Michelin confirms full-year guidance despite first quarter declines

Clermont-Ferrand, France – Michelin Group has maintained its full-year financial guidance despite a decline in first quarter sales.

Revenue for the three months to end of March came in at €6.6 billion, down 4.6% compared to the year before, said the French group 24 April.

Lower sales reflected a 4.1% decline in volumes, which Michelin linked to “the weakness in certain markets”, such as construction and farm tires as well as ‘inventory drawdowns’ in the mining tire sector.

Furthermore, Michelin said its “ongoing value strategy focused on the most value-accretive segments” impacted first quarter sales.

Revenue was favourably impacted by a 0.7% increase from the positive tire price-mix effect.

Here, Michelin said a €62 million negative price effect from "the application of contractual indexation clauses", was “cushioned” by favourable renegotiation of certain contracts.

Overall, a €112 million positive mix effect “amply offset” the negative impact of price effect, it added.

Michelin said the geographic mix was also favourable, with demand rising faster overall in the North American and Chinese markets.

Non-tire sales were flat, as growth in connected mobility solutions and in fine dining and travel services was offset by the lower sales of conveyors, belts and seals.

The group also noted a 1.9% decrease from the negative currency effect, due to the declines in currencies such as the US dollar, Chinese yuan and Turkish lira against the Euro.

Breaking down the segments, Michelin said sales in the automotive division fell by 2.4% to €3,376 million in the first three months of 2024, from €3,457 million in the prior-year period.

Segment volumes eased back a slight 1.1% over the period, as OE sales broadly tracked the flat market and replacement sales declined.

The replacement demand was particularly impacted in 17-inch and smaller tires and in the lower-value brands, Michelin added.

In the truck tire business, sales dropped 6.0% year-on-year to €1.6 billion, as volumes contracted by 5.8%.

The lower volumes, said Michelin, reflected an “ongoing deployment of the strategic focus on the segment’s highest value-accretive market segments.”

Michelin’s ‘speciality businesses’, which includes mining, off-road, aircraft and two-wheeler tires as well as non-tire units, reported a 7.6% decline in sales to €1.6 million during the quarter.

In mining tires, sales volume declined although the ore market remains “structurally positioned for growth”.

Here Michelin noted a strong comparison base from last year, “when 2022 back-order fulfilments pushed volumes to record highs”.

Following that, it said, mining operators implemented a “gradual drawdown of inventory.”

In the off-road segment, volumes declined over the first quarter, dragged down by “a sluggish construction tire market”.

On the upside, high value-added categories such as agricultural systems and tracks, as well as tires for high-power tractors continued growth, particularly in North America.

Two-wheel tires saw volumes decline in “a generally depressed market”.

Motorcycle tire sales fell over the period, as a rebound in North America was offset by softer demand in Southeast Asia and other regions.

Bicycle tire sales, meanwhile, returned to slight growth from a relatively low basis of comparison.

Following on from 2023, demand in the aircraft tire segment “remained robust”, particularly in the commercial segment, which saw “significant volume growth”.

The conveyor belt business contracted over the first quarter, mainly due to an unfavourable comparison with the “record highs” reached in 2023.

The polymer composite solutions business was “almost on a par” with the prior-year period.

Michelin did not provide earnings details for the period but said it maintained full-year outlook despite the decline in sales.

As announced in February, for 2024, Michelin expects to deliver “above €3.5 billion” in segment operating income in “stable global markets”, and more than €1.5 billion in free cash flow before acquisitions.