Michelin Reports Its First Half Financial Results as of June 30, 2010

Report Highlights:

First-Half Net Sales up 17% to €8,349 Million
Historically High Operating Margin, at 9.8%

Contributing Factors:
1. Further growth in tire demand in every geography
2. Sales volumes up 15.3% in the first half, supported by the MICHELIN brand’s global footprint
3. Excellent manufacturing performance, demonstrating the improvement in competitiveness
4. Solid financial structure maintained

NET SALES AND RESULTS:

SALES:
Consolidated net sales amounted to €8,349 million, up 17.0% compared with the prior-year period. The increase primarily reflected the 15.3% improvement in sales volumes, which tracked the markets’ significant rebound. The price-effect, which was a negative 2.1% in the first quarter and a positive 0.1% in the second, ended the first half at a slightly negative 1.0%. The currency effect was a positive 2.4%, mainly reflecting changes in exchange rates between the euro and the Brazilian real, Canadian dollar, Australian dollar and Mexican peso.

RESULTS:
Operating margin before non-recurring items stood at a historically high 9.8%, compared with 4.0% in the first half of 2009.
At €822 million, operating income before non-recurring items rose sharply on the significant increase in sales volumes and the excellent operating performance of the Group’s manufacturing plants. Net income for the period came to €504 million, compared with a net loss of €122 million in first-half 2009, which reflected the cost of plans to specialize production and reorganize operations.

NET FINANCIAL POSITION
In the first half of 2010, free cash flow was only a slightly negative €30 million. The year-on-year decline was primarily attributable to the increase in working capital requirement following the recovery in output. In addition, inventories were furtherimpacted by the increase in raw materials prices and rose by €669 million overall during the period.

Capital expenditure amounted to €251 million in the first half and is expected to end the year at around €1 billion following start-up of construction on the new plants in fast-growing countries. Gearing improved to 53%, compared with 75% at June 30, 2009 and 55% at December 31, 2009. The dividend reinvestment plan, which was renewed in 2010, attracted more than half of all shareholders, enabling the Group to save €82 million in cash.

Outlook for 2010

The clear rebound in the tire markets is expected to continue in the second half of the year, even though the pace of economic recovery will vary from one region to another. While rising raw materials costs will have a negative impact on second-half consolidated results (and reduce full-year income by €600-650 million), Michelin will benefit from the price increases introduced in the first half. In addition, the Group is announcing around a 3% increase in its passenger car and light truck replacement tire prices in Europe starting in September, thereby confirming its commitment to a responsive pricing policy.

In this environment, Michelin reaffirms its full-year 2010 target of driving 10%-plus growth in sales volumes, maintains its objective of generating positive free cash flow and, despite the expected impact of raw materials costs,intends to deliver an operating margin before non-recurring items of close to 9%.

To read the full report, please go to www.michelin.com/corporate.