Michelin has revised downwards its full year operating margin as difficult trading conditions in Europe and North America persist, despite successfully implementing what it called “unprecedented” price increases.
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The tyre group announced net sales up 4.5% at constant currency rates to EUR12.5 billion for the first nine months of the year. However, at current exchange rates, the figure fell 1.1%.
Michelin added that it had seen 1.4% cumulated sales volume growth for the first nine months of 2008. The third quarter was up slightly, despite the recent sharp decline of the European and North American markets.
The company also benefitted from price increase with a 3% positive price-mix for the first 9 months and nearly 5% for the third quarter alone.
“In a particularly difficult trading environment in Europe and North America, especially at the end of the reporting period, Michelin posted a rather satisfactory commercial performance for the first nine months of 2008,” the company said in a statement.
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By GlobalDataMichelin said that although the decline of oil and natural rubber prices recorded in the third quarter were particularly sharp, the trend would not impact Michelin’s accounts in 2008, due to the time lag between raw material purchases and the sale of tyres made from them.
“The group therefore confirms that the additional cost burden in 2008 due to raw materials should amount to approximately EUR750m, excluding currency effect. Michelin was able to implement unprecedented global price increases to offset these extra costs,” the company said
Looking forward, Michelin confirmed that it would need to revise down its full year estimates.
“In July, the group had based its estimated results for the full year on the assumption that ‘second half markets do not worsen beyond estimated levels’ forecasted at the time. The different trends recorded since early October point to a sharper deterioration of demand in most European and North American countries. If this trend is confirmed in November and December, the group should post 7% to 7.5% operating margin before non-recurring items for fiscal 2008,” it said.
