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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Michelin | EU:ML | Euronext | Ordinary Share |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.12 | 0.33% | 36.44 | 36.43 | 36.45 | 36.71 | 36.24 | 36.32 | 749,163 | 14:57:21 |
PRESS RELEASE
Clermont-Ferrand, February 11, 2019
COMPAGNIE GÉNÉRALE DES ÉTABLISSEMENTS MICHELIN
Financial information for the year ended December 31, 2018
2018: in a challenging environment, €2,775 million in segment operating income*, up €304 million or 11% at constant exchange rates
€1,274 million in structural free cash flow
2019: sustained growth in segment operating income, even before the additional contribution from acquisitions
Jean-Dominique Senard, Chief Executive Officer, said: "In 2018, in a difficult economic environment, Michelin demonstrated its ability to increase operating income and sustain the improvements in structural free cash flow achieved in recent years. The year also saw faster deployment of the Group's strategy, with the acquisitions of Fenner and Camso, and the creation of the TBC wholesaling joint venture in the United States. These transactions have strengthened the Group in key markets and provided new opportunities to create value."
In 2019, the Passenger car and Light truck tire markets are expected to be mixed, with modest growth in the Replacement segment and a contraction in the Original Equipment segment. Truck tire markets are expected to remain stable overall, given the decline in demand in China, while the Mining, Aircraft and Two-wheel tires markets should remain dynamic. Based on January 2019 exchange rates, the currency effect is expected to have a slightly favorable impact on segment operating income. The impact of raw materials costs is currently estimated at around a negative €100 million.
In this environment, Michelin's objectives for 2019 are: volume growth in line with global market trends; segment operating income exceeding the 2018 figure at constant exchange rates and before the estimated €150 million contribution from Fenner and Camso; and structural free cash flow of more than €1.45 billion.**
* Formerly known as operating income from recurring activities, segment operating income is the performance metric for the reporting segments. It is stated before the amortization of brands and customer lists recognized on the acquisition of the corresponding companies, which is included in other operating income and expenses.
** Of which €150 million from the application of IFRS 16
(in € millions) | 2018 | 2018 at 2017 exchange rates | 2017 |
Sales | 22,028 | 22,866 | 21,960 |
Segment operating income1 | 2,775 | 3,046 | 2,742 |
Segment operating margin | 12.6% | 13.3% | 12.5% |
Automotive & related distribution | 11.6% | 12.3% | 12.3% |
Road transportation & related distribution | 8.8% | 9.7% | 8.1% |
Specialty businesses & related distribution | 19.6% | 20.2% | 19.6% |
Other operating income and expenses | (225) | (111) | |
Operating income | 2,550 | 2,631 | |
Net income | 1,660 | 1,693 | |
Segment EBITDA | 4,119 | 4,087 | |
Capital expenditure | 1,669 | 1,771 | |
Net debt | 3,719 | 716 | |
Gearing | 31% | 6% | |
Employee benefit obligations | 3,850 | 3,969 | |
Free cash flow2 | (2,011) | 662 | |
Structural free cash flow3 | 1,274 | 1,509 | |
ROCE4 | 14.0% | 13.0% | |
Employees on payroll5 | 117,400 | 114,100 | |
Earnings per share | €9.30 | €9.39 | |
Dividend per share6 | €3.70 | €3.55 |
1Formerly known as operating income from recurring activities, segment operating income is the performance metric for the reporting segments. It is stated before the amortization of brands and customer lists recognized on the acquisition of the corresponding companies, which is included in other operating income and expenses. In 2018, amortization of acquired intangible assets amounted to €39 million for the year.
2Free cash flow: net cash from operating activities less net cash used in investing activities and net cash from other current financial assets, before distributions.
3Structural free cash flow: free cash flow before acquisitions, adjusted for the impact of changes in raw materials costs on trade payables, trade receivables and inventories.
4ROCE excluding goodwill, acquired intangible assets and associates & joint ventures. 2017 standard tax rate of 31%; 2018 standard tax rate of 26%.
5At period-end.
62018 dividend to be submitted to shareholder approval at the Annual Meeting on May 17, 2019.
Market Review
2018/2017 (in number of tires) | Europe including Russia & CIS* | Europe excluding Russia & CIS* | North America | Central America | Asia (excluding India) | South America | Africa/ India Middle East | Total |
Original equipment Replacement | - 2 % + 2 % | - 2 % + 1 % | - 1 % + 3 % | + 1 % + 4 % | - 4 % - 2 % | + 3 % - 8 % | + 4 % + 0 % | - 2 % + 1 % |
Fourth quarter 2018/2017 (in number of tires) | Europe including Russia & CIS* | Europe excluding Russia & CIS* | North America | Central America | Asia (excluding India) | South America | Africa/ India Middle East | Total |
Original equipment Replacement | - 7 % + 3 % | - 8 % + 2 % | + 4 % + 4 % | - 2 % + 7 % | - 10 % + 1 % | - 8 % - 13 % | - 10 % + 7 % | - 7 % + 2 % |
*Including Turkey.
The global Original Equipment and Replacement Passenger car and Light truck tire market was stable in 2018, with a slight 1% gain in the first half erased by a 1% decline in the second, caused by the 5% drop in Original Equipment demand.
2018/2017 (in number of tires) | Europe including Russia & CIS* | Europe excluding Russia & CIS* | North America | Central America | Asia (excluding India) | South America | Africa/ India Middle East | Total |
Original equipment Replacement | +3% +0% | +4% -2% | +19% +7% | -8% +4% | -6% -5% | +54% +2% | +10% -1% | +1% -2% |
Fourth quarter 2018/2017 (in number of tires) | Europe including Russia & CIS* | Europe excluding Russia & CIS* | North America | Central America | Asia (excluding India) | South America | Africa/ India Middle East | Total |
Original equipment Replacement | -1% -1% | +0% -3% | +28% +5% | +16% +6% | -4% -8% | +31% -4% | +10% -0% | +3% -4% |
*Including Turkey.
The number of new Truck tires sold worldwide declined by 1% in 2018. After gaining 2% in the first half, led by demand in North America, the market fell back 3% in the second six months, reflecting strong headwinds from the 12% drop in Chinese demand off of very high comparatives in an uncertain economic environment.
2018 Sales and Results
Sales stood at €22,028 million for the year ended December 31, 2018, up 0.3% from 2017 due to the combined impact of the following factors:
Segment operating income amounted to €2,775 million or 12.6% of sales, versus €2,742 million and 12.5% in 2017.
The 2018 performance reflected (i) a €56 million increase from changes in the scope of consolidation following the inclusion of Fenner PLC over the last seven months of the year and the deconsolidation of TCi; (ii) a €57 million increase from the 0.9% growth in volumes; (iii) a robust €444 million increase from the price-mix effect thanks to disciplined price management, which cushioned (iv) the €158 million adverse impact from raw materials costs. The €317 million increase in costs was entirely offset by €317 million in competitiveness gains. Depreciation and amortization expense rose by €40 million and start-up costs by €41 million. Other factors totaled a negative €14 million for the year. Lastly, the highly unfavorable currency effect trimmed €271 million from the reported figure.
The €225 million in net other operating expenses corresponded primarily to the €146 million provision for the closure of the Dundee plant, the €39 million in amortization of acquired brands, and the costs of acquiring Fenner and Camso.
In all, net income came to €1,660 million.
Free cash flow ended the year at a negative €2,011 million, a €2,673 million decline resulting from the acquisitions of Fenner, A.T.U and Camso and the creation of the TBC joint venture with Sumitomo Corporation. Based on this free cash flow, less the payment of €637 million in dividends and the €75 million in share buybacks, consolidated gearing stands at 31%, corresponding to net debt of €3,719 million.
On January 1, 2018, Michelin introduced a new business organization, which has led to the following changes in the reporting segments:
(1) Replacement Light truck tires have been transferred from the Automotive segment (formerly Passenger car and Light truck tires) to the Road transportation segment (formerly Truck tires).
(2) Construction Truck tires have been transferred from the Road transportation reporting segment to the Specialty businesses segment.
In € millions | Sales | Segment operating income | Segment operating margin | |||
2018 | 2017 | 2018 | 2017 | 2018 | 2017 | |
Automotive & related distribution | 11,340 | 11,953 | 1,314 | 1,465 | 11.6% | 12.3% |
Road transportation & related distribution | 5,852 | 5,946 | 513 | 483 | 8.8% | 8.1% |
Specialty businesses & related distribution | 4,836 | 4,061 | 948 | 794 | 19.6% | 19.6% |
Group | 22,028 | 21,960 | 2,775 | 2,742 | 12.6% | 12.5% |
Sales in the Automotive and related distribution segment declined by 5.1% to €11,340 million, from €11,953 million in 2017, mainly due to a scope effect (TCi deconsolidation) and adverse movements in exchange rates.
Segment operating income amounted to €1,314 million or 11.6% of sales, versus €1,464 million and 12.3% the year before.
The decline in segment operating margin was primarily due to adverse movements in exchange rates. The steady enhancement in the product mix, reflecting (i) the sustained success of the MICHELIN lines, particularly the MICHELIN Primacy 4, MICHELIN CrossClimate +, X Ice North 4 and Alpin 6.tires, and (ii) the strong growth in the 18'' and larger segment (up 10% in a market up 9%), as well as the disciplined pricing policy pursued throughout the year all helped to more than offset the decline in volumes.
Sales in the Road transportation and related distribution segment amounted to €5,852 million in 2018, a 1.6% decline from the €5,946 million reported the year before.
Segment operating income came to €513 million or 8.8% of sales, compared with €483 million and 8.1% in 2017.
The improvement was led by a strong price-mix effect, which amply offset the highly unfavorable currency effect. New products and services continued to be introduced over the period, which was shaped by the success of the BFGoodrich lines in Europe and of the MICHELIN Agilis CrossClimate light truck and van tires.
Sales by the Specialty businesses segment stood at €4,836 million for the year, up 19.1% from €4,061 million in 2017.
Segment operating income amounted to €948 million or 19.6% of sales, versus €794 million and 19.6% the year before.
The increase in segment operating income corresponded to the robust growth in volumes led by the sustained rebound in demand for the Group's mining tires, the solid performance of the other businesses, the consolidation of Fenner over the last seven months of the year, and a strong price-mix effect that offset unfavorable exchange rate movements.
Compagnie Générale des Établissements Michelin
Compagnie Générale des Établissements Michelin ended the year with net income of €813 million, compared with net income of €1,029 million in 2017.
The financial statements were presented to the Supervisory Board at its meeting on February 8, 2019. An audit was performed and the auditors' reports on the consolidated and company financial statements were issued on February 11, 2019.
The Chief Executive Officer will call an Annual Shareholders Meeting on Friday, May 17, 2019 at 9:00 am in Clermont-Ferrand. He will ask shareholders to approve the payment of a dividend of €3.70 per share, compared with €3.55 in respect of the previous year.
The Group is planning to simplify its legal structure by the first half of 2020, subject to obtaining the necessary agreements.
As part of this streamlining process, the Group's external financing operations would be transferred to Compagnie Générale des Établissements Michelin, the Group's parent company, while intra-group financing transactions would be retained by a dedicated subsidiary.
In addition, all of the international subsidiaries and affiliates would be consolidated by Compagnie Générale des Établissements Michelin, as is already the case for the French subsidiaries and affiliates.
2018 non-financial ratings
In 2018, Michelin was included in several non-financial performance indices in recognition of its sustainable development and mobility approach:
VigeoEiris - Michelin was ranked number 1 for environmental, social and governance (ESG) performance in the automotive industry and number 10 worldwide (out of more than 4,000 companies).
EcoVadis - Michelin achieved a "Gold CSR Rating" for its environmental, social, Human rights and sustainable purchasing policies.
CDP Climate Change - Included in the "Climate Change A List 2018", Michelin is one of 127 companies worldwide recognized as being pioneers in the fight against climate change. More than 7,000 companies were assessed by the CDP in 2018.
CDP Supply Chain - Michelin was named "Supplier Engagement Leader 2019" for its initiatives and strategy to support the energy transition in its supply chain.
These ratings are testimony to Michelin's unwavering commitment to sustainable mobility and development.
2018 Highlights
A full description of 2018 highlights
may be found on the Michelin website: https://www.michelin.com/en
Presentation and conference call
Full-year 2018 results will be reviewed with analysts and investors during a presentation today, Monday, February 11, at 6:30 pm CET. The event will be in English, with simultaneous interpreting in French.
Webcast
The presentation will be webcast live on: https://www.michelin.com/en/finance/
Conference call
Please dial-in on one of the following numbers from 6:20 pm CET:
The presentation of financial information for the year ended December 31, 2018 (press release, presentation, financial report) may also be viewed at https://www.michelin.com/en/, along with practical information concerning the conference call.
Investor calendar
Investor Relations Édouard de Peufeilhoux +33 (0) 4 73 32 74 47 +33 (0) 6 89 71 93 73 (mobile) edouard.de-peufeilhoux@michelin.com Matthieu Dewavrin +33 (0) 4 73 32 18 02 +33 (0) 6 71 14 17 05 (mobile) matthieu.dewavrin@michelin.com Humbert de Feydeau +33 (0) 4 73 32 68 39 +33 (0) 6 82 22 39 78 (mobile) humbert.de-feydeau@michelin.com | Media Relations Corinne Meutey +33 (0) 1 78 76 45 27 +33 (0) 6 08 00 13 85 (mobile) corinne.meutey@michelin.com Individual Shareholders Isabelle Maizaud-Aucouturier +33 (0) 4 73 98 59 27 isabelle.maizaud-aucouturier@michelin.com Clémence Rodriguez +33 (0) 4 73 98 59 25 clemence.daturi-rodriguez@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 on our www.michelin.com 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.
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