Michelin : Michelin : Financial Information for the Year Ended December 31,
Clermont-Ferrand - February 12, 2013
COMPAGNIE GÉNÉRALE DES ETABLISSEMENTS MICHELIN
Financial Information for the Year Ended December 31, 2012
Strong 2012 earnings in lackluster markets
More than €1 billion in free cash flow
€2,423 million in operating income before non-recurring items, up 25%
Operating margin up 2 points, to 11.3% of net sales
oOperating income before non-recurring items up 25% to €2,423 million,
oAn efficient pricing policy.
oA global footprint.
oStructurally high margins in specialty tires.
oRestored profitability in the Truck tire business, despite a sharp
oVolumes down 6.4%, with demand remaining flat in the second half.
oMore than €1 billion in free cash flow, demonstrating:
oThe Group's ability to structurally generate cash
oThe effective integration of value creation into every unit's
o12.8% return on capital employed.
oProposed dividend of €2.40 per share, subject to approval at the Annual
Shareholders Meeting of May 17, 2013.
oOutlook for 2013
Given its global footprint, Michelin expects to hold volumes steady in 2013,
in a market environment that is uncertain in mature markets but still
expanding in the new ones.
Raw materials prices are expected to remain stable in the first half, adding a
further €350-400 million to operating income. This will be partly offset,
however, by the impact of indexation clauses on the original equipment and
The capital expenditure program totaling around €2 billion will support
Michelin's growth ambitions by bringing new production capacity on stream in
the growth regions, whose start-up will weigh on costs. The program is also
designed to improve competitiveness in mature markets and drive technological
Confident in its competitive strengths and thanks to the launch of an
ambitious project to improve its management systems, Michelin confirms its
2015 objectives and for 2013 expects to report stable operating income before
non-recurring items at constant exchange rates, a more than 10% return on
capital employed and positive free cash flow.
(in € millions) 2012 2011
Net sales 21,474 20,719
Operating income before non-recurring items 2,423 1,945
Operating margin before non-recurring items 11.3% 9.4%
Passenger Car and Light Truck Tires and Related Distribution 9.3% 9.4%
Truck Tires and Related Distribution 6.6% 3.5%
Specialty Businesses 26.0% 21.5%
Operating income after non-recurring items 2,469 1,945
Net income 1,571 1,462
Capital expenditure 1,996 1,711
Net debt 1,053 1,814
Gearing 12% 22%
Free cash flow^1 1,075 (19)
Return on capital employed 12.8% 10.9%
Employees on payroll^2 113,400 115,000
^ ^1 Cash flow from operating activities less cash flow used in
^2 At period-end
oPassenger Car and Light Truck tires
2012 Europe* North Asia South Africa-India-Middle East Total
% change America (excluding America
Original -5% +16% +11% +0% -3% +6%
-10% -2% +2% +2% -3% -4%
Fourth-Quarter Europe* North Asia South Africa-India-Middle Total
2012 America (excluding America East
% change India)
^(in number of
Original -8% + 10% +5% +12% - 12% +2%
-9% - 1% +4% +4% -5% -2%
*Including Russia and Turkey
§ Original Equipment
oIn Europe, tire demand contracted by 5% in 2012. The collapse in new car
registrations, which fell to a 17-year low in the European Union, masked a
contrast between the decline in broadline carmaker sales and the firmer
resistance of specialty and export-driven brands. Markets in Eastern
Europe continued to expand, increasing by 11% over the year.
oThe North American tire market grew by 16% in 2012, returning to 2007
levels thanks to strong new car sales as buyers replaced aging models.
oIn Asia (excluding India), demand rose by 11% overall. While still
buoyant, the Chinese market cooled somewhat, ending the year up 6%. Demand
in Japan (up 11%) and Southeast Asia (up 38%) rebounded off of a 2011
impacted by natural disasters.
oThe South American market was stable overall, with a brisk 7% gain in the
second half offsetting the 7% decline in the first. Demand in Brazil rose
by 3%, lifted by the government measures introduced in the autumn.
o In Europe, replacement demand dropped 10% year-on-year in a highly
uncertain economic environment. Western Europe saw a record decline, steeper
even than in 2008, that was accentuated by dealer inventory drawdowns. The
winter tire market dropped 16%, as expected, and the high-performance tire
segment (17" and bigger) slowed to a lesser extent than the European market
average, reflecting the sustained improvement in the mix.
o Demand in North America retreated 2% as consumer confidence weakened,
despite the relative stability of average miles traveled and fuel prices.
After an upturn in 2010, the market has returned to 2009 levels, with volumes
sold noticeably lower than in 2007. Impacted by the significant increase in
Chinese imports after customs duties were lifted, the US market declined by
o In Asia (excluding India), markets ended the year up 2% overall. Demand
rose 4% in China despite slowing economic growth, but eased back 1% in Japan,
where winter tire sales were stable and volumes moved back in line with
recurring trends after the run-up in replacement buying in 2011 following the
natural disasters. In South Korea, the market fell 6% in an export-driven
economy hit hard by global economic uncertainty.
o The South American market gained a slight 2% overall, but with wide
variations among countries. Demand expanded by 3% in Brazil as sell-out held
firm at 2011 levels.
q Truck tires
2012 Europe** North Asia South Africa-India-Middle Total
% change America (excluding America East
Original -4% +2% -9% -30% +31% -5%
-14% -2% -6% +3% +8% -4%
Fourth-Quarter Europe** North Asia South Africa-India-Middle Total
2012 America (excluding America East
% change India)
^(in number of
Original - 7% -15% - 10% - 27% + 31% - 9%
+ 2% + 2% + 2% +6% + 6% +3%
*Radial market only
**Including Russia and Turkey
§ Original Equipment
oDemand in Europe declined by 4%, to below 2007 and 2008 levels. Although
the fall-off was a relatively limited 2% in the first half, it gained
momentum in the second, to 5%, under the impact of the worsening economic
situation in the region.
oAfter surging 17% in the first half, the North American market slowed
precipitously in the second half, to end the year with just a 2% gain.
Economic uncertainty caused by tax issues in the United States weighed on
new truck orders during the year.
oIn Asia (excluding India), demand retreated by 9% overall, with a fairly
steep 15% drop in China as growth in the economy (particularly exports)
cooled over the year. The Southeast Asian market, which continues to shift
to radials, was highly active, up 42%, while the Japanese market rebounded
12%. In both cases, growth was lifted by prior-year comparatives shaped
by, respectively, flooding and the tsunami.
oThe South American market plunged 30% after Brazil introduced Euro V
emissions standards during the year. However, the Brazilian government's
introduction of more favorable financing terms helped the market to turn
around, with an upturn in the final quarter.
o Demand in Europe dropped 14%, with a 25% plunge in the first half due to
inventory drawdowns and high bases of comparison. In the second half, the
market continued to shrink on weak transportation activity and the lackluster
economic outlook. In Eastern Europe, the market declined by 3%, primarily due
to dealer destocking.
o The North American market ended the year down just 2%, reflecting fleet
manager caution in the face of economic uncertainty, despite relative robust
freight demand. The contraction may also be explained by the sharp growth in
original equipment sales and the availability of retreadable casings.
o In Asia (excluding India), markets declined by 6% overall during the
year. The Chinese market ended 2012 down by 7%, reflecting the slower growth
in the economy and in exports. The Japanese market was down 6% off of a high
prior-year comparative, which was lifted by last year's price increases and
inventory rebuilding after the tsunami. Demand in South Korea also declined as
the global economic slowdown weighed on exports and transportation demand.
o The South American market gained 3% during the year. In Brazil, the
stricter application of customs inspections reduced imports and dampened
demand in general, although the first signs of a recovery appeared in the
q Specialty Tires
§ Earthmover tires: The mining sector is continuing to expand, led by
sustained demand for ore, oil and gas, and the market for large tires remains
buoyant. After rising in the first half, the original equipment market
contracted in the final quarter, with a particularly steep fall-off in Europe.
Demand for tires used in infrastructure and quarries is shrinking in Western
Europe and, after increasing in the first half, turned downwards in the final
quarter in North America.
§ Agricultural tires: After climbing in the first half, worldwide original
equipment demand declined in the fourth quarter, particularly in Europe. The
replacement market dropped significantly in mature markets during the year,
dragged down by the prevailing economic uncertainty.
§ Two-Wheel tires: Impacted by the lackluster economy, the motorized segments
declined in mature geographies, except North America, but continued to expand
in emerging markets.
§ Aviation tires: Passenger load factors are continuing to improve in the
commercial aviation segment, on both domestic and intercontinental routes, but
the cargo market was down for the year.
2012 Net Sales and Results
Consolidated net sales amounted to €21,474 million for the year, up 3.6% at
current exchange rates compared with €20,719 million in 2011.
Of the total price mix effect, which added 6.2% to growth, €1,052 million
corresponded to the net impact of the price increases introduced in 2011 and
the contractual price reductions due to the raw materials indexation clauses
applicable on nearly 30% of consolidated sales volumes. It also included the
€157 million impact of a further improvement in the sales mix, led by the
premium strategy and the expanding specialty businesses.
Weak demand, particularly in European markets, dragged sales volumes down by
6.4% over the year.
The positive 4.2% currency effect primarily resulted from gains in the euro
against the US dollar.
Consolidated operating income before non-recurring items amounted to €2,423
million or 11.3% of net sales, compared with €1,945 million and 9.4% in 2011.
This €478-million improvement mainly reflected the positive price mix (€1,209
million, of which €1,052 million from price increases), which favorably
combined with the limited negative impact from raw materials costs (€76
million). It also reflected the €504-million negative impact of the decline
in volumes, the €176 million in outlays to drive growth (start-up and other
costs in the new markets), the €311 million increase in production costs and
other expenses and the €3-million positive impact on productivity of
production slowdowns. The currency effect was a positive €268 million. Lastly,
the improvement also included the initial impact of the competitiveness plan
launched in early 2012.
In all, net income for the year came to €1,571 million.
oNet financial position
Free cash flow ended the year at €1,075 million, as available cash flow and
the sale of a property complex in Paris helped to offset the faster deployment
of growth investments.
At December 31, 2012, gearing stood at 12% while net debt amounted to €1,053
q Segment Information
€ millions Net sales Operating income Operating margin
before non-recurring before non-recurring
2012 2011 2012 2011 2012 2011
Passenger Car and 11,098 10,780 1,033 1,018 9.3% 9.4%
Light Truck Tires and
Truck Tires and 6,736 6,718 444 233 6.6% 3.5%
Specialty Businesses 3,640 3,221 946 694 26.0% 21.5%
Group 21,474 20,719 2,423 1,945 11.3% 9.4%
§ Passenger Car and Light Truck Tires and Related Distribution
In all, net sales in the Passenger car and Light truck tires and related
distribution segment stood at €11,098 million, up 2.9% on 2011.
The sustained firm pricing policy and ongoing improvement in the product mix,
led by the MICHELIN brand's premium positioning, helped to offset the 5.5%
decline in volumes. As a result, operating income before non-recurring items
stood at €1,033 million or 9.3% of net sales, compared with €1,018 million and
9.4% in 2011.
§ Truck Tires and Related Distribution
Net sales in the Truck tires and related distribution segment amounted to
€6,736 million, unchanged from 2011.
In a depressed market, volumes fell 10.8% as the Group focused on turning the
Truck tire business around and restoring its margins. This strategy, along
with the wide array of market launches and the decline in raw materials costs,
drove a sharp increase in operating income before non-recurring items, to €444
million or 6.6% of net sales from €233 million and 3.5% in 2011.
§ Specialty Businesses
Net sales by the Specialty businesses rose by 13.0% to €3,640 million in 2012.
At €946 million or 26.0% of net sales, operating income before non-recurring
items confirmed these businesses' structurally high profitability. In a
particularly favorable currency environment, they benefitted from the still
positive impact of contractual indexation clauses based on raw materials
prices, as well as from the 1.7% increase in volumes.
Compagnie Générale des Etablissements Michelin
Compagnie Générale des Etablissements Michelin reported a profit of €465
million in 2012.
The financial statements were presented to the Supervisory Board at its
meeting on February 7, 2013. The audit was completed and the auditors' report
was issued on the same date.
The Managing Partner will call an Annual Shareholders Meeting on Friday, May
17 at 9:00 am in Clermont-Ferrand.
Shareholders will be asked to approve the payment of a dividend of €2.40 a
share, with a dividend reinvestment option.
oStandard & Poor's upgrades Michelin's credit rating to BBB+ (March 23)
oGlobal leadership in Earthmover tires strengthened with the construction
of a new plant and the extension of another in North America (April 10)
oMoody's upgrades Michelin's credit rating to Baa1 (April 24)
oFirst Passenger Car and Light truck tire produced at Pau-Brasil plant
oIn addition to sticker information, the MICHELIN Total Performance
strategy is showcasing all of the benefits of tire technology with the
slogan: "Michelin sells performance, not rubber". (June 29)
oNew MICHELIN Restaurants website launched in France (May 25)
oThe Group celebrates 10 years of Michelin Performance and Responsibility
oMichelin successfully places €400 million seven-year notes issue (June 19)
oMichel Rollier hands over the reins to Jean-Dominique Senard at the Annual
Shareholders Meeting on May 11
o2015 guidance updated (September 19)
oFirst Truck tire produced at the new Shenyang 2 plant in China (September
oNew Truck tire lineup presented at the IAA Show in Hanover (September 20)
oNew Earthmover product lineup for 2012 unveiled at the MINExpo Trade Show
in Las Vegas (September 24)
oFIA World Rally Championship: a 20^th Drivers' Title and a 22^nd
Manufacturers Crown for Michelin (October 9)
oInvestor Day organized at the Technology Center in Ladoux, France
A full description of 2012 highlights
may be found on the Michelin website: www.michelin.com/corporate/finance
Presentation and Conference call
Full-year 2012 results will be reviewed with analysts and investors during a
conference call today, Tuesday February 12, at 11:00 am CET (10:00 am UT). The
conference will be in English, with simultaneous interpreting in French. If
you wish to participate, please dial-in one of the following numbers from
10:50 am CET:
oIn France 01 70 77 09 19 (Français)
oIn France 01 70 77 09 39 (English)
oIn the UK 0203 367 9462 (English)
oIn the United States +1 866 907 5924 (English)
oFrom anywhere else +44 203 367 9462 (English)
Please refer to the website www.michelin.com/corporate for practical
information concerning the conference call.
oQuarterly information for the three months ended March 31, 2013:
Monday, April 22, 2013 after close of trading
oFirst-half 2013 net sales and results:
Thursday, July 25, 2013 before start of trading
Investor Relations Media Relations
Valérie Magloire Corinne Meutey
+33 (0) 1 78 76 45 37 +33 (0) 1 78 76 45 27
+33 (0) 6 76 21 88 12 (cell) +33 (0) 6 08 00 13 85 (cell)
Alban de Saint Martin Jacques Engasser
+33 (0) 4 73 32 18 02 +33 (0) 4 73 98 59 08
+33 (0) 6 07 15 39 71 (cell) email@example.com
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
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.
2012 FY ENG
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Source: Michelin via Thomson Reuters ONE
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