CLERMONT-FERRAND, France (July 28, 2015) — Group Michelin reported an 8.9-percent jump in operating income for the six months ended June 30, on 8.5-percent higher sales.
The report prompted management to affirm previously disclosed growth projections for fiscal 2015.
Operating income before non-recurring items rose to $1.41 billion, or 12 percent of sales, as sales hit $11.7 billion on 2.4-percent great sales volume and a favorable currency effect. Offsetting the gains were a 4.3-percent drop in the price/mix component and a negative impact from raw materials-based contractual price adjustments.
Net income rose 13.3 percent to $705.4 million.
Michelin CEO Jean-Dominique Senard attributed the positive results to Michelin's ability to leverage its “broader portfolio of solutions,” to expand access to customers and to take advantage of rising demand in its traditional markets.
As a result of the first-half results performance, Mr. Senard affirmed Michelin's full-year outlook, which includes increased operating income, a return on capital employed of more than 11 percent and structural free cash flow of more than $780 million. Capital expenditures should total about $2 billion.
Mr. Senard pointed out that Michelin strengthened its position in the OE segment and launched products in new segments, like the CrossClimate and Premier All-Season and BFGoodrich KO2 and Comp-2 lines.
By segment, Michelin reported:
- Sales in the passenger car and light truck tires and related distribution segment rose 13.4 percent to $6.54 billion, as tonnages sold jumped 7 percent. Segment operating income rose 7.5 percent to 705.4 million. Michelin said the “highly favorable impact” from the product mix was dampened by a shift in the brand mix driven by the strong sales growth in the Tier II and Tier III categories.
In Europe, price increases were announced to offset the impact of the euro's decline against the dollar on raw-materials prices. Price variations reflected the application of raw materials indexation clauses in the OE segment and the increasingly aggressive competitive environment, especially in China.
- Sales in the truck tires and related distribution segment grew 4.8 percent to $3.42 billion on the strength of OE and retread business in mature markets coupled with the launch of intermediate lines in the Americas, Southeast Asia and Africa/Middle East.
Segment operating income jumped 29.6 percent to $327 million, boosting the operating margin two points to 9.6 percent. The margin improvement was led by the resilient volumes, which beat the market with just a slight 1-percent decline on high prior-year comparatives.
- Sales in the specialty businesses segment fell 0.6-percent to $1.75 billion, as a postive currency effect offset a 5-percent drop in volumes sold. Operating income fell 2.3 percent to $376 million, but the operating margin continued at 21.5 percent.
Michelin said the 5-percent volume drop was actually slightly better than the market, as mining companies continued to draw down inventory as commodity markets remained flat.