CLERMONT-FERRAND, France — Group Michelin posted 4.6% higher first-half operating income despite a 2.4% drop in sales revenue and an economic environment "that remains particularly unstable."
Fueled by product/mix improvements and lower operating costs, segment operating income grew to $1.88 billion, or 13.2% of sales, up from 12.1% in the first half of 2023.
Gains were linked to a "strong" 1.9% mix improvement, which Michelin said offset negative impacts, including high levels of Asian tire imports in replacement markets in Europe.
Michelin was further hampered by a negative price effect from contracted price indexation and a "sharp downward cycle" in certain OE markets.
Sales revenue fell to $14.2 billion, a decline Michelin attributed to a 4.4% decline in tire volumes, stemming primarily from the group's strategy of "selectively focusing on the product segments, regions and partners most capable of leveraging the full value of its technological leadership."
The negative effect of the volume drop was offset to a degree by increased sales of higher value-added products such as 18-inch and larger rim-diameter passenger tires and agricultural tracks, and to a lesser extent by a favorable shift in the geographic and market mix.
In the automotive segment, operating income rose 5.5% to $988 million on slightly lower sales of $7.4 billion. As a result the operating margin was up more than a point to 13.4%.
The road transportation segment saw a similar pattern, with operating earnings up 79% over 2023 to $324.3 million, despite 3.9% lower sales revenue of $3.53 billion. The operating margin increased more than four points to 9.2%.
In the specialty business segment, operating earnings fell 15.2% to $614 million on 7.8% lower revenue of $3.64 billion.
Despite the mixed results, Michelin CEO Florent Menegaux said these results "enable us to maintain our guidance for 2024."
On the positive side, replacement market sales in North America increased, by 4% and 17%, respectively, in the consumer (passenger/light truck tires) and commercial sectors.
Original equipment sales in North America were fairly flat for passenger vehicles — up just 1% — while truck tire OE sales dropped 9% from a year ago.
_________________________________________________
Article based in part on reporting by European Rubber Journal.
