CLERMONT-FERRAND, France—Michelin has raised its earnings expectations for fiscal 2016 based on above-market growth in the first quarter and continued headwinds from lower raw materials costs.
Speaking at the firm's annual meeting May 13, Chief Financial Officer and Executive Vice President Marc Henry said the tire maker is raising its earnings ratio expectations for the consumer and commercial business units by up to 3 or 4 percentage points, respectively. Meanwhile, the outlook for the specialty business (earthmover, agricultural, etc. tires) could weaken somewhat.
Specifically, Henry told shareholders Michelin is projecting an operating margin for the consumer business of 11 to 15 percent, up from 10 to 13 percent projected earlier. The commercial operating margin should be between 9 and 13 percent, he said, up from 7 to 9 percent earlier.
Henry also muted the company's earnings expectation for the specialty business, dropping the low end of the range 3 points to 17 percent while holding to the upper end of the range at 24 percent.
The consumer and commercial businesses represent 59 and 28 percent, respectively, of the firm's overall sales revenue.
Henry noted that the projections are based on a “constant scope of consolidation and raw materials prices,” and with markets expanding by a compounded annual growth rate of 2.5 percent in passenger car and light truck tires and of 1.5 percent in truck tires.