Compagnie Générale des Établissements Michelin Société en commandite par actions (MGDDF) Q2 2023 Earnings Call Transcript

For the period ending June 30, 2023

May 10, 2023 8:30 a.m. ET

Prepared Remarks

Questions and Answers

Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, welcome to the Michelin Conference Call. [Operator Instructions] I will now hand over to Mr. Florent Menegaux, Chief Executive Officer, and Mr. Yves Chapot, General Manager and Group CFO. Gentlemen, please go ahead.

Florent Menegaux

Thank you. Good evening, good morning, and good afternoon to all. Yves and I are very pleased to welcome you to our Half Year Results.

So without further introduction, I will start directly by saying that Michelin has delivered sales growth of 5.9% in the first semester and has increased its segment operating income by 11.4% over the semester on adverse markets. The free cash flow before M&A reached EUR922 million. And I'm pleased to tell you that we have revised our guidance upwards on both segment operating income and free cash flow.

So if we enter into more details, the sales up by 5.9% to EUR14.1 billion. We are lifted by pricing discipline and the fast-growing non-tire sales. The tire markets were flat in passenger car and decreasing in trucks supported by OE, but penalized by the strong destocking from distribution and B2B fleets. The tire sales volumes were down by 3.7%, reflecting market dynamics and group's priority on value accretive segments.

Our price-mix effect reached 9.4%, recognizing the value of our offers and we recorded net positive mix despite adverse OE/RT sales development. Our non-tire sales grew by 17% at constant exchange rate, fueling our group's growth. The currency effect turned negative at minus 1%, due to the depreciation of most currencies against the euro.

Our segment operating income increased by 11.4% to EUR1.7 billion, reflecting our value steering, our value management of -- and the value management has been offsetting the cost inflation and the negative impact of volumes. The Auto and Specialties segments have increased their performance. The road transportation is facing negative OE/RT mix. Their volumes were heavily impacted and the plant loading and the fixed cost absorption has suffered from that.

We had a strong price-mix effect, benefiting from sustained product mix enrichment and the pricing policy and lag effect of indexation clauses. The Specialty segment, the segment three, operating margin has been reaching 18.3%, coming back to where it used to be supported by a dynamic mining, aircraft and high-tech materials businesses.