French tyre group Michelin reported yesterday a rise during last year's operating income due to cost cuts and price hikes and said despite many uncertainties it expected a further increase this year.

Sales of speciality tyres for earth movers and mining equipment were up due to a boost in grain and raw material prices which leads farmers and miners to boost output and buy equipment.

"Michelin is starting this year with a healthy and robust situation and is well armed to deal with a challenging environment marked by multiple uncertainties," managing partner Michel Rollier said.

"With the remarkable turnaround of free cash flow, we will be in a position to forge ahead with our development, while simultaneously strengthening our financial independence."

The operating margin before non-recurrent items was up 1.6 points to 9.8 percent and would have been 10.2 per cent, but for a €74 million one-off payment for a French law change for early retirements. The market expected a 10.2 per cent margin. Under the Horizon 2010 plan, Michelin aims for a EBIT operating income margin of above 10 per cent for that year.

The operating margin after non-recurring items was 7.8 per cent. Mr. Rollier said the group was not changing its targets yet because there was still time to 2010 and added that the key target of an operating margin above 10 percent had no upper limit while a 30 per cent productivity gain target would be "more than met".

Net turnover rose three per cent to €16.867 billion, and operating income before non-recurring items was up 22.9 per cent to 1.645 billion.

The group took €326 million in restructuring charges for the closure of plans as part of a rationalisation plan and the net attributable income was up 35.3 per cent to 774 million.