Michelin Doubles Net Income

In the 1st half of 2004, Michelin further improved its market position. Its continuous efforts to improve efficiency and successful price increases enabled the group to offset continually rising raw material costs and double net income to 328.9 million euros.

All businesses posted significant operating margin improvement. This performance demonstrates the effectiveness of the long-term strategy the Group has been pursuing for a number of years.

After an outstanding first half-year Michelin expects second half replacement markets to progressively return to their annual long-term 2 to 3 per cent growth trend. Also, it expects raw material consumption costs to continue to rise to the tune 6 or 7 per cent, through the course of the second half.

Against this operating background, Michelin confirms that it is poised to post a visible improvement in its operational performance for the full year 2004.

Excluding the impact of currency fluctuations, net sales are up 10.4 per cent. This is due to the combination of the following factors:

A negative impact (-3.6%) of exchange rates. This is mostly related to the appreciation of the euro, in particular versus the US dollar, although currencies somewhat stabilized compared to the first semester of 2003.

A positive impact (+6.1%) generated by higher sales volumes. This trend is the result of both strong replacement markets fuelled by dynamic ‘sell-out’ demand and by dealers anticipating price increases and a robust Original Equipment demand on the commercial tyre side.

A positive price/mix effect (+3.3%), calculated at constant exchange rates. This reflects strong replacement sales, an improved product-mix and price increases across all regions.

The positive impact from the scope of activity and consolidation (+0.8%), mainly due to the acquisition of the tire distribution activities of Viborg. Conversely, jointly controlled operations in Eurofit (fitted assemblies) that were fully consolidated, are now accounted for using the equity method, in accordance with future IFRS standards.