Michelin Reiterates Limited Growth Expectations in H2

Michelin Reiterates Limited Growth Expectations in H2

Michelin is fending off critics by reassuring all interested parties that its earnings and sales will improve this year, despite reiterating the fact that it expects higher raw-material prices to limit its growth in the second half.

“Raw-material prices are and will continue to rise and put pressure on margins,” Michelin’s CEO Edouard, told French newspaper Le Figaro.

“You can’t extrapolate our results for the whole year from the first half onwards, particularly regarding operating margins,” he continued. The company’s first-half operating margin; operating profit as a percentage of sales was recorded as 8.9 per cent.

He also explained that a 10 per cent increase in raw-material costs meant the company would raise its prices by 2 per cent “to avoid the erosion of margins and to remain competitive.” He added that raw-material costs take up about 20 per cent of Michelin sales.

The company’s first-half results put it on track to meet its full year target of higher profitability, but at its earnings presentation in July the company stated that “growth in demand would slow in the second half,” and it would have to weather a six to seven per cent rise in raw-material costs compared with the first half.

“We are constantly improving our productivity,” Michelin told the French newspaper. “But if the price increases for raw materials persist we will continue to raise our tariffs.”

Michelin also said in July that raw-material costs in the second half could outpace prices, especially in North America. A rise in raw-material costs had already knocked $228 million off its first-half operating profit.