Compagnie Générale des Établissements Michelin Société en commandite par actions (MGDDF) Q3 2023 Earnings Call Transcript

For the period ending September 30, 2023

October 24, 2023 12:30 p.m. ET

Prepared Remarks

Questions and Answers

Call Participants

Prepared Remarks:

Yves Chapot

Good evening, ladies and gentlemen. I'm very happy to share with you our group sales figure for the third quarter of 2023, and update you regarding our full year of guidance.

So as you have probably seen in the presentation and the press release, our sales are up 2% at EUR21.2 billion, despite sub volumes and ForEx headwinds, supported by our mix enhancement, our non-tire activities, and our brand and technological leadership.

The market for the first nine months are shaped by inventory drawdowns, particularly in Europe and North America for passenger car and truck tires particularly, and also beyond road tires. If we look overall, passenger car and light truck tire markets are stable overall at the end of the nine months, with the robust regional equipment demand in most regions, slightly upset by negative replacement demand dampened by the stocking in Europe and America.

The demand for 19-inch and larger tires is still expanding, and we consider that inventory levels are back to normal in most regions except for winter tires in Europe. Truck tires outside China dropped 5% due to the substantial dealer and B2B fleet inventory reduction. Both in Europe and North America, original equipment demand is still robust, and of course the destocking is impacting the replacement market, and we estimate that the destocking should be over by the end of the year.

Specialty tires markets are dynamic in mining, aircraft and in original equipment for agriculture tires. They are softer in construction, replacement for agriculture, and of course two-wheel tires. Non-tire markets are up in most segments, both in fleet services, mining, energy and stable in general industry applications.

Our sales are up by 2% at the end of the nine months, and if we look at the different effects, so first, Q3 sales are stable, excluding the currency effect, but if we look overall for the nine months, the volumes are down by 3.6%, reflecting mostly the market destocking and our group priorities on value accretive segments.

The price effect is 6.2%, concerning the recognized value for our product and solutions and the impact of price indexation closures from 2022. The mix effect, which 1% reflecting our position in the 19-inch and larger passenger car tire segments and a favorable geo-mix, partially offset by an adverse original equipment replacement market mix across businesses.