Michelin revises market forecast based on EU emissions squeeze, China slowdown

October 22, 2018

Michelin-tyreFrench tyre maker Michelin has revised the full-year forecasts for the global tyre market, warning that a sales slowdown could worsen in the fourth quarter, against the back of slower demand from China’s car market and new emissions standards in Europe.

Michelin said its own sales volumes are now expected to show only a “slight increase” for 2018. It had previously pledged to increase sales in line with more robust market growth expectations, in guidance reiterated in September.

The slowing car and truck-tyre demand in China and tougher new emissions testing in Europe has proven worse than expected, Chief Finance Officer Marc Henry said according to a report by Reuters.

The company posted a 5.2% increase in third-quarter revenue to EUR5.62 billion. But its sales to carmakers fell 5% in China and in Western Europe – where the tougher new Worldwide Harmonised Light Vehicle Test (WLTP) has led to approval delays and withdrawals for new car models.

Michelin, which had earlier pledged to increase 2018 recurring operating profit, said its growth would amount to at least EUR200 million before exchange-rate effects.

But it slashed 2018 market growth forecasts to 0.5% for car tyres, instead of the previously forecast 1.5%; and to a 1.5% decline in truck tyres rather than a 0.5% expansion.

Truck tire demand is expected to shrink by 5-6% in the fourth quarter, the company has said.

The company nevertheless reiterated its 2018 target of EUR1.1 billion in positive structural free cash flow goal.

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