UPDATE 1-Michelin lifts cash-flow goal again as sales rise

Mon Oct 22, 2012 1:01pm EDT

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By Laurence Frost

PARIS, Oct 22 (Reuters) - French tyremaker Michelin said quarterly revenue grew 5.7 percent and raised its cash-flow target for a second straight month as strong pricing and currency effects offset a decline in sales volumes.

Revenue rose to 5.44 billion euros ($7.11 billion) in the third quarter, the company said in a statement on Monday.

Michelin said it was on course to meet its full-year goal of a "clear increase in operating income" from the 1.945 billion euros achieved in 2011, helped by a 200-300 million decline in raw-material costs for the second half.

The company also pledged positive free cash flow of 400-500 million euros, excluding gains from a Paris real-estate deal. In July, Michelin had forecast merely "positive" cash flow for 2012, before raising the goal to 300-400 million last month.

Michelin's revenue and outlook bucked the auto-market slump in its home European markets, where sales to car manufacturers nonetheless plunged 6 percent in the quarter and replacement tyre sales dropped 8 percent. Truck tyre sales also fell.

"The key for us in these numbers is the sequential development in price and mix, which did beat our expectations," said London-based Credit Suisse analyst David Arnold.

The improved mix - reflecting a shift in demand toward more expensive tyre models - delivered a 2.7 percent revenue lift, Michelin said.

North America also helped Michelin to resist Europe's gloom, with a 14 percent jump in sales to automakers, while global revenue from specialty tyres for planes and earthmoving equipment surged 16 percent.

The euro's decline against other currencies helped overcome a 3.5 percent quarterly decline in Michelin's overall sales volume, measured in metric tons.

Michelin shares closed 1.5 percent lower at 61.86 euros in Paris before the sales announcement. The stock has advanced 38 percent this year, outpacing a 23 percent gain on the 14-member Stoxx Europe 600 autos and parts index.

The Clermont-Ferrand, France-based tyremaker aims to generate operating profit of 2.9 billion euros in 2015, it said last month, upgrading a previous medium-term target of 2.5 billion. ($1 = 0.7651 euros) (Editing by James Regan)

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