First quarter revenue declined 2.4% for Michelin, Europe’s largest tiremaker, as the strong euro and the weaker demand in Easter Europe dented sales.
The company, located in Clermont-Ferrand, France, reported its sales went down to 4.76 billion euros ($6.58 billion) from 4.88 billion euros in the same period of 2013. According to the company, the mounting tensions between Russia and Ukraine and the rise of the European currency over the dollar and other currencies managed to offset with a 232 million-euro charge the sales volumes, which increased slightly, by 3.4 %.
According to Chief Financial Officer Marc Henry, the global delivery gains were hit by an 8% fall in replacement tires demand in Easter Europe, as tensions mounted on “the Ukrainian crisis and the weakening Russian economy.”
Although the region is not seeing an improvement any time soon, the company maintained its target of growing worldwide tire sales by around 3%, with the tiremaker aiming to cut costs by 1 billion euros until 2016 and also seeking to raise its operating profit to 2.9 billion euros in 2015.
While European sales are still struggling to recover from a six years slump in demand, Michelin is cutting jobs in France, ending production of heavy-truck tires at a facility in Joue-les-Tours, near Paris. On the other hand, the tiremaker is adding new plants in emerging markets like Brazil, China and India.