Michelin, Continental lift tire sales targets

PARIS/FRANKFURT (Reuters) - French tire maker Michelin and German rival Continental raised full-year sales targets as price hikes offset higher raw material costs.

Cost inflation as well as the impact of supply chain disruption from Japan's earthquake in March have been in focus as car makers and suppliers have reported quarterly results in recent days.

Michelin and Continental sounded confident on Thursday in the face of these obstacles.

The French tire maker said the market should return to pre-crisis levels of growth in the second half as it increased its full-year sales volume target. Its German rival predicted higher revenues and said it may raise prices again to offset raw materials costs.

On Thursday, U.S. rival Goodyear Tire & Rubber Co said an improvement on price mix overcame higher raw materials costs, as it beat Wall Street second-quarter profit expectations by a wide margin.

Michelin said on Friday its sales volumes should rise 8 percent in 2011, compared with a previous forecast of a rise of at least 6.5 percent.

The French company stuck to its prediction that high raw material prices would have a 1.8 billion euro negative impact in 2011 and said already announced or implemented price rises would offset it.

Michelin unveiled its latest round of price hikes to deal with ballooning costs in April.

Chief executive designate Jean-Dominique Senard has spoken of "incredible pressure" from raw material prices.

Asian physical rubber prices were trading around $4.80 per kilo on Friday, compared with a level of about $3 in July 2010.

Continental upped its estimate of the impact on its tires business from raw material costs to 850 million euros in 2011, versus a previous estimate of 700 million euros, due to a spike in the price of synthetic rubber after the Japan disaster.

Goodyear said on Thursday it expected raw materials costs to rise more than 30 percent for the rest of the year, up from previous projections for increases of 25 percent to 30 percent.

Michelin posted a first-half operating profit of 971 million euros, or a 9.6 percent margin, on revenues of 10.1 billion euros, in line with forecasts by Unicredit analysts.

JP Morgan analysts wrote in a research note: "We expect a slightly negative reaction to the results but we think investors will be somewhat reassured by reaffirmed outlook."

By 0805 GMT Michelin shares were down 3.7 percent at 58.94 percent, with Continental shares were up 0.3 percent at 68.43 and the sector index <.SXAP> down 0.5 percent.

Continental said it was now forecasting 2011 sales would reach 29.5 billion euros ($42.36 billion) compared with a previous outlook for 28.5 billion euros with an adjusted operating margin of about 10 percent.

However, it sounded a positive note on earnings. Chief Executive Elmar Degenhart said in a statement: "At present, we do not see any reason why the good development in earnings should be weaker in the second half of 2011 than in the first half."

Continental posted a second-quarter adjusted profit before interest and tax (EBIT) of 749.8 million euros, in line with the average forecast given in a Reuters poll of analysts.

(Reporting by Helen Massy-Beresford, Maria Sheahan and Gilles Guillaume; Editing by David Cowell and Erica Billingham)

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