• Segment Operating Income: EUR3.4 billion.
• Free Cash Flow: EUR2.2 billion.
• Revenue: EUR27.2 billion, down by 3.1% at constant exchange rates.
• Operating Margin: 12.6% at constant exchange rates, 12.4% at current exchange rates.
• Dividend Per Share: EUR1.38, corresponding to a 52% payout ratio.
• EBITDA Margin: 19.7%, equating to EUR5.3 billion.
• Net Financial Debt: Decreased by nearly EUR170 million.
• Gearing Ratio: 16.7%.
• Passenger Car Tire Market Growth: 2% over 2024.
• Truck Tire Market Growth: 1%, excluding China.
• CO2 Emission Reduction: Decreased by 13% for Scope 1 and 2 emissions.
• Renewable and Recycled Content: Increased to 31% from 28% in 2023.
• Engagement Rate: 84.7%, increased by 1.2 points from 2023.

• Warning! GuruFocus has detected 3 Warning Sign with MGDDF.

Release Date: February 12, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Michelin (MGDDF) reported a strong cash flow generation of EUR2.2 billion for 2024, marking the second-best performance in the company's history.
• The company has maintained a high employee engagement rate of nearly 85%, indicating strong internal morale and commitment.
• Michelin (MGDDF) has successfully reduced its CO2 emissions by 13% compared to 2023, showcasing its commitment to environmental sustainability.
• The company has increased the renewable and recycled content in its products to 31%, reflecting progress in its sustainability initiatives.
• Michelin (MGDDF) has a robust local-to-local strategy in the US, with 70% of its sales in the region being serviced by local production, enhancing its market resilience.

Negative Points

• Michelin (MGDDF) experienced a 3.1% decline in sales at constant exchange rates, with a significant volume decrease of 5.1% in 2024.
• The company faced challenges in the Specialty segment, particularly in the Beyond Road activities, which were impacted by a sharp decline in original equipment sales.
• There was a notable underperformance in the SR1 segment due to platform choices that did not perform well, affecting market share.
• Michelin (MGDDF) anticipates a EUR250 million headwind from raw material costs in 2025, including EUR100 million related to UDR compliance.
• The company is facing uncertainties in the market for 2025, with expectations of a flattish or slightly positive growth, but with potential volatility in the first half of the year.

Q & A Highlights

Q: What are your expectations for the Specialty division's return on sales for the current year, given the 11.6% recorded in the second half? A: Florent Menegaux, CEO, explained that 2024 was a record year for two-wheel activities, and they expect mining to perform better in 2025 without the one-off impacts seen in 2024. However, the Beyond Road segment may not fully recover until 2026.

Q: How does the postponement of the UDR affect Michelin's competitive position, and what are your market share expectations in SR1 and SR2? A: Florent Menegaux stated that Michelin is fully UDR-compliant, and the postponement should not significantly impact their competitive position. In SR1, their market share in OE has temporarily suffered, but they expect recovery as chosen platforms begin to sell.

Q: Can you clarify the impact of tariffs on your guidance and the potential upside scenarios? A: Florent Menegaux noted that the guidance includes known tariffs, but any future changes are speculative. Michelin aims to over-deliver on commitments and has historically managed well through various challenges.

Q: What are the main drivers for achieving the 2025 segment operating income guidance, and how do you see the phasing between H1 and H2? A: Yves Chapot, CFO, mentioned that the guidance assumes a rebound in volumes in the second half, with 45% of income expected in H1 and 55% in H2. Key drivers include mix effects, competitiveness measures, and contributions from mining and non-tire activities.

Q: What is the expected net cash impact from restructuring actions on free cash flow in 2025? A: Yves Chapot indicated a net cash impact of EUR350 million to EUR400 million in 2025, with most of the cash impact occurring in 2025 and 2026.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.