September 13, 2018 / 6:24 AM / in a month

Tyre maker Michelin confirms 2018 guidance despite China slowdown

PARIS (Reuters) - Shares in French tyre maker Michelin (MICP.PA) climbed on Thursday after it confirmed its 2018 financial outlook and said signs of growth in Europe and North America would offset a slowdown in China.

FILE PHOTO: Formula E - FIA Formula E Paris ePrix, Paris - 18/05/17. A mechanic balances a new Michelin tire in the pits. REUTERS/Benoit Tessier/File Photo

Tyre makers such as Michelin and its rivals Continental AG (CONG.DE) and Goodyear (GT.O) have been hit by weaker demand in China, whose economy has been slowing, and the impact of adverse foreign exchange movements and commodity prices.

But Michelin said growth in Europe and north America meant it would stick to its overall 2018 financial targets.

Xavier Caroen, an analyst at French brokerage Bryan Garnier, said the statement would reassure investors that the French company had not been as badly affected as other tyre makers.

Michelin's shares rose 3.4 percent in early session trading, the top performer on France's benchmark CAC-40 index .FCHI.

“Michelin is one of the rare auto equipment firms to not have to change its 2018 guidance,” added Roche Brune Asset Management fund manager Meriem Mokdad, citing Continental’s profit warning in August.

Michelin’s 2018 guidance is for sales volume growth in line with that of global tyre markets and an increase in recurring operating profit, combined with structural free cash flow of above 1.1 billion euros ($1.3 billion).

“The global replacement passenger car and light truck tyre market is benefiting from growth in the European markets, which is offsetting a slowdown in the Chinese market”, Michelin said in a statement.

“The truck tyre market remains lifted by strong demand from the freight industry in Americas and Europe, while the Specialty markets continue to grow at a fast pace,” it added.

The French company also said a rise in the U.S. dollar on currency markets would offset the adverse effect from other foreign exchange movements, such as slumps in the Argentine peso and the Turkish lira.

Michelin shares remain down by about 15 percent so far in 2018, in line with a similar drop in the STOXX Europe 600 Autos & Autos Parts index .SXAP, with the sector as a whole hurt by trade wars and the China slowdown.

Reporting by Sudip Kar-Gupta; Additional reporting by Alan Charlish; Editing by Emelia Sithole-Matarise and Edmund Blair

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