French tyre maker Michelin has reported a “significantly improved” 2007 operating margin up 1.6 percentage points at 9.8%.
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But the company’s shares fell over 3% after traders said Michelin had missed its profitability target and amid some disappointment about the company’s cautious outlook, Reuters reported. The shares shed 22% in 2008 after a more than 8% 2007 gain, the news agency added.
Michelin noted that the margin would have been 10.2% excluding EUR74m in one-off expenses in connection with application of the new French Social Security Law (loi de financement de la Sécurité Sociale) 2008, related to end-of-career compensation, which became effective last December.
Operating income before non-recurring income and expenses rose 22.9% to EUR1,645m. Net income rose 35% year-on-year to EUR772m on sales up 3.2% to EUR16,867bn.
One-off costs during the year included restructuring charges of EUR326m.
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By GlobalDataThe board will recommend a 10.3% dividend increase to EUR1.60 per share at the company’s the annual shareholders meeting on 16 May.
Michelin said the group’s gross margin rose 1 point to 29.9%, due in particular to product mix and productivity gains.
“The combination of these factors together with further structure cost savings pushed the operating margin before non recurring items up 1.6 point to 9.8%,” it said in a statement.
Managing partner Michel Rollier added: “In an environment where overall demand was supportive and where the impact of raw material cost increases was limited, Michelin achieved a fine operating performance in 2007; and this translated into a return to growth after two rather lean years.
“Almost all operations, although at times curbed by saturated group production capacity, posted healthy sales volume growth. Michelin further improved its results and financial structure.
“The 2010 Horizon plan is yielding its first fruit and further significant progress has yet to be achieved. Michelin is starting 2008 with a healthy and robust situation and is well armed to deal with a challenging environment marked by multiple uncertainties.”
For 2008, Michelin said it “expects tyre markets to be driven by the dynamics of the emerging countries.”
It added that it expected further raw material price increases costing an estimated EUR200m at current exchange rates.
“Against this background, Michelin will pursue its pricing policy aimed at offsetting the negative impact of raw material cost increases and will continue its drive to improve competitiveness through productivity gains and streamlined structure costs.
“In these conditions, and provided there is no sharp deterioration in the trading environment, Michelin’s net sales and operating income before non-recurring items should post further progress in 2008,” the company added.
