Cie Generale Des Etablissements Michelin Sa · EURONEXT:ML
Cie Generale Des Etablissements Michelin Sa — Michelin — Exane BNP Paribas CEO Conference 2024
57 slides from Cie Generale Des Etablissements Michelin Sa's conference presentation, Jun 6, 2024
Slide 1: CEO Conference Exane BNP Paribas
CEO CONFERENCE EXANE BNP PARIBAS
Slide 2: Increasing cash and margin generation across business cycles
2 Increasing cash and margin generation across business cycles FCF (1) and SOI (2) evolution vs. change in volumes > 3,5 20% 3.5 3,0 15% 2.5 13% 2,0 12% > 1,5 10% 7% 1.5 3% 3% 5% 1,0 2% 1% 1% -1% 0.5 0% 0% -2% - 0 .5 -3% -5% -5% -6% -10% - 1 .5 - 2 .5 -15% -14% -15% - 3 .5 -20% 2008 2009 2010 2011 2
Slide 3: Wide range of destination markets ensuring resilience, growth in non-tire activities
3 Wide range of destination markets ensuring resilience, ambitious growth in non-tire activities Non-tire activities directionally above 20% of total revenue, supported by value-accretive M&A 2023 sales breakdown reference (% of revenue) Reference scope Businesses other than tire manufacturing Rest
Slide 4: 2026 targets: Driving higher profitability
4 2026 targets: Driving higher profitability Segment Operating Income Segment Operating Margin Segment Operating Margin - by SR * (bn €, excl. substantial (1) M&A, @2023 FX) (% of sales) (% of sales) 4.2 14.0% 13.7% SR1 3.6 >14% 3.3 12.5% 12.3% 3.0 2.8 6.5% SR2 >10% 16.5% 2017- 2021 2022 2023 2026 S
Slide 5: 2026 targets: Stronger cash generation, ROCE floor and shareholder return confirmed
5 2026 targets: Stronger cash generation, ROCE floor and shareholder return confirmed FCF before M&A Return on Capital Employed Payout Ratio (bn €, cumulative over the period) (% of net result) 11.4% 49% 5.5 c.50% 44% 4.4 Cumulative 4.0 >10.5% over 10.3% 2024-26 10.1% 21% 2017-19 2021-23 2024-26 201
Slide 6: Taking Group competitiveness to the next level: Manufacturing
6 Taking Group competitiveness to the next level: Manufacturing Strategic levers Tech & Care levers o Local-to-local o IA & Digital o Value-driven production mix o Industrial process optimization o Lower environmental impact o Reduce water and energy consumption o Talent attraction & retention o Saf
Slide 7: Guidance
GUIDANCE
Slide 8: 2024 tire markets scenario maintained overall flat
8 2024 tire markets scenario maintained overall flat, with favorable OE/RT mix evolution GUIDANCE Passenger car / Light Truck * Truck * excl. China Specialties * Mining tires: fundamental demand holds, markets impacted by stock fluctuations Beyond-road tires: slight growth across RT businesses, OE n
Slide 9: 2024 Group scenario & guidance unchanged
9 2024 Group scenario & guidance unchanged GUIDANCE Volumes [-2% ; 0%] Operating performance slightly positive net of inflation Cash-out capex [€2.2bn ; €2.4bn] Segment operating income > €3.5bn at constant FX vs 2023 Free cash flow > €1.5bn before Acquisitions CEO Conference, June 6, 2024
Slide 10: 10
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Slide 11: Appendix
fy ). APPENDIX
Slide 12: April YTD sell-in tire markets above projected range
12 April YTD sell-in tire markets above projected range, driven by additional business days and Truck tires imports into North America ahead of expected tariffs hike APPENDIX Passenger car & Light truck Truck excluding China Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec 2024 2023 Projection prese
Slide 13: A wide diversity of destination markets ensuring Group resilience
13 A wide diversity of destination markets ensuring Group resilience Accelerating growth on polymer composite solutions with FCG acquisition APPENDIX (% of 2023 sales) Main drivers: GDP, PMI, R&D & public spending Main drivers: GDP, public spending, commodity prices, construction Main drivers: miles
Slide 14: Shareholder return: further development of dividend and pay-out
14 Shareholder return: further development of dividend and pay-out APPENDIX Per share data (in €) Target @CMD21 DIVIDEND POLICY 0.50 0.58 1.13 1.25 1.35 (4) • Gradually raise payout ratio towards 50% in 2030 2.42 0.88 2.58 2.81 2.77 • Pay-out calculated on reported net income SHARE BUY-BACK POLICY 2
Slide 15: Leveraging unique and differentiating assets across enlarged playground
15 Leveraging unique and differentiating assets across enlarged playground APPENDIX Tires Services and Experiences Highly engaged and A powerful and widely talented teams recognized brand Connected E-Retail Solutions Distribution Lifestyle & Retail Polymer Composite Solutions Conveyors, Sealing Inno
Slide 16: M&A: A proven track record of successful integration
16 M&A: A proven track record of successful integration APPENDIX Active portfolio management Multistrada & Camso Fenner 2018-2019 : • Multistrada EBIT from negative territory €4.5bn net acquisitions in 2019 to SR1 accretive in 2023 FCG • Camso accelerating in AG Tracks 2021-2023 : €1.0bn acquisition
Slide 17: M&A as a growth & value accelerator
17 M&A as a growth & value accelerator: Accessing new markets and leveraging Group innovation power APPENDIX Clear fundamentals Strict financial criteria Strategic fit EPS-accretive Accelerating from year 1 growth Parental advantage brought by Michelin Group ROCE sustained Value-accretive above 10.5
Slide 18: 2030 ambitions confirmed on People, Profit and Planet dimensions
18 2030 ambitions confirmed on People, Profit and Planet dimensions APPENDIX Be world-class in employee engagement Engagement rate 79.8% 83.5% >85% Be world-class in employee safety TCIR (1) 1.43 1.01 <0.5 People Be a reference in diversities and inclusion of teams IMDI (1) - 72 80 pts (over 100) Be
Slide 19: Raw materials cost breakdown
19 Raw materials cost breakdown APPENDIX FY 2023 CEO Conference, June 6, 2024
Slide 20: Natural rubber price
20 Natural rubber price APPENDIX TSR20 and RSS3 in $/kg 4.8 3.7 4.5 3.4 3.4 2.8 2.6 3.2 2.3 1.9 2.0 2.0 2.1 2.1 2.5 2.5 1.8 1.8 1.6 1.6 1.6 1.6 1.6 1.5 1.5 1.7 2.2 1.8 1.7 1.7 1.7 1.8 1.5 1.6 1.4 1.4 1.4 1.4 1.3 1.4 1.3 1.3 Q1 Q2 Q3 Q4 Q1 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 2 0 11 2 0 1 2 2 0 1 3 2 0 1
Slide 21: Brent price
21 Brent price APPENDIX Brent in $/bbl 112 112 109 98 100 99 82 86 83 80 82 77 73 72 71 62 64 54 55 45 43 Q1 Q1 Q2 Q3 Q4 Q1 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 CEO Conference, June 6, 2024
Slide 22: Butadiene price
22 Butadiene price APPENDIX Butadiene EUROPE in €/t 1952 1773 1258 1113 1112 1011 1006 970 944 1108 798 824 1086 772 812 644 937 722 634 511 656 Q1 Q2 Q3 Q4 Q1 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 CEO Conference, June 6, 2024
Slide 23: Sales by currency & impact on segment operating income
23 Sales by currency & impact on segment operating income (SOI) APPENDIX Q1 2024 currency change vs. € ➔ Q1 2024 currency change vs. € ➔ 12 rolling months 12 rolling months USD 40% -1.2% 20% / 30% AUD 3% -5.0% 60% / 70% EUR 31% - - JPY 1% -11.8% 80% / 85% CNY 6% -6.0% 20% / 30% MXN 1% +8.7% 25% / 30
Slide 24: Outstanding bond issues
24 Outstanding bond issues (As of December 31, 2023) APPENDIX Compagnie Générale Compagnie Générale Compagnie Générale Compagnie Générale Compagnie Générale Compagnie Générale Compagnie Générale Compagnie Générale Issuer des Etablissements des Etablissements des Etablissements des Etablissements des
Slide 25: An adequate cash position with maturities well spread over time
25 An adequate cash position with maturities well spread over time APPENDIX Debt maturities at December 31, 2023 (carrying amount in € millions) 6,000 2030 - 2045 Bond maturities: 2030 (3/sept.) = 1’000 MEUR Loans from financial institutions 2032 (2/nov.) = 500 MEUR 5,000 2033 (1/juin) = 1.5 MEUR Se
Slide 26: Tire businesses
26 Tire businesses
Slide 27: Strengthening leadership in high-value market segments
27 Strengthening leadership in high-value and increasingly demanding market segments APPENDIX Acceleration of >18’’ segment fostered by electrification, Specialities: driving substantial mix enhancement Winning where it matters 2023 +12% Launch of the CAGR * 19’’ > 18’’ by 2025 >100m€ for the world’
Slide 28: Wear particles: considerable competitive advantage
28 Wear particles: considerable competitive advantage, without any compromise on safety APPENDIX Particle emissions: Particle emissions get reduced with each new Michelin vs. other premium tiremakers (1) range (2) Particle per vehicle unit: g/1,000 km 131 136 e.Primacy CrossClimate 2 Pilot Sport 5 1
Slide 29: Tire and road wear particles: definition and state of knowledge
29 Tire and road wear particles (TRWP): definition and state of knowledge APPENDIX Scientific studies have started to measure the environmental impact of TRWP (1) : Studies confirm that TRWP account Studies suggest that most TRWP 5 x 10-2 mm for only a very small proportion never reach estuaries. (<
Slide 30: Services & Solutions
30 Services & Solutions
Slide 31: Services to fleets: a suite of innovative solutions
31 Services to fleets: a suite of innovative solutions that empower mobility players to race towards zero-accident, zero-downtime, zero-emission APPENDIX Unique customer intimacy and usage expertise Actionable insight provider for fleets leading towards Decision levers provider for public and privat
Slide 32: Watèa by Michelin: decarbonize urban LCV fleets
32 Watèa by Michelin: a unique solution to decarbonize urban LCV fleets APPENDIX Stakes of transition to E-LCV Fleets pain points Value proposition LCVs ~ 3-4% of Tailored solution How to transition ? EV, charging solution, maintenance global CO2 emissions Switch to EV ➔ - 60% emissions How to opera
Slide 33: Polymer Composite Solutions
33 Polymer Composite Solutions
Slide 34: Polymer Composite Solutions: Delivering sustainable growth and value
34 Polymer Composite Solutions: Delivering sustainable growth and value APPENDIX Dynamic growth Increasingly EBIT-accretive Low capital intensity PCS sales (€ bn, excl. Solesis) PCS operating margin as a % of sales Capex as a % of sales, 2023 14% CAGR +4.5 pts 9% 8% CAGR ~ SR3 0.20 1.35 level 1.15 5
Slide 35: High-tech materials: expanding beyond tires
35 High-tech materials: expanding beyond tires by leveraging our expertise and AddUp enlevé our innovations, from materials to solutions, for highly demanding applications APPENDIX R&D Manufacturing Growth strategy ● Unique expertise ● Ability to scale up and ● Organic growth acquired in tire design
Slide 36: FCG: Strong financial profile confirmed, on track to deliver synergies
36 FCG: Strong financial profile confirmed, on track to deliver synergies APPENDIX Strong financial profile Targeted EBIT synergies confirmed 2023 FY data (1) Dynamic growth ✓ €21m run-rate EBIT synergies by 2028 +9% ✓ Accelerated innovation pipeline leveraging Group’s R&D assets ~€200m organic reve
Slide 37: Symbio: fast expansion towards worldwide leadership
37 Symbio: fast expansion towards worldwide leadership in light and heavy commercial vehicles APPENDIX Major grants awarded in Europe (IPCEI *) and in the USA (California) Fuel cell development leveraging expertise in materials and industrial processes 2014 to join Michelin and Michelin stake: Faure
Slide 38: Non-financial performance
38 Non-financial performance
Slide 39: Recognized leadership in non-financial performance
39 Recognized leadership in non-financial performance APPENDIX Major ratings (as of December 31, 2023) A- B Low Risk B- 78 / 100 AAA 71 / 100 11.52 CLIMATE WATER Prime Platinum CHANGE SECURITY « LEADERSHIP » « MANAGEMENT » CEO Conference, June 6, 2024
Slide 40: Natural resources and decarbonation
40 Natural resources and decarbonation: driving up industry standards on product performance APPENDIX If the world was driving on michelin PC/LT tires, it would save every year… Tire industry CO2 emissions are mostly related to scope 3 (3) Illustration: Michelin 2023 CO2 emissions (1) (2) 89% scope
Slide 41: Michelin has been leading all major innovations in the tire industry
41 Michelin has been leading all major innovations in the tire industry APPENDIX 1946 Tire Connected Mobility Solutions Polymer Composite Solutions (low rolling resistance) 1992 CEO Conference, June 6, 2024
Slide 42: On the path to full product circularity
42 On the path to full product circularity with 40% renewable or recycled materials by 2030, up to 100% by 2050 APPENDIX (2) (1) (2) (1) … (1) European project sponsored by Horizon 2020; project number: 82068 (2) Carried out with the support of ADEME CEO Conference, June 6, 2024
Slide 43: 1st manufacturer with road-homologated tire with 58% renewable or recycled materials
43 Michelin 1st manufacturer to design a road-homologated tire with 58% renewable or recycled materials APPENDIX On the way to our “100% Renewable or Recycled materials by 2050” goal: new tires with breakthrough technologies Steel incorporating Sustainable recycled scrap metal textile fibers Carbon
Slide 44: Commitment to reduce impact on biodiversity and ecosystems
44 Strong commitment to reduce impact of operations on biodiversity and ecosystems APPENDIX 2023 results, 2030 commitments + To know more (1) Criteria in accordance with the European Union Deforestation-free Regulation (2) Calculated on the basis of 2023 volumes by supplier (3) Per hectare (4) Other
Slide 45: Sustainable natural rubber by Michelin
45 Sustainable natural rubber by Michelin: driving progress across a fragmented value chain APPENDIX ID CARD ~90% of Group’s supply • Dedicated roadmap tracking commitments on zero deforestation, human rights, and farmer come from ~2 M farmers with empowerment an average farm size of 3 Ha Up to 7 mi
Slide 46: Reduction of CO2, VOC emissions and water withdrawals
46 Reduction of CO2 emissions, VOC(1) emissions and water withdrawals: 2023 achievements exceeded ambitions APPENDIX Externality costs evolution (€ millions) +260 590 (3) 545 -104 436 -32 -13 -5 CO2 CO2 Scopes Water Volatile Scope 3(2) 330 1&2 organic compounds Increase in the CO2 cost per ton from
Slide 47: Michelin applies TCFD recommendations
47 Michelin applies the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD) APPENDIX Michelin’s answer See p. 175 of 2022 Universal Registration Document for more details As part of the Supervisory Board’s role of exercising permanent oversight of the Group’s management
Slide 48: Climate strategy: transition and adaptation plans
48 Climate strategy structured around transition and adaptation plans, towards Net-Zero emissions by 2050 APPENDIX Structured around 2 axes: ● A TRANSITION plan including initiatives to decarbonize direct and indirect activities in the value chain (Scopes 1, 2 & 3) and a strategic plan to support a
Slide 49: 2030 environmental ambition: path to net zero in 2050
49 Group’s ability to 2030 environmental ambition: on the path to reach net zero emissions in 2050 have an influence high APPENDIX limited -25%(1) -44%(1) -50% Manufac- Reduce energy Shift towards CO2 emissions turing consumption renewable energy vs. 2010 Transport less, better and differently -15%
Slide 50: Sharp reduction in environmental footprint of operations
50 Sharp reduction in the environmental footprint of our operations, on track to reach 2030 target APPENDIX Reduction of the environmental footprint of our sites ISO14001- certified 100 Water withdrawal x water stress Generated waste MEF(1) i-MEP(2) Organic solvent use // Energy use 2005 2019 2023 2
Slide 51: Diversity and inclusion progress
51 Diversity and inclusion: progress in gender balance and acceptance of diversity, demonstrating the Group’s commitment APPENDIX Every employee can develop his/her talents within the company. Michelin pays particular attention to the internal promotion of manufacturing operators. Achieve parity amo
Slide 52: Michelin governance pillars
52 Michelin governance pillars: clear segregation of management and supervisory powers APPENDIX SUPERVISORY BOARD GENERAL PARTNERS With unlimited joint and personal liability for the Company’s debts MANAGERS SAGES Barbara Dalibard Non-Managing General Partner Chair of the Board Administer and manage
Slide 53: ESG awareness and oversight in governance structure
53 ESG awareness and oversight are fully embodied in Michelin’s governance structure APPENDIX CEO Conference, June 6, 2024
Slide 54: ESG criteria included in Managers' compensation
54 ESG criteria are included in the Managers’ compensation and shared with all employees via performance share plans APPENDIX Fixed compensation Performance share grants Annual variable compensation Subject to performance conditions over 3 years €1,100,000 Capped at 150% of fixed compensation Allo
Slide 55: Glossary
55 Glossary GLOSSARY Free cash-flow excluding M&A: free cash-flow, which is stated before dividend payments and financing transactions, corresponds to net cash from operating activities less net cash used in investing activities, including JV financing, adjusted for net cash-flows relating to cash m
Slide 56: Disclaimer
56 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 documents filed in France with Autorité des marchés financiers, which are also available from the
Slide 57: Investor relations contacts
57 BUSINESS CENTER PARIS TROCADERO Guillaume JULLIENNE 112 avenue Kléber 75116 Paris – France Flavien HUET 23 place des Carmes Dechaux 63040 Clermont-Ferrand – France Benjamin MARCUS investor-relations@michelin.com CEO Conference, June 6, 2024