Michelin Group posted sales of more than $14.6 billion during the first half of 2024, down from $15.2 billion during the same period last year.
However, the company boosted its year-over-year segment operating income from $1.84 billion during the first six months of 2023 to $1.93 billion during the same period in 2024.
Michelin officials say the firm’s “focus on value-accretive segments and regions” translated into a mix improvement of just under 2%, which off-set the “negative price effect from indexation clauses in contractual businesses.”
Segment operating income gains were driven by “further improvement in automotive segment operating margin,” as well as “strong margin recovery.”
Sales deep dive
Michelin officials attribute the company’s first half sales decline to a 4.4% in tire volume, “stemming primarily from the group’s strategy of selectively focusing on the product segments, regions and partners most capable of leveraging the full value of (the company’s) technological leadership.”
Looking at specific segments, Michelin’s automotive segment, which includes passenger and light truck tires, posted sales of $7.4 billion during the first half of 2024 versus $7.6 billion the year before, but benefited from a “highly positive product mix, thanks to the steady increase in sales of 18-inch and larger tires and by the favorable impact of raw material costs,” according to company officials.
Michelin’s road transportation segment, which includes TBR tires, achieved sales of $3.5 billion during the first half of 2024, down from slightly more than $3.6 billion recorded during the same period in 2023.
The firm’s overall TBR volume declined by 4.7% during the first half, which reflected “the cyclical slowdown in the OE truck tire markets.” However, Michelin achieved gains in replacement TBR tire sales since the second quarter of 2024, “supported by growth in North America.”
Michelin officials add that the Michelin Connected Fleets program “also reaped the benefits of a value-driven strategy” during the first half, “as streamlining the business portfolio and improving operating efficiency fed through to a significant increase in operating income.”
Volume in Michelin’s specialty tire business “contracted rather sharply” by 7.2% during the first half of 2024, “dragged down by destocking in the mining industry, depressed OE off-road markets and difficulties in serving certain customers in Central Asia.”
Regional analysis
Michelin says overall market demand for OE passenger and light truck tires in North America increased by 1%, “supported primarily by automaker inventory rebuilding” following 2023 labor stoppages. Demand for OE tires in China rose by 5% versus the first half of 2023, led by exports of electric cars to Europe. And demand for OE tires in Europe fell by 5%, dropping sharply during the second quarter of 2024. Declines in Europe were driven by “tightening purchasing power, rising interest rates and reductions in subsidies for the purchase of electric vehicles in certain countries.”
Demand for replacement consumer tires in North America increased by 4% year-over-year, slightly trailing a 6% demand increase in Europe. China’s replacement tire market saw demand increase by 1%.
On the OE TBR side, the “worldwide sell-in market, excluding China, grew by 2% compared with first-half 2024. Regionally, demand for replacement TBR tires declined most dramatically in Europe by 17%, followed by a drop of 9% in North America.
“The decline in Europe reflected a return to more normal levels after three years of strong, post-COVID growth, exacerbated by the still-uncertain economy and more difficult access to financing,” say Michelin officials.
“In North and Central America, demand slipped following the introduction on Jan. 1, 2024, of the new emission standard that had spurred a wave of early buying throughout 2023.”
In the replacement channel, North America experienced the largest gain in demand for TBR tires, registering an increase of 17%, “fueled by the surge of Asian imports ahead of the increase in anti-dumping duties expected in summer 2024.”
Meanwhile, replacement TBR tire demand in South America grew by 4% during the first half of 2024, led by robust growth in manufacturing, while sell-in demand in Europe slipped by 2%, though activity increased there during the second quarter.
Specialty tires
In what Michelin calls the “agricultural, infrastructure and material handling tire” segment, OE markets “ended the period down significantly, particularly in the agricultural (tire) segment, which is more cyclical and adversely impacted by the decline in average farming income.” However, the decline was “less steep” for tires that go on high-powered tractors.
Demand for mining tires “fell slightly short” during the first half thanks to inventory draw-downs by mining operations “against a backdrop of higher interest rates” and a sharper focus on cash flow.
CEO remarks
Commenting on the first half, Michelin CEO Florent Menegaux says that the company “achieved a very solid first half,” despite an unstable economic environment. “These results enable us to maintain our guidance for 2024.
“I am convinced that our value-based approach, which positions us on very high value-added activities and the most accretive markets, is the right one. Michelin is giving itself every advantage to successfully implement its ‘Michelin in Motion 2030’ strategy.”
