Market and product

French tyre maker Michelin reported a 9 percent rise in first-half profit, as cost-cutting efforts and lower raw material costs more than made up for lower revenue.

Net income rose to 773 million euros ($850 million) even as sales declined 2 percent to 10.3 billion euros. Recurring operating income rose 11 percent to 1.41 billion euros, lifting the operating margin to 13.7 percent from 12 percent.

Michelin, based in Clermont-Ferrand, central France, is pushing an overseas expansion while cutting costs and struggling to defend its namesake brand's higher prices against mid-market and budget rivals. Earlier this month it announced a 450 million euro investment in a new Mexican plant.

Over the rest of the year, passenger and truck tyre demand is "expected to lose some momentum in North America and Europe", the company said on Tuesday, while Chinese car tyre demand will remain buoyant.

First-half results beat analysts' expectations of 739 million euros in net income and 1.32 billion euros in operating profit - albeit on higher sales of 10.44 billion euros, based on the median of 11 estimates in a Reuters poll.

Demand for truck and car tyres rose across most regions in the first half, barring Latin America, although demand for outsize mining equipment tyres "fell back sharply for the third year in a row", Michelin said.

Despite a 2.5 percent increase in overall sales by volume, group revenue was weighed down by adverse currency effects.

But a 339 million euro gain from cheaper raw materials - mainly natural and synthetic rubber - outpaced price cuts resulting from contracts that pass on savings to customers. Productivity improvements of 115 million euros kept a lid on rising overheads.

Michelin reiterated its full-year goals including an increase in sales volume and higher operating income underpinned by free cash flow in excess of 800 million euros.