French tire manufacturer Cie Generale des Etablissements Michelin (ML.FR) Monday said it expects a clear increase in operating income this year despite flat sales in volume terms and predicted that price increases will amply offset an estimated EUR300 million to EUR350 million additional cost of raw materials.
The company, one of the world's leading tire makers, also reported an increase of 5.1% on the year in revenue in the first quarter of this year to EUR5.30 billion, despite a fall of 9.6% in volume sales.
Michelin said that price increases introduced last year and contractual price adjustments, together with more sales of higher-value tires, had more than offset the drop in volume sales.
"Michelin confirms its objective of stable sales volumes over the full year, in a market environment that is more uncertain in Europe, resilient in North America and more vigorous in the growth regions," the company said.
"Sustained price management in response to rising raw materials should amply offset their additional cost impact, which is still estimated at EUR300 million to EUR350 million for the year."
Michelin reaffirmed its 2012 objectives of reporting a "clear increase" in operating income and positive free cash flow, before the impact of the sale of real-estate in central Paris this year that has generated a capital gain of EUR100 million.
Michelin's first-quarter revenue came in above an average estimate of EUR5.15 billion among a panel of 12 analysts polled by the company.
-By David Pearson, Dow Jones Newswires; +33 1 4017 1740; firstname.lastname@example.org