Michelin: Sales up 7.5% in H1 2017
During the first half of the year, Michelin increased both sales and net income on the back of higher volumes. Net sales were up 7.5 per cent to 11.1 billion euros in the six months to 30 June, and while operating income declined 0.8 per cent year-on-year to 1.4 billion euros (with the margin down 1.1 per cent to 12.6 per cent), the tyre maker described this result as “stable and in line with the Group’s roadmap.” Net income rose 12.2 per cent to 863 million euros.
“Michelin’s good performance, compared with a strong first-half 2016, is in line with our 2020 roadmap,” commented Michelin’s chief executive officer, Jean-Dominique Senard. “The main drivers of the period include an increase in volumes, tight pricing policy management, further improvements in our competitiveness and the commitment of our employees to serving customers. Today, we are confirming our guidance for 2017, with a second half that will benefit from the improved margins resulting from the price increases.”
Tyre sales volumes increased 4.1 per cent (3.6 per cent at constant scope of consolidation) over the first half of the year, however volumes in the second quarter were dampened by heavy buying ahead of price increases in the first quarter. Passenger and light commercial vehicle tyre volumes were up three per cent year-on-year; original equipment business was up three per cent and replacement market volumes up four per cent. Truck tyre volumes rose three per cent; original equipment volumes increased nine per cent and replacement market one per cent. Growth in the specialty tyres business was between eight and ten per cent up, having rebounded in the second quarter after volumes decreased in the first; this growth was driven by healthier demand for mining tyres and a sharp upturn in original equipment earthmover and agricultural tyre sales.
Price-mix effect has been positive, amounting to 1.4 per cent in the first half, accelerating to 2.8 per cent in second quarter, reflecting the initial impact of price increases and resulting in a 186 million euro net negative price-mix/raw materials effect over the period.
Michelin’s outlook for the second half of the year is for replacement markets to recover from their decline after the surge in early buying; the tyre maker anticipates this will occur regardless of the weather the coming winter will bring. Demand for original equipment tyres should remain on an upward trend in the Truck, Earthmover and Agricultural segments, with growth slowing in the Passenger car and Light truck segment. Sales of mining tyres are expected to remain buoyant.
Given the full-year impact of higher raw material costs, which are currently estimated at 800 million euros, Michelin says it will “continue to agilely manage prices,” holding unit margins firm in businesses not subject to indexation clauses and applying those clauses in businesses that are. As a result, changes in the price mix and raw materials costs are expected to have a net positive impact in the second half of the year.
For the full year, Michelin confirms its targets of volume growth in line with global market trends, operating income from recurring activities exceeding the 2016 figure at constant exchange rates, and structural free cash flow of more than 900 million euros.
Further information on Michelin’s H1 2017 results can be found in the Tyrepress.com company profiles and reports section.