by Pauline Foret
(Reuters) – Michelin reported a 3.1 percent drop in first-half sales on Wednesday, excluding currency effects, weighed down by pressure on European demand from an influx of budget tires from Asia and high costs.
The French tire maker posted sales of 13.48 billion euros, including currency effects, below analysts’ expectations, who had been counting on 13.53 billion euros on average, according to a consensus compiled by the company.
The group’s chairman, Florent Ménégaux, said in a call with journalists that Europe was facing structural difficulties since the Covid crisis, with energy, transport and wage costs making exports from Europe uncompetitive.
In the last half-year, the influx of “budget” tires on the European market, especially from Asia, could no longer be offset by exports. “Until now, we had resisted, but now that is no longer possible,” he added.
Michelin had already announced the closure of its truck tire production in Poland and the restructuring of its activities in Germany due to overcapacity resulting from pressure on demand. “Other countries will be affected,” said Florent Ménégaux, adding that the group continued to “review this situation.”
“The situation in Europe worries us, because Europe is not protecting its industry and the conditions are no longer right,” he lamented.
On the other hand, earnings before interest, taxes, depreciation and amortization (EBITDA) came to 2.8 billion euros, reaching 20.4% of turnover, an increase of 1.6 points compared to the first half of 2023.
“We are not overly concerned,” said Florent Ménégaux, commenting on the drop in turnover, adding that the company’s value would still continue to appreciate thanks to mix effects and a favorable evolution of operating expenses.
The group maintains its forecasts for the year 2024, with an operating result from the sectors exceeding 3.5 billion euros at constant exchange rates, and a free cash flow before acquisitions exceeding 1.5 billion euros.
(Written by Pauline Foret, with Olivier Cherfan and Gianluca Lo Nostro in Gdansk, edited by Kate Entringer)
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