April 23, 2018 / 4:17 PM / 6 months ago

Michelin sales fall as euro compounds China, U.S. weakness

PARIS (Reuters) - French tyre maker Michelin’s (MICP.PA) revenue fell 6.3 percent in the first quarter on weaker sales to carmakers in China and the United States, compounded by the effects of a stronger euro.

A sign with the logo of French tyre maker Michelin, with a Bibendum, the Michelin Man mascot, is pictured on media day at the Paris Mondial de l'Automobile, October 2, 2014. REUTERS/Benoit Tessier

Revenue fell to 5.218 billion euros (4.56 billion pounds) from 5.567 billion a year earlier, Michelin said on Monday. Demand from manufacturers fell 5 percent in North America and 2 percent in China, while replacement tyre sales fared slightly better.

Michelin, based in Clermont-Ferrand, central France, is cutting costs as it responds to competitive pressure from low-cost Chinese rivals. The group is pursuing 1.2 billion euros in savings by 2020.

The euro’s strength, which erodes the value of dollar-zone sales, reduced revenue by 7.7 percent, Michelin said, while sales volumes fell 2.3 percent.

Firmer tyre pricing and sales of higher-end models helped to limit the decline, it said.

“We’re maintaining our strong price-mix position in a market that has been in a negative trend,” Chief Financial Officer Marc Henry told analysts on a call.

At constant exchange rates, excluding the 429 million-euro currency hit, revenue would have risen 1.4 percent.

“The currency effect will remain highly unfavourable throughout the year,” the company predicted, increasing the forecast negative profit impact to 350 million euros from the 300 million it had expected in February.

The impact of rising raw-material costs will be a negative 50 million euros at worst, however, rather than the 50-100 million euros previously forecast, Michelin said, reiterating its 2018 earnings guidance.

Reporting by Laurence Frost; Editing by Susan Fenton and David Evans

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