|
Michelin: tough road ahead
|
 |
February 27, 2001: 4:36 a.m. ET
French tyre maker sees difficult 2001 as it reports 35% rise in profit
|
LONDON (CNN) - French tyre maker Michelin warned on Tuesday that rising raw material costs and a U.S. slowdown would make 2001 a difficult year.
The world's second-largest tyre maker gave its warning as it delivered a 35 percent increase in full-year profits. Net income rose to  438 million ($400 million) from 325 million in 1999.
Like its peers, the company has slashed jobs and closed plants as rising raw material expenses, particularly oil prices, a slowdown in U.S. growth and a decline in the North American truck market threatened profitability.
Michelin shares price plunged 6 percent to 40.40 after the announcement in early Paris trade. Michelin (PML) shares have bounced back from a two-year low of 30.10 last September and closed at 42.55 on Monday.
The outlook is "clearly going to be more difficult in 2001," the company said in a statement. The company gave several reasons including, a "slowdown in the U.S. economy in the first-half, followed by a pick up in the second half."
Michelin said it sees a "sharp decline" in tyre sales to truck market in North America and a jump in raw material costs such as oil and oil-derived products, with crude oil at an average of $29 a barrel.
"In this context the group's sales should grow by at least two (percentage) points more than the market, in line with the performance achieved over the past two years," it said.
The Clermont-Ferrand, France-based company said operating profit slipped 3.7 percent to 1.16 billion, in line with analysts' forecasts. The operating margin dropped to 7.6 percent from 8.8 percent a year earlier. Operating margin reflects the operating profit expressed as a percentage of revenue, and is a common measure of company profitability.
The company said net sales rose about 12 percent to 15.4 billion. Although the company benefited from rival Bridgestone's recall of 6.5 million tyres in a huge North American safety scare, this was offset by weaker than expected winter sales due to lack of snow in Europe and Japan. 
|
|
|
|
|
 |
|
