Tyre-maker Michelin has posted a smaller than expected first-half loss.
However, directors said that, although industry stocks were returning to more normal levels, it was too soon to talk about an upturn.
The French group, which employs about 1,000 workers at a factory in Stoke-on-Trent, said it was committed to generating positive free cash flow in the second half of the year, after achieving £489 million in the first six months.
It posted a net attributable loss of £101 million in the first half.
That came as a surprise to many analysts, as expectation was for a loss of £216 million, compared to £365 million last year.
Michelin said the loss was due to high restructuring costs.
The group achieved an operating margin of four per cent in the first half.
Cash flow and a cut in net debt were also “significant positive surprises”, driven by a reduction in inventory, said Morgan Stanley analyst Adam Jonas in a research note.
Mr Jonas said that “Michelin surprised in all the right areas”.
The group said inventory was down by £493 million since the end of 2008, when it stood at £3.1 billion.
“The second-half margin should be closer to 10 per cent than four per cent,” Mr Jonas said in the note.
Michelin shares were up 6.9 per cent in early trading following the announcement.
Chief executive Michel Rollier said, in a statement, that the company had benefited from keeping a close eye on costs – which included several shutdowns at its Stoke plant over the winter period.
He said: “Faced with the persistent, steep decline in global tyre markets, Michelin has responded swiftly and effectively by tightening its management and deploying production adjustment programmes.
“As part of this response, the group nevertheless had to introduce short-time working hours in a number of countries and to implement the production reorganisation programmes needed to make Michelin more competitive.
“Concerning the business environment, inventories have now returned to more normal levels, but not to the extent that we can talk about a real upturn.”
Michelin’s own inventory would probably be lower in 2009 as a whole in terms of value, managing partner Jean-Dominique Senard told a news conference.
Mr Rollier had said in June that he did not see a recovery in global tyre markets before the end of 2010.
In February, when the group presented full-year results, Rollier had said tyre markets would begin to firm in the second half as replacement market inventories were replenished and business activity began to recover.
The group, which has had to cut working hours and production to cope with the sales slump, would maintain its efforts in the months ahead, but “the decline in raw material prices should support second-half margins”, Mr Rollier said.
Senard said raw material price declines should have a positive impact of up to £510 million in 2009, after six years of increases.
Michelin said sales were down 13.4 per cent at £6 billion in the first half.
Unit sales fell 23 per cent as tyre demand dropped in all markets except China, Michelin said.
The group reduced its net debt by 10.7 per cent to £3.24 billion at the end of the first half.