PARIS — Group Michelin's fiscal 2018 segment operating income fell 1.2 percent on a slight increase in sales as shifting currency exchange rates and rising raw materials costs ate into potential earnings gains.
Segment operating income of $3.27 billion was driven primarily by improvements in the company's commercial and specialty tire businesses, which offset a double-digit earnings decline in the automotive and related business unit, Michelin said.
Net sales rose 0.3 percent to nearly $26 billion. Michelin said sales at constant exchange rates would have risen 4.1 percent. Unit sales volume was up just 0.9 percent. Sales revenue in North America fell 2.9 percent to $9.1 billion.
Commenting on the results, outgoing CEO Jean-Dominique Senard said, "Michelin demonstrated its ability to increase operating income and sustain the improvements in structural free cash flow achieved in recent years" in what he termed a "difficult economic environment."
Mr. Senard stressed the company's acquisitions of the conveyor belting producer Fenner P.L.C. and industrial tire producer Camso Inc. and the creation of the wholesaling joint venture in the U.S. with TBC Corp., saying these transactions "have strengthened the group in key markets and provided new opportunities to create value."
These transactions, plus Michelin's more recent agreement to buy Indonesia's P.T. Multistrada, could boost the French company's annual revenue by up to $2 billion.
The firm's operating income ratio improved slightly to 12.6 percent, Michelin noted. Net income slipped 1.9 percent to $1.96 billion.
The company also noted it restructured its operating segments this past year, with sales of replacement light truck tires being reported in the "road transport" segment (formerly the truck tire segment) and construction truck tires as part of the specialty businesses segment.
Considering the expected impact of its 2018 acquisitions, Michelin released a relatively modest fiscal 2019 forecast — volume growth in line with global market trends; segment operating income exceeding the 2018 figure at constant exchange rates and before the estimated $175 million in contributions from Fenner and Camso; and structural free cash flow of more than $1.7 billion. Raw materials costs are expected to have a negative impact of about $117 million.
In North America, Michelin said it gained consumer tire market share with its Michelin and BFGoodrich brands, while sales of the Uniroyal brand fell "sharply" due to its incomplete product coverage. In the truck tire area, Michelin's volume suffered from certain unspecified supply chain issues and the Uniroyal brand's insufficient market coverage, the company said.