PARIS-Groupe Michelin's net profit for the first half soared nearly 3.5 times higher than last year, despite markedly higher raw material costs. The French firm's principal operating unit, Compagnie Generale des Establissements Michelin, reported a first-half profit of 1.51 billion French francs ($296.4 million at current exchange rates), vs. 434 million francs in the first half of 1994.
Sales for the period slipped half a percent to 33.1 billion francs ($6.50 billion). However, the European tire market has begun to recover, Michelin said, and the company's sales in Europe for the six months grew 8 percent.
North American sales have stabilized at a high level, the company added, though it did not break out any figures for the region.
Michelin attributed its improved earnings to a combination of factors, including:
an ongoing cost-reduction program, begun last year;
a 20-percent reduction in interest expenses, resulting equally from reduced debt levels and lower interest rates; and
a $43.4 million capital gain associated with the disposal of warehouses in Singapore.
Though the prices of certain raw materials increased sharply, the increases generally were expected, Michelin said, and the firm raised the prices of its products to offset the effects.
Michelin said it does not expect additional increases in raw materials prices for the foreseeable future, and believes the tire price hikes recently implemented, together with its cost-cutting program, should compensate for any additional cost in supplies.
The tire maker expressed optimism regarding the global tire market for the second half. Finance Director Eric Bourdais de Charbonniere told the Wall Street Journal Europe that analysts' forecasts that Michelin's earnings for the year would reach 2.3 billion francs ($451.5 million)-double 1994's figure-were realistic.