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Michelin pumps up profits as weak pound deflates sales
[PARIS] France's Michelin, one of the world's biggest tyre makers, on Tuesday reported a sharp rise in net profit for 2016 even as sales dropped partly on pound weakness following last year's Brexit vote.
Net profit increased by 43 per cent to 1.7 billion euros (S$2.561 billion) on sales of 21 billion euros, down 1.4 per cent.
The drop in sales was partly due to weakness in the pound after Britain's vote to leave the European Union as sales generated in sterling resulted in fewer euros, the company's reporting currency.
Commodity prices also weighed on sales, Michelin said.
But the tyre maker, in the global top three with Bridgestone and Goodyear, managed a 2.1-per cent rise volume sales, outperforming the overall market, Michelin said.
Combined with a favourable product mix and an exceptional gain this resulted in a much better bottom line.
"The 2016 results show clear progress compared with the previous year," CEO Jean-Dominique Senard said.
Michelin met all its annual targets, including "very significant" cash flow.
Debt fell and Michelin's operating margin rose.
The results "make us extremely confident about the future," Mr Senard told reporters.
He said the Brexit fallout was having a "complex" impact on Michelin's performance, but had so far been "limited overall".
He said Michelin raised its tyre prices in Britain to compensate for the pound's weakness. At the same time Michelin's factory in Scotland was enjoying a competitive advantage from the weaker currency's impact on export prices.
"It is too early to draw definitive conclusions," Mr Senard said.