Currency fluctuations affect Michelin's first-half sales

July 30, 2003

Groupe Michelin reported net sales of 7.35 billion euros during the first half ended June 30. That's down 6.1% from first-half 2002 results.

However, the company estimates it suffered a 10% negative impact linked to exchange rate variations. For example, the dollar in the United States lost 19% against the euro.

Excluding the impact of currency fluctuations, Michelin's net sales were up 4.4%. In addition, sales volumes were up 2.4%, although the trend "is more the effect of inventories being rebuilt at dealers, especially in Europe, than of an actual increase in end user demand."

Operating income for the half was comparatively up 1.5%, while operating margin as a percent of net sales increased from 7.3% during the first six months of 2002 to 7.9% this year.

According to Michelin, net income declined 35% compared to the first half of 2002.

In North America, Michelin suffered a 3.1% volume decline in the replacement consumer market during the first half compared to the same period last year. The company cites the following reasons for the decrease:

* deterioration in consumer confidence, "especially during the March-May period that corresponded to the war in Iraq";

* a sharp hike in gas prices;

* an "unfavorable basis for comparison" due to the end of the Ford Motor Co. recall of Firestone tires in January and February 2002;

* delayed recovery in the market as a whole and in the SUV segment.

Michelin North America Inc.'s first-half consumer tire sales were down 3.9% compared to a year ago, which resulted in a slight decrease in market share.

In the replacement truck tire market, Michelin recorded an 8% increase in sales in North America for the first half.

Groupe Michelin says its second-half results will continue to be impacted by high raw material costs. In addition, it will amortize the goodwill corresponding to its acquistion of Viborg in Europe over a single year, which also will impact earnings.