Michelin Beats First-Half Profit Forecasts on Cost Cuts

The figures show healthy sales in Western Europe, in line with recent car-industry commentary.
By Laura Board ,

French tire maker Michelin (MGDDF) beat earnings forecasts in the six months ended June thanks to cost costs and healthy demand for new car tires in Western Europe.

Michelin said net profit rose to €769 million ($845.9 million) in the first half, up from €707 million a year earlier and well ahead of a consensus forecast compiled by Reuters for profit of about €733 million.

First-half revenue fell by 2% to €10.29 billion, though sales by volume climbed by 2.5%. Original passenger-car and light truck tire sales rose by 7% in the first half in Europe, excluding Russia and the former Soviet states, compared with 3% in North America, 2% in Asia and a decline of 19% in South America.

A cost-control program generated a boost of €155 million, offsetting higher production costs.

The first-half results support auto industry data and updates from carmakers including Volkswagen  (VLKAY) and Daimler (DDAIF) that point to mainland European resilience, even as some pockets of their business, including truck sales in North America for Daimler, and revenue in South America, suffer.

Michelin confirmed its full-year year targets of volume growth "exceeding global trends" in its markets, an increase in operating profit from recurring activities at constant exchange rates, and structural free cash flow of more than €800 million.

It completed €150 million of share buybacks in the first half and plans the same again in the second half.

Michelin shares edged up 0.50% to €89.16 in early trading in Paris.

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