Michelin reports lower sales, net income in H1 2024

For the first half of 2024, Michelin reports total sales of €13,481 million, 3.1 per cent lower year-on-year than the €14,079 million achieved in the same period of 2023. Despite lower sales, segment operating income increased from €1,704 million and 12.1 per cent of sales in H1 2023 to €1,782 million and 13.2 per cent of sales, driven by mix improvements and reduced operating costs.
Net income amounted to €1,163 million in H1 2024, down 4.7 per cent year-on-year.
Michelin’s Automotive segment saw its H1 2024 margin improve to 13.4 per cent from 12.3 per cent, while the Road Transportation segment experienced a strong margin recovery, increasing to 9.2 per cent from 5.0 per cent. The Specialty Businesses segment maintained a robust margin of 16.8 per cent, down from 18.3 per cent in H1 2023, despite facing adverse conditions.
The company generated €669 million in free cash flow before acquisitions, supported by disciplined business management and efficient inventory management. The segment EBITDA stood at €2.8 billion, marking an increase of 1.6 percentage points compared to the first half of 2023.
Full year-guidance continues to forecast segment operating income above €3.5 billion at constant exchange rates and free cash flow before acquisitions exceeding €1.5 billion.
The right approach
“In an economic environment that remains particularly unstable, Michelin achieved a very solid first half,” states Florent Menegaux, chief executive officer of Michelin. “These results enable us to maintain our guidance for 2024. I would like to warmly thank our teams for their ability to adapt and for their commitment.
“I am convinced that our value-based approach, which positions us on very high value-added activities and the most accretive markets, is the right one,” Menegaux continues. “By pursuing its environmental and technological transformations and by placing people at the heart of all its decisions, Michelin is giving itself every advantage to successfully implement its Michelin in Motion 2030 strategy.”
Sales
According to Michelin, the 4.2 per cent year-on-year decrease in sales, to €13,481 million, was due to several factors:
- 4.4 per cent decline in tyre volumes, primarily resulting from the company’s strategic focus on selectively targeting product segments, regions, and partners that can fully leverage its technological leadership.
- 1.1 per cent increase from a positive price-mix effect. The negative price impact of €105 million from applying contractual indexation clauses was offset by a favourable €261 million impact from the mix. This was driven mainly by an increase in the sales of high value-added products such as 18-inch and larger passenger car tyres and agricultural tracks, along with a favourable geographic and market mix shift.
- Stable non-tyre sales, reflecting high prior-year comparatives due to record conveyor sales in the first half of 2023. The Lifestyle and Connected Solutions activities continued their growth momentum during the period.
- 1.2 per cent decrease from negative currency effects, particularly due to declines in the Chinese yuan, Turkish lira, Japanese yen, and several other currencies against the euro.
- 0.4 per cent increase from changes in the scope of consolidation, primarily due to the inclusion of Flex Composite Group (FCG) on 26 September 2023.
Results
In the first half of 2024, Michelin’s segment operating income amounted to €1,782 million or 13.2 per cent of sales, compared to €1,704 million or 12.1 per cent in the first half of 2023. Michelin reports several factors behind this increase in segment operating income:
- €27 million increase from changes in the scope of consolidation, mainly from the acquisition of Flex Composite Group in September 2023.
- €325 million decrease due to an unfavourable volume effect, reflecting the decline in volumes sold and the resulting under-utilisation of production capacity.
- €84 million increase from a positive price-mix effect. This includes an unfavourable impact from prices adjusted downwards due to contractual indexation clauses, offset by a favourable mix effect driven by sales of high value-added products like 18-inch and larger passenger car tyres.
- €250 million increase from the decline in raw material costs used in production in late 2023 and early 2024.
- €207 million increase from reduced manufacturing and logistics costs, thanks to lower shipping and energy costs and operating efficiencies.
- €101 million decrease due to the year-on-year growth in SG&A expenses, reflecting the impact of inflation on payroll costs.
- An aggregate €15 million decrease from other unfavourable factors, including a slight decline in non-tyre segment operating income.
- €49 million decrease from unfavourable exchange rate movements, particularly due to the decline in the Turkish lira and other currencies against the euro.
Other operating income and expenses not allocated to the operating segments resulted in a net expense of €211 million, compared to a net expense of €90 million in the first half of 2023. This increase was primarily due to business restructuring provisions and impairments. These included adjustments to provisions recognised in the second half of 2023 for restructuring projects in the United States and Germany, as well as new provisions and impairments for projects in China and Poland announced in the first half of 2024.
Overall, net income for the period was €1,163 million, compared to €1,220 million in the first half of 2023.
Comments