French tyre maker Michelin (MICP.PA) on Tuesday posted half-year sales up 18.7%, but said the suspension of its operations in Russia hit net profit.
The first Western tyre maker to enter Russia in 2004, Michelin decided to hand over its activities there to a new entity under local management by the end of the year, after it said it became impossible to resume output amid growing supply chain problems resulting from Russia’s invasion of Ukraine.
Net profit, which dropped to 843 million euros ($852 million) from 1.03 billion euros a year earlier, included an impairment loss of 202 million euros related to this.
The company, which makes tyres used in cars, aircraft, bicycles and industrial equipment, saw its sales increase to 13.29 billion euros in the six months to June, which it attributed to its premium positioning.
The tyre industry, still reeling from pandemic-related supply issues, turned to price increases to help offset surging inflation and the impact of Western sanctions on Russia.
Chief Financial Officer Yves Chapot said he expected to offset an expected inflation impact of around 2.4 billion euros over the year with price increases and sales of more expensive tyres.
Michelin said higher pricing led to a 1.4 billion euros boost over the first six months of the year, more than enough to outweigh higher costs such as for raw materials and logistics.
The group maintained its full-year guidance for segment operating income above 3.2 billion euros at constant exchange rates and structural free cash flow above 1.2 billion euros.
It also warned supply chain disruptions and inflation continued to dampen the outlook for tyre market growth.
The performance of the passenger car and light truck markets is expected in a range of down 2% to up 2%, while the truck market is seen growing 2-6%, Michelin said.
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