Michelin reports 4.6% lower Q1 2024 sales

Michelin Group has disclosed its financial results for the first quarter of 2024, reporting total sales amounting to €6,642 million. This figure marks a decline of 4.6 per cent compared to the corresponding period in the previous year. The decrease in sales can be attributed to various factors, including a decline in tyre volumes, driven by weaknesses in certain markets, including construction and agricultural tyres, as well as mining tyre inventory drawdowns.

(Source: Michelin)

Automotive Segment:

Sales in the Automotive and related distribution segment experienced a 2.4 per cent decline, reaching €3,376 million in Q1 2024 compared to €3,457 million in the same period last year. The segment volumes saw a slight contraction of 1.1 per cent. Despite broad tracking of OE sales with the flat market, Replacement sales notably declined, particularly in 17-inch and smaller tyres and in lower-value brands. The price effect within this segment was unfavourable due to the delayed application of pricing clauses indexed to raw materials and other costs, which saw a decline over the reference period. However, the mix effect proved highly favourable, driven by sustained growth in the proportion of 18-inch and larger tyres in the sales mix, along with a favourable geographic mix led by growth in North America and China.

Road Transportation Segment:

Sales in the Road Transportation and related distribution segment declined by 6.0 per cent to €1,595 million from €1,696 million in Q1 2023. Group volumes contracted by 5.8 per cent, reflecting the ongoing deployment of strategic focus on the segment’s highest value-accretive market segments. While sales of fleet services remained unchanged, the price effect was slightly favourable due to the renegotiation of OEM contracts in recent months. The mix effect was also favourable, with the application of the Group’s value strategy focused on the most value-accretive segments offsetting the impact of the OE/Replacement mix. Exchange rate movements, however, had a generally unfavourable impact on segment sales.

Specialty Businesses Segment:

Sales in the Specialty businesses segment saw a notable decline of 7.6 per cent over the period, totalling €1,671 million compared to €1,808 million in Q1 2023. Within this segment:

Mining tyres: Sales volumes declined, impacted by the unfavourable comparison with the previous year when back-order fulfilments pushed volumes to record highs. The gradual drawdown of mining operator inventory further contributed to this decline.

Beyond-road tyres: Volumes declined due to a sluggish Construction tyre market, but high-value categories such as agricultural systems and tracks pursued robust growth, particularly in North America.

Two-wheel tyres: Motorcycle tyre sales declined, though there was a slight rebound in North America. Bicycle tyre sales returned to slight growth.

Aircraft tyres: Demand remained robust, especially in the Commercial segment, with significant volume growth. Both the price and mix effect remained positive.

Conveyor belt business: Contracted due to an unfavourable comparison with record highs reached in 2023.

Polymer Composite Solutions: Maintained performance similar to the prior-year period, with seals and membrane sales tracking varied market growth by region. The integration of Flex Composite Group is progressing as planned.

Exchange rate movements had a generally unfavourable impact on segment sales across the Specialty Businesses segment.

Outlook

Despite the challenges faced in various segments, Michelin Group remains focused on strategic initiatives to navigate market dynamics and capitalise on growth opportunities in key regions and segments.

Michelin Group is maintaining its projected sell-in markets scenario, with sales volumes still expected to end the year within the [-2%; 0%] range. The company’s 2024 guidance is unchanged, with segment operating income above €3.5 billion at constant exchange rates and reported free cash flow excluding M&A of more than €1.5 billion.