Michelin updates 2015 guidance

Over the summer, Michelin reviewed its capital expenditure programme and 2015 financial outlook. The review followed on from the Group’s interim 2012 earnings performance, which Michelin describes as “robust” and says reflected its strategic vision, competitive strengths and management.

Despite current uncertainties, Michelin opines that the global tyre market will remain supportive over the medium and long terms, and therefore the company is focusing on projects that will “sustain its growth and strengthen its competitive advantages.” These growing premium capacity, specialty business investments and a broad worldwide footprint. In total, Michelin intends to commit between 1.6 billion and 2.2 billion euros a year, depending on the market outlook, to capital expenditure in the 2012 to 2015 period.

The premium tyre segment, which is expanding faster than the overall market, represents a strong growth opportunity. Michelin says it intends to seize this by expanding its premium tyre (17-inch and above) production capacity by nearly 70 per cent between 2012 and 2015. The company also plans to strengthen its specialty segment activities with a US$750 million investment in projects in South Carolina; these involve increasing mining tyre capacity at its Lexington plant and building a new facility in Anderson.

Michelin views its global footprint as being well balanced between Europe, North America and the rest of the world, and the tyre maker intends to step up its deployment in the new markets, which will account for nearly 60 per cent of its new capacity investments. Furthermore, Michelin plans to invest around 550 million euros a year through to 2015 on materials in order to “widen its technological leadership.”

In a statement released 19 September, the tyre maker confirmed its guidance for full-year 2012, including a clear increase in operating income before non-recurring items, with a three to five per cent expected decrease in full-year sales volume, and free cash flow of around 300 to 400 million euros before the impact of the sale of a property complex in Paris.

After a year of transition in 2013, the company expects tyre markets should return to their structural growth of four to five per cent a year, with raw materials prices tracking a similar trend. The Group’s objective is to increase sales in line with market growth.

For 2015, Michelin aims to report operating income before non-recurring items of around 2.9 billion euros, with normalised operating margins before non-recurring items of 10-12% in the passenger car & light truck segment, 7-9% in the truck segment and 20-24% in the specialty businesses, which are expected to grow more quickly than the rest of the Group.

Michelin also aims to deliver a more than ten per cent return on capital employed and positive free cash flow in each year over the period.