Michelin posts loss on low sales, restructuring costs

Michelin & Cie., the world's second- largest tiremaker, reported a loss in the first half on a slump in sales to vehicle manufacturers and trucking companies hit by the global recession.

The net loss was 119 million euros ($168.1 million) compared with net income of 430 million euros a year earlier, the Clermont-Ferrand, France-based company said in a statement today. Sales fell 13 percent to 7.13 billion euros. Analysts had expected a 320 million-euro loss on sales of 7.09 billion euros, according to the median of estimates compiled by Bloomberg.

"Inventories have now returned to more normal levels, but not to the extent that we can talk about a real upturn," Chief Executive Officer Michel Rollier said in the statement. Declining raw-material prices "should support second-half margins."

Tiremakers are being squeezed by a slowdown in vehicle production and weakening sales of replacement truck tires, as the recession hits freight carriers and construction companies. While government-backed sales incentives halted Europe's auto- market slump last month, demand was 11 percent lower for the first half overall.

Michelin rose 2.01 euros, or 4.4 percent, in Paris yesterday, extending the stock's gain this year to 26 percent and valuing the company at 7 billion euros.

The company gave no earnings forecast for the full year. Rollier said in February the 10 percent operating margin originally targeted for 2010 may be achieved "a little later" as the sales slide forces the postponement of some investments.

Earnings Details

Michelin recorded a first-half operating profit of 282 million euros, excluding one-time gains and losses, for an operating margin of 4 percent. That compared with a 708 million- euro profit a year earlier, or 8.6 percent of sales.