July 26 (Reuters) – France’s Michelin (MICP.PA) on Wednesday raised its full-year core profit and free cash flow forecasts based on price increases on its tyres for SUVs, sports cars and aircraft and anticipation of lower production costs in the second half of the year.
The group, whose tyres are also used in bikes and industrial equipment, now sees 2023 segment operating profit at over 3.4 billion euros ($3.76 billion) after previously forecasting over 3.2 billion.
Michelin, one of the world’s leading tyre manufacturers along with Japan’s Bridgestone (5108.T) and U.S. Goodyear (GT.O), also lifted its forecast for free cash flow excluding mergers and acquisitions to more than 2 billion euros from more than 1.6 billion. “In the second half of the year, we will start to benefit from a kind of deflation on raw materials, on shipping, and probably from energy costs that are slightly lower than in 2022,” Chief Financial Officer Yves Chapot said in an interview.
Michelin’s segment operating profit rose 11.4% to 1.70 billion euros between January and June, helped by the tyre price increases.
Tyre volume fell 3.7% in the period as the uncertain economic environment prompted dealers to hold down inventories, the group said.
Non-tyre sales, which Michelin aims to account for 20%-30% of the total by 2030, increased by 16.6%, led by conveyors, belts and sealing businesses and the growth in services to fleets.
The group, which is also a well known publisher of hotel and restaurant guides, said the gastronomy, hospitality and travel businesses were rebounding sharply after three years of severe disruption due to the COVID-19 pandemic.
The termination of its operations in Russia following Moscow’s invasion of Ukraine, which weighed mainly on 2022 results, had a residual impact of around 50 million euros in the first six months of 2023, Michelin said.
($1 = 0.9040 euros)
Reporting by Diana Mandiá and Gilles Guillaume, editing by Kirsti Knolle and Bill Berkrot
Our Standards: The Thomson Reuters Trust Principles.
Michelin lifts 2023 core profit forecast helped by price increases
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