In the first half of 2017, sales increased by 4.1% (including a constant consolidation range of 3.6%) due to a large number of purchases before the first quarter's price increase, sales growth slowed in the second quarter, and sales of passenger car tires and light truck tires increased ( (3% increase). Truck tire sales were stable; demand for mining tires continued to pick up; sales of original market construction machinery tires and agricultural tires increased rapidly; in December 2016, Levorin, a Brazilian motorcycle tire manufacturer, was acquired.
The favorable price/product mix effect in the first half of the year was 1.4%, which accelerated to 2.8% in the second quarter, reflecting the initial impact of price growth. The negative price/product mix and raw material impact in the first half of the year was EUR 186 million.
Michelin tires
The income of the competitiveness plan offsets inflation as scheduled
The EUR 305 million negative free cash flow, which is consistent with the annual target, remains stable, excluding the interest on the capitalization of acquisitions and OCEANE securities; and the operation of capital management to cope with the adverse effects of rising raw material prices.
Mr. Sunard, CEO of the Michelin Group, said: “Compared with the strong growth in the first half of 2016, Michelin performed well in the first half of 2017 and is in line with the 2020 development plan. The main growth drivers in the first half of 2017 include increased sales. , Strict price management policies, initiatives to increase competitiveness, and the commitment of employees to serve our customers. Today, we have confirmed our goals for 2017, and we will be mainly relying on increased profits from price increases in the second half of the year."
Forecast
In the second half of 2017, regardless of the cold weather in winter, the replacement tire market is expected to emerge from the recession after the early purchases soared. The demand for original tyres in the market for truck tyres, construction machinery tyres and agricultural tyres will continue to grow, while the demand for primary tyres in the passenger car tyres and light truck segment will grow at a slower pace. Miner's tire sales are expected to continue to maintain a strong trend.
In view of the impact of the increase in raw material costs throughout the year (currently estimated at around 800 million Euros), Michelin will continue to flexibly control prices, ensure that the gross profit of business units unaffected by the price index terms remains unchanged, and at the same time implement the price index in the corresponding business sector. Terms. Therefore, the price/product mix and raw material effects are expected to have a favorable impact in the second half of the year.
On the whole, Michelin is expected to complete its annual sales target in line with the development trend of the global market. The operating profit of the recurring business exceeds 2016 with constant exchange rate, and forms a structural free cash flow of more than 900 million euros.
In the first half of 2017, tire sales in the global market for truck original tyres and replacement tyres increased by 3%. The price of replacement tyres increased. The profit in the first quarter increased by 7%. In the second quarter, it contracted by 3%. The original market segment continued to grow in the first half of the year. %.
Original tire
Due to low interest rates, increasing demand for truck services, and recovery in the construction industry leading to a rebound in truck sales, sales of original tyres in Western Europe increased by 6%. At the end of 2016, the eastern European market began to pick up, and it continued until the first half of 2017, with an increase of 11% in sales volume.
The sales volume of the North American market decreased by 19% in 2016 and began to rebound rapidly in the second quarter of 2017, mainly driven by the demand for truck services.
In the first half of 2017, sales of radial tires and bias tires in Asia (excluding India) generally increased by 17%. The Chinese market rebounded and sales surged by 22%, mainly due to the law prohibiting truck overload and the Chinese government's infrastructure investment plan. Market sales in Thailand grew steadily, by 10%, offsetting the 5% unfavorable situation of Japan's truck tire production decline caused by weak export sales.
The sluggish economic development in the South American region led to a 3% drop in local market sales. The market demand in the entire South American region and Brazil has stabilized.
Sales of tires in the original and replacement tire markets for passenger cars and light trucks increased by 3% in the first half of 2017. After most tire manufacturers announced price increases, consumers made significant purchases of tires, which led to a 5% increase in sales in the first quarter, and sales volume increased by only 1% in the second quarter as market demand fell.
Original tire
In the European market, sales rose rapidly by 6% in the first quarter, and fell 4% in the second quarter due to the decline in car sales in the UK and Germany. The Eastern European market began to recover. Product demand was stronger than in the first quarter.
Demand in the North American market continued to decline. Although sales increased by 2% in the first quarter, sales fell by 1% in the second quarter.
The Asian market (excluding India) increased its total sales by 3% in the first quarter. Although the Chinese government has adjusted its purchase incentive policies for small cars, the Chinese market has continued to prosper and sales have increased by 3%.
The South American market has also risen. Affected by the recovery of the automobile production and sales industry in Argentina and Brazil, the sales volume has increased steadily in the first quarter, but it is also vulnerable to the unstable political situation in the region.
Replacement tire
Prior to the price increase, Western European market demand increased by 5% in the first quarter and demand decreased by 2% in the second quarter, mainly due to the decrease in demand from end-users and an increase in dealer stocks. Sales in the 18-inch and above tires and seasonal tires market surged in the first half of the year. The Eastern European market continued to grow steadily in the first half of the year, an increase of 16% over the same period of last year. Budgetary imports continue to flow into Western and Eastern European markets on a sustainable basis.
In the North American market, the announcement of future price increases prompted the market to increase by 3% in the first quarter and by 1% in the second quarter. At the same time, sales of imported tires increased by 5% in the first half of the year and demand for high-speed tires was strong.
The demand for Asian markets in the first half of the year increased by 5% (excluding India). Due to the earlier announced price increase in the Chinese market, the market demand in the first quarter increased by 12%, the demand in the second quarter fell to 2%, dealer stocks were high, and wholesalers sold relatively slowly. Demand in the Japanese market increased by 6%, and demand in the South Korean market increased sharply before May, mainly due to an increase in sales before the price rise, but quickly declined in June. In the first half of 2017, the ASEAN countries (excluding Thailand) experienced a substantial increase, mainly due to the large number of purchases before the price increase.
In the first half of 2017, the overall demand in South Africa increased by 7%, the Brazilian market increased by 10%, and the number of imported Asian tires increased by 70%.
Replacement tire
The freight and construction industry environment in Western Europe is very good. Rising tire prices and importation have led to high dealer inventory and dealer demand. In the Eastern European market dominated by mid-to-low-end segmented business, demand in the first half of 2017 increased by 7%, and quickly declined to 1% in the second quarter.
In the second quarter of 2017, the sales volume of the North American market plunged by 9% compared with the same period of last year. This was mainly due to the increase in the import volume of Chinese tires before the implementation of the latest tariff item in the previous year. In addition, the sales of new models of trucks led to the second quarter sales recovery of the original market, but at the same time limited the market sales of replacement tires.
The Asian mid-market replacement tire and bias replacement tire market (excluding India) experienced a 3% drop in sales in the first half of 2017. The overall sales volume in the Chinese market increased by 3%. However, the decline in the freight market, the restructuring of some dealers, and the rainstorms in southern China in June affected the above factors, and the sales volume in the second quarter fell by 6%. Sales in the Southeast Asian market increased by an overall 3%, and sales in the Japanese market picked up rapidly, increasing 11%, offsetting the 3% drop in sales in the Thai market.
In the first half of 2017, the sales volume of radial tires and bias tires in the South American market increased by 3%. However, sales volume slowed down at the end of the first half of the year due to rising prices and large inventory of dealers. Affected by a favorable economic environment, the Brazilian market has increased sales by 10%.
Special tires
Construction Machinery Tire: After three consecutive years of decline, the miner tire market began to pick up in the first half of 2017, with stocks bottoming out and production recovering.
Affected by low inventory and high demand for mining equipment, sales of the original tire market began to increase.
The demand for infrastructure and quarrying and mining tires has generally risen as tire manufacturers have announced price increases.
Agricultural tires: In the mature areas, the sales volume of the original tire market fell. Since the second quarter, the original market demand has unexpectedly increased.
Although the prices of agricultural commodities are low, the replacement tire market still maintains expansion, mainly because distributors bulk up before the price rises.
Motorcycle tires: The demand for motorcycle tires in the mature market has increased, and emerging markets continue to maintain a good momentum of development.
Aircraft tires: With the growth of passenger flow, passenger tire market demand continues to grow.
Net Sales and Earnings in the First Half of 2017
Net sales
In the first half of 2017, total net sales reached 11.059 billion euros, an increase of 7.5% compared to the same period of last year. This is mainly due to the following factors:
Product sales increased by 3.6% and sales increased by 372 million euros, of which 52 million euros came from acquisition of Levorin, a Brazilian motorcycle tire manufacturer;
Sales increased by 145 million euros from a favorable price/product mix effect of 1.4% (which was 0.1% in the first quarter and 2.8% in the second quarter). The price effect has caused net sales to increase by 60 million euros, including offsetting the impact of rising raw material costs, the 67 million euros in price increase in non-price index business, minus the 7 million euros in price adjustments in the application of price index clause business. The favorable product portfolio effect brought in another 85 million euros of net sales, reflecting the extremely favorable product mix effect and the favorable effect of the recovery of the mining machinery tire business, partly offset by the negative impact of the relative growth rate of sales of original and replacement tyres.
Affected by the favorable exchange rate, sales increased by 198 million euros, which was mainly affected by the dollar.
result
In the first half of 2017, the operating income of the combined recurring business reached 1.393 billion euros, accounting for 12.6% of net sales, while the figures for the same period in 2016 were 1.405 billion euros and 13.7% respectively. The non-recurring business operating profit reached 27 million euros, which was mainly affected by the American post-retirement medical plan and the amendment clause of the British pension plan, which partially offset the changes in the fair value of non-current assets.
Recurring business operating profit comes from EUR 139 million in sales growth. And as previously indicated, the favorable price/product mix effect of 145 million euros partially offset the 331 million euros negative impact of rising raw material costs. The competitiveness plan is in line with the implementation schedule, bringing in 146 million euros of revenue, helping to offset the additional €142 million in production costs and administrative expenses. In the end, the exchange rate effect brought in 37 million euros in revenue growth.
On the whole, net profit for the first half of 2017 reached 863 million euros, an increase of 12%.
Net asset positioning
In terms of negative free cash flow, as of June 30, 2017, the dividend expenditure was 585 million euros, the share repurchase expense was 101 million euros, and the debt-to-equity ratio was 16%, which was not much changed compared to the same period of last year, and the net liabilities were 1.685 billion. Euro, compared with December 31, 2016, the company's debt to equity ratio was 9% and net debt was 944 million euros.
Passenger car/light truck tires and related distribution business
Net sales of passenger car/light truck tires and related distribution business increased by 5.9% in the first half of 2017 compared to 5.916 billion euros in the same period of last year and this year it increased to 6.263 billion euros.
The recurring business operating profit was 800 million euros, accounting for 12.8% of net sales, while the figures for the same period of 2016 were 814 million euros and 13.8%, respectively.
The 3% increase in sales volume and the optimized price/product mix are the main reasons for the changes, which can basically offset all the impact brought by the increase in raw material prices. This favorable price-combination effect demonstrated the success of the MICHELIN CrossClimate+ and MICHELIN Pilot Sport 4S product lines, driving Michelin-branded tires (up 4%) and sales of 18-inch tires (up 23%). Sales of other brands of the Group increased by 3% over the same period.
Truck tires and related distribution business
Compared with the same period in the first half of 2016, net sales of truck tires and related distribution business increased from 2.907 billion euros to 3.041 billion euros, an increase of 4.6%.
Recurring business operating profit reached 229 million euros, accounting for 7.5% of net sales, and data for the same period of the first half of 2016 was 288 million euros and 9.9% respectively.
The changes in growth mainly reflected stable sales, which was mainly due to the initiative to increase prices and increase profits in the second half of the year. In the first half of the year, new products and services continued to be introduced, and the success of MICHELIN X Multi, MICHELIN X Works, mid-market tire products and tire maintenance services improved.
Special tire business
Net sales of special tires reached EUR 1,755 million, compared to EUR 1,469 million in the same period last year.
The recurring business operating profit was EUR 364 million, accounting for 20.8% of net sales. In the first half of 2016, the figures for the same period were 303 million EUR and 20.6% respectively.
This result was mainly attributed to the 16% increase in sales volume, showing that the Group's mining machine tire market demand continues to pick up, sales of construction machinery and agricultural raw tires increased rapidly, which can fully offset the application of contractual price index adjustment provisions in the first half of the year, raw materials The impact of rising prices and continued price declines.
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