Michelin shares slip following 1H financials

Michelin shares fell 5 per cent after the publication of its first half 2013 financial results. Writing just a couple of hours after the earning details had been published, the Wall Street Journal opined that because first-half net profit fell 45 per cent and because Michelin is taking a 250 million-euro restructuring charge to improve manufacturing efficiency some investors became unsettled and closed their positions. However, Michelin was the not the only firm suffering in Europe and mixed responses to British GDP improvements and German business confidence are thought to have affected investors too.

Summarising the news in a brief investor update published immediately after Michelin’s financials were published, Deutsche Bank analysts reported that the company’s first half operating income of 1.15 billion euros (down 13 per cent year-on-year) was in line with consensus, but shy of Deutsche’s 1.2 billion euro estimate. Their view is that this is down to “a small negative price and mix [decline] net of raw mat which will reverse in the second half”. First half net profits of 507 million also fell short of Deutsche Bank estimates of 570 million euros and a long way behind consensus expectations of 610 million euros. 

Nevertheless the analysts appear to have faith in the management’s belief that the business will have a stronger second half thanks to positive volume effect and improved positive price and mix positioning. As a result, their full year estimates of 2.4 billion euros of operating profit (an increase of 15 per cent in the second half of the year) remain unchanged.