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France

First-half loss at Michelin due to restructuring

Text by NEWS WIRES

Latest update : 2009-07-31

French tyre manufacturer Michelin marked up a 119 million euro first-half loss - due largely to restructuring - from a net profit of 430 million euros for the same period in 2008. Last month, the group announced a future 1,093 redundancies.

AFP - French tyre giant Michelin tumbled into a net loss for the first half of the year and said on Friday that operating profit fell by 60 percent.

The group, a supplier to the crisis-struck global auto industry, said big restructuring charges were a main factor pushing it in a loss of 122 million euros (171 million dollars) from a net profit of 430 million euros in the same period of last year.

Operating profit fell 60 percent to 282 million euros.

Sales were down 23 percent by volume, reflecting the pressure on the market, especially for new tyres supplied to vehicle makers, with revenues falling 13.4 percent to 7.13 billion euros.

In the first six months, the group achieved free cash flow, or the positive difference between the rate at which funds came into the business and were spent, of 575 million euros.

The figure contrasted with a negative free cash flow of 445 million euros in the same period of last year.

This turnaround was achieved by reducing inventories and cutting back sharply on investment to 319 million euros from 500 million euros in the first half of last year.

The group said that for the second half of the year, it intended to generate positive cash flow so as to keep the overall accounts in healthy balance, chief executive Michel Rollier said in a statement.

It said a normalisation of tyre inventories held was not enough on its own to point to real economic recovery and markets remained very depressed.

Other industries have reported that the process of destocking appears to be slowing, a sign of possible recovery because it suggests clients may soon order new products to replace stock sold.

Rollier said the state of the market meant that the company could not relax in coming months, even though lower raw material prices should support profitability in the second half of the year.

Commodity prices rose sharply in the first half of 2008 and were highly unfavourable but were now falling, helping the bottomline.

The group took a charge of 292 million euros for restructuring, related to a project to increase specialisation of some industrial activities in France and to the reorganisation of industrial and marketing activities in North America.

Last month, the group said it would shed 1,093 jobs in France by next year. It has also put some of its workers in different countries on part-time work.

Michelin said all its markets had been under pressure except for China.

 

Date created : 2009-07-31

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