Michelin reported a wider-than-expected operating margin of 8.8 per cent, its highest since 1999, and said the 2006 margin figure would be about the same as raw materials costs rise.
The world's largest tyre maker today reported a 5 per cent rise in 2005 operating income before non-recurring items to €1.37 billion, beating the median analyst forecast as price increases offset a hike in raw material costs.
Financial analysts had expected operating income of €1.35 billion and a margin of 8.7 per cent, according to the median figure from Reuters Estimates.
Michelin shares fell 3.84 per cent to €52.60 at 0810 GMT.
Michelin said that even though its operating income was showing progress, it did not reflect the group's growth potential. "That is why in 2006 we will strengthen our focused growth strategy and strengthen our cost-reduction efforts," Managing Partner Edouard Michelin said in a statement.
Michelin expected markets to grow, with a rebound in the European truck tyre market.
Raw material prices last year were 15 per cent higher at constant currencies, Michelin said, leading to a charge of €455 million euros. Raw material costs represented 24 per cent of net sales and 34 per cent of the cost of sales in 2005. For 2006, it forecast an extra 11 per cent rise.