Cie Generale des Etablissements Michelin SA · EURONEXT:ML
Cie Generale des Etablissements Michelin SA — Michelin — Exane BNP Paribas 5th Nordic Investor Forum 2017
54 slides from Cie Generale des Etablissements Michelin SA's conference presentation, May 24, 2017
Slide 1: Exane BNP Paribas 5th Nordic Investor Forum
Stockholm May 24, 2017 Exane BNP Paribas 5th Nordic Investor Forum
Slide 2: 2016: a year of progress, in line with our 2020 roadmap
2016: a year of progress, in line with our 2020 roadmap 2016 guidance 2016 actual Volumes Above-market growth +2.1% Operating income from recurring €2,692m activities at constant exchange > 2015 up €235m rates Structural FCF > €800m €961m 2 Stockholm - Exane BNPP - 5th Nordic Investor Forum -
Slide 3: Improvement in unit margin due to effective pricing management over time
Improvement in unit margin due to effective pricing management over time Net effect of price mix and raw materials prices on operating income (in € millions ) 2010 2011 2012 2013 2014 2015 2016 +1,133 +264 +159 +103 +118 -93 -266 3 Stockholm - Exane BNPP - 5th Nordic Investor Forum - May 24, 2017
Slide 4: New 2017-2020 competitiveness plan: €1.2bn targeted over 4 years
New 2017-2020 competitiveness plan: €1.2bn targeted over 4 years only 2007-2010 plan Objectives met 2012-2016 plan 2017-2020 plan In € millions Target: €1,000m Target: €1,200m SG&A 251 522 500/550 Manufacturing 406 448 450/500 -Transport Raw materials 365 227 150/200 Total 1,022 1,197 ~1,200 4 Sto
Slide 5: 2016 performance in line with 2020 objectives
2016 performance in line with 2020 objectives Deliver structural FCF > €1,400m Deliver an after-tax ROCE ≥ 15% as from 2020 as from 2020 (in € millions) (in %) ≥ 21.7% 17.3% 17.6% 17.5% 15.8% > 1,400 961 10.0% 833 749 12.2% 12.1% ≥ 15.0% 517 11.9% 10.9% 5.4% 2011 2013 2015 2016 2020 2009 2011 2013 2
Slide 6: Sustained shareholder return policy: dividends and share buybacks
Sustained shareholder return policy: dividends and share buybacks ● Share buyback program ● Total Shareholder Return €297 ─ €750m committed in 2015-2016 and 300 €275 cancellation of 4.5% of outstanding shares 280 ─ 2017: €100m in buybacks planned to offset 260 the dilutive impact of share-based 240
Slide 7: Dividend increase in line with Group gains
Dividend increase in line with Group gains Per share data (in €) 3.25* 2.85 2.40 2.50 2.50 2.10 1.78 2010 2011 2012 2013 2014 2015 2016 2013-2020 payout ratio: ≥ 35% of consolidated net income (before non-recurring items) * Subject to shareholder approval at the Annual Meeting on May 19, 2017 7 Stoc
Slide 8: 2017 guidance: on the road to our 2020 objectives
2017 guidance: on the road to our 2020 objectives 2017 Growth in line Volumes with the markets Operating income from recurring activities at constant exchange rates ≥ 2016 Net price-mix effect vs. raw materials Non-indexed businesses: neutral Structural FCF* > €900m * Adjusted for the payment in Jan
Slide 9: Worldwide price increases for Michelin
Worldwide price increases for Michelin North South Europe China ASEAN America America Up to 8% over the Up to 8% from Up to 3% Up to 8% Up to 8% first four months Feb. to April in January in February in March-April ● Further price increases have been announced in Europe in the Truck (up 5% to 8% fro
Slide 10: A business model strongly linked to consumption
A business model strongly linked to consumption Net sales by drivers PC RT 49% PC OE 12% Consumption Autos 29% 10% Manufacturing Commodities 2016 net sales by sector 10 Stockholm - Exane BNPP - 5th Nordic Investor Forum - May 24, 2017
Slide 11: Q1 2017 net sales, 2017 guidance, On the road to 2020
May 24, 2017 Exane BNPP 5 th Nordic Investor For um 1 Q1 2017 Net Sales up 10% boosted by growth (+7,3%) 2 2017 guidance 3 On the road to 2020 11 Stockholm - Exane BNPP - 5th Nordic Investor Forum - May 24, 2017
Slide 12: Q1 2017: Net sales up 10% boosted by growth
May 24, 2017 Exane BNPP 5 th Nordic Investor For um 1 Q1 2017: Net sales up 10% boosted by growth (+7,3%) 12 Stockholm - Exane BNPP - 5th Nordic Investor Forum - May 24, 2017
Slide 13: Q1 2017: €5.6 billion in net sales (up 10%), with strong growth in volumes
Q1 2017: €5.6 billion in net sales (up 10%), with strong growth in volumes ● Generally expanding market environment ─ Sustained OE demand ─ RT demand buoyed by early buying ahead of price increases ─ Rebound in Mining tire demand ● Q1 volumes up 7.3%, lifted by early dealer buying and the recovery i
Slide 14: Q1 2017 markets lifted by early buying ahead of RT price increases
Q1 2017 markets lifted by early buying ahead of RT price increases PASSENGER CAR: +5% TRUCK: +8% SPECIALTY: +9%/+11% Global OE: +4% Global OE: +9% ● Mining tires: rising demand Global RT: +5% Global RT: +7% led by the end of destocking ● Robust demand in every ● OE: sustained firm growth in ● RT Agr
Slide 15: Strong growth in volumes vs. a high basis of comparison
Strong growth in volumes vs. a high basis of comparison and price-mix stabilizing ahead of price increases YoY quarterly change (in %) Volumes Price-mix Currency effect Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4 Q1 2016 2017 2016 2017 2016 2017 7.3 3.7 4.2 2.5 1.4 -0.1 -0.1 -0.9 -1.3 -1.0 -1.3 -1.9 -
Slide 16: Improved Group positions
Improved Group positions (in € millions and % in tonnes) Q1 2017 Q1 2016 RS1 net sales 3,201 2,897 Volume growth +8% +4% RS2 net sales 1,518 1,430 Volume growth +3% +3% RS3 net sales 848 738 Volume growth +14% +0% 16 Stockholm - Exane BNPP - 5th Nordic Investor Forum - May 24, 2017
Slide 17: Passenger car and Light truck tires: solid performance
Passenger car and Light truck tires: solid performance across all brands and in every segment Passenger car and Light truck growth (YoY) +31% +15% +8% +9% +8% +5% Market Market RS1 MICHELIN brand Other OE + RT ≥ 18" Total ≥ 18" brands Source: Michelin 17 Stockholm - Exane BNPP - 5th Nordic Investor
Slide 18: Product launches driving volume and market share gains
Product launches driving volume and market share gains Passenger Car Truck Specialty MICHELIN MICHELIN Pilot MICHELIN MICHELIN CrossClimate + Sport 4 S X-One Urban Bus X®Guard MICHELIN Power RS MICHELIN XDR3 Convoy MICHELIN TripleA Alpin 5 MICHELIN XWorks BFGoodrich MICHELIN All Terrain T/A K02 Prem
Slide 19: 2017 guidance
May 24, 2017 Exane BNPP 5 th Nordic Investor For um 2 2017 guidance 19 Stockholm - Exane BNPP - 5th Nordic Investor Forum - May 24, 2017
Slide 20: Markets in 2017: early-year growth driven by price increases
Markets in 2017: early-year growth driven by price increases PASSENGER CAR: +2%/+3% TRUCK: +0%/+2% SPECIALTY: +3%/+5% Growth in line with long-term Growth in line with long-term ● Of which Mining tires: trends trends +8%/+10% ● Slowing momentum in the ● China: Return to growth in the ● Of which Agri
Slide 21: PC Tire Market
PC Tire Market April 2017/2016 % YoY change Europe including Europe excluding in number of tires North America Brazil China Russia & CIS* Russia & CIS* Original equipment -15% -16% -4% -1% -3% Replacement -4% -5% -4% +0% +2% YTD April 2017 % YoY change Europe including Europe excluding in number of
Slide 22: TB Tire Market
TB Tire Market April 2017/2016 % YoY change Europe including Europe excluding in number of tires North America Brazil (Radial + Bias) Russia & CIS* Russia & CIS* Original equipment -7% -9% -8% -16% Replacement +1% +2% -7% -15% YTD April 2017 % YoY change Europe including Europe excluding in number o
Slide 23: 2017 guidance confirmed: on the road to our 2020 objectives
2017 guidance confirmed: on the road to our 2020 objectives 2017 Growth in line Volumes with the markets Operating income from recurring activities at constant exchange rates ≥ 2016 Net price-mix/raw materials effect Non-indexed businesses: neutral Structural FCF* > €900m * Adjusted for the payment
Slide 24: 2017 scenario: H1 lifted by volumes and H2 by price increases
2017 scenario*: H1 lifted by volumes and H2 by price increases H1 2017 2017 Impact of raw materials costs Around €900m headwind Currency effect Around a positive €100m Net price-mix/raw materials €100-200m Indexed businesses: negative effect headwind Non-indexed businesses: neutral Competitiveness p
Slide 25: Raw materials: a negative impact mainly in H2
Raw materials: a negative impact mainly in H2 2017 assumptions per half 140 137 135 133 130 132 125 124 120 115 Purchase cost 110 P&L cost 106 105 105 100 101 100 95 H1 2016 H2 2016 H1 2017 H2 2017 25 Stockholm - Exane BNPP - 5th Nordic Investor Forum - May 24, 2017
Slide 26: Worldwide price increases for Michelin
Worldwide price increases for Michelin North South Europe China ASEAN America America Up to 8% over the Up to 8% from Up to 3% Up to 8% Up to 8% first four months Feb. to April in January in February in March-April ● Further price increases have been announced in Europe in the Truck (up 5% to 8% fro
Slide 27: On the road to 2020
May 24, 2017 Exane BNPP 5 th Nordic Investor For um 3 On the road to 2020 27 Stockholm - Exane BNPP - 5th Nordic Investor Forum - May 24, 2017
Slide 28: An ambitious value creation target: ROCE at 15% from 2020
An ambitious value creation target: ROCE at 15%* from 2020 Tires Services Experience Materials 2015-2020 Net Sales Net Sales Net Sales Capitalize on our objectives + 20% x2 x3 leadership MICHELIN net promoter score Synthetic rubber EverGrip TM Action plan and first steps EFFITIRE™ by Shorter product
Slide 29: Investor calendar
Investor calendar ● Upcoming events: ─ May 19, 2017: Annual Shareholders Meeting ─ July 25, 2017 after close of trading: First-half 2017 results ─ October 19, 2017 after close of trading: Third-quarter 2017 net sales ● Dividend dates: ─ May 24, 2017: Ex-dividend date ─ May 25, 2017: Record date ─ Ma
Slide 30: 1st in the largest number of essential performances
1st in (the largest number of) essential performances: ● 1st in DRY braking (1) ● 1st in WET braking (1) ● 1st in DRY laptime (1) ● 1st in longevity (2) LEGAL MENTIONS (1): Thanks to external tests realized by TÜV SÜD in June and July 2016 in 255/35-19 96 Y XL with BRIDGESTONE Potenza S001, CONTINEN
Slide 31: Appendices
May 24, 2017 Exane BNPP 5 th Nordic Investor For um Appendices 31 Stockholm - Exane BNPP - 5th Nordic Investor Forum - May 24, 2017
Slide 32: PC and Light truck tires: Robust demand in every region
PC and Light truck tires: Robust demand in every region and segment, lifted by early dealer buying Passenger car and Light truck market at March 31, 2017 (YoY in %, in number of tires) North America Europe excl. Russia & CIS Europe incl. Russia & CIS +5% +5% +5% +6% +2% +3% Global Market China Asia*
Slide 33: Truck & Bus: rebound in global market
Truck & Bus: rebound in global market fueled by sharp growth in China and sell in pre-buy Truck tire market at March 31, 2017 (YoY in %, in number of new tires) North America Europe excl. Russia & CIS Europe incl. Russia & CIS +14% +13% +13% +9% +9% -8% China Asia* South Africa, India, Global Market
Slide 34: 2016-2020 projections: growing worldwide demand
2016-2020 projections: growing worldwide demand PC OE&RT market projection TB OE&RT market projection (in millions of units) (Radial & Bias in millions of units) CAGR 1,689 CAGR 229 ~ 2.5% ~ 1.5% 216 o/w ≥17" CAGR ~ 7% or +37m tires/year 1,530 2016 2020e 2016 2020e 34 Stockholm - Exane BNPP - 5th No
Slide 35: 2017: Mining tires, return to growth – Agricultural tires stabilizing
2017: Mining tires, return to growth – Agricultural tires, stabilizing before returning to growth Agricultural tires* (base 100 in 2016, in tonnes) Mining tires (base 100 in 2016, in tonnes) ~115/125 ~104/108 ~108/110 100 ~100 100 2016 2017e 2020e 2016 2017e 2020e * OE & RT in Europe and North Ameri
Slide 36: 2016 Operating income up €237m at constant exchange rates
2016 Operating income up €237m at constant exchange rates YoY change in operating income from recurring activities (in € millions) +€115m +545 -386 +233 -264 +4.5% -89 Price mix Competitive- +22 -122 Inflation 2,692 +176 o/w mix: ness +52 Depreciation Other 2,577 Raw materials Currency effect Volume
Slide 37: Improvement in unit margin due to effective pricing management over time
Improvement in unit margin due to effective pricing management over time Net effect of price mix and raw materials prices on operating income (in € millions ) +1,133 +118 -93 +159 +264 +103 +139 +104 +115 +44 -64 -266 -198 2010 2011 2012 2013 H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016 ● 2016: n
Slide 38: Demonstrated ability to pass along sharp price increases
Demonstrated ability to pass along sharp price increases in response to surging raw materials costs Price and raw materials effects by half year, 2011-2012; price increases (in € millions and % of net sales, YoY) 1400 1,400 Up to +13 % year-on-year price 1200 1,200 repositioning 1,233 1000 1,000 equ
Slide 39: A business that structurally generates free cash flow
A business that structurally generates free cash flow Structural free cash flow 961 (in € millions) 833 749 717 2013 2014 2015 2016 Free cash flow (1) 1,154 322 653 1,024 Acquisitions (2) 0 (400) (312) (16) WCR impact of raw materials costs (3) 405 177 132 79 WCR impact of year-end volumes (4) nm (1
Slide 40: Investing to create value
Investing to create value Successfully carry out our priority Capex Closing the gap between Capex and M&A projects to drive expansion: and depreciation: (in € billions, at current exchange rates) ● In growing markets: Premium PC, North America and Asia 1.8 1.7 to 1.8 1.6 to 1.8 ● In the supply chain
Slide 41: 2016 net sales by currency
2016 net sales by currency Other AUD % of net sales EBIT sensitivity to €/$ exchange rate: BRL CAD AUD 1% A one cent change in the average annual CNY BRL 3% €/$ exchange rate would lead to a € 15-20 million change in EBIT for the year. CAD 3% CNY 5% €/$ exchange rate – 2012- Jan. 2017 EUR 34% 1.45 1
Slide 42: Raw materials in 2016 and 2017
Raw materials in 2016 and 2017 in USD/kg Raw material purchases in 2016 (€4.3bn) 400 300 RSS3 8% €/$ exchange rate: 200 Textiles Average Q1’16 : 1.102 10% 25% 100 Natural -3.4% TSR20 Steel cord rubber 0 Average Q1’17 : 1.065 2013 2014 2015 2016 2017 15% 150 300 indexed Chemicals 250 100 25% 200 17%
Slide 43: Natural rubber price trend
Natural rubber price trend Indexed, at end of April 2017 (per kg, base 100 in Q1’15) TSR20 in $ RSS3 in $ Quarterly average TSR20 in $ & quarterly change in % 180,0 1.4 1.5 1.3 1.2 1.2 1.4 1.3 1,7 2.1 2.2 2.0 1.6 180.0 -5.6% +6.7% -11.6% -10.6% -4.0% +19.7% -4.2% +26.4% +26.8% +4.1% -10.4% -16.7% 16
Slide 44: Brent price trend
Brent price trend Indexed, at end of April 2017 (per barrel, base 100 au Q1’15) Brent in $ Quarterly average Brent in $ & quarterly change in % 55 63 51 45 35 47 47 51 56 56 53 54 140 -28.5% +15.0% -19.3% -12.4% -21.7% +33.2% +0.3% +8.8% +8.9% +0.8% -6.1% +2.3% 120 100 80 60 40 20 0 Q1’15 Q2’15 Q3’1
Slide 45: Butadiene price trend
Butadiene price trend Indexed, at end of April 2017 (per tonne, base 100 in Q1’15) Butadiene Europe Quarterly average Butadiene in € & quarterly change in % 608 642 745 628 515 618 670 773 940 1,400 1,750 1,750 330 -28% +6% +16% -16% -18% +20% +8% +15% +22% +49% +25% +0,0% 280 230 180 130 80 30 Q1’1
Slide 46: A robust balance sheet after the share buybacks
A robust balance sheet after the share buybacks, confirmed by the rating agencies Gearing Solid long-term ratings Net debt/equity, in % 22 20 S&P A-2 Short term Moody’s P-2 12 S&P A- 11 Long term 9 Moody’s A3 7 S&P Stable 2 Outlook Moody’s Stable 2010 2011 2012 2013 2014 2015 2016 46 Stockholm - Exa
Slide 47: A comfortable cash position
A comfortable cash position Debt* maturities at Mar. 31, 2017 (book value, in millions €) 3 500 3,500 Loans from financial institutions Securitization 3 000 3,000 Bond 2 500 2,500 CP Derivatives and leases 2 000 2,000 Cash and cash equivalents Cash management Financial Assets 1 500 1,500 Confirmed B
Slide 48: Outstanding bond issues
Outstanding bond issues (as of May 5th, 2017) Compagnie Générale MICHELIN MICHELIN MICHELIN MICHELIN Issuer des Etablissements Luxembourg Luxembourg Luxembourg Luxembourg MICHELIN Issue Senior Note Senior Note Senior Note Senior Note Senior Note Type Bond Convertible Bond Bond Bond Principal amount
Slide 49: 2016: a year of progress, in line with our 2020 roadmap
2016: a year of progress, in line with our 2020 roadmap Group operating income and margin* & ROCE 3000 3,000 12.8% 12.2% 14% 11.1% 12.9% 11.9% 12.2% 11.1% 2,500 2500 10.5% 10.9% 12.1% 12% 9.7% 9.4% 11.3% 10% 2,000 2000 9.5% 11.0% 9.8% 5.6% 8% 1,500 1500 5.6% 5.4% 2,577 2,692 6% 5.8% 2,423 2,234 1000
Slide 50: Improving PC margins: product innovation and 17" and over strategy
Improving PC margins: product innovation, contribution from the 17“ and over strategy, better customer service RS1 operating income and margin* (in € millions and %) 15% 1,800 1 800 13.1% Target for 1,600 1 600 2016-2020** 1,400 1 400 11.5% 1,200 1 200 10.5% 11% 10.4% 10.2% 1,000 1 000 9.4% 9.3% 9.2
Slide 51: Consolidation in TB margin led by competitiveness
Consolidation in TB margin led by competitiveness, product innovation and customer satisfaction RS2 operating income and margin* (in € millions and %) 13% 1,200 1 200 Target for 1,000 1 000 2016-2020** 10.4% 9.7% 800 8.1% 9% 7.6% 7.8% 600 6.6% 400 4.4% 3.5% 2.5% 503 495 645 580 200 427 444 249 233 1
Slide 52: Specialty businesses: solid margin resistance in challenging markets
Specialty businesses: solid margin resistance in challenging markets RS3 operating income and margin* (in € millions and %) 900 26.0% 800 24% 700 600 21.5% Target for 20.6% 2016-2020** 500 17.9% 17.8% 946 19.3% 17.8% 18.6% 18.6% 400 694 645 300 574 548 527 17% 200 388 412 432 13.3% 100 270 0 2007 20
Slide 53: Disclaimer
Disclaimer "This presentation 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 documentation published in France by Autorité des Marchés Financiers available from the http://www.michelin.co
Slide 54: Contacts
Contacts Valérie MAGLOIRE Matthieu DEWAVRIN Humbert de FEYDEAU +33 (0)4 15 39 84 68 27, cours de l’île Seguin 92100 Boulogne-Billancourt - France investor-relations@michelin.com 54 Stockholm - Exane BNPP - 5th Nordic Investor Forum - May 24, 2017
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