Europe: Michelin fails to surpass analyst estimates on profit image

Michelin & Cie., the continent’s biggest tiremaker, announced earnings that were below analyst estimates, with slowing demand and currency headwinds offsetting the savings coming from the lower raw material prices.

The company’s shares dropped the most since last October as the French tiremaker announced that operating profit before one-time gains and charges slid to 2.17 billion euros ($2.46 billion) from 2.23 billion euros a year earlier. The Clermont-Ferrand, France-based company reported earnings that fell below the 2.23 billion-euro average of 14 analyst estimates surveyed by Bloomberg. Michelin aimed to shed reliance on the slumping core European market by expanding its operations towards the prospective emerging markets – such as Brazil, China and India, but the company now has to resist the forecasts of slower economic growth in the aforementioned regions. Together with the higher pressure on deliveries, the overseas industrial shift has also made the tiremaker more exposed to significant currency swings.

With shares down as much as 4.7 percent following the announcement, Michelin said it expects growth to follow the trends set by the regional markets this year, also forecasting that weaker sales in the emerging markets – except for China – are expected to continue through 2015. To shield itself from the volume slump, the company aims to boost the savings envisioned by a cost-cutting strategy that spans through 2016 to reach a total of 1.2 billion euros, instead of the originally planned one million euros, commented Chief Executive Officer Jean-Dominique Senard. The executive also hinted towards the possibility of acquiring a lower-tier manufacturer, particularly in Asia, to boost its presence in the region.

Via Bloomberg