The market slowdown observed since the second quarter continued into the third:
- Weakening demand in Europe, especially in Truck tires.
- Contraction in original equipment demand in new markets, except China.
- Sustained solid growth in North America.
Sales volume rose by 1% over the period, reflecting:
- Firm resilience of the MICHELIN brand’s market share in the Passenger car and Light truck and Truck segments.
- Growth in the OE Earthmover and Infrastructure businesses, which cushioned the impact of sustained inventory drawdowns in mining tires.
The price-mix effect was a negative 2%.
- Application of contractual indexation clauses and price repositionings, at a time of declining raw materials costs.
- Favorable mix effect thanks to sustained execution of the premium strategy.
The currency effect was negative over the nine months, but turned positive in September.
In a global environment shaped by economic uncertainty and geopolitical difficulties, demand for Passenger car and Light truck and Truck tires should remain buoyant in North America and China and stable in Europe. In the new markets other than China, the slowdown observed, particularly in the original equipment segment, is expected to continue, while replacement tire demand should remain robust in the Passenger car and Light truck segment and ease back somewhat in the Truck segment.
Given this environment, Michelin has lowered its outlook for volume growth, in line with the market, to a range of 1% to 2% for the entire year. Specialty tire tonnages should end the year on a par with 2013, with favorable prior-year comparatives in the fourth quarter for mining tires.
In the final quarter, Michelin expects to adjust its cost management process in response to changing market conditions, while enjoying a more favorable currency environment. Michelin’s competitiveness plan, with €169 million in savings over nine months, attests to its industrial efficiency. The Group confirms its objective of reporting higher operating income before non-recurring items and at constant exchange rates.
Michelin also confirms its objective of delivering a more than 11% return on capital employed and generating structural free cash flow of more than €500 million. The capital expenditure program is maintained at around €2 billion in 2014 and will be revised downwards in 2015 and 2016.