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Michelin profit falls 29%
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September 19, 2000: 8:53 a.m. ET
Lower inventories, strong dollar, high raw material costs hit first-half net
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LONDON (CNNfn) - French tire maker Cie. Générale des Etablissements Michelin said higher raw material prices and the strong dollar punctured first-half profit, which fell a bigger-than-expected 29.1 percent.
Michelin (PML) said group net profit fell to  210 million ($179 million) from 296 million a year earlier. Analysts polled by Reuters had been expecting net profit to fall 15 percent to 281 million.
Operating profit slid to 540 million, a drop of 9.4 percent, bigger than the
5 percent decline that analysts expected. The company had warned in July that operating profit would fall.
"The economic environment looks much less favorable than we had anticipated at the beginning of the year," managing partner Edouard Michelin said in a statement.
 Michelin shares slumped 5 percent to 31.16.
First-half sales increased 13.7 percent to 7.4 billion, but the company said currency fluctuations, including a 12 percent rise in the dollar against the euro, accounted for 380 million of the extra sales.
Lower inventories held by auto makers, and a nearly 15 percent increase in the cost of raw materials helped to drive down profit.
The company said a slump in the North American truck market, higher raw material costs, and the weak euro would continue to weigh on the company's operating profit margin, which fell to 7.3 percent in the first half from 9.2 percent a year earlier. The operating margin, a measure of a company's underlying profitability, shows operating profit as a percentage of sales.
The company said it expected its second-half operating margin to be either 7.3 percent or 9 percent, depending on the economic environment.
Michelin's earnings report followed a warning from French car parts maker Valeo (PFR) late Monday that 2000 profit would not meet its target because of rising raw material costs.
A number of big U.S. and European companies have warned in the past weeks that profits will be lower than expected, sending stock markets lower in recent days. 
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Michelin
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