Supported by its diversified offering, engaged employees and robust financial position, Michelin is demonstrating its resilience through a crisis that is as intense as unprecedented
- The Group quickly deployed all the measures needed to safeguard employee health, ensure business continuity and conserve cash
- Despite collapsing markets and a 20.6% contraction in sales, segment operating income ended the first half at €310 million:
- 22.4% decline in volumes, leading to a deep fixed cost shortfall
- 0.3% gain from assertive pricing policy at a time of declining raw material prices
- 1.6% gain from the still buoyant mix, reflecting market share gains in the 18-inch and larger segment and resilience in the Specialty businesses
- €192 million reduction in SG&A costs, excluding €77 million in exceptional outlays directly related to Covid-19
- A robust financial position recognized by the rating agencies to weather the crisis
- Strategic choices validated during the first half:
- A global presence and diversified business base (resilience in the Specialty businesses, with a 14.7% operating margin)
- CO2 reduction pathways and objectives approved by the Science Based Targets initiative
- Expanded CSR governance within the Supervisory Board
After these recent months of unprecedented crisis, I want to express my immense pride in the remarkable engagement of our teams, which has enabled Michelin to fulfill its commitments to its customers, its communities and its partners. With this same determination, the Group has undertaken all the measures needed to secure the sustainability of its operations and attenuate the financial impact of the economic slowdown. In this still very uncertain environment, the Group pursues its competitiveness initiatives to maintain its leadership in the tire businesses and drive deployment of its growth strategy.
Outlook for 2020
In 2020, after a first half shaped by the effects of the health crisis, notably the various restrictions on freedom of movement, global tire demand is expected to be impacted in the second half of the year by the economic recession ensuing from the pandemic. Passenger car and Light truck tire markets are expected to decline by 15% to 20% over the year and Truck tire markets by between 13% and 17%. Given the relative resilience of certain segments, the Specialty markets are expected to contract by 13% to 17%.
In this still highly uncertain market scenario, Michelin’s objectives are to deliver full-year segment operating income in excess of €1.2 billion at constant exchange rates and structural free cash flow* of more than €500 million, barring any new systemic impact from Covid-19.