OREANDA-NEWS. February 11, 2015. French tyre maker Michelin will look for an extra 200 million euros (\\$227 million) in cost savings after cut-price competition hit profits more than expected last year.

Shares in the company dropped as much as 4.9 percent in early Tuesday trading after it also missed a sales forecast reduced as recently as October.

Michelin is already in the midst of a cost-cutting drive as it struggles with weaker demand and stiffer competition from cheaper rivals in the North American truck tyres sector and other key markets.

It has bigger exposure than rivals Pirelli and Continental to mass-market car tyres - where the pricing pressure is fiercest - and lags behind in some faster-growing emerging markets.

Michelin's shares were down 4.1 percent at 82.82 euros, after what Citi analyst Philip Watkins described as "a somewhat lacklustre set of 2014 results".

Michelin said net income fell 8.5 percent to 1.03 billion euros last year, missing the average forecast of 1.29 billion, according to the SmartEstimate in Thomson Reuters data based on 17 analysts' predictions.

Sales volumes rose 0.7 percent, less than the 1-2 percent gain pledged in October, when the company cut its goal from 3 percent and said it would rein in investment.

Michelin said the benefit of earlier cost cutting had been offset by production cost inflation that sucked an additional 256 million euros from earnings last year.

"The competitiveness plan will also be accelerated," Chief Executive Jean-Dominique Senard said, promising 1.2 billon euros of savings in the 2012-2016 period, an increase of 200 million.

Operating income fell 2.9 percent to 2.17 billion euros before one-time gains and charges, for a little-changed operating margin of 11.1 percent of sales.

Declining prices accounted for 596 million euros of the earnings slide, Michelin said, exceeding the windfall from falling raw-material costs by 5 percent.

Further pressure on the pricing and sales mix will have a negative impact of about 350 million euros on 2015 earnings, Chief Financial Officer Marc Henry said.

Michelin blamed weakening demand in key markets, particularly European truck and winter tyres. Demand from European truck makers fell 9 percent, with the slide accelerating in the fourth quarter.

Car- and truck-tyre markets should grow in 2015, albeit modestly in Europe, Michelin said, with the lucrative mining and agricultural tyre businesses contracting further.

The company renewed its annual goal of increasing operating income before currency effects, with a return on capital above 11 percent and positive structural free cash flow of about 700 million euros.