PARIS -- Europe's biggest tire maker Michelin posted a forecast-beating 18 percent rise in 2002 operating profit on Tuesday as price increases and cost cuts helped it resist grim markets and a weak U.S. dollar.
The French firm was cautious on the year ahead, declining to give firm forecasts and betting on stable tire markets with a risk of waning demand. But investors cheered the profit figures, driving the stock up more than five percent.
Michelin said net profit almost doubled to 580.8 million euros ($624.5 million) from 296 million in 2001, or up 96 percent to 614.5 million euros before minority interests, adding it had swerved past a key operating margin target.
Lower interest and tax charges than in 2001 and an exceptional capital gain from real estate sales in North America helped flatter the bottom line, the firm said in a statement.
A three-year belt-tightening plan began to pay off in 2002, helping Michelin lift operating profit and weather an industry downturn that has hurt some rivals.
And price increases also helped swell margins, as did a strategy of focusing on more lucrative top-end tires and on selling more tires direct to individuals rather than carmakers, although all this was tempered by unfavorable exchange rates.
Michelin, also famed for its upscale restaurant guides, said it would not give firm forecasts for 2003 due to uncertain economic and geopolitical conditions but said it aimed to keep improving performance.
"It's an uncertain road ahead in 2003," Chairman Edouard Michelin told a news conference. "But that does not undermine our confidence in being able to continue to improve performance at all levels," he added, confirming a target of 10 percent operating margin in 2005 if markets return to normal.
Michelin, whose chairman is striving to turn what was once a staid family firm into the world's top tyre maker, took a hit earlier this month when Standard & Poor's rating agency said it could downgrade its credit rating due to unfunded pension liabilities.
The company said it made additional pension contributions to the tune of 347 million euros in 2002, mostly in north America, and may have to pay more in social costs this year.
But Chief Financial Officer Michel Rollier said cashflow of 1.2 billion euros in 2002 would comfortably cover requirements and stressed its financial position was sound.
Operating profit for full-year 2002 totalled 1.225 billion euros compared with 1.04 billion in 2001. That was good for an operating margin of 7.8 percent, up from 6.6 percent in 2001 and above the firm's target of 7.0 to 7.4 percent.
A consensus of 18 analysts polled by the French firm had predicted operating profit would rise almost nine percent to 1.13 billion euros, with net profit before minority interests up 46 percent to 458 million euros.
Michelin said earlier this month full-year sales slipped 0.8 percent as weak U.S. and Latin American currencies bit into revenues, although sales by volume motored higher, mainly thanks to strong sales of truck tires.
Michelin said it expected tyre markets to remain stable in 2003 but with a risk of decline, adding raw material prices would likely increase, but that a weakening U.S. dollar versus the euro would offset this.
VIBOURG CHARGE SEEN IN 2003
This year's bottom line would likely be hit by a one-off charge of more than 50 million euros in goodwill amortisation for the acquisition last September of Danish group Vibourg's European tire distribution assets, CFO Rollier told Reuters.
The firm cut debt in 2002 by one billion euros to 3.81 billion, and said it would invest one billion euros in 2003.
The figures come after French carmakers PSA Peugeot Citroen and Renault both posted robust full-year earnings but cautioned they expected little growth next year as the western European car market continues to shudder.
Japanese tire-making rival Bridgestone posted a 161 percent surge in net profit on Friday, confirming its comeback after a massive recall at its Firestone unit.