UPDATE 1-Michelin sales rise on buoyant car demand, mining rebound
(Adds CFO comment, details, background)
PARIS, April 20 Michelin's revenue rose 9.9 percent in the first quarter, buoyed by European auto-market growth and a rebound in demand for outsize mining tyres, the company said on Thursday.
Revenue rose to 5.57 billion euros ($5.99 billion) from 5.07 billion euros a year earlier, the French tyre maker said in a statement. Sales by volume rose 7.3 percent.
The company reiterated its 2017 goals, which include volume growth in line with global markets, an increase in full-year operating income at constant exchange rates and structural free cash flow in excess of 900 million euros.
Under competitive pressure from no-frills rivals, Michelin is cutting production costs to defend profitability while raising prices to absorb higher costs of raw materials, including natural and synthetic rubber.
First-quarter sales were "boosted by pre-buy ahead of pricing increases" as dealers stocked up, Chief Financial Officer Marc Henry said on a conference call.
Sales of specialty tyres for vehicles including agricultural and mining equipment rose 14.9 percent to 848 million euros, Michelin said. Car tyre sales gained 10.5 percent to 3.2 billion euros, while truck tyres rose 6.1 percent to 1.52 billion.
Further price increases are needed to offset higher raw-material costs despite their slight decline from recent peaks, Henry said, playing down analysts' doubts about the strategy amid cut-throat competition from Chinese brands.
"Chinese competitors have increased prices so far," Henry said, outlining Michelin price hikes of up to 8 percent planned by the end of this month. "I'm quite confident these price increases will stick."
Weaker pricing nonetheless reduced first-quarter revenue by 1 percent, largely offset by stronger sales of 18-inch and other premium tyres, the company said.
Michelin said it expects raw material costs to reduce full-year earnings by 900 million euros, reiterating a forecast given in February. ($1 = 0.9296 euros) (Reporting by Laurence Frost; Editing by GV De Clercq and Adrian Croft)