Michelin targets €4.2bn operating income by 2026

Clermont-Ferrand, France – Michelin Group has set itself a target to achieve a segment operating income (SOI) of €4.2 billion by 2026, up 16% compared to €3.6 billion reported in 2023.

The group exceeded its 2023 targets, having achieved sales of €28.3 billion and SOI of €3.6 billion last year, up from goals of €24.5 billion and €3.3 billion set in 2021.

At 12.6%, it however failed to achieve the 13.5% segment operating margin last year, Michelin announced during a 28 May capital markets day.

Michelin linked the lower margin to lower volumes within its truck business, which reported a 7.6% margin, against the target of 10%.

For its 2026, Michelin has not indicated a sales target but expects to increase its margins to 14% and cash flow to €5.5 billion, from €4.4 billion reported in 2023.

Levers to achieve the targets include increasing industrial-loading rate for passenger car and truck tires from 73% in 2023 to more than 83% by 2026.

This, according to chief financial officer Yve Chapot, includes ‘volume tuning’ between replacement and OE tires, and improving mix.

Here, the CFO said, Michelin expects 2024 volumes to remain negative with a rebound expected in 2025/2026.

The French group also aims to maintain its capital expenditure between €2.0 and €2.4 billion per year through to 2026 and reduce inventory by €500 billion as part of the process.

This level of capex can be broken down into four brackets globally, said the Michelin finance chief during the event.

Around 40% of that amount relates to recurring investments to maintain manufacturing footprint “in a good shape” and improve the factories as a “good place to work”.

Another 40% of investments are related to "competitivity" of the group, which include local-to-local strategy and the evolution of product mix.

The remainder will be invested in the non-tire segment and the decarbonisation of the group.

Key 'decarbonisation' projects, Chapot said, involve the electrification of tire presses, water-saving processes, and increasing the use of sustainable materials.

As part of its broader 2030 vision, the group also redefined non-tire goals, aiming to achieve 20% of overall sales through ‘beyond tire’ activities.

In 2023, non-tire sales contributed to 16% of sales, of which 5% was related to the materials business, recently renamed as 'polymer composite solutions'.

The business includes sealing technologies, conveyor belting, hoses, engineered polymers and fabrics & films.

Another 11% of non-tire revenue came from ‘services and experiences’, which include fleet management, retail, distribution and lifestyle.

“Michelin is much more than a tire manufacturer: it is, actually, a true high-tech company,” said CEO Florent Menegaux during the capital markets day.

The group, he said, will continue to be a “key player” in tires but will further leverage its materials knowledge for application in “most tech-demanding, growth-oriented markets, far beyond mobility.”

Such markets, according to Menegaux, include healthcare, aerospace, marine, industry or construction.