PARIS -- Michelin, Europe's biggest tire maker, doubled its first-half earnings as price increases and fewer one-off charges offset rising rubber costs, putting it on track to meet its target of higher full-year profitability.
Net profit totalled 319 million euros ($384.5 million), the French company said on Friday, compared with 157.5 million last year and just above the average forecast of 300 million from a Reuters poll of ten analysts.
Operating profit jumped 20 percent to 695 million, above an average forecast of 626 million euros, while net sales rose 6.4 percent to 7.82 billion euros.
Michelin said growth in demand would slow in the second half and the company would also have to weather a 6 to 7 percent rise in raw material costs compared with the first half.
"These are good results and above expectations," said one Paris-based analyst. "But some people are probably disappointed by the fact that the second-half margin will be lower, plus the stock has performed very well recently."
Despite a tougher environment in the second half, Michelin confirmed it expected a "visible improvement in operating performance" for 2004, spurred by the better-than-expected first-half figures.
A jump in raw material costs, particularly rubber and steel, lopped 185 million euros off Michelin's operating profit.
Michelin more than atoned thanks to brighter markets, productivity gains, price increases and higher sales of more lucrative replacement tires, but said the second half would be tougher.
"There is a major and lasting crisis in raw material prices," Chief Financial Officer Michel Rollier told a news conference. "Raw material costs in the second half could outpace prices, especially in north America."
Rollier said exceptional effects that had buoyed sales in the first half, like a rush to buy tires before the introduction of price increases, would not recur in the second half. This meant market growth should slow to an annual average of 2 to 3 percent.
To offset the negative factors, Rollier said more price increases were justifiable, particularly in north America.
Michelin saw its operating margin, or operating profit as a percentage of sales, widen by 1 percentage point to 8.9 percent in the first half.
The company was hit in the first half of 2003 by one-off restructuring costs, which flattered its bottom line this year. Its debt fell to 4.6 billion euros at the end of June 2004 -- 80 percent of shareholders equity -- from 4.41 billion a year ago.