Michelin Cie Gen Unsp/Adr

Good afternoon and good evening. As a CEO, I wanted to introduce this conference and stand in front of you at this challenging moment for Mishnah. On Monday last week, we issued a profit warning. It came late in the year and with unexpected magnitude. I fully recognize it. I owe you clarity to help you understand what led us to warn this way. I won't elaborate much on the highly uncertain business context, you are fully aware of it. My purpose today is to share more of what is specific to us. First thing, until we got September financial results, we were in line with our expectations. But September business took a hit and forced us to drastically adjust the year-end forecast. What hit us had mostly to do with our North American business, which represents around 40% of our group sales. Two major causes. The first one, we decided to stop our operations with the largest tire wholesaler in the US as of 1st of July. This decision led to important volumes missing in Q3 versus last year. as we have been redirecting sales flows to other wholesalers. This one-off transition period should be behind us by year-end. Second, we lost market share due to the positioning of our offerings. We passed price increases at OE to restructure our margin and on replacement markets to offset cost inflators, starting with raw materials first, then EUDR, and then tariffs. This resulted in a decrease of a market share over Q3. For the replacement market, we took the lessons, we have already taken steps to regain these lost shares. Now, if we consider the current situation from a broader perspective, it results from a combination of our strategy being implemented and the context in which we operate. Our Michelin Emotion 2030 strategy is being deployed, and I have no doubt that it will lead to substantial value creation for the company and for our shareholders. Deploying a strategy leads to resolute decisions and actions, and I take full accountability for these decisions, even though some of them conflicted with the current context. Let me give you a few examples. We exited several value-destroying market segments, which logically led to negative volume impact. In parallel, we restructured our pricing conditions with OEMs to reach a better balance. We have done it over the past two and a half years. Margins got restored and volumes got rebalanced as well. Context-wise, these two key measures came at an unfortunate time because their negative volume impact cumulated with the widespread drop of OE demand across industries, passenger car, truck, agriculture, and construction. This resulted in low utilization rates for our plants and low absorption of our fixed cost, which negatively impacted our segment operating income. Another example. We restructured and we are still restructuring our manufacturing footprint and global capacity to adjust to a transformed competitive environment and to prepare for the future. We announced 12 activity closures in the past two years. This is a lot in a very short time and it penalized our financials before we will get the benefits from now onwards. Last example, we were resolute on passing through cost inflators to the market to properly value our technologies. In a market disturbed by overcapacity and low overall demand, this was detrimental to the competitiveness of our offers on the replacement market. These examples show how some strategy-led decisions have interfered with context. Let's be clear, I have no regret in driving those changes as they are making Michelin stronger and prepare it for the upcoming demand when OE markets rebounds and vehicle fleets are renewed. On the operational front, our teams are reacting and fighting in this context with numerous successes, to name just a couple. In Q3 specifically, besides North America, group tire sales have posted growth in volume. In China, we have been able to tune our positioning last year and we will deliver double-digit growth in 2025. Our group has solid fundamentals, remains highly profitable and generates significant cash flow. Our balance sheet is strong and provides us with independence and room for maneuver. Our cash generation in 2025 is sufficient and will allow us to complete our share buyback program. As a conclusion, Michelin is emerging stronger from the current turmoil. We are looking ahead to 2026 with confidence. Thank you for your attention and your long-lasting support. I now hand over to Yves for details on our sales development and our outlook for the near term.

Thank you, Florent. Good evening, ladies and gentlemen. So, I will drive you through our sales of the third quarter and, of course, the bridges related to our new full-year guidance. So, regarding first the context, if we look at the selling market at the end of September, they posted a slight growth in the segment one. plus 2% in OE, plus 1% in replacement. We have already commented in the past that the replacement market was mostly driven by the flow of imports before the implementation of tariffs, as well as the flow of imports in Europe before the implementation of duties for anti-dumping that the European Commission is expecting to implement. officialized by the end of the year. During the Q3, we have seen more or less the same trend, a little bit more dynamic original equipment market and regarding the replacement market, the selling was probably better in Europe and it's clearly the import from China. because it has been expected that the tariff following the anti-dumping measures will be implemented probably with a retroactive effect from 1st of October. And the negative minus 4% replacement market in the US, probably the consequence now of the implementation of tariffs from the third quarter. On the truck side, The market is still very negative in original equipment, minus 4. You note that the European market is nearly flat. We record a slight recovery in Q3. When the North American market is still very negative at minus 20, it was minus 24 for Q3, and even worse if we look at the Class 8 segment. On the replacement side, the market is at plus four here also probably triggered by the growth of imported brands both in europe and north america as far as the specialities are concerned the mining business is steady the beyond road continue to show a negative trend in oe particularly driven by agro and the North American agro-market is partially impacted by the implementation of tariff for the import of soya in China from US. Replacement market post a slight growth and the other markets such aircraft and polymer composite solutions are growing slightly as well. So that translates in an overall decrease of our volume by 4.4% at the end of the nine months, 2.3% coming from the currency and 2.1% from our activity. Meaningless scope effect, volume minus 5.5%, price mix plus 3.2% and equally share between price and mix. an entire business which contributes positively to ourselves at the end of the nine months. Zooming now on the third quarter, so you observe that beside the currency, the trend is very similar with the six previous months. The currency effect is huge, minus 4%, mostly driven by the USD. And as far as the other elements are concerned, meaningless scope effect, minus 4.5% of volume, and Florent has commented it, it's in fact nearly minus 10% in North America, and a slightly growing volume in the rest of the world. Price mix is less favorable, plus 1% in mix, plus 0.5 in price. The mix effect is exacerbated by the regional mix effect, as traditionally our North American business posted a higher margin than the average of the group. And the entire business contributed by 0.3 points to the group growth in the third quarter. No zooming on the volume. Here you have the picture of the first six months on the left and the third quarter on the right of that slide. As you can see, our volume dropped during Q3, mostly in North America. So it represents nearly five points of our volume lost during the quarter. mostly triggered in SR1 by the wool cell shift that was explained by Florent, and in SR2 by the original equipment drop. We are seeing as well negative trend or negative outlook of the fleets in the U.S. with the level of freight. And we are included in the deck in the annexes slide with the trend of the freight. We are seeing the freight at very low level in North America for the third quarter. If I look at the rest of the world, so OE outside North America is at slightly minus one for the group. Here mostly driven by the beyond road activities and replacement post positive without North America, positive volume thanks to our mining business, our aircraft business, two wheels and the China region. So now, zooming on the guidance for segmental parity income for the full year. So versus our previous guidance, which was issued at the end of July, so we dropped the guidance from above 3.4 to in between 2.6 and 3 billion euros. Basically, and we provide here some range which help you to... to understand why we have communicated on such a wide range at this stage of the year. We have still the unknown of what is going to happen in North America and on the truck original equipment, which is not only North America, it's Europe as well. The Brazilian market has been really impacted by the 50% tariff implemented by the U.S. and its weight down on the overall economy and the volume of freight. Regarding the price mix, so we expect price to be slightly positive during the Q4, but the mix is impacted by the geographical mix as well by the implementation of the tariff and of the EODR. Raw material should have a positive effect, but we have less unknown regarding the raw material. It's pretty consistent with the hypothesis we had at the end of July. And regarding operating performance, it will be impacted from the tariff, from raw material, cost of goods sold, and as well as operating efficiency. Because our factories are running with quite a low level of activity. Year to date, we were at around 74% for SR1, 72% for SR2. Our agriculture tire factory are running below 50%. And our construction and earth mover run 73%. So it's impact as well the efficiency of the factory, not only the fixed cost absorption. And there might be some upside on the SG&A side. That's why we have put a range between zero and 100 million. Now, looking at the the bridge, what should be the bridge at the end of the year versus 2024? So most of the loss will come from the volume. And in the volume, we have, let's say, two thirds of volumes in one third of fiscal sanctions. Price mix should partially but not totally compensated the volume effect. In the raw material, which is pretty consistent, again, with our previous expectations, we have close to 100 million of EUDR effect. In the operational performance, so in our supply, logistics, and manufacturing cost, we had the impact of tariff. We assume that since the first quarter of 2025, till the end of the first half of 2026 we will have around 500 million euro of additional tariff cash out 300 million should impacted our pnl in 2025 and around 200 million at the beginning in the first half of 2026. And we expect the currency effect to be in the range of minus 180, minus 200 million at the end of the year with an average euro dollar parity at 1.13. And here again, to explain the range of the SOI landing, we try to help you to clarify this landing. On the volume side, our expectation today is to be at minus 3 during the fourth quarter. But depending on the evolution of the conjuncture, it can move between minus 1 and minus 5. There is as well some volatility in the mix and a little bit on the prices. And we consider as well that there is some uncertainty on the operational performance and others. So clearly there is some opportunities. Our product plan, we have renewed a large part of our offer in truck tire this year. We have launched... few new iconic range in passenger car tire, the Primacy 5, the new Cross Climate 3, the Cross Climate Sport. So it's clearly an opportunity. Our dynamic in China is as well an opportunity, and we believe that we have room for improvement in the management of our SG&E as well. On the other hand, tariffs are still an uncertainty. Until yesterday, we were not clear about the 25% duty on the trucks. that has been decided from 1st of November by the US. We did not know if it's included or not the parts, and if it was included or not USMCA product. In fact, we have learned yesterday that it does not include USMCA product. We have as well the trend of the original recuperated parquet. There are still uncertainties. And we have the question mark on the right side about the GDP evolution and the consumer behavior in North America and the pace of recovery of the OE truck market in Europe, which is in Q4 slower than in Q3. So all of that gives you this 400 million range uncertainty. If I look at the market on the Q4, here you have for each market the nine first months and our Q4 expectations. On SR1, we noticed on our side a little late start of the winter season in Europe. And probably on the regional equipment side, we will have a basis of comparison in China which will be less favorable as the Chinese government started to implement incentives for acquisition of BEV and hybrid at the end of the third quarter 2025. On the truck side, OE should still be very negative, particularly driven by North and South America. And the replacement side should be negative as the market, the selling market, after the tariff implementation and potentially the implementation of, after the tariff implementation in North America. On the specialty side, we don't notice huge change in the market evolution versus the nine first months. So, as mentioned, we updated our guidance for our segment operating income one week ago. We were probably less pessimistic on the free cash flow than on the segment operating income because we are managing our capex in the lower part of our range of capex for the year. which means around 2 billion euro and we are going to as well record positive contribution from our working capital particularly on the inventory side and the positive contribution of our joint venture as it was already the case during the first half of the year. Now looking for 2026. So, of course, we will tune our guidance in February with the full 25 full year disclosure. But we already know that we will not be able to achieve our 26 ambition that was shared during the capital market day to reach 4.2 billion euro at 2023 Forex and 14% operating margin. What we already know regarding 2026, probably two negative impacts. The tariff that I mentioned, we should have an additional $200 million. And a negative impact on the price side coming from the raw material closest adjustments. But on the other hand, we'll have some tailwinds, the raw material that will lose price that are further declining. Most of the restructuring saving should be achieved by the end of 2026. At the time we are speaking, Most of the announcement made has been concretely achieved. I mean that the factories have stopped operations except the two last ones that were announced during the first half of this year. We should see a further SG&A improvement and hopefully a slight volume improvement at ISO market conditions. On the free cash flow, front, we maintain our ambition to deliver 5.5 billion euros of free cash flow over three years before acquisition. Thanks to some effort on our capex, the continuous improvement of our inventory and our working capital. So in this context and following Florence's comments, confidence in our cash generation will speed up our share buyback program with an additional 400 million euro that we are going to implement by the end of this year. So basically that's all for the presentation and I think we can now open the Q&A session.

Danone, if you wish to ask a question, please press star 1 on your phone keypad. Please ask your question in English. The first question is from Thomas Besson of Kepler Chevreux. Please go ahead.

Thank you very much for taking my question. Good evening. It's Thomas from Kepler Chevreux. I have a couple of questions for you. You have just said that you're going to implement a 400 million incremental buyback. Could you update us on where you were I think you had launched a plan last February for a billion, done 500 million last year, and you were supposed to do 250 million this year. Do you therefore mean you're going to do 250 plus 400 or 400 on top of the 250 you had in mind? And could you indicate whether we may assume as well that you will maintain dividend given the strength, the confirmed strength of your cash generation and also confirmed asset disposal? the first question on capital returns. The second question really is about the relative lack of feasibility you still seem to have and allowing us to better understand what drives your relative performance and market compared with some of your peers. So, I mean, you give us a very wide range at the end of October for Q4. And we have seen Michelin over the last two, three years showing almost consistently a decent underperformance versus the end market in the SL1, for instance. In 2025, you seem to largely underperform in SL2. We've seen Continental issue a reverse warning while you were issuing a warning. with them having as well some exposure to the track market you mentioned as a key reason for your warning. So, my second question is basically, why don't you have more visibility and could you help us understanding when we should expect Michelin to be closer to its end markets in its various segments? Thank you very much.

So, I will give you some elements to answer and then Yves will So as far as the dividend for the end of this year, we have a dividend policy and we have no reason to change that dividend policy. And of course, this is a discussion we will have with our board and we will discuss the details early next year. As far as the buyback, it's on top of what we have done already. and we had done around a little bit in excess of 750 million and the 400 million comes on top of that. Now, the underperformance of our competition and you mentioned Continental, we have several leads to that. As I was explaining, we have been undertaking a heavy restructuring of our plants that has weighed a lot in our results in 2025, especially in segment two on the truck operations, because we had to ramp down and ramp up some activities. Our competition didn't have to do the same thing. The second restructuring we have done is our structural pricing at OE and especially in North America where we were over indexed in market share with OEMs in North America and our prices were not at the adequate level. So we have done what we had to do on price but In a market that has reversed sharply, suddenly it has created some issue and we've lost share with those OEMs. Half of those share loss were expected and not wanted, but we were anticipating those. Half were not expected. I think we have adequate margins now at OE, and we just have to wait for the market to get back to more normal levels. And of course, the market share loss has been opportunities for our competition. Of course, now the wet conditions they took them is down to them. Now, we are also, in terms of business, we have a big activity in Beyond Road. Beyond Road, especially in agricultural, agricultural in North America is heavily depressed. And we have two activities now. We have tracks, systems and tracks, and we have high-performing for high-power tractors in North America. Right now, this business is heavily depressed. I don't think our competition has the same exposure to that business. And for us, it is still an area of focus to restructure our go-to-market and what we do with this business. And especially the OE portion in ag is heavily depressed. So these are some elements to help you understand why we have seen this difference in performance versus our competition. And maybe if you want to add one more thing. Okay, clear.

Thank you very much, Claude. Maybe on the visibility, why is it not higher at the end of October for Q4?

I mean, we have had so many surprises. since the beginning of this year, so I prefer that we stay cautious on what we can expect. Maybe we'll have good news, maybe we'll have bad news, I don't know. I mean, really this year has been really intense in terms of surprises.

Just an illustration, our South American operations were trending very well during the first eight months. And then the decision of 50% implementation of tariff from the U.S. have completely turned the market upside down.

So really... Yeah, so... I wish I would have the clever glasses from others that are able to predict what will happen in Q4. Thank you.

The next question is from Harry Martin of Bernstein. Please go ahead.

Thank you and good evening. I'll start with a question on the US on the volume side. I mean, can you help us understand what the immediate production actions that you're taking in some of the plants like the truck and bus segment in the US where original equipment production is set to be down double digits for many more months before getting better? And then a related question to this is, should we expect that the SOI drops through on volumes this year to be slightly better than normal, given that the declines in 2025 are focused in North America, where cost flexibility is usually higher than somewhere like Europe. And then the second question just about the pricing in the U.S. I mean, you have a long track record of pricing, cost, inflation, and so on, as you mentioned, the ability to earn a price for your technology. So it's been surprising from the outside that it's been, you know, pricing stepping backwards in Q3. How much of this environment do you think is transitory around dealers buying those cheaper tires ahead of the tariffs coming in over capacity? And should we expect a full price pass through that sort of roughly 300 million of tariff cost in the medium term?

So some element of answers and I will leave the rest to Yves. So on the U.S. volume, We are net importer of truck tires in the U.S. from various parts of the world. So in the low level of markets, what we are doing is we are loading better our plants in the U.S. But it takes a while to adjust the global flows so that we reduce the imports from other countries to build better our plants. We will have this effect, we have better effect of this happening in the fourth quarter and going on in 2026. So the U.S. volumes are heavily depressed because we consider that as temporary because we think the OE truck producers have built inventories in preparation of a new legislation, a new regulation on engines in the U.S. That regulation has been postponed. So it means that the truck OEMs have excess inventories of trucks on the yard, and they have to purge that. But that is temporary, so this is depressing further the volume, but we think it's not structural to the market. Now, when you assess the pricing environment, and when you look at what is happening also in the market, When we look at how the market is assessed, it's based on sell-in activities and the sell-in has been mainly driven by cheap imports from Asia into North America in anticipation of tariffs. So the market has been artificially inflated by this phenomenon. The same thing happened also in Europe and in other parts of the world. So as far as the pricing environment, our price premium continues to be what it used to be. In the long run, either the entire industry accepts to drop their margins or that will go into the market. When it will happen, I don't know. We've tried our bit. And then on the drop-through... Yeah, maybe on the drop-through.

So Harry, you clearly see it very well. Our North American operation has been much more impacted in Q3 than during the first six months. Accordingly, we have lower capacity utilization in the U.S. where we have the higher fish cost, so the less fish cost absorption. So that's why we have recorded higher drop through this year. Conversely, when the market will rebound and we'll be able to reload our U.S. factory, it will have a positive effect on the drop-through.

Thank you very much.

The next question is from Akshat Kakar of J.P. Morgan. Please go ahead.

Thank you for taking my question from JP Morgan. I have three quick ones, please. The first one on the overall inventory situation in passenger car and trucks. I think you have frequently highlighted the high inventories of budget tires and anticipation of those anti-dumping or import duties in different regions. Could you just talk about how those overall inventory levels look like in these different markets and how long do you think it could take to normalize that based on current sellout trends? And if you still expect Continued low fixed cost absorption and low capacity utilization going into the first half next year. Just trying to understand the overall inventory situation for your business. The second question is on the underlying profitability in the second half of this year. And thanks for explaining all the negative surprises that you've had in the last month specifically. So when I think about all the actions that you mentioned, you have talked about inventory management, you have talked about sequential price actions, you have talked about low fixed cost absorption. And I know it's very difficult to answer, but can you quantify the extent or one-off that you are seeing the second half of this year, which should not carry into 2026, please? Those are the two questions. Thank you.

As far as the quantification, I have my personal calculator on my left, so I will leave Yves to answer on this. So as far as inventories levels, if we look at our inventory level is adequate at Michigan Brown, adequate to low level. So we are well placed. Unfortunately, inventory levels at the dealerships are at a high level almost everywhere because of, especially in the Americas and Europe, because of this phenomenon of the flow of budget tires in every categories. So now how long it will take to purge? Several months. We don't know. It depends on the level of activity overall. So back to what Yves was mentioning, for example, if I look at the US. Right now, the tons to be hauled in the US is decreasing. So this is not helping to purge excess inventory. So we just have to wait for the economy to stabilize further and to be at a higher level. If we look at South America, you mentioned it very well, the economy was... growing nicely up until and our business as well was growing nicely up until the 1st of July and then suddenly in July a change in the tariff and suddenly the economy in South America is having more difficulties so of course it has a rippling effect on the truck activity in passenger car what we see is the overall mileage driven is steady on the world, slightly growing but steady. What is the real phenomena on passenger car is the aging of the vehicle park. That is aging very fast. So how long these phenomena, those phenomena are going to last, I don't know because we consider that what is happening right now is not normal. These are not normal market conditions. And then on the underlining...

The quantification is pretty tricky. It's very difficult to quantify what we can call one-offs because we are more facing a very volatile environment. As you have seen during the presentation, every element of the bridge has some, of course, the volume wider and the cogs, because of the tariff as well, wider. But every element of the bridge has some element of uncertainties. So we are more trying to build up our forecast on the risk and opportunities based on the central scenario. And then it's very difficult today to decipher what we'll have. We know, for example, that there will be some element will have positive effect in 2026. I was mentioning the raw material cost. On the other hand, we know that the tariff started during Q2 and Q3, implemented mostly starting from Q3. And so it will have a ripple effect over the first half of 2026. And hopefully at one stage it will start to normalize, providing there will not be a renegotiation of the USMCA agreement. So that's the world we are living in as of today.

Just as I was listening to Yves, something came to my mind is that, for example, if I look at truck, In 2025, especially in the first semester, we had to, in the first nine months, we had additional costs due to the restructuring of our plants. We had to ramp down and ramping up. So this could be considered as one-off, but since this summer, We know that we have to reshuffle some of our flows because of what is happening in the U.S. and in other parts of the world. So suddenly, those one-offs are going to be offset. The positive one-off, the benefit of restructuring, is going to be offset by additional costs just to reshuffle our flows. So that's why it's tricky to answer more precisely on this.

And what we can say, particularly on the truck side, we have right size our manufacturing setup and it is now in condition to be able to better react to an uplift in volume, particularly when the original equipment market will start to rebound.

Thank you. Just one quick clarification. Have you built in any bonus provision relief in the second half of the year within your guidance, please? Thank you.

Yes. Yes.

Thank you. The next question is from Monica Bosio of Intesa San Paolo. Please go ahead.

Good evening, everyone, and thanks for taking my questions. I have three, if I may. The first one is on SR2. In the first half, the margins for SR2 set at 5.5%. We know that the company does not guide at the divisional level, but on the back of the fixed cost absorption, which I can imagine is very low, In H2, can we imagine an operating loss for the SL2 division in the second half of 2025? Or are you still confident on the back of the restructuring that the division could achieve the break-even? The second question is on the potential savings from restructuring. We should see another batch in the fourth quarter but can you also provide us an indication for 2026 thank you and the very last is on the beyond road tires i know it's difficult to answer the visibility is very poor but uh what is your outlook for 2026 across the quarters for example Could we expect that positive volume trend for beyond the road tires already in the second quarter? Or do you see volume turning positive only from the second part of 2026? Just your flavor. Thank you very much.

So we do not anticipate at this stage operating losses in the second half of 2025 for SR2. We had in the first semester some restructuring cost plus low volume but we don't anticipate And restructuring, of course, has helped. And as Yves mentioned, we have speeded up some restructuring, so we'll have the benefit sooner in our bottom line. So, seeing from today, we don't anticipate operating losses in SR2. Now, I will answer on the beyond road. Beyond road, typically, So looking at this very interesting environment we are in, because of sudden change in the tariffs between US and China, China has stopped buying American soybeans. Unfortunately, American soybeans, they are very large farms and using very heavy tractors and they consume a lot of tract systems. So now, will it last? I don't know. Will those farmers find other markets than China? I don't know. It depends on the relationship between US and China. Unless something changes there, we don't foresee a rebound in the agricultural activities in the near term. So really and we are over indexed in track systems. We have a very high market share in track systems and the track systems only work on heavy tractors especially in the US and same for some of our technical tires in agriculture. So far our discussions with our specialized teams on this tell us maybe in H2 2026 maybe but really you see things are moving very fast and we don't know it's difficult to have a good visibility but you're right for beyond road these are very important markets and very very lucrative markets

For the overall SR3, taking into account the growth in aircraft and in mining, we should be at a flat volume very soon and growing volume probably in the first half of 2026 because of the other activities. Regarding your question about restructuring, we expect a full saving of 200 million over 2025. of which, at the end of September, we have already recorded 120, 130, so we should have a further 70 million in Q4, and probably a little bit more than 100 million for the full year 2026.

Thank you very much.

If I may, just a quick follow-up on the North American ag activities. On the back of the scenario, Are you planning any further restructuring in this case in beyond the road tires or are you just waiting and see what's going to happen?

We are re-engineering heavily our business activities in the Beyond Road in general, and we will let you know when we have made a decision.

And we completed during the quarter the sales of our bias tires and small tracks activity to the SEAT group. Perfect.

Thank you very much.

The next question is from Martino de Ambrogi of Equita. Please go ahead.

Thank you. Thank you very much. Three questions focusing on free cash flow. You mentioned if CapEx would go down. Could you remind us what is your best estimate for 2025 and 2026? This is the first. Always on free cash flow is the cash out for restructuring. If I remember correctly, you mentioned 400 million in the previous call for 25. What could be your assumption for 26? And the last question is on the pricing. So I know very well you don't make any more specific comment on prices. But could you elaborate a general comment on what is the pricing at sector level considering the low volume environment? Is there any big change that you see in the landscape or everything is similar to what used to be in the past?

On pricing, we will make no comment. Even on the landscape, we have said what we had to say on prices. Maybe for the capex and... For the free cash flow.

So the capex, we will lend probably slightly above 2 billion. You know that we have a range between... 2 and 2.4, we were nearly between 2.1 and 2.2 last year, so we are piloting at the lower part of the range. And it should be similar in 2026, given the context we are operating in. On the restructuring side, we are expecting the figure has not changed. The $400 million for 2025 is still relevant. And for 2026, it should be lower, probably around $300 million.

Okay, thank you, Yves. And networking capital, is there any specific trend we should be aware of?

Networking capital, we have two, I will comment on two aggregates. First on the receivable, we have a slight negative effect of our mix in the U.S. because of the change of wholesaler and that impacts slightly negatively our term of payment. But overall, if I look at the overall working capital, our inventory is are going down because it was something that we shared during the CMD last year. We have a plan to better manage our inventory, looking at the full process from the forecast from the sales team up to the way we are managing our inventory in our warehouse, as well as the way we deploy our inventory over a given territory. Having said that, the only downside we can have on the inventory side is the impact of the tariff in the inventory level, in the price, which is slightly negative. But on the other hand, there is currently a decrease in raw material prices, which should lend to a decrease of inventory price as well. Thank you.

The next question is from Michael Espinal of Jefferies. Please go ahead.

Thanks. Good evening, Florian Eates. Can I go back to SR1? You mentioned the competition you saw in SR1 in the report that it mainly affected Tier 2 tyre brands. Can you just remind us what your split is? to the Michelin and non-Michelin brands? And did you see the kind of same types of competition at the Michelin brand or was it mostly in tier two?

In terms of volume, 85% of what we sell is Michelin brand. in terms of volumes. The rest is mainly Tier 2 and a little bit of Tier 3. Tier 3 is really a very intense competition. So right now, for example, our Union Royal brand that plays in the bottom of Tier 2 and top of Tier 3, is imported from Indonesia, or we export from Indonesia to the US. So we are looking at how we can adapt the flows. For example, that brand was sold through the wholesaler, mainly through the wholesaler, but we have decided to cancel. So, of course, we have to re-channel that brand into other wholesale channels. And the competition in Tier 2 is intense. In Tier 1, it's less... The Tier 1 market is more stable, even though now there is a big push from the Tier 4, Tier 3, especially in the US, that is weighing a little bit on the Tier 1 proportion. But I think it's more short-term things than structural. Long-term, I don't foresee a major change in that. However, in Europe, Europe had more Tier 1 proportion than Tier 2 and Tier 3. And now it's getting more into... levels of what we see in another part of the world.

Okay, that's useful. And there's the second one on the distribution model. It sounds like, I mean, I think there was a question earlier as to how much or what kind of things we can think about as being one-off. The change in distribution sounds like something you probably won't do every year kind of going forward. Maybe you can kind of help us with how much the change in distribution impacted volumes in 3Q or 4Q or the year?

It's the main driver of the volume loss in SR1 in North America. And it's a one-off because we are not changing every year. It's every 20 years. It's every year, every 20 years.

Thank you.

The next question is from Michael Fundukidis of OdoBHF. Please go ahead.

Yes, good evening. A few questions left on my side. First, to come back on ATD. I mean, it was a move that was planned by you probably since at least a few quarters. So could you give us more color on what exactly went wrong? Was it more challenging to get dealers to switch from ATD to NTW? Is it something like that? So that's the first question. Second question, and sorry to insist on Q4, but This uncertainty you're mentioning and you're referring to is probably affecting a lot of companies, especially in autos. We could have expected tires to be somewhat less impacted, even considering trucks or ag exposure. So I know it's a bit of an oversimplification, but based on FUDIA guidance or even the employee H2, Your SOI runs at around, let's say, 200 million per month. We have only two months left, and you're talking about 400 million uncertainty over Q4. So what does it mean for the last two months? Maybe a view on October, which is almost done. That's the second question. And maybe last, could you clarify your views on M&A in this context? Any change in terms of mindset? No, not at all. Thank you.

Okay, so on the first question on ATD, the decision has not been planned several quarters before. The situation with ATD has deteriorated when they went to Chapter 11 and they didn't notify us in advance on this. And after that we have reassessed our relationship with ATD and we came to the conclusion that we could not continue with this type of wholesale channel to promote our Michelin brand. So yes, we had decided then, but it was really a decision that was made late in the first semester. And then we discussed, it was made by our US teams that they said, we don't foresee how we could improve the situation with ATD. So we said, okay, if you want to make the decision, we will follow you. And they made the decision. Then, of course, that business has to be re-channeled through two other wholesalers mainly. It's NTW and US Venture. uh with us venture it's going according and with ntw it's slower than what we were anticipating and expecting but of course it's a big flow to rechannel so that's why but we think that movement will be over by the end of the year now if i look at the mna ambitions in this context our strategy is um clear, there is an M&A portion in our strategy, but as I always say, to succeed in an M&A transaction is we have to have a buyer, we are clearly a buyer, we have to have a seller, and you have to agree on the price. And so far, we have not been able to have the three, according to what I just said. Now, number two, and then Yves will complement. We have been surprised by September. And what we have seen happening in our September results, we start to see the tariff effect, we start to see a lot of input cost happening, plus the pricing environment where we know we cannot pass the input cost. So we said, okay, now, that was a surprise we had in the September results. That's why for the remainder of the year, we have said, we just have to re-look at what we should expect.

Maybe to give a little bit more color on that question, Michael, so I refer to slide number eight of the presentation. Don't forget that October and November are among the four best months in terms of operating margins for the group with March and September. So we have this seasonality effect. You know that traditionally we have a far better segment of income in H2 than in H1 because we have September, October, November that are very critical months. The September sales in themselves were not too bad versus what we expected and versus last year, but it comes with a margin deterioration explained by mostly North America, only North America, with the consequence in terms of fixed cost absorptions and mix that we have been describing.

Thank you. Very helpful. Maybe just one last one. I could sneak in. On the share buyback program, could you just clarify very precisely what is new from the, let's say, 750 million that you have done already and the 1 billion program that you had, if I'm not wrong? Could you clarify if there's something new on that?

So we have announced in Feb 2024 one million program over three years. We completed 500 million last year. We completed 265 by mid-October, early October. It's the one that we announced at the end of July. And we will complete it with an additional 400 million by the end of the year.

So that's 150 incremental versus the 1 billion, or it's 250 plus 400 still remaining?

Incremental versus the 1 billion. And within two years instead of three years.

Okay, thanks.

The next question is from Christoph Laskawi of Deutsche Bank. Please go ahead.

Good evening, thank you for taking my questions. The first one, sorry, to come back to that, market shares, you commented that you are basically trying to get market shares back. Could you just remind us on the main levels for that? Is it just a normalization of distribution or are you planning to use the raw material tailwind next year to reposition brands a bit versus competition? And then when could we expect that to materialize? The second one just on the winter tires, you commented relatively slow start to the winter tire season. Now, PSF commented that they actually saw quite a decent start. Is that basically due to brand-specific inventory levels at Stevens or any other points that you would highlight? And then, sorry for a clarification question also on the shareboard, because my line was bad when you just answered it. Did you say 400 million incremental to the 1 billion or just 165 million incremental? Thank you.

We just said... Okay, sorry, I leave the math to... So we will do 400 million...

On top of what has been done. On top of what we have done already. And we have done 500 last year and 265 this year.

So you add 400 to that. 500 plus 265 plus 400. Now, on the winter and continental. Continental has had smart host in the pre-winter stocking season. and they've taken the remaining available space from the huge influx of cheap imports from Asia. So the winter is not over and we are very positioned because we have very good product and so the winter is not over yet but they have been better than us in the pre-season of winter. So now long-term reunion shares, we have launch really excellent product. Climate C5 mentioned by Yves, cross-climate three is excellent. Cross-climate sport, cross-climate three sport is really defining a new category. So all of that will contribute to regaining some position in terms of shares. And those launches have just happened. So we just have to wait and CrossFlamet is already showing very good signs in several states. Now of course the pricing on replacement has been very clear and we had to reposition our prices because we became less competitive in the market. We have started to do it and it will have the effect that our price premium really doesn't change in the market. So we look at our competitiveness all the time and I'm confident we will get back to normal levels. We have a very strong signal happening in China where we have done this and it had paid a very strong dividend and we are back to close in China.

Thank you. As a follow-up to that, maybe we highlighted pricing to be still slightly positive in Q4, I think. But since you now started to implement those repositioning measures, that obviously would see a fading into 26 then, right? Also considering the comp base in 25.

The thing is moving so fast that you cannot say what will happen in 2026 at this stage. We'll see.

And even in 2025. We'll see. And we don't comment further on future price decisions.

I think this was the last question. So thank you very much for attending and thank you for your commitment. Thank you very much. Have a nice evening.