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The group, which makes tyres used in cars, aircraft, bicycles and industrial equipment, still expects full-year segment operating income to exceed 3.2 billion euros ($3.4 billion) at constant exchange rates and a structural free cash flow above 1.2 billion euros.
First-quarter sales rose 19% to 6.48 billion euros, beating a company-provided analyst consensus of 6.34 billion euros.
“In 2022, in a very uncertain environment, markets should show slight growth,” Michelin said in a statement, adding that growth in passenger car, truck and speciality business markets would be at the lower end of the ranges initially forecast.
Finance chief Yves Chapot said in a call that the group expects inflation to hit the company by 1 billion euros more than what it had forecast before Russia’s invasion of Ukraine in February, mostly from raw materials.
The company’s balance sheet exposure to Russia and Ukraine still amounted to roughly 200 million euros, he added.
European Union sanctions against Russia over its invasion of Ukraine, including a ban on imports of coal and tyres from the country, could further disrupt tyre makers’ supply chains still recovering from the pandemic.
Goldman Sachs (NYSE:GS) said in a note from March that the fallout from the Ukraine conflict posed risks for tyre markers’ supply chains as over half of European production of carbon black – used to strengthen rubber in tyres – comes from Russia and Ukraine.
Michelin said demand for new tyres dropped 14% in March alone.
It added that passenger car and light truck markets grew by 2% in the quarter, as the group’s replacement business offset the operational difficulties of manufacturers.
($1 = 0.9385 euro)
