PRESS
RELEASE
Clermont-Ferrand - July 25, 2017
COMPAGNIE GENERALE
DES ETABLISSEMENTS MICHELIN
Financial Information for the Six Months Ended
June 30, 2017
Net income of €863 million, up 12%
Volumes up 4.1% (3.6% at constant scope of
consolidation)
Operating income from recurring activities of €1.4
billion, stable and in line with the Group's roadmap
2017 guidance confirmed
-
Volumes up 4.1% (3.6% at
constant scope of consolidation) over the first half, dampened in
Q2 by heavy buying in Q1 ahead of price increases
-
Growth in Passenger car and
Light truck tire volumes (up 3%) and stable volumes in Truck
tires,
-
Sustained rebound in mining
tire demand and sharp upturn in OE Earthmover and Agricultural tire
sales,
-
Acquisition of Brazilian
two-wheel tiremaker Levorin in December 2016.
-
Price-mix effect positive, at
1.4% in the first half, accelerating to 2.8% in Q2, reflecting the
initial impact of price increases and resulting, as announced, in a
€186 million net negative price-mix/raw materials effect over the
period.
-
Competitiveness plan gains
offset inflation, as expected.
-
Free cash flow of a negative
€305 million, in line with annual objectives
-
Stable, excluding acquisitions
and capitalized interest on the OCEANE bonds,
-
Working capital management in
response to the unfavorable impact of higher raw materials
prices.
Jean-Dominique
Senard, Chief Executive Officer, said: ''Michelin's good
performance, compared with a strong first-half 2016, is in line
with our 2020 roadmap. The main drivers of the period include an
increase in volumes, tight pricing policy management, further
improvements in our competitiveness and the commitment of our
employees to serving customers. Today, we are confirming our
guidance for 2017, with a second half that will benefit from the
improved margins resulting from the price increases."
Over the second
half of the year, regardless of prevailing winter weather
conditions, replacement markets are expected to recover from their
decline after the surge in early buying. Demand for original
equipment tires should remain on an upward trend in the Truck,
Earthmover and Agricultural segments, with growth slowing in the
Passenger car and Light truck segment. Sales of mining tires
are expected to remain buoyant.
Given the
full-year impact of higher raw materials costs, which are currently
estimated at €800 million, Michelin will continue to agilely
manage prices, holding unit margins firm in businesses not subject
to indexation clauses and applying those clauses in businesses that
are. As a result, changes in the price mix and raw materials costs
are expected to have a net positive impact in the second half of
the year.
For the full
year, Michelin confirms its targets of volume growth in line with
global market trends, operating income from recurring activities
exceeding the 2016 figure at constant exchange rates, and
structural free cash flow of more than €900 million.
(in € millions ) |
First-Half
2017 |
First-Half
2016 |
Net sales |
11,059 |
10,292 |
Operating income from recurring activities |
1,393 |
1,405 |
Operating margin on recurring activities |
12.6% |
13.7% |
Passenger car/Light truck tires and related distribution |
12.8% |
13.8% |
Truck tires and
related distribution |
7.5% |
9.9% |
Specialty businesses |
20.8% |
20.6% |
Operating income/(loss) from non-recurring activities |
27 |
(51) |
Operating income |
1,420 |
1,354 |
Net income |
863 |
769 |
Earnings per share1 (in €) |
4.76 |
4.24 |
Capital expenditure |
585 |
623 |
Net debt |
1,685 |
1,719 |
Gearing |
16% |
18% |
Employee benefit obligations |
4,570 |
5,273 |
Free cash flow2 |
(305) |
8 |
Employees on payroll3 |
112,800 |
112,400 |
1 Attributable
to shareholders of the Company.
2 Free cash
flow: net cash from operating activities less net cash from
investing activities less net cash from other current financial
assets, before distributions.
3 At
period-end.
First-Half 2017
% change YoY
(in number of
tires) |
Europe
including Russia & CIS* |
Europe
excluding Russia & CIS* |
North America |
Asia
(excluding India) |
South America |
Africa/India/Middle East |
Total |
Original equipment
Replacement |
+1%
+4%
|
+1%
+2% |
+1%
+1% |
+3%
+5% |
+13%
+7% |
+8%
+2% |
+3%
+4% |
Second-Quarter 2017
% change YoY
(in number of
tires) |
Europe
including Russia & CIS* |
Europe
excluding Russia & CIS* |
North America |
Asia
(excluding India) |
South America |
Africa/India/Middle East |
Total |
Original equipment
Replacement |
-4%
+0%
|
-4%
-2%
|
-1%
-1% |
+1%
+3% |
+8%
+7% |
+4%
+3% |
-0%
+1% |
*Including Turkey.
In the first half of 2017, the
global original equipment and replacement Passenger car and Light
truck tire market grew by 3% in number of tires sold. It rose by 5%
in the first quarter, driven by purchases ahead of the price hikes
announced by most tiremakers, and by 1% in the second quarter as
demand cooled.
· Original equipment
-
In Europe, after expanding by a very brisk 6% in
the first quarter, demand fell off sharply in the second, losing
4%, with a decline in vehicle sales in the United Kingdom and
Germany. The recovery underway in Eastern Europe is gaining
momentum quarter after quarter.
-
Demand continued to show signs of slowing in
North America, with a 1% decline in the second quarter following on
from a 2% increase in the first.
-
Demand in Asia (excluding India) ended the first
half up 3% overall. The Chinese market held firm, gaining a further
3%, despite adjustments to the government's compact car purchase
incentives.
-
Markets also rose in South America, more
robustly in the first quarter thanks to the recovery in automobile
production and sales in Argentina and Brazil, but they remain
vulnerable to the region's political uncertainties.
· Replacement
-
Demand in Western Europe contracted by 2% in the
second quarter after gaining a very healthy 5% in the first due to
early buying ahead of price increases. This was against a backdrop
of slower sales to end customers and high dealer inventory levels.
Sales in the 18 inch and over and all-season segments rose sharply
over the period. Growth remained firm throughout the first half in
Eastern Europe, with a 16% increase off of favorable prior year
comparatives. Budget imports are continuing to pour into both
Western and Eastern Europe at a sustained pace.
-
In North America, the announcement of
forthcoming price hikes caused the market to swing from a 3%
increase in the first quarter to a 1% decline in the second. Note
as well that import sales rose by 5% over the full period, which
also saw strong demand for tires with high speed ratings.
-
Demand in Asia (excluding India) ended the first
half up 5% overall. In China, the announced price increases drove a
12% gain in the market in the first quarter, which slowed to 2% in
the second, leaving dealers with high inventory amid relatively
sluggish sell-out. Markets in Japan (up 6%) and South Korea rose
sharply until May, lifted by early buying ahead of the price hikes,
but fell back suddenly in June. Growth continued apace throughout
the first half in the ASEAN countries, except in Thailand, where
early buying had an impact.
-
Demand in South America rose by 7% overall, with
the Brazilian market gaining 10% on a 70% increase in imports from
Asia.
First-Half 2017
% change YoY
(in number of
tires) |
Europe
including Russia & CIS* |
Europe
excluding Russia & CIS* |
North America |
Asia
(excluding India) |
South America |
Africa/India/Middle East |
Total |
Original equipment
Replacement |
+6%
+7%
|
+6%
+6%
|
+4%
-2% |
+17%
+3% |
-3%
+3% |
-8%
-3% |
+9%
+1% |
Second-quarter 2017
% change YoY
(in number of
tires) |
Europe
including Russia & CIS* |
Europe
excluding Russia & CIS* |
North America |
Asia
(excluding India) |
South America |
Africa/India/Middle East |
Total |
Original equipment
Replacement |
+3%
+2%
|
+2%
+3%
|
+14%
-9% |
+16%
-3% |
-0%
-0% |
-14%
-3% |
+9%
-3% |
*Including Turkey.
Global demand for new original
equipment and replacement Truck tires rose by 3% in number of tires
sold in the first six months of 2017, with increases in replacement
sell-in prices spurring a 7% gain in the first quarter followed by
a 3% contraction in the second and with robust 9% growth in the OE
segment over the full period.
· Original equipment
-
The Western European market expanded by 6%,
buoyed by low interest rates, sustained demand for freight services
and renewed truck sales in the recovering construction industry. In
Eastern Europe, the rebound that began in late 2016 continued,
driving an 11% gain.
-
After dropping 19% in 2016, the North American
market enjoyed a sharp rebound in the second quarter, led by demand
for freight services.
-
Demand for radial and bias tires in Asia
(excluding India) climbed 17% overall. The Chinese market rebounded
by a very strong 22%, thanks to the legislation banning over-loaded
trucks and the government's infrastructure investment plan. Demand
rose by a robust 10% in Thailand, helping to offset the 5% slowdown
in truck production in Japan due to weakening export sales.
-
The South American market fell back 3% in a
still hesitant economic environment, both across the entire region
and in Brazil, where demand has leveled off.
· Replacement
-
In a more favorable Western European freight and
construction environment, high dealer inventory levels following
the price increases are weighing on sell-in demand, whose increase
is being partially driven by imports. In Eastern Europe, where
markets are led by the intermediate and budget segments, demand
bounced back by 7% over the first half, but with a sharp slowdown
to 1% in the second quarter.
-
In North America, the steep 9% drop in the
second quarter reflected a prior-year basis of comparison that had
been boosted by Chinese tire imports ahead of the expected
introduction of new customs duties. In addition, sales of new
trucks to replace aging models, which drove the second-quarter
rebound in the OE market, also dampened demand for replacement
tires.
-
Replacement radial and bias tire markets in Asia
(excluding India) ended the first half down by 3%. In China,
demand increased by 3% overall, but contracted by 6% in the second
quarter due to the decline in the freight market, the restructuring
of certain dealers and, in June, heavy rains in the South. In
Southeast Asia, where the market gained 3% overall, the robust 11%
rebound in Japan helped to offset the 3% decline in Thailand, where
demand was dampened by price increases.
-
Radial and bias tire markets in South America
edged up 3% over the first half, despite a slowdown at period-end
caused by price increases and high dealer inventory levels. In
Brazil, demand rose by 10% in an improving economy.
Original equipment markets have
turned upwards at a time of low inventory and rising demand for
mining machines.
Infrastructure and quarry tire
markets also rose over the period, partly in response to the
announced price increases by tiremakers.
Despite low farm commodity prices,
replacement markets expanded over the period, led by dealer
purchases ahead of announced price increases.
-
Two-wheel tires: demand for
motorcycle tires rose in the mature markets, while emerging markets
also remained on an upward trend.
-
Aircraft tires: demand in
the commercial aircraft segment continued to grow, led by the
increase in passenger traffic.
First-Half 2017 Net Sales and Earnings
Net sales for the first six months
of 2017 totaled €11,059 million, an increase of 7.5% from the year
earlier period that was attributable to the net impact of the
following factors:
-
a €372 million increase from the 3.6% growth in
volumes, along with a €52 million gain from the first time
consolidation of Brazilian two-wheel tiremaker Levorin;
-
a €145 million increase from the favorable 1.4%
price-mix effect (of which a negative 0.1% in the
first quarter and a positive 2.8% in the second). The price
effect added a net €60 million, comprising €67 million in
price increases in non-indexed businesses to offset the impact of
higher raw materials costs, less the €7 million in price
adjustments in the businesses subject to raw materials indexation
clauses. The positive mix effect added another net €85 million,
reflecting the still highly positive product mix and the favorable
impact of the rebound in the mining tire business, partially offset
by the unfavorable impact of the relative growth rates of OE and
replacement tire sales;
-
a €198 million increase from the favorable
currency effect, primarily stemming from the US dollar.
-
Results
Consolidated
operating income from recurring activities amounted to €1,393
million or 12.6% of net sales in the first six months of 2017,
compared with €1,405 million and 13.7% in first-half 2016. The €27
million in net operating income from non-recurring activities
corresponded to gains on amendments to the US post-retirement
healthcare plan and the UK pension plan, which were partially
offset by changes in the fair value of non-current assets.
Operating income from recurring
activities was first shaped by growth in volumes, which contributed
€139 million. As announced, the €145 million positive price-mix
effect partially offset the full-period €331 million negative
impact of higher raw materials costs. In line with the
implementation schedule, the competitiveness plan delivered €146
million in gains that helped to absorb the €142 million increase in
production costs and overheads. Lastly, the currency effect added
€37 million to the reported figure.
In all, net
income for the period came to €863 million, an increase of
12%.
Taking into account the negative
free cash flow, the payment of €585 million in dividends and the
€101 million in share buybacks, gearing stood at 16% at June
30, 2017, unchanged from a year earlier and corresponding to net
debt of €1,685 million, compared with gearing of 9% and net
debt of €944 million at December 31, 2016.
In € millions |
Net sales |
Operating income from recurring activities |
Operating margin on recurring activities |
|
H1 2017 |
H1 2016 |
H1 2017 |
H1 2016 |
H1 2017 |
H1 2016 |
Passenger car/Light truck tires and related distribution |
6,263 |
5,916 |
800 |
814 |
12.8% |
13.8% |
Truck tires & related distribution |
3,041 |
2,907 |
229 |
288 |
7.5% |
9.9% |
Specialty businesses |
1,755 |
1,469 |
364 |
303 |
20.8% |
20.6% |
Group
|
11,059 |
10,292 |
1,393 |
1,405 |
12.6% |
13.7% |
· Passenger car/Light truck tires and related
distribution
Net sales in the Passenger
car/Light truck tires and related distribution segment rose by 5.9%
to €6,263 million, from €5,916 million in the prior-year
period.
Operating income from recurring
activities came to €800 million or 12.8% of net sales, versus €814
million and 13.8% in first-half 2016.
The change was primarily
attributable to the 3% growth in sales volumes and the improvement
in the price mix, which offset almost all of the impact of higher
raw materials prices. The still favorable mix effect reflected the
success of the MICHELIN CrossClimate+ and MICHELIN Pilot Sport
4S lines, which drove strong growth in sales of MICHELIN brand
tires (up 4%) and 18-inch and larger tires (up 23%). Sales of
other Group brands grew 3 % over the period.
· Truck
tires & related distribution
Net sales in the Truck tires and
related distribution segment amounted to €3,041 million in the
first half of 2017, a 4.6% increase from the €2,907 million
reported a year earlier.
Operating income from recurring
activities amounted to €229 million or 7.5% of net sales, compared
with €288 million and 9.9% in first-half 2016.
The change primarily reflected the
stable volume performance, stemming from the priority focus on
raising prices to deliver higher margins in the second half. New
products and services continued to be introduced over the period,
which was shaped by the success of the MICHELIN X Multi, MICHELIN X
Works, intermediate tire lines and Tire Care services.
· Specialty businesses
Net sales by the Specialty
businesses stood at €1,755 million for the period, compared
with €1,469 million a year earlier.
Operating income from recurring
activities stood at €364 million or 20.8% of net sales, versus €303
million and 20.6% in first-half 2016.
The increase stemmed from the
robust 16% growth in volumes, led by the sustained rebound in
demand for the Group's mining tires and the sharp upturn in
Earthmover and Agricultural original equipment sales. This amply
offset the impact of higher raw materials costs and continued price
reductions over the period in application of contractual indexation
clauses.
COMPAGNIE GÉNÉRALE DES ÉTABLISSEMENTS
MICHELIN
Compagnie Générale des
Établissements Michelin ended the first half with net income of
€906 million, compared with €1,338 million in the first six
months of 2016.
The financial statements were
presented to the Supervisory Board at its meeting on July 24, 2017.
A review was performed by the statutory auditors, who issued
their related report on July 25, 2017.
First-Half 2017 Highlights
-
Successful issue of
non-dilutive, cash-settled convertible bonds (January
5, 2017)
-
MICHELIN PILOT SPORT 4S, the
new ultra high performance tire, is among the first tires in its
category to be rated A in wet grip (for the 19-inch model) (January
2017)
-
Michelin North America
announces broad price increase (January 31, 2017)
-
Michelin raises tire prices in
Europe in response to rising raw materials costs
(February 3, 2017)
-
MICHELIN X®
FORCE(TM) ZL: the new genuinely tough all-terrain tire for small
civilian and military trucks (February 14, 2017)
-
Launch of a €100 million share
buyback program (February 17, 2017)
-
MICHELIN CrossClimate+: better,
longer lasting performance in every season
(February 27, 2017)
-
Four new MICHELIN mountain bike
tire ranges (March 13, 2017)
-
The new Alpine A110 fitted with
MICHELIN Pilot Sport 4 tires (March 21, 2017)
-
Harley-Davidson selects
MICHELIN for its new Street Rod(TM) model (March 30,
2017)
-
General Motors and Michelin, a
shared vision of sustainable rubber tree farming
(May 18, 2017)
-
MICHELIN Vision concept tire:
an expression of mobility for the future (June 13, 2017)
-
Movin'On: it's time to take
action for sustainable mobility (June 13, 2017)
-
Michelin acquires NexTraq, a
telematics provider, to expand fleet management capabilities for
commercial trucks in the United States (June 14, 2017)
-
24 Hours of Le Mans: Michelin
notches up its 20th consecutive
success (June 19, 2017)
-
Michelin and Safran develop the
first connected aircraft tire (June 20, 2017)
-
A new global reorganization
project to better serve Michelin customers (June 22,
2017)
-
Acquisition of a 40% stake in
Robert Parker Wine Advocate, the world's most widely read
independent consumers' guide to fine wine (July 5, 2017)
-
Michelin and SIFCA own 89.15%
of outstanding SIPH shares (July 12, 2017)
A full
description of first-half 2017 highlights
may be found on the Michelin website:
http://www.michelin.com/eng
Presentation and
Conference call
First-half 2017 results will be reviewed with analysts and
investors during a presentation today, Tuesday July 25, at
6:30 p.m. CEST. The event will be in English, with simultaneous
interpreting in French.
Webcast
The presentation will be webcast live on www.michelin.com/eng
Conference call
Please dial-in on one of the following numbers from 6:20 p.m.
CEST:
-
In France
01 70 77 09 29 (French)
-
In France
01 70 77 09 44 (English)
-
In the United Kingdom
0203 367 9462 (English)
-
In North
America
(855) 402 7763 (English)
-
From anywhere else
+44 (0) 203 367 9462 (English)
The presentation of financial
information for the six months ended June 30, 2017 (press release,
presentation, interim financial report) may also be viewed at
http://www.michelin.com/eng, along with practical information
concerning the conference call.
Investor
calendar
Thursday, October 19, 2017 after
close of trading
Investor Relations
Valérie Magloire
+33 (0) 1 78 76 45 37
+33 (0) 6 76 21 88 12 (cell)
valerie.magloire@michelin.com
Matthieu Dewavrin
+33 (0) 4 73 32 18 02
+33 (0) 6 71 14 17 05 (cell)
matthieu.dewavrin@michelin.com
Humbert de Feydeau
+33 (0) 4 73 32 68 39
+33 (0) 6 82 22 39 78 (cell)
humbert.de-feydeau@michelin.com
|
Media Relations
Corinne Meutey
+33 (0) 1 78 76 45 27
+33 (0) 6 08 00 13 85 (cell)
corinne.meutey@michelin.com
Individual Shareholders
Jacques Engasser
+33 (0) 4 73 98 59 08
jacques.engasser@michelin.com
|
DISCLAIMER
This press release is not an offer to purchase or a
solicitation to recommend the purchase of Michelin shares. To
obtain more detailed information on Michelin, please consult the
documents filed in France with Autorité des Marchés Financiers,
which are also available from the www.michelin.com/eng
website.
This press release may contain a
number of forward-looking statements. Although the Company believes
that these statements are based on reasonable assumptions as at the
time of publishing this document, they are by nature subject to
risks and contingencies liable to translate into a difference
between actual data and the forecasts made or inferred by these
statements.
CP_2017 H1_EN
This
announcement is distributed by Nasdaq Corporate Solutions on behalf
of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the
information contained therein.
Source: Michelin via Globenewswire
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