The French company, Europe’s largest tiremaker, said currency swings in the US, Japan and South America were responsible for the negative result, prompting it to review spending plans.
Sales dropped to 5.12 billion euros ($7.06 billion) from 5.44 billion euros a year earlier, even as deliveries increased 2 %, the Clermont-Ferrand, France-based company said late yesterday in a statement. The tiremaker expects operating profit to surge by around 150 million euros before one-time items and currency effects, which will be “more deeply negative” than anticipated at the beginning of the year.
“What is clear to us is that Michelin provides a natural hedging through a balanced geographic portfolio,” commented CFO Marc Henry. “The geographical portfolio and the portfolio of activities of Michelin is bringing us a natural hedge that is quite impressive.”
The slumping dollar and yen moved against the French manufacturer’s efforts to increase volumes by growing outside Europe, where demand has been hit by economic uncertainty. The company is also investing in further adding capacity in new markets and by selling tires for mining equipment and other large vehicles. Europe’s drop has already prompted the company to seek cost cuts in the region, where about 59 % of its 107,000 workforce resides.
Michelin expects foreign-exchange fluctuations to impact the full-year operating profit by about 250 million euros, according to Chief Financial Officer Henry. The company previously predicted a negative currency impact of as much as 150 million euros for 2013.