Michelin Cie Gen Unsp/Adr

Ladies and gentlemen, welcome to the Michelin 2025 first quarter sales conference call. I will now hand over to Mr. Yves Chapeau, General Manager and Group CFO. Please go ahead, sir.

Thank you. Good evening, ladies and gentlemen. Following the publication of our first quarter sales data, I will try during the next 15 to 20 minutes to give you some colors about these figures and then to project ourselves over the full year. First, when we look at the global tire market, they have been demonstrating very different patterns during the first quarter of 2025. Original equipment market have dropped across all business segments, with the exception of the passenger car tire original equipment market in China, which was supported by government subsidy. If we look at Europe and North America, both passenger car, truck and bus, and agriculture's original equivalent market stepped down at a double-digit pace. Minus 13% for PCLC European OE market, minus 12% for truck tire OE market, minus 14% for truck tire oil market in North America. And that has heavily impacted our top line, obviously. The second element is that replacement markets have posted limited growth in the context of tariff announcement and some import anticipation. So in Europe, You see that the passenger car market grew by 6% in North America by 1%. In China, on the contrary, due to a very shy construction trend, the market decreased by 1%. And as far as the truck market is concerned, outside China, where we have a very limited presence, the market grew by 1% for replacement in Europe and decreased by 3%. In North America, we have to keep in mind that during the first half of 2024, there was a huge inflow of tires coming from Southeast Asia in the U.S. in anticipation of tariffs that have been implemented in September last year. Specialties in the specialties market, all other markets like mining, aircraft, and in some aspects, polymer composite solutions are posted as a stable or slight growth outcomes. So that's basically the situation of the market. And in this context, our sales decreased by 1.9% in value at 6.5 billion euro for the first quarter, with three major effects. The first one is a volume decrease by 7.3%, mostly due to the drop of our original equivalent market sales across all business segments. The second effect is a very strong price effect of 2.3%, of which nearly 40% is coming from indexation closes, and 60% to the aging impact of inflation, such EUDR on some raw material price increase that we had anticipated at the end of 2024. And the last effect is a strong mixed effect of 2.5%, due to both favorable business, market, brand, and, of course, product mix. Overall, when we look at our volume, our sales dropped by nearly 20% in original equipment across all segments, and when in replacement, the sales volume were slightly growing. Looking at the top line for the different reporting segments, you see clearly a very different pattern between B2C and B2B activity. SR1 achieved revenue growth despite negative volume effect, and thanks to the replacement sales, which were positive for our global brand business, and a strong mixed enrichment On top of that, our two-wheel business posted a double-digit growth during the first quarter of 2025. In the second segment of transportation, truckers, buses, the sales were hit by the sharp decrease in original occupant volume in Europe and North America. In replacement, our volume has increased in the key geographies like Europe, North and South America, and we have even been able to regain market share in the replacement market in this geography. You can observe that the second segment benefited from the largest price-mix effect among the three segments due to both positive market mix between OE and And due also to the strong price actions that has been taken during the second half and the whole year of 24, but particularly in the second half. The reporting segment number three sales are down by 7.3%, of which 9.6% are coming from volumes. primarily due to our beyond-road activity. Original equipment markets have sharply decreased in agriculture. Mining sales are stable, and the one-off effect of 2024 are clearly behind us for mining. Aircraft tire sales are progressing well, and our polymer composite solution sales are nearly stable despite adverse conditions in some end markets such as the conveyor belt or the marine activities. So now looking forward for the full year, we are living obviously in an environment that has never been so volatile and unpredictable. So we are expecting a slight improvement in OE markets for SR1 in H2 versus H2 2024, which was already starting to decrease, and stable replacement market in SR1. Truck tire market should post a positive trend in H2 due to a favorable comparison with the second half of 2024. We have seen these markets dropping already since July last year. And replacement truck tire market should post a positive outcome in the second half of the year. Of course, these hypotheses are subject to the evolution of global GDP in the context that you know very well. On the speciality side, we are not expecting major change in H2 versus H1, just taking into account that original equipment market have started to drop sharply at the end of Q2 last year, so with the H2 data were heavily penalized both in construction and agriculture in the second half of 2024. I mentioned already 2025 is characterized by its unpredictability and its volatility. And in such environment, the group is more than ever relying on its innovation capabilities. This is translated by a lot of product renewal across the different tire product lines. So as you can see on this slide, on the passenger car business or SR1, we have two major range renewal in the off-road segment, the BF Woodridge CO3, which is already ranked number one by Tire Rack in the all-terrain segment. In, let's say, the core of the market, the Michelin Primacy 5, which has been called Tire of the Year and received a Tire Technology Award. This product is generating 18% additional mileage versus its predecessor. In truck-tire, we have launched a very important product line, the machine X-Line NRG, with very important fuel savings, 0.6 liters per 100 kilometers, all the capability provided by a machine-connected fleet, which help the fleet to reduce their cost and improve their efficiency. In the same segment, we are pleased to launch a new generation of retread tires, so Michelin Remix 2, which will offer to its customer a minus 23% total cost of ownership versus a single tire life. That illustrates very well the commitment of the company for already a long time to the circular economy. In specialty, I will mention two major innovations, new products. One with the Michelin X-Crane 2, which is improving its load capacity versus the previous range by 8%. And this activity, this product, is a key asset to answer safety and efficiency demands in the construction and infrastructure segments. And last, the Michelin Cerex BIB2 with a minus 45% ground pressure, which is decreasing ground compaction, therefore improving the outcome of the land thanks to the Ultraflex technology. Beyond this product plan renewal, the group continues to partner with OEMs to offer the best tire with the best balance of performance. And you have here a sample of the recent homologation in the diverse the vehicle segments and these innovations and these new homologations are as well supported by data and artificial intelligence innovation first with the machine smartware algorithm which helps drivers to predict the moment they will need to change their tires thanks to Algorithm and software that are 100% machine-owned. And the partnership with the Brembo in order to improve braking capabilities and therefore the safety of passengers thanks to digital connection between the data provided by our algorithm, our understanding of the tire behavior and road.

with the braking systems of the vehicles.