PARIS (Feb. 14) — Groupe Michelin will focus on controlled growth and reducing costs this year in an effort to offset higher raw materials costs and generate higher operating earnings.
Michelin said it believes raw materials prices should stabilize throughout 2006 at levels close to those at year-end 2005. Nonetheless, the elevated price levels will result in a negative impact on 2006 earnings of about 11 percent, the company said in its 2006 outlook.
Replacement markets should be reasonably favorable in 2006, Michelin said, with the European truck tire market expected to rebound. Passenger and light truck original equipment demand, however, should remain lackluster, while in truck OE demand should ease off after a strong 2005.
Michelin said price increases implemented at year-end and with those announced for the beginning of 2006 will help limit the impact of the raw materials effect.
The company said its objective for 2006 is to maintain an operating margin equivalent to that of 2005, which stood at 8.8 percent.