Michelin Q1 revenue falls 6.3% on currency swing

PARIS — Weighed down by an unfavorable currency exchange swing in the past several months, Group Michelin reported a 6.3-percent drop in sales revenue for the three months ended March 31.

The drop was compounded by a 2.3-percent drop in unit volumes, which Michelin attributed to "massive" dealer inventory build-ups ahead of price increases announced in the fourth quarter of fiscal 2017. Mining tire sales maintained their momentum from 2017.

Despite the first quarter decline, to $6.41 billion, Michelin is sticking by its earlier forecasts of volume growth in line with global market trends and operating income from recurring activities exceeding the 2017 figure, at constant exchange rates.

Michelin did not disclose earnings at this time.

Over the full year, Michelin said it expects demand to increase slightly in the passenger car and light truck tire markets and remain stable in the truck tire markets. The mining tire market should continue to enjoy "robust" growth.

Michelin said it expects the currency effect will remain "highly unfavorable" throughout the year, generating a negative impact on operating income of nearly $430 million.

Michelin has revamped its segment operating organization into what it's calling a "closer-to-the-customer" organization. This consists primarily of shifting reporting for replacement van tires into the "Road Transportation & Related Distribution" segment and construction truck tires into the "Specialties" segment.

This reorganization meant a shift of roughly $180 million in the automotive sector to the road transportation sector, and about $215 million from the transportation sector to the specialty businesses unit.

By segment, Michelin's auto and road transportation business areas reported 9.3- and 8.2-percent drops in sales, respectively, to $3.41 billion and $1.68 billion. The specialty business unit (earthmover, aircraft, agricultural and 2-wheeler tires), by contrast, reported a 5.5-percent rise in sales to $1.32 billion.

Within the specialty business unit: earthmover tire sales rose sharply over the 2017 quarter, lifted by strong growth in volumes; agricultural tire sales increased, led by growth in OE volumes; two-wheeler tires sales, excluding Levorin, suffered from the contraction in the recreational segment in mature markets; aircraft tire sales were down slightly, as the currency effect more than offset the robust volume gains in the commercial radial segment.

Michelin said it is counting on a "large number" of product launches planned for 2018 to help lift sales volumes. In addition, the group expects to be able to manage prices "agilely" so as to protect unit margins in an increasingly competitive marketplace.