Michelin posts 57.6% increase in net income for 1H 2007

July 27, 2007

Groupe Michelin recorded net income of 436 million euros on consolidated net sales of 8.4 billion euros for the first half ended June 30, 2007. That compares with income of 277 million euros on sales of 8 billion euros for the same period a year ago.

(Based on the exchange rate on June 30, Michelin posted net income of $589 million on net sales of $11.3 billion.)

The comparative 4.7% increase in sales based on euros was a result of increases in all three of its tire segments: passenger/light truck (up 2.8%), truck (up 4.5%) and specialty (up 13.4%). Net income was up 57.6%.

Michelin says it benefited from, among other things, the favorable impact of price increases implemented during second half of 2006; a strong positive price/mix effect at constant currency; and the streamlining of sales, general and administrative costs.

Operating income totaled 797.7 million euros, up 64.4% from the first half of 2006. Operating income before non-recurring income and expenses totaled 860.6 million euros, up 33.5%.

Operating margin was 9.5%; before non-recurring income/expenses it was 10.2%, broken down as follows (with the previous year’s comparative percentage in parentheses):

Passenger/light truck tire division: 9.9% (8%).

Truck tire division: 7.3% (5.5%).

Specialty tire division: 18.7% (14.8%).

"In a first-half 2007 characterized by a supportive environment, Michelin's results confirm the group's ability to achieve significant operating margin improvements before non-recurring items," says Managing Partner Michel Rollier. "This clearly is encouraging progress that must be made sustainable over time.

"Indeed, maintaining structurally high operating profits is key to achieving the group's other objectives by 2010, in particular return on capital employed of at least 10% and significantly positive free cash flow. Accordingly, we will press ahead with the major programs

undertaken to reduce our overhead costs and optimize our industrial base worldwide."

Michelin projects that average raw material costs will be higher in the second half than in the first -- and 60 million euros higher for fiscal 2007 compared to 2006. "In light of healthy demand," however, the company says its fiscal 2007 "should post a substantial improvement relative to financial year 2006."

Michelin expects full-year operating margin before non-recurring items "to approach the first half-year level."