Net sales are up 7.1% worldwide.
Net income is down 28.2% compared to the first half of 2005, primarily because of the restructuring charges for the closing of the BFGoodrich plant in Kitchener, Ontario, according to Michelin.
Operating margin for Groupe Michelin is expected to be close to 8%, before non-recurring items, in fiscal 2006. That figure is down 1.2 points compared to the first half of 2005.
The “massive increase in raw materials costs” represented an additional cost of 352 million euros, according to the tiremaker. In a release, Michelin said that its price increases were not sufficient to offset rising raw materials costs.
In North America, Michelin said the replacement market is down 4.7% (-5% for the U.S. alone). As a result, the tiremaker’s flag brands – Michelin, BFGoodrich and Uniroyal – were able to maintain marketshares, while private and associate brands “are very depressed.”
Michelin expects these trends to continue in the second part of the year. “North American replacement markets should remain depressed, whereas in Europe, these markets should be relatively robust, supported, in particular, by Eastern Europe,” said the tiremaker.
The increase in raw materials costs is expected to total 23% for 2006, representing an additional cost of 800 million euros.
“Over the past two and a half years, the repeated increases in raw material prices have deteriorated Michelin’s costs by more than one billion euros,” Michel Rollier, managing partner. “As the Group is finding it difficult to fully compensate for this evolution, it is becoming essential to accelerate the productivity improvement and cost reduction programs that are already in place. Michelin’s teams are aware of the challenge and of the measures that need to be taken to rise to it. I am fully confident that they will succeed.”
Consolidated net sales for the third quarter ending Sept. 30 will be announced on Oct. 24.
