PARIS, July 29 (Reuters) - French tyre maker Michelin’s first-half net profit rose 13 percent to 624 million euros ($838 million) despite a fall in revenue as lower raw material costs outweighed adverse currency effects, price cuts and slowing demand for big tyres.
Operating income before non-recurring items was 1.159 billion euros, up from 1.153 billion a year ago and slightly below the 1.19 billion middle of an 11-strong range of analysts’ forecasts.
Revenue fell to 9.673 billion euros from 10.159 billion a year earlier, even though sales volumes rose by 1.9 percent, as price cuts bit.
The company confirmed its 2014 financial targets, including a planned improvement in sales volumes of 3 percent.
Demand for vehicles is rebounding from a six-year slump in Europe, improving the outlook for suppliers and tyre makers like Michelin and Bridgestone of Japan. But a weakening of the U.S. dollar, Russian rouble and South American currencies is hurting the value of Michelin’s overseas sales.
In the second half, the company said it expects global demand for car, light truck and truck tyres should remain supportive in the mature markets and China.
Other new markets are seeing a slowdown, though, especially in the original equipment segment, it said, even though original equipment demand for earthmover tires should improve.
Mining companies, whose demand for specialist tyres is crucial to the industry,“are expecting to continue drawing down inventory through the end of the year,” the company said in its results statement.
CEO Jean-Dominique Senard warned in February that currency effects could thwart his pledge to reach 2.9 billion euros in operating profit next year - from 2.36 billion expected for 2014.
But on Tuesday, Michelin said it was maintaining its view for 2014 - that volumes will increase by around 3 percent this year, in line with projected market growth.
It also aims to deliver higher operating income before non-recurring items at constant exchange rates, a more than 11 percent return on capital employed, and structural free cash flow of more than 500 million euros along with a capital expenditure program maintained at around 2 billion euros.
“In a competitive environment that persisted through the first half, Michelin met its objective of delivering a further improvement in its performance,”... said Senard in a statement.
“A continuous flow of innovations... and a responsible, ambitious industrial strategy enabled the Michelin brand to maintain its global positions in the forefront of mobility.” (1 US dollar = 0.7446 euro) (Reporting by Andrew Callus; Editing by James Regan)