Michelin Cie Gen Unsp/Adr

Thank you. Good evening, ladies and gentlemen. Good afternoon for those who are listening from North America. So I'm very pleased to have the privilege to present you our sales performance for the first quarter of 2024. And I will jump directly on the market evolutions as the selling markets developed slightly driven by replacement demand. You will see that in detail. The truck tire market is sorted by Asian imports into North America ahead of expected tariff heights. Passenger car markets, so on the slide three, grew by 2%. They were basically flat at original equipment with a contrasted situation between China market grew by 4%, North America by 6% with replenishment of vehicles at inventory, dealers' inventory during the quarter, and with basically a flat European market and a dropping market in Asia out of China, particularly Japan and Korea. On the other end, the replacement market passenger car tires grew by 3%. He also led by China plus six, US, North America plus eight. In the North American data, there is some selling effect import due to the reduction of the custom duties from tires imported from Thailand. The truck and bus market grew by 2%. with a negative original equipment minus seven so two percent so it's without excluding china and again excluding china uh we decreased by seven percent mostly driven by uh europe and north america and both markets decreased by 16 percent over the quarter and it was anticipated as uh particularly in the u.s uh there was implementation of a new regulation that lead to anticipated purchase in the first half of 2023. And on the replacement market, grew by 4%, mostly driven by South America, plus 8%. Europe, US, plus 18%. And here clearly, we know that the US administration is going to implement tariffs for truck tires imported from Southeast Asia. This regulation will probably be decided during the second quarter, but with a retroactive effect on April 1st. So that's why there was a surge in the selling market in imports in the U.S. market for truck tires in the first quarter. And the European market was down by 4%. Specialities markets show more mixed trends. Construction, agriculture, regional equipment, and tools The aircraft tire market is still progressing. When the mining market, although the demand is favorably pulled by the extractions, mining companies are reducing slightly their inventories, which leads to a market which is slightly negative on the quarter. And the market is flat in polymer composite solutions, belts, conveyor belts, and other categories. Now, moving to our sales bridge. So our sales were down 4.6%, including currency exchange rate. which is strongly negative at minus 1.9%, so excluding exchange rate, our sales are down by 2.7%, with a scope effect, positive scope effect, which is mostly due to FCG integration. Volume effect, minus 4.1%, anticipated on our side, driven by our value-driven strategy. We have a selective segment approach, and most of these volume drops were managed by our team. We have a price effect which is negative at 0.9%, which is mostly and uniquely the effect of the raw materials and energy prices adjustments that are on our index business. And it has been overly compensated by 1.6% mix effect. Knowing that this mix effect, we consider that we do not have yet the full benefit of the mix effect due to the fact that we still have an original equipment replacement mix, which is not the one that we are aiming for. Non-tire business outside the FCG integration were flat with very high comparison for the first half and the first quarter of 2023. And of course, the currency that I already comment. Looking now at the sales by business segment, the volume decline is mostly in truck and specialities, which reflect the soft overall demand and our selective market approach. On the other hand, you see that on the SR1, the volume effect is less impactful. So SR1 cells decreased by 2.4%. Our volume are down in 18-inch and minus segment, but we are having a strong growth in 18-inch and above, which now represents 63% of machine cells, machine branch cells, original equipment and replacement up five points year on year. We have in this segment a favorable mix, which is overcompensating the negative price impact from indexation causes, particularly for original equipment. And this is a segment which is the most penalized by the Forex. The truck segment, the transportation segment, I've seen sales decreasing by 6%, including 5.8% of volumes, supported by a very selective market approach, which is impacting our volume on lower-value segments, including non-Michelin-branded products. And our mix and prices effect both are horrible with improved OE contracts. On the SR3, you see a decrease of 7.6%. Our mining volume were penalized by a strong 2023 reference and a slight customer destocking. The Beyond World segments are focusing on the most value-creating business segments. And we have, as you know, this segment is the most exposed to indexed business. is probably the most penalized by the negative price effect, but that are fully compensated by the mix between the different businesses. And our polymer composite solution sales are up 11% including the SCG integration. So before now coming to the guidance, I would like to draw your attention on several elements. The first one is related to our portfolio of activity. Each of these activities are driven by underlying economic trends that are somehow independent from each other. So I always remind that if you look at 2023 yearly figures, our pure exposure to regional equipment for automotive, for passenger car tires, represent 10% of the group sales. When we have 36% of our sales that are linked to replacement of four-wheels or two-wheels vehicles, and driven mostly by constructions, mileage-driven used car market. The pure transportation tire market, which is mostly correlated to GDP and PMI, represent 20% of our overall sales. The specialty segment that can be correlated more to drivers such as Of course, GDP, but also public spending and commodity prices and construction represent 18% of our global sales. And we have 5% linked to polymer composite solutions and 11% in fleet services, retail, distribution, and lifestyle, so more service kinds of activities. The second element that we wanted to share with you is related to our strategy. We clearly prioritize value over volume. In a market which is characterized by overcapacity, we focus on segments where we can create value on our three dimensions, people, profit, and planet, for the benefits of all our stakeholders. It leads us to be selective both for original equipment and replacement, whatever the business segment. At Original Equipment, we rely on our innovation potential, our strong brand leadership to partner with OEMs and to leverage this presence on our loyalty at the replacement market. And of course, we are focusing on replacement segments that are creative in terms of value. reinforcing our leadership by increasing our market share on these value-accretive segments, enhancing, of course, our partners' performance, and valorizing our technologies and offers. So all these strategies should lead us to improve our value creation for both our customers and the group and shareholders. Third, in 2023, we have announced, at the end of the year, the breakdown of several activities in Europe and North America, in Arnmore for passenger car tires, in Carrefour-Rombaud for truck tires in Europe, and the closure of our Trier steel core factory in Germany. We have completed this plan in 2024 by the announcement of the closure of our truck tire activity in Poland, in China, and the associated semi-finished components still called activities in Shanghai. In parallel, the group is investing in mostly improving its capacities in passenger car tire. Last year, we already announced the increase of capacity in Shanghai, in our Shanghai factory, in Bridgewater, in Leon, in Mexico. In Shenyang, we will, along with the decrease of our capacity in truck tire, we are increasing our capacity in Shenyang, as well as in Poland, which means that the two projects of the two truck tire capacity closure in Poland and in China are done with practically no social effects as we are transferring our employees from one activity to another. And of course last year we have announced the improvement of our capacity in Junction City in the USA to grow our capacity to build agricultural tracks for very high-power tractors. So all together, this project has led the group to reinforce its local-to-local strategy, improve our value-driven production mix as we, particularly for passenger car tire, we decrease the share of our capacity in 17 inches and above and increase our capacity in 18 inches and above. lower our environmental impact, and improve the retention of the talent in the factory that are impacted by these transformations when we switch people from one activity to another. So basically, it leads us to remove around 7% of the group global capacity in passenger car and light truck below 18-inch, and around 15% of our global truck tire production in the world. Last, I would like to remind you that over the past year, the group has been able to wave on different crises and structurally improve its segment operating income in its 3K flow. I would say despite the fluctuation of the volumes, and we have structurally lead the group to progress both in operating margin and in cash flow generation.

Moving now to the guidance.

Our market assumptions have been unchanged versus what we share for the full year 2023 disclosure. Also, Q1 was particularly for the market, as I said earlier, artificially boosted by some anticipation, particularly in the truck tire selling market in North America. And the PC and passenger car markets will be in the range slightly lower than our 2023 actual market for the year to go. So basically, year to go, passenger car market should be slightly lower than last year. We estimate that the combination of OE and RC in track tire should lead us to be, let's say, in the range of 2023, but with a complete reverse mixed effect between original equipment and replacement, particularly in the area where we play, mostly the Americas and Europe. And in specialities, we consider that in mining, there is still some fundamental demand positively oriented with some customer inventory reduction impacted by the selling demand in a context a little bit also polluted by the red sea crisis and some disruptions in the supply chain. Beyond road tires, will grow slightly in replacement, but with a sharp decrease in original equipment for agriculture and construction as it was anticipated. And the two-wheel market, which was probably the one which was thought to be destocked at the end of 2023, should have further destocking in H1 and recover, let's say, a normal market growth in the second half And we also believe that aircraft tires should continue to grow, but let's say on a more normalized pattern after a very strong 2023 growth. So given this hypothesis, our guidance remains unchanged for the full year. So we believe that volume should be between zero and minus two and with let's say a stronger negative Q1 and which will gradually ease along the year. We bet on a slight positive impact on our operating performance net of inflation. We are on change in our CapEx hypothesis and it leads us to reaffirm our segment operating income guidance, which will be above 3.5 billion euros at constant exchange rate, and free cash flow generation before acquisition above 1.5 billion euros. So that's all for my presentation, and I'm here to answer your questions in the Q&A.