Compagnie Générale des Établissements Michelin Société en commandite par actions (MGDDF) Q4 2023 Earnings Call Transcript

Prepared Remarks

Questions and Answers

Call Participants

Prepared Remarks:

Florent Menegaux

Good evening. Yves Chapot and myself are very happy to welcome you to our 2023 Annual Results Presentation. And as you are going to see, then our results are very solid.

I'm very pleased to report that Michelin has delivered a high segment operating income despite adverse market conditions and currencies. We have been demonstrating, again, the quality of our business model, while improving people engagement and accelerating our sustainability roadmap. This reflects our group strategy to capture the full value of our differentiated offers and solutions that are designed to meet increasingly demanding customer requirements. Our sales have been flatish at EUR28.3 billion, but they were up 2% at constant exchange rates, with mix and price offsetting unfavorable market conditions. Our non-tire sales were up 10%.

So if we zoom in on our revenue, the tire selling markets were globally flat, but with an adverse mix and with OE growing in most segments and replacement facing massive destocking. The tire sales volumes were down 4.7%, reflecting our growth strategy of prioritizing markets and segments that do appreciate our unique value proposition. Our price and mix effects were up 5.7%, of which 1.2% was the mix, pulled by both products and geographies. Our non-tire sales were up 10%, which means around EUR146 million at constant scope of consolidation. And by the way, I'm happy to report that in the integration of our latest acquisition, Flexible Composite Group, is well on track. We had this year a negative 2.9% adverse exchange rate effect as most currencies declined against the euro.

If we now look at our segment operating income, it reached an all-time high of EUR3.6 billion and the margin were up 0.7 points -- 70 basis points to 12.6% of our sales. The price effect was lifted by the lag impact of 2022 adjustments. We had a substantial mix effect resulting from market and segment targeting, combined with our groups enhanced value proposition. We improved operating performance and offsetting cost inflation factors. Our free cash flow before acquisition was at EUR3.3 billion, reflecting improving EBITDA and a sharp reduction in working capital. Our EBITDA was up 4% -- sorry about that, at EUR5.5 billion or 19.4% of our sales.

We had a EUR1 billion reduction in working capital, and that was driven mainly by the decline in both inventory volumes and value. We had a positive EUR200 million contribution from JVs and associates, notably the TBC distribution JV we have in the US. Our ROCE reached 11.4% and was up 60 basis point, reflecting our intrinsic performance and our active portfolio management. Our net income was stable at EUR2 billion, despite the inclusion of EUR600 million of our provision for our industrial restructuring. That's why we propose a dividend of EUR1.35 per share that will be submitted to our shareholder meeting in month of May and that represent a 8% increase versus 2022.