Michelin: In the first quarter of 2020, at a time of systemic
crisis due to COVID-19, Michelin saw an 8.3% decline in sales and
deployed the measures needed to attenuate the impact of the crisis
on employee health and the Group’s business.
Press ReleaseClermont-Ferrand,
France – Wednesday, April 29, 2020
COMPAGNIE GÉNÉRALE DES ÉTABLISSEMENTS
MICHELINFinancial information for the three months
ended March 31, 2020
In the first
quarter of 2020, at a time of systemic crisis due to COVID 19,
Michelin saw an 8.3% decline in sales and deployed the measures
needed to attenuate the impact of the crisis on employee health and
the Group’s business.
- In response to the pandemic, Michelin first focused on
safeguarding the health of its employees and their families by
implementing all of the recommended precautions. The Group is
actively engaging with its host communities in every country,
offering its technological expertise, repurposing its production
capacity and donating both equipment and
funding.
- Global tire demand dropped in the first quarter, as
lockdown policies gradually spread around the world, impacting
every business segment.
- Passenger car and Light truck tire markets dropped 15%
after carmakers suspended production and consumers went into
isolation.
- Truck tire markets fell by 17% year on
year.
- In the Specialty Businesses, certain mining markets and
the Replacement agricultural tire markets showed some signs of
resilience.
- First-quarter sales declined by 8.3% year on year at
current exchange rates, reflecting:
- An 11.7% contraction in volumes, which accelerated in
March (down 21%)
- A 2.0% gain from the robust price-mix, led by the
strength of the MICHELIN brand
- A 1.0% increase from changes in the scope of
consolidation.
- To mitigate the financial impact of the impending deep
recession, in mid-March the Group implemented the following
measures:
- Tracking supply and demand on a weekly basis to keep
inventory under control,
- Reducing capital expenditure by €500
million,
- Reducing the dividend submitted to shareholder approval
by €330 million,
- Suspending the share buyback program, except for the
firm commitments outstanding for 2020,
- Reducing overhead costs.
- In addition, the Group reaffirms that it has the
sources of financing in place to deal with the uncertainty
surrounding the crisis. Stress tests, based on volumes declining by
between 20% and 35% over the full year, have shown that the Group
has sufficient cash and cash equivalents, without drawing down its
confirmed back-up lines of credit.
Florent Menegaux, Managing Chairman,
said: “I would like to thank all of our employees for their
dedication, commitment and agility, which I am sure will enable
Michelin to weather this unprecedented global crisis of still
unknown proportions. This exceptional situation has deepened our
belief that the Group's future is anchored in the balance between
the engagement of its employees, without whom nothing is possible,
the sustainable growth of its business operations and the robust
strength of its finances.”
So far, the direction of the pandemic
and its economic impacts remain too uncertain to issue any reliable
market forecasts and a related profit scenario. Nevertheless, at a
time of steeply declining raw material prices, the Group expects to
see a more positive net price-mix/raw materials effect, which
should slightly attenuate the much more pronounced impact of lower
volumes.
First-quarter sales growth:
Sales(in € millions) |
First quarter2020 |
First quarter2019 |
% change |
RS1: Automotive & related distribution |
2,597 |
2,788 |
-6.9% |
RS2: Road transportation & related
distribution |
1,360 |
1,550 |
-12.3% |
RS3: Specialty businesses & related
distribution |
1,370 |
1,471 |
-6.9% |
Group Total |
5,327 |
5,809 |
-8.3% |
Market Review
·Passenger car and Light truck tires
First
quarter2020/2019(in number of tires) |
Europeincluding Russia &
CIS* |
Europeexcluding Russia &
CIS* |
North America |
Central America |
South America |
Asia(excluding India) |
Africa/ India/ Middle East |
Total |
Original Equipment Replacement |
-15% -11% |
-16% -10% |
-12%** -11% |
-3% |
-18% -4% |
-32% -20% |
-21% -3% |
-23% -12% |
* Including Turkey
** Including Central America
The global Original Equipment and Replacement
Passenger car and Light truck tire market declined by 15% in the
first quarter of 2020, dragged sharply down by the impact of the
health crisis, starting in February in China and in mid-March in
the rest of the world.
- Original Equipment
- In Europe, Original Equipment markets fell 15% in the first
quarter, as the shutdown of automobile plants in the wake of
lockdowns implemented to contain the COVID-19 pandemic led to a
sharp 37% drop in tire demand in March.
- In North America (including Central America), the market
declined by 12% during the period, as demand, after holding firm in
the first two months, plunged 34% in March following the suspension
of automobile production.
- In Asia (excluding India), demand tumbled 32% overall year on
year, dragged down by the Chinese market, which bottomed out in
mid-February with a pandemic-related 81% drop. The 47% decline in
March reflected the gradual recovery in automobile output. The rest
of Asia suffered less than China, reporting just an 11% decline for
the quarter.
- In South America, demand ended the period down 18%, with a
steeper 25% decline in March as the pandemic began to have an
impact.
- In Africa/India/Middle East, the market narrowed by 21% in the
first quarter, with a sharp 46% drop in March.
- Replacement
- The COVID-19 crisis caused the European Replacement tire market
to decline by 11% in the first quarter, with a faster 21% drop in
the final month. The Southern European countries (France, Italy and
Spain), where stricter isolation measures were implemented sooner,
were more severely affected in March (down 35%) than the Northern
European markets (Germany, the United Kingdom and the Nordic
countries), down 16%.
- In North America, demand contracted by 11%, reflecting the
later onset of the pandemic and less restrictive lockdowns. The
market downturn gained momentum in March with a 19% drop.
- In Asia (excluding India), the market plummeted 20% in the
first quarter. The Chinese market was the first to be impacted by
the health crisis, with demand bottoming out in February with a 60%
drop, before easing to a 31% decline in March after dealership
networks were gradually reopened. In the rest of Asia, demand eased
back slightly over the first two months, but slid 14% in March as
the impact of the health crisis began to be felt.
- In Central America, the market contracted by just 3% in the
first quarter.
- Demand in South America ended the period down 4%, after holding
steady in the first two months and dropping 13% in March as the
health crisis began to have an impact.
- In Africa/India/Middle East, demand eased back by a limited 3%
over the quarter, as the 19% fall-off caused by COVID-19 in March
completely offset the 5% increase over the first two months of the
year.
· Truck tires (radial
& bias)
First quarter2020/2019(in number of
tires) |
Europeincluding Russia &
CIS* |
Europeexcluding Russia &
CIS* |
North America |
Central America |
South America |
Asia(excluding India) |
Africa/ India/ Middle East |
Total |
Original Equipment Replacement |
-21% +4% |
-21% -6% |
-21%** +0% |
-6% |
-8% -9% -
|
-28% -30% |
-21% -4% |
-24% -15% |
* Including Turkey
** Including Central America
The number of new Truck tires sold worldwide
fell by a sharp 17% year on year in the first quarter. The expected
decline in Original Equipment markets in Asia, Europe and North
America was exacerbated by the health crisis, with demand plunging
24% over the quarter. Replacement markets ended the period down
15%, primarily due to the 30% drop in Chinese demand.
- Original Equipment
- In Europe, while OE demand fell 15% in the first two months of
the year, in line with the expected cyclical downturn, the initial
impact of the health crisis drove a faster 32% decline in
March.
- After dropping 14% in fourth-quarter 2019, demand in North
America lost another 14% in January and February 2020, before
plunging 32% in March as the health crisis worsened.
- In Asia (excluding India), the market tumbled 28% in the first
quarter, dragged down by a 29% drop in China, where demand fell to
a 51% low point in February due to the health crisis before easing
to a 35% decline in March.
- In South America, the 8% overall decline in the first quarter
was mainly attributable to the initial effects of the health crisis
in March, down 23%.
- Demand in Africa/India/Middle East ended the quarter down
21%.
- Replacement
- In Europe, the Replacement tire market rose by 4% overall
during the quarter. Demand in Russia surged 26%, lifted by buying
ahead of the price increases announced for April to offset the
depreciation of the ruble. In the rest of Europe, the market
declined by 6%, of which an 18% drop in March, as the health crisis
began to take its toll. The impact of the resulting lockdown
measures was primarily felt in Southern Europe (France, Italy and
Spain), where demand fell 31% in March.
- In North America, quarterly demand was stable overall thanks to
the favorable comparison with first-quarter 2019, when dealers
sharply drew down inventory after the massive, late-2018 run-up in
buying ahead of new customs duties. In addition, the effects of the
health crisis on North American demand were not yet visible in the
first quarter of 2020.
- Markets in Asia (excluding India) were hard hit by the effects
of the pandemic in China, losing 38% overall during the first
quarter, including 65% in February and 36% in March.
- The South American market was down 9% year on year, with a 16%
drop in March alone due to the initial impact of the health
crisis.
- Specialty BUSINESSES
- Mining tires: Despite a slight decline, the
surface mining tire market is proving to be relatively resilient,
buoyed by sustained demand from mining companies and certain
procurement problems caused by tire plant closures. The quarry tire
segment remains in a cyclical downturn, amplified by customer plant
closures.
- Off-the-road tires: Demand for construction
and materials handling equipment tires declined over the quarter,
mainly due to carmaker plant shutdowns and the initial impact from
COVID-19. The Replacement agricultural tire market has been
relatively resilient thanks to the sustained food needs of the
global population.
- Two-wheel tires: The recreational and
commuting Two-wheel tire segments contracted sharply due to the
health crisis, particularly in Europe, with demand nevertheless
remaining stable in Japan.
- Aircraft tires: The commercial aircraft tire
market gradually cooled over the first quarter as the health crisis
spread. By the end of March, almost all of the world’s air traffic
was at a standstill.
- Conveyor belts: In the conveyor belt markets,
the Mining segment has remained resilient, but manufacturing
customers are cutting back on orders due to the economic
situation.
Michelin
sales
·Consolidated Sales
(in € millions) |
First quarter 2020 |
Sales |
5,327 |
Q1 2020 vs. Q1 2019 |
|
|
Total change |
-482 |
-8.3% |
Of which Volumes* |
-677 |
-11.7% |
Price-mix |
+117 |
+2.0% |
Currency effect |
+19 |
+0.3% |
Changes in scope of consolidation |
+59 |
+1.0% |
*In tonnes
Sales for the first three months of 2020 totaled
€5,327 million, a decrease of 8.3% from the year-earlier period
that was attributable to the following factors:
- a steep 11.7% or €677 million drop in volumes,
caused by the collapse in demand after health measures (lockdowns
and production shutdowns) were deployed in most regions of the
world to address the spread of the COVID-19 virus. The fall-off in
volumes accelerated in March, particularly over the last two
weeks.
- a 2.0% increase from the favorable price-mix
effect. Prices added 0.1%, reflecting the net impact of the Group’s
unwavering commitment to disciplined price management and the
expected adverse impact of adjustments from the application of raw
materials indexation clauses as of January 1, with the mix effect
adding another 1.9% further to the sustained up-market shift in the
product mix and the strength of the MICHELIN brand.
- the favorable 0.3% currency effect, as
gains in the US dollar against the euro were offset by declines in
the Russian ruble, the Argentine peso and the Brazilian real in
particular.
- a 1.0% increase from changes in the scope of
consolidation, primarily due to the first-time inclusion of
Multistrada and Masternaut and the disposal of BookaTable.
- Sales by reporting segment
- Automotive and related distribution
Sales in the first three months of 2020 amounted
to €2,597 million, down 6.9% on the same period in 2019.
In falling markets hit by the business impact of
the health crisis, the Group reported a 10.5% contraction in
segment volumes, thereby consolidating its market share. The
price-mix effect was favorable, reflecting the expected unfavorable
impact of applying raw materials indexation clauses as of January 1
in the indexed businesses, disciplined price management in the
Replacement markets, supported by the strength of the MICHELIN
brand, and the continued enrichment of the product mix. The
consolidation of Multistrada and the deconsolidation of BookaTable
had a net positive impact on the segment over the quarter.
q Road transportation and related
distribution
Sales for the first quarter amounted to €1,360
million, a decline of 12.3% compared with first-quarter 2019.
In markets down a steep 17% over the period, the
segment reported a 14.9% decline in volumes, cushioned by a
favorable geographic mix and the resilience of its services and
solutions offering. The price-mix effect was robust, reflecting the
selective focus on markets most capable of creating value and the
favorable impact of consolidating newly acquired Masternaut.
q Specialty businesses and related
distribution
First-quarter sales totaled €1,370 million, down
6.9% on the same period of 2019.
Segment volumes fell back 9.9% due to the
collapse of certain markets impacted by the health crisis, although
some of the decline was offset by the robust price-mix effect.
- Mining tires: sales of surface mining tires remained resilient,
thanks to sustained demand from mining companies, where the Group
maintained its solid positions.
- Off-The-Road activities: firm pricing policies and resilient
market share partially offset the impact of the steep decline in
volumes caused by the market collapse.
- Two-wheel tires: Sales fell back slightly, reflecting market
share gains in a sharply contracting market, the effect of 2019 and
early 2020 price increases, and the improvement in the mix related
to the steeper decline in OEM demand due to customer plant
shutdowns.
- Aircraft tires: sales remained somewhat firm, supported by the
strong demand in the commercial aircraft tire segment early in the
year and the resilience of the military segment.
- Conveyor belts: Fenner sales benefited from the business’
geographic and market segment mix.
- Reinforced polymers: the more resilient underlying markets for
these activities have been affected by the COVID-19 crisis to a
lesser extent.
Group cash
position
As of April 28, 2020, the Group had €2.3 billion
in cash and cash equivalents and €1.5 billion in undrawn confirmed
lines of credit. In the regulated countries where local credit
facilities can be put in place, such as China, South American
countries and Russia, only 35% of the cash facilities had been
used.
Since the beginning of March, as the pandemic
spread, the Group has used its commercial paper program to issue a
net €1 billion in securities with an average maturity of 7.5
months.
Stress tests have shown that the Group has
sufficient cash and cash equivalents, without drawing down its
confirmed back-up lines of credit. In particular, the tested
scenarios assume a decline in volumes ranging from 20% (H1: -32%;
H2: -10%) to 35% (H1: -42%; H2: -27%) over the full year and
reflect the measures now in place to conserve cash.
In addition, the Group has no bonds falling due
before the first half of 2022.
First-quarter
2020 highlights
- January 17, 2020 – Michelin and HDI Global SE form a
partnership to help, prevent and reduce road risk for company
vehicle fleets, thereby enhancing the Group’s offering of connected
solutions.
- January 23, 2020 – Proposed support program for employees at
the Michelin plant in La Roche-sur-Yon, France is signed by the
CFDT, CFE-CGC, SUD and FO trade unions.
- January 27, 2020 – This year, the MICHELIN Guide France 2020 is
celebrating sustainable gastronomy by introducing a new green star
pictogram.
- February 3, 2020 – Fenner Precision Polymers acquires Fabri
Cote, a leader in the development and manufacture of custom
rubber-coated fabrics for aerospace applications.
- February 10, 2020 – In 2019, in a highly unstable environment,
Michelin successfully maintained its market share and improved its
earnings.
- February 18, 2020 – During the third Global Ministerial
Conference on Road Safety, Michelin reaffirms its commitment to
safer mobility through a wide range of global partnerships and a
variety of initiatives to raise the awareness of public authorities
and communities.
- February 24, 2020 – Michelin and Total subsidiary AS 24 join
forces to design and trial Fleet Diag 24, a new connected
diagnostic solution to inspect truck tires in service
stations.
- February 27, 2020 – Michelin wins a double at the Tire
Technology Expo in Hanover, being voted “Tire Manufacturer of the
Year” for the second consecutive year and earning the Innovation
Award for Uptis, its puncture-proof tire.
- March 2, 2020 – Fenner, the world leader in polyurethane
conveyor belts, launches the new Eagle Poly-V line for roller
conveyor applications.
- April 1, 2020 – COVID-19: Michelin will hold its Annual
Shareholders Meeting behind closed doors on June 23, 2020
and reduce the proposed 2019 dividend to
€2.00.
- April 6, 2020 – COVID-19: During the health crisis, in a spirit
of solidarity with the community of Michelin employees, the
Managers and the members of both the Executive Committee and the
Supervisory Board have reduced their compensation.
- April 8, 2020 – COVID-19: Michelin and other companies in
France’s Auvergne-Rhône-Alpes region step up to mass manufacture
reusable face masks.
- April 8, 2020 – COVID-19: Michelin has mobilized on all fronts
to produce masks and visors. The Group is also involved in many
other projects involving medical device components,
patient-positioning cushions and hand sanitizer.
- April 15, 2020 – Michelin partners with Enviro to develop and
mass produce an innovative pyrolysis technology to recycle
end-of-life tires. The partnership fits seamlessly with the Group’s
“All Sustainable” vision.
A full description of
highlights for the first three months of 2020may be found on the
Michelin website: http://www.michelin.com/
Presentation and Conference
CallFirst-quarter 2020 sales will be reviewed with
analysts and investors during a presentation in English today,
Wednesday, April 29, 2020 at 6:30 p.m. CEST.
WEBCASTThe
presentation will be webcast live on: https://www.michelin.com
CONFERENCE
CALLPlease dial-in on one of the following numbers from
6:20 p.m. CEST:
- In France
01 72 72 74 03 (English) PIN: 12826131#
- In the United Kingdom
+44 (0) 207 194 3759 (English) PIN: 12826131#
- In North America
(+1) 646 722 4916 (English) PIN: 12826131#
- From anywhere else
+44 (0) 207 194 3759 (English) PIN: 12826131#
The presentation of financial information for
the three months ended March 31, 2020 (press release and slideshow)
may also be viewed at http://www.michelin.com/en , along with
practical information concerning the conference call.
Investor calendar
- Sales and results for the six months ending June 30,
2020: Monday, July 27, 2020 after close of
trading.
- Financial information for the nine months ending
September 30, 2020: Thursday, October 22, 2020
after close of trading.
Investor Relations Edouard
de Peufeilhoux+33 (0) 4 73 32 74 47+33 (0) 6 89 71 93 73
(mobile)edouard.de-peufeilhoux@michelin.com Humbert de
Feydeau+33 (0) 4 73 32 68 39+33 (0) 6 82 22 39 78
(mobile)humbert.de-feydeau@michelin.com Pierre Hassaïri+33 (0)
4 73 32 95 27+33 (0) 6 84 32 90 81
(mobile)pierre.hassairi@michelin.com |
Media Relations Paul-Alexis Bouquet +33
(0) 6 79 33 51 47paul-alexis.bouquet@michelin.comHervé Erschler +33
(0) 1 45 66 22 22+33 (0) 6 70 47 85 04
(mobile)herve.erschler@michelin.comIndividual
Shareholders Isabelle
Maizaud-Aucouturier +33 (0) 4 73 32 23
05isabelle.maizaud-aucouturier@michelin.com Clémence
Rodriguez +33 (0) 4 73 32 15
11clemence.daturi-rodriguez@michelin.com |
DISCLAIMER
This press release is not an offer to
purchase or a solicitation to recommend the purchase of Michelin
shares. To obtain more detailed information on Michelin, please
consult the documents filed in France with
Autorité des marchés financiers, which are also available
from the Michelin website
https://www.michelin.com/en.
This press release may contain a number of forward-looking
statements. Although the Company believes that these statements are
based on reasonable assumptions as at the time of publishing this
document, they are by nature subject to risks and contingencies
liable to translate into a difference between actual data and the
forecasts made or inferred by these statements.
- 20200429_Sales Results_Q1
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