CLERMONT-FERRAND, France — Group Michelin's sales and operating income fell in the first half of 2018, due in part to "unfavorable" prior-year comparatives and the impact of swings in world currency exchange ratios.
Operating income for recurring activities declined 4.7 percent to $1.5 billion, a drop Michelin attributed to a negative currency effect of nearly $265 million and $81 million in higher raw materials costs, which more than offset a $400 million positive impact from the price-mix effect.
Sales for the January-June period fell 4 percent to $12.8 billion despite a 2.6-percent gain in unit volumes in the second quarter. The decline in revenue, according to Michelin, was due to a $890 million decrease from currency effect, primarily stemming from the U.S. dollar/euro exchange rate change.
The operating ratio stood pat at 12.5 percent. Net earnings rose 6.4 percent to $1.11 billion.
Michelin rolled out a new "closer to the customer" organizational structure at the beginning of the year. This, according to CEO Jean-Dominique Senard, delivered a $183 million improvement in operating income at constant exchange rates.
Another highlight of the period was the successful takeover of Hessle, England-based engineering group Fenner P.L.C. and the creation of a North American wholesale partnership with Sumitomo Corp. of America.
Mr. Senard also noted the pending acquisition of Camso Group, which will create the "world leader in off-the-road mobility."
Over the half-year period, Michelin reported sustained, strong growth in the specialty businesses, led by the buoyant mining, agricultural and construction tire markets.
Additionally, Michelin's sales of 18-inch and larger rim diameter passenger tires in the second quarter rose 14 percent in the second quarter.
The volume of OE passenger and light truck tires was up 1 percent in the first half despite a 1-percent drop in the first quarter.
In North America, the downward trend in OE demand, which began in the second half of 2017, continued in the first six months of 2018 with a 5-percent decline, tracking the fall-off in vehicle production, Michelin said.
Demand for replacement tires in North America varied, with a 3-percent gain in the second quarter offsetting a 1-percent drop in the first quarter.
Markets in South America continued to expand at a robust pace throughout the period, despite the region's prevailing political uncertainty.
In Western Europe, demand was stable over the first half, with a 3-percent rebound in the second quarter offsetting a 4-percent drop decline in the first quarter.
According to Michelin, the recovery in Eastern Europe "is gaining momentum" quarter by quarter.
The replacement market in Europe also rebounded to an overall 4-percent growth, with strong demand for 18-inch tires and all-season tires in Western Europe.
Over the second half of the year, Michelin expects replacement markets to remain on an upward trend, regardless of prevailing winter weather conditions. Demand for OE tires also should remain strong in the earthmover segment, but lose momentum in the passenger car and truck segments.