Michelin Group announced sales growth of 5.9% and a 11.4% increase of segment operating income in its 2023 first-half financial results.
The company says sales are up due to “dynamic pricing and fast-growing non-tire sales.”
“Tire sales volumes (are) down 3.7%, reflecting market trends and the group’s priority on value-accretive segments,” says Michelin officials.
Michelin says its first-half net income was $1,310 million compared to $875 million in 2022. Segment operating income was $1,851 million and 12.1% of sales.
The increase in segment operating income is due to “value management offset cost inflation and the decline in sales volumes,” according to the results.
The group reported that the auto and specialties categories delivered a higher performance in segment operating income; while road transportation encountered a negative OE/RT mix and low volumes, which impacted utilization and fixed cost absorption.
There was a “strong price-mix effect, led by sustained product mix enhancement, pricing policies and the lagging impact of indexation clauses.”
The specialty category’s operating margin rose to 18.3% and was supported in part by “dynamic mining” business.
Free cash flow ended the first half at a positive of $836 million, compared to a negative $1.01 million a year earlier.
The results also said free cash flow before mergers and acquisitions reached over $1 billion.
Michelin noted that TBC Corp. generated positive cash of more than $278 million “partly due to the proceeds from the sale of its company-owned retail network” to Mavis Tire Express Services Corp.
“The Group’s business results were good in the first half, in context of accelerated market transformation to which we are constantly adapting,” says Florent Menegaux, CEO, Michelin Group.
“Michelin enjoys a number of strengths including quality products and services that, together with the right pricing and mix, enable us to focus on the segments with the highest value generation. I would like to recognize our teams for their agility and these achievements in a persistently difficult environment for the Truck and Beyond Road segments. In high-tech materials, the deployment of our strategy is gathering pace with the announced acquisition of Flex Composite Group.”
Sales
Sales for the first six months of 2023 resulted in over $15.3 billion for Michelin.
“The 3.7% decline in tire volumes stems from the major dealer inventory drawdowns over the period, the uncertain economic environment and the increase in interest rates, which prompted dealers to hold down inventories,” the tiremaker says.
The report continues, there was a 9.4% increase from the positive tire price-mix effect and that the $1.2 billion positive price effect resulted from the “full-period impact of the price increased introduced in 2022 and early 2023 to offset an array of cost inflation factors.”
There was a growth in demand for 18-inch and larger tires in the passenger car and light truck tire segments.
“Despite a softer market scenario, Michelin’s 2023 guidance has been revised upwards, and now calls for segment operating income at constant exchange rates of more than $3.7 billion (previously $3.5 billion) free cash flow before acquisitions of more than $2.2 billion (previously $1.7 billion),” says the report.
