French tyre-maker Michelin’s profitability suffered in early 2019 despite its first-half revenue and operating earnings – net income fell 8% to US$940 million; operating margin fell to 12.2% from 12.5%; and sales of the car/light-truck tyres fell by 7.9%, further paring its operating margin to 10.3%. The poor profits are an aftereffect of a contraction in global auto markets and have prompted profit warnings from manufacturer and suppliers alike, including German rival Continental.
At present, Michelin is cutting costs to sustain its premium pricing from intensifying competition. Price hikes have added some US$103 million to January-June revenue, while increased sales of upscale/mining tyres contributed to a US$92 million gain.
In the face of declining vehicle production and higher prices for butadiene, used to produce synthetic rubber, company Chief Executive Florent Menegaux said the group is pursuing its competitiveness initiatives –Michelin’s reiterated goals include an increase in full-year tyre business operating income and structural free cash flow above US$1.6 billion.