Michelin warns of a sluggish first quarter, with sales, pricing, and exchange rates all acting as headwinds.

Investing.com - Michelin warned on Wednesday that first-quarter 2026 sales will reflect a soft start to the full year, tire unit sales are still declining, pricing has turned negative, and ongoing foreign-exchange headwinds remain.

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The French tire manufacturer said that despite a more relaxed year-over-year comparison base, first-quarter sales volume fell in the “low-to-mid single-digit” percentage range, indicating that underlying demand for much of its key segments remains weak, including passenger cars and light trucks, commercial vehicles, and its North America Beyond Road agricultural business.

Michelin’s replacement tire market shows some resilience, with consumer segments returning to “moderate growth,” but not enough to offset weakness in other areas.

Pricing was a key profitability support in 2025, with a contribution margin of positive 3%, but it turned negative this quarter due to indexation clauses that automatically link contract prices to lower raw material costs, and the difficulty of passing through U.S. tariff costs in an increasingly competitive market.

It expects the product mix effect to continue to partially offset the weakness, benefiting from stronger sales of Michelin’s premium tires and tires 18 inches and above.

There are no signs that foreign-exchange headwinds are easing. Michelin noted that FX pressure is “roughly equivalent” to the “fourth quarter of 2025,” when the impact reached negative EUR 346 million, or 4.9% of net sales. For every 1-cent move in the EUR/USD exchange rate, the company’s operating income will be affected by about EUR 30 million.

Management did not provide any new details on the impact of the Middle East conflict, saying it is not currently facing supply shortages, but remains on alert.

The latest information on input cost scenarios (including raw materials, energy, and freight) is expected to be released on April 29, together with first-quarter sales data.

Michelin maintained its full-year volume guidance, expecting quarter-on-quarter improvement in 2026; second-quarter sales volume will turn “slightly positive,” and the second half will turn more noticeably positive, targeting slight full-year volume growth.

Barclays rates Michelin as “Underweight,” with a target price of EUR 25, compared with the prior close of EUR 29.22. The bank said the update is “consistent with recent communications,” but noted that a triple headwind—sales volume, the price-volume mix, and foreign exchange—makes it unlikely to be resolved before mid-year.

As of 06:07 a.m. U.S. Eastern Time (10:07 a.m. Greenwich Mean Time), the company’s stock price is up 4.7%.

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