Citing weaker trading conditions in the automotive industry - particularly in North America - and higher raw material prices, Michelin has posted a 28% decline in net profit for 2001.

Net profit at Europe's largest tyre manufacturer declined by 28% to 314 million euros last year from 438.4 million euros in 2000. However, Michelin managed an increase in net sales of 2.5% to 15.8 billion euros.

Higher oil prices in 2001 meant that tyre manufacturers paid more for synthetic rubber and demand for tyres from vehicle manufacturers worsened markedly in the second half of the year.

Nevertheless, Michelin put a positive spin on the results, focusing on the company's relatively high operating margin (6.6%) and the markets seem to have received the results well. The 2001 operating margin is just 1 percentage point off the previous year and means that Michelin has met the target announced last July.

"Michelin kept its course in a particularly difficult environment. Our results are in line with our objectives. They performed better than [the] competition," said company chairman, Mr Edouard Michelin.

For 2002, Michelin is forecasting continued difficult market conditions in the first half. However, the company expects improved conditions in the second half and is targeting operating margin between 6.7% and 7.4% for the whole year. The leeway between the two figures reflects uncertainty over the strength of the demand recovery in the second half - the more optimistic prognosis getting a boost with GM's announcement of raised expectations for 2002 this week.

Michelin expects 2002 to see the benefit of lower raw material costs 'because of the traditional lag between the purchasing costs of raw materials and their translation into the cost of goods sold (3 to 6 months).'

The company said that rationalisation measures are forecast to reduce costs further, by 'up to 25 million euros in Europe, on top of the 1999 plan, and up to 125 million dollars in North America.'