Compagnie Générale des Établissements Michelin Société en commandite par actions (MGDDF) Q2 2022 Earnings Call Transcript

For the period ending June 30, 2022

July 26, 2022 12:15 p.m. ET

Prepared Remarks

Questions and Answers

Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, welcome to the Michelin 2022 First Half Results Conference Call. I now hand over to Mr. Florent Menegaux, CEO, and Yves Chapot, General Manager and Group's CFO. Gentlemen, please go ahead.

Florent Menegaux

Good evening, and good morning to all of you. Thank you for joining us for this semester results. Let me first start by just reminding us about our Michelin strategy and telling – reminding everyone that our equity stories that Michelin's value will be driven by its growth in a time of shifting paradigm. I'm sure all of you have noticed that our environment is much more challenging than it was 18 months ago. So if we recap what you see on the screen, if we recap what's our strategy, our growth strategy is to expand the size of our business and the size of the value created for our shareholders in three areas of business, of course, in wheel tires like we've done for the past decades.

Around the tires, it's mainly on service and solutions and beyond tires, it's mainly leveraging our strong capabilities and know-how in high-tech materials. All of that, the around tires and beyond tires will extend the reach of our know-how and our capabilities in fast-growing markets and with good EBIT generation and with lower capital intensity, therefore, enhancing our value creation overall.

And what you see on the right of your screen is that the paradigms have shifted. Now we operate in high inflation environment. The global GDP is under stress after a deep dive during the COVID period with a very sharp recovery and now with a lot of uncertainties in front of us, plus many issues in the transportation, logistics and the overall upstream supply chain, and also the energy transition we have to also accumulate. So the paradigm shifts are now impacting our activities and we are adapting to them while we are confident that our strategy we think is the right one for Michelin.

So if we now move to our results for the semester. We are staying the course in a very turbulent environment with sales up almost 19% and with an operating income of €1.5 billion. We maintained our guidance for the year, and if we move into the – some more details, the market environment in which we operate has overall deteriorated with the new systemic impact affecting our business. Of course, we have the rippling effect of the conflict in Ukraine and the health crisis – the COVID health crisis that is still in front of us in some part of the world. Despite that our sales have been up almost 19%. Despite also, the supply chain disruptions and the fast rising inflation that is dragging down the tire markets.