2016 First-Half Results
Analyst / Investor conference webcast
Operating income from recurring activities rises in first-half 2016,
to €1,405 million, or 13.7% of net sales
Volumes up 2.5%, outpacing the markets
2016 guidance confirmed
- Passenger car and Light truck tire markets rose over the period, with replacement sales leveling off in the second quarter; Truck tire markets were less dynamic and Earthmover markets contracted further.
- Volumes up 2.5%, beating the market in every segment, rising 4% in Passenger car and Light truck tires and 1% in Truck tires, and declining by 2% in the Specialty businesses.
- Strong growth in operating income from recurring activities of €241 million at constant exchange rates to 13.7% of net sales, representing a 1.7 point improvement led by:
- The €115 million positive impact of changes in the price mix and raw materials costs, thanks to effective management and a favorable basis of comparison.
- The €155 million in gains from the competitiveness plan, which offset, as expected, the increase in production costs and overheads.
- Positive free cash flow of €8 million, representing a €108 million improvement from first-half 2015 before acquisitions.
- Share buybacks: €150 million tranche completed in the first half; new €150 million tranche scheduled for launch in the second half.
In the first half, Michelin delivered a strong business performance driven by the quality of its tires and services, the effective management of the balance among growth and pricing, as well as by cost competitiveness. In a highly competitive marketplace, our company is focused more than ever on the four areas of improvement designed to fulfill our strategic vision: enhancing the quality of customer service, streamlining our operating procedures, deploying digital solutions and increasing the empowerment of our teams.
Over the rest of the year, the Passenger car/Light truck and Truck tire markets are expected to lose some momentum in North America and Europe, but to remain buoyant in China's Passenger car/Light truck segment. The Specialty tire market is expected to continue to be impacted as mining companies complete their inventory drawdowns.
In this environment, margin management in the second half should help to deliver a positive price mix/raw materials effect over the full year.
As a result, Michelin is confirming its full-year targets of volume growth exceeding global trends in its markets, an increase in operating income from recurring activities at constant exchange rates, and structural free cash flow of more than €800 million.
Year over year comparison
|In € millions||First-Half 2016||First-Half 2015|
|EBITDA from recurring activities||2,085||1,913|
|EBITDA margin on recurring activities||20.3%||18.2%|
|Operating income from recurring activities 1||1,405||1,262|
|Operating margin on recurring activities||13.7%||12.0%|
|Passenger car and light truck tires and related distribution||13.8%||10.8%|
|Truck tires and related distribution||9.9%||9.6%|
|Operating income/(loss) from non-recurring activities||-51||-17|
|Earnings per share 2 (in €)||4.24||3.79|
|Employee benefit obligations||5,273||4,780|
|Free cash flow 3||+8||-219|
|Employees on payroll 4||112,400||112,600|
1 To make its operating performance easier to understand and analyze, Michelin now presents "Operating income before non-recurring income and expenses" as "Operating income from recurring activities" and has refined its definition.
2 Attributable to shareholders of the Company
3 Free cash flow: net cash from operating activities less net cash from investing activities less net cash from other current financial assets, before distributions
4 At period-end