Michelin Cuts Sales Volume Forecast Amid Weaker Demand

(Reuters) – Michelin on Wednesday cut its sales volume forecast for the full year as the French tyre maker reported third-quarter sales that fell short of market expectations due to weaker demand.

Group sales in the third quarter dipped 4.2% to 6.77 billion euros (approximately $7.29 billion) from 7.07 billion euros a year before, below the 6.82 billion forecast in a company-compiled consensus.

The French group also said it now expects its sales volumes to fall 4-6% this year, versus a previous forecast for between a 5% contraction and 2% growth.

CEO Florent Menegaux stated that adverse factors the company had been facing were increasing, leading to "substantial drops in our sales volumes and production reductions".

The company has also cut its forecast for segment operating income – total sales minus the cost of sales and operating expenses – at constant exchange rates to about 3.4 billion euros from 3.5 billion euros previously.

In May, Michelin (EPA:MICP) announced its target of a segment operating margin of 14% by 2026, aided by rising demand for higher value-added tyres like those used in sports cars.

However, the company may need more restructuring to avoid another guidance cut, after it already lowered its long-term targets for its non-tyre business, as flagged by Bernstein analysts.

As European carmakers face weaker sales and rising trade tensions with China, the tyre industry has been looking to a strong price mix and cost-cutting measures to help offset growing economic pressures and supply chain disruptions.

Leading tyre manufacturers, including Michelin, are currently under investigation in the EU after antitrust regulators raided them in January regarding a possible price-fixing cartel.

Michelin and five other tyre makers are facing a trio of class action lawsuits in the U.S. with similar allegations.

($1 = 0.9283 euros)