Michelin pledges extra cost cuts after full-year profit decline
(Updates with operating income, goals, details, background)
By Laurence Frost
PARIS, Feb 10 (Reuters) - French tyre maker Michelin pledged on Tuesday to step up cost-cutting efforts after unveiling an 8.5 percent profit decline for 2014 on sales that missed its own forecast.
Net income fell to 1.03 billion euros ($1.17 billion) last year, Michelin said in a statement, as revenue dropped 3.4 percent to 19.55 billion, declining at all three divisions.
The company has cut sales goals and increased savings targets in recent months as it struggles with weaker demand and stiffer competition from cheaper rivals in the North American truck tyres sector and other key markets.
Michelin has bigger exposure than rivals Pirelli and Continental to mass-market car tyres - where the pricing pressure is fiercest - and lags behind in some faster-growing emerging markets.
The 2014 profit number fell short of the 1.292 billion euros expected by analysts, according to the SmartEstimate in Thomson Reuters data based on 17 analysts' predictions.
Sales volumes rose 0.7 percent, less than the 1-2 percent gain pledged in October - when the company had cut its goal from 3 percent and pledged to rein in investment.
Michelin also said the benefit of earlier cost-cutting had been offset by production cost inflation that sucked an additional 256 million euros from earnings last year.
"The competitiveness plan will also be accelerated," Chief Executive Jean-Dominique Senard said on Tuesday, pledging 1.2 billon euros of savings in the 2012-2016 period, an increase of 200 million euros.
Operating income fell 2.9 percent to 2.17 billion euros before one-time gains and charges, for a little-changed operating margin of 11.1 percent of sales.
Declining prices accounted for 596 million euros of the earnings slide, Michelin said, exceeding the windfall from falling raw-material costs by 5 percent amid tough competition.
The company blamed weakening demand in key markets, particularly European truck and winter tyres. Demand from European truckmakers fell 9 percent, with the slide accelerating in the fourth quarter.
Car- and truck-tyre markets should grow in 2015, albeit modestly in Europe, Michelin said, with the lucrative mining and agricultural tyre businesses contracting further.
The company renewed its annual goal of increasing operating income before currency effects, with a return on capital above 11 percent and positive structural free cash flow of about 700 million euros.
($1 = 0.8825 euros) (Reporting by Laurence Frost; Editing by Andrew Callus)
