruos, while operating margin stood at 10.8%, versus 6.3% in first-half 2009.

Operating income was 822 million euros compared with 282 million euros in 2009.

Net income for the period came to 504 million euros, compared with a net loss of 122 million euros in the first-half of 2009, which reflected the cost of plans to specialize production and reorganize operations, Michelin reports.

"The clear rebound in the tire markets is expected to continue in the second half of the year, even though the pace of economic recovery will vary from one region to another," the company notes.

"While rising raw materials costs will have a negative impact on second-half consolidated results (and reduce full-year income by 600-650 million euros), Michelin will benefit from the price increases introduced in the first half. In addition, the Group is announcing around a 3% increase in its passenger car and light truck replacement tire prices in Europe starting in September, thereby confirming its commitment to a responsive pricing policy," Michelin reports.

"In this environment, Michelin reaffirms its full-year 2010 target of driving 10%-plus growth in sales volumes, maintains its objective of generating positive free cash flow and, despite the expected impact of raw materials costs, intends to deliver an operating margin before non-recurring items of close to 9%."

Passenger car and light truck tires: The company showed gains in OE passenger and light truck tire sales in all areas except Africa/Middle East, which was down 1%. In North America, the company saw gains of 71%, Europe was up 26%, and Asia was up 47%.

Replacement passenger and light truck tire sales showed a 9% improvement in North America, an 11% increase in Europe, a 12% increase in Asia and a 4% increase in Africa/Middle East.

In the original equipment market, "Following the historic collapse in the first half of 2009, virtually every original equipment market experienced robust growth in the first half of 2010, lifted by auto industry support programs implemented in most of the leading country markets," the company notes.

In the replacement market: "In Europe and North America, demand rebounded faster than expected, boosted by the uptick in kilometers traveled and partial dealer inventory rebuilding. Tires with high speed ratings outperformed the market, as did winter tires in Europe and recreational tires in North America.

In South America, the replacement markets returned to growth, with particularly robust performances in Brazil, Argentina and Colombia.

Markets in Asia remained buoyant, led by 17% growth in China.

Truck tires: Sales figures for OE truck tires showed a 23% increase in North America in the first half, the company notes. Truck tire sales increased 29% in Europe, 61% in Asia and 9% in Africa/Middle East.

Replacement tire sales were also up. The North American market was up 22%, Europe was up 35%, Asia showed 14% growth and Africa/Middle East was up 2%.

Original equipment: Still hesitant in the first quarter, European demand rebounded quickly in the second quarter off of low prior-year comparatives, but nevertheless remained weaker than in 2007. While freight demand was sometimes shaky in the second quarter, truck orders rose sharply overall, supported by renewed export activity, Michelin reports.

The North American market turned sharply upwards, particularly in the trailer tire segment, but remained far below its historic highs.

In South America, demand rose 53%, impelled by government incentives to purchase trucks in Brazil.

The Chinese market pursued its strong growth momentum, gaining 63%.

Replacement: In Europe, at a time of rising truck-borne freight tonnages, tire demand jumped 35%, albeit without attaining 2007 levels, says the company.

In North America, replacement tire demand outpaced the recovery in the freight market, lifted by the beginnings of restocking by increasingly confident dealers.

Specialty tires: For earthmover tires, global original equipment demand rebounded sharply during the period, fueled by equipment dealer restocking and the impact of government stimulus plans. Infrastructure markets recovered in North America but remained weak in Europe, while Asian markets demonstrated comparatively more resilience. The mining segment continued to expand, led by strong demand for ore and renewed work on major projects.

Agricultural tires:Global OE demand was down overall year-on-year, but began to pick up in the second quarter. Replacement demand declined during the period, notably in North America and, to a lesser extent, in Europe. The compact line market turned sharply upwards, against low prior-year comparatives.

Two-wheel tires: In Europe and North America, the motorized segments made a strong recovery off of low bases of comparison. The improvement was particularly pronounced in growth markets.

Aircraft tires: All of the Commercial Aviation markets rose during the period, with a sharp improvement in aircraft load factors. The General Aviation segment rebounded after collapsing in 2009, while demand for Military aircraft tires remained stable.

The year-on-year decline was primarily attributable to the increase in working capital requirement following the recovery in output, the company notes. In addition, inventories were further impacted by the increase in raw materials prices and rose by 669 million euros overall during the period.

Capital expenditure amounted to 251 million euros in the first half and is expected to end the year at around 1 billion euros following start-up of construction on the company's new plants in fast-growing countries.

Specialty businesses: Net sales from the specialty businesses amounted to 1,162 million euros for the first six months of the year.

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