Michelin fears higher raw material costs amid shaky outlook

12 February 2010 20:27  [Source: ICIS news]

TORONTO (ICIS news)--Michelin expects to see higher raw material costs - in particular for natural rubber - this year, but the economic outlook remains uncertain, the France-based global tyre major said on Friday.

The company produces at 64 manufacturing sites in 19 countries and is a large user of chemical inputs, including styrene-butadiene rubber (SBR) and carbon black.

Michelin would work to pass through higher costs to customers, but its succees in doing so depended on demand and the strength of the global economy, chief financial officer Jean-Dominique Sennard said in a webcast briefing following the company’s 2009 results disclosure.

“Visibility is extremely low ... it will depend on the strength of the economic growth in coming months, and honestly, nobody today is able to assess this properly,” he said.

Passing on higher input costs was a matter of long-term sustainability for Michelin, he said, adding that the company had recently announced price increases for the US and Europe.

Last year, declining raw material costs and “a firm pricing policy”, backed by Michelin’s strong global brand, helped the company to at least partially offset a “historic decline in tyre demand” and low capacity utilisation, it said.

For 2009, Michelin’s full-year net income dropped by 71% to €104m ($142m) and sales fell 9.8% to €14.8bn. Results included €412m in restructuring charges.

($1 = €0.73)

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By: Stefan Baumgarten
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