Michelin on track despite headwinds: CEO

CNBC with Reuters
China slowdown is no surprise: Michelin CEO

French tire giant Michelin is "extremely confident" about regaining pricing power in the market despite warning of stiffer headwinds on raw materials, the company's CEO told CNBC.

"We have increased our prices, notably in Europe recently, on all product lines: passenger cars, trucks, agriculture. And this has been followed in the market so it will increase naturally the performance of the price mix and raw material effect in the second half," Jean-Dominique Senard told CNBC.

"We are extremely confident for the whole year."

However, pricing and raw materials will have a "net negative effect on the business" over the full year, Michelin cautioned in its half-year postings.

Net profit rose 13.3 percent to 624 million euros ($691 million), the company said. Revenue rose 8.5 percent to 10.5 billion euros, beating the 10.3 billion euros forecast by analysts, based on the mean of six estimates in a Thomson Reuters poll.

Tire demand is "expected to remain on an upward trend in mature regions but more challenging in new markets", the company said in its results statement.

Read More U.S. slaps duties on Chinese tires for cars and light trucks

Michelin, based in Clermont-Ferrand, central France, is pushing a 1.8 billion euro expansion into emerging markets while struggling to defend the pricing premium its core brand typically commands, amid tougher competition from mid-market and budget rival offerings.

Rainier Ehrhardt | Getty Images

Senard also commented on the slowdown of economic growth in China and how that may impact the company.

"(The slowdown) is not a surprise for us, we have seen that for some time in the market," he said. "The original equipment market is starting to show some slowdown.

"But for us the major market in China today is the replacement market, so we benefit from that growth which was nine percent during the first half."

Meanwhile, in crisis-hit Latin American markets, demand for truck and car tyres slumped further in the second quarter.

Recurring operating income came in at 1.26 billion euros, keeping pace with the growth in sales to hold Michelin's operating margin at 12 percent for the first half.

Merely reiterating its pledge for a full-year "increase" to operating income, the company hinted at a tougher second half of the year to come.

Profitability improved in truck tyres - where North American demand surged in the first half - but declined in car tyres to a 10.8 percent operating margin from 11.4 percent.

Michelin said its net debt more than doubled to 1.8 billion euros at June 30 from 707 million euros at the end of 2014, following a 600 million euro bond issue.