Half Year 2025 Compagnie Générale des Établissements Michelin Société en commandite par actions Earnings Call
Ladies and gentlemen, gentlemen, welcome to the Michigan conference call.
Speaker Change: I now hand over to Mr. Floron manigot, chief executive officer and Mr. Eve shappell, general manager and group CFO.
Gentlemen, please go ahead.
Speaker Change: Good evening, ladies and gentlemen. Thank you for joining us tonight for our semester results.
Speaker Change: In, uh, highly environment, volatile and environments that I am sure everyone has noticed.
Speaker Change: I would like to emphasize the very solid profile of our group.
Speaker Change: We what we can see on the slide is that we have a very engaged and agile teams.
Speaker Change: Which was which, which, which US in a very good position in term of Engagement, we have the ability to cope with crisis quickly. And to adapt,
Speaker Change: And we also have a very strong Innovative background.
Speaker Change: We have built over time, robust financials.
Uh, high level of profitability and cash generation and a strong balance sheet.
Speaker Change: All major agencies rating at a level with scope and Moody's reaffirming their notation of a few weeks ago.
Speaker Change: Our local to local sourcing strategy. Pays dividend.
Speaker Change: Especially in this time.
Speaker Change: 70% of our Us sales is produced in the US.
Speaker Change: And the same Us sales 90% of the same Us sales is usmca compliant.
Speaker Change: Our business profile is very balanced both in terms of destination markets and geographies.
Speaker Change: And this participates.
Speaker Change: To our resilience in turbulent times.
Speaker Change: We are evolving in a very challenging and unpredictable context.
first public regulations that are um,
Speaker Change: amounting, um, appearing everywhere, we have duties, uadr taxes and all in all
Speaker Change: These these um, new duties taxes, um, regulations have a negative impact of more than 100 million on our group results. In the first semester 2025,
Forex as well, and
Speaker Change: I'm referring mainly to the US, uh, Euro US dollar euro.
Speaker Change: Exchange rate is evolving very quickly and we started the year with a positive, uh, effects assumption for 2025. And now we see a negative impact with a Euro, appreciating sharply versus most currencies, especially the US dollar,
Speaker Change: We also have risk on global growth and the consequence of Economic and geopolitical uncertainty.
Speaker Change: Businesses. Hate uncertainties.
Speaker Change: In the context.
Speaker Change: But we have taken actions to manage risk and to seize opportunities.
Speaker Change: We have adapted and stabilized. Our where to play. We have now executed from most of the least active areas, and this adjustment is mostly behind us.
We have a clear OE positioning working with the right partners and other Fair contractor. Conditions.
Speaker Change: We have optimized our manufacturing footprint.
Speaker Change: We have done a lot of the past 2 years.
Speaker Change: 12 activity closures, have been announced and we are pursuing with 2 announcement over the past quarter.
Speaker Change: we are starting to see the benefits of it both in terms of loading and in terms of financials,
Speaker Change: We also have a sharp steering mode uh, in the short term agility in adjusting. Our spending to the current context, both in effects and capex,
Speaker Change: And in the median term, we continue to invest in the drivers of our differentiation.
Speaker Change: I mean, 2 of them 1 is digitalization and 2 is innovation.
Speaker Change: And thanks to our actions and despite numerous uncertainties, we are maintaining our financial Ambitions for the year 2025.
In the absence of any further deterioration in the economic environment.
Speaker Change: In the second semester of 2025.
Speaker Change: A lot of unexpected events.
Speaker Change: Will occur across the world and will affect the general economy and our markets in a positive or A negative way in the year to go.
We have and we are solid on our fundamentals.
Speaker Change: And determine to leverage every opportunity, what you can see on the screen now.
Speaker Change: Uh, is our performance in a 360 mode as you're aware at mishnah. We always look at the group's performance. From a combined perspective.
Speaker Change: People profit and planet.
Speaker Change: On the people's side, uh, we have made strong Improvement in terms of safety and also in term of retention rate for employees with less than 2 years seniority.
Speaker Change: And you see the rate has improved and that shows the ability of our group to retain its new talents,
in terms of profit we have generated 1.5 billion segments, operating income.
Speaker Change: Solid H1. Um, if you consider the strong headwinds and it is in line with
Speaker Change: our sequencing of our profit generation for the year with, um, um, this year should be more back and loaded.
Speaker Change: In term of free cash flow. You see, um, almost at the equilibrium, we have returned to, um, seasonal pattern of cash flow generation with a strong increase in capital. Um,
Capital a working capital requirements.
Speaker Change: In the first half of the year.
in term of Planet, you see we have had a strong reduction in our
CO2 emissions, minus 15%, mostly driven by our progress initiatives in that respect.
And it's across all our activities.
Speaker Change: As a reminder, our climate related ambitions.
Speaker Change: Have been validated by sbti.
Speaker Change: And the second metric to emphasize our progress. There is around
Speaker Change: uh water withdrawal. You see we have um uh it has diminished by 11%
Speaker Change: Thanks to the again, the numerous actions taken into our plans.
Speaker Change: We have just obtained a AAA from the carbon disclosure project. CDP rewarding our group's commitment towards climate change, water, security, and supplier engagement.
Eve Shappell: And now leave the floor for more details with Eve.
Good evening, ladies and gentlemen. So I'm going to drive you through our results for the semester and the guidance for the full year.
Eve Shappell: So first regarding the market, I just want to remind that when we speak about OE volumes, it's linked to the production of vehicles and the sales of tires to produce vehicles. And the replacement volumes are, uh, the selling market. So the self from manufacturers to distributors or or the Imports, uh, in a given country for non-local Productions.
Eve Shappell: um, so you see first that on the passenger car and and Light Truck segment, uh, we have a contractor's picture between a regional equipment and and replacement
With, uh, a sharp drop of original equipment, sales Market, in Europe and North America.
Eve Shappell: Uh, plugged by consumer confidence, question about the pace of electrification in some countries, and of course, the impact of incentive on this electrification.
On the other end, the market in China was pulled by incentive and bi export, uh, and grew by 10%.
Eve Shappell: On the replacement Market.
Eve Shappell: The market grew by 3% overall plus 5 in Europe plus 2 in North America and zero in China in Europe and North America. We believe that the market is mostly pulled by anticipation in the inclusion of anti-dumping inquiry in Europe.
And the threat of strong tariff from particularly, from Asian countries in in the in the US.
On the 2 wheel Market, the market know is that has no base which is quite Uh, current between selling and sell out. And the market grew steadily, uh, in uh, in the first semester
On the track and the market, you see as well. That the original equipment Market are down in Europe and North America in truck and bus. We focus only on the regions where we have significant market share. So basically it's Europe and the Americas.
Eve Shappell: Um in uh in uh in North America. Uh the minus 19% is even worse if we look at Class 8 Vehicles. So the the widest, the biggest tractors. Uh and it mostly due to the accumulation of inventory by uem over the past 3 years.
Eve Shappell: When at the same time, the new US Administration decided to postpone some uh environmental regulation. That would would have triggered uh anticipated purchase from the fleet. And on top of that in the current on the oral context, The Fleets are hesitating to invest in new vehicles um because of the lack of visibility and uncertainty.
Eve Shappell: Uh, so the market has been down already since June July August last year, and it has continued over the first semester.
Eve Shappell: like a group by 4%, but we observe very strong, uh, movement of imports, particularly in North America, uh, from a tier 3 brands from Asia, probably, as well, in anticipation of some
Eve Shappell: Troubles over, uh, over the the countries of exportations.
Eve Shappell: Overall, when we look at distributors in both passenger care and truck tires, uh they seem to be a bit over uh stock uh looking at the budget brands.
Eve Shappell: But looking at our own Brands, uh, we consider that we are at a healthy level both in Europe and North America across both segments.
Eve Shappell: On the speciality side, the picture has not considerably changed uh, versus last year, we are still seeing mining replacement in Beyond Tire in aircraft growing at the CD pace.
Uh, Mining and and replacement tire for be replacement for beyond the road tires. At let's say low single digit pace.
Eve Shappell: Uh, at the same times the original equipment markets for agriculture. Infrastructure is still down. Uh it's for probably the third semester in a row and we believe that probably during the second half of the year will be at the market will have probably bottom.
Eve Shappell: The composite polymer solution show, overall, stable, uh, Evolutions, uh, over the semester.
now, looking at the bridge of ourselves, uh,
So, first You observe that, uh, uh, the cells are done by down by 3.4%, uh, at current foreign exchange rate.
Eve Shappell: Uh, given the 200 million. So 1.5 points of currency affect, uh, the the sales are done by 1.9%,
Eve Shappell: At ISO Forex.
Eve Shappell: so, maybe before I, I detailed the um,
Eve Shappell: The different elements of the bridge. I would like to uh, to uh, preliminary statement as you open Union as open and investigation into
Eve Shappell: Statement, as or answer to question about pricing during public earning calls.
Eve Shappell: Although limited to Europe will not comment, on pricing matters.
And uh, we maintain that we have uh, we are complying with the competition rules and we are actively defending our case, but given the circumstance will not detail. For example, the breakdown between price and mix and we not enter about detail about the pricing.
Eve Shappell: Uh so the different elements, you see uh of course, the volume effect which is minus 6.1%.
Eve Shappell: Uh, basically, it's if you look overall at the group level, it's minus 18 for original equipment and minus 1.2 for replacement.
Eve Shappell: You see that no entire business are contributing positively plus 02 at the group level.
And uh, we benefit from a strong price mix effect driven both by price.
Eve Shappell: We benefit from uh uh the indexation clo, uh, closest uh, following 2024, raw material cost increase.
Eve Shappell: And mix, uh, both with the product brand and Market mix, which is obviously positive, due to the uh big difference between original equipment and Replacements, markets evolutions.
Eve Shappell: Looking now at the evolution of our volumes and to give you a little bit more flavor about this, uh, volumes Evolution. So, you see that overall original equipment account for 985% of the total volume decline.
Eve Shappell: Mainly in truck and agricultural markets.
Eve Shappell: When some targeted business, segments are generating growth.
Eve Shappell: so, in original equipment, uh, we are as well panelized for passenger car in rs1 uh by customer and vehicle mix which is unfavorable
Eve Shappell: Uh, this is the market.
Eve Shappell: On the replacement Market, the mission brand is flat and the loss of volume is mostly coming from other brands.
Such a Costa, for example, in Indonesia or unreal in, in the US.
Eve Shappell: Looking at the second segment. So Transportation You observe a sharp drop of OE on AV vehicle, particularly the class a dimension in North America.
Eve Shappell: When replacement cells are stable and we observe that the machine brand is uh keeping his share of line in this in this segments.
And on the species. Uh strong drop in OE. Mostly triggered by agriculture in infrastructure. Businesses.
Eve Shappell: uh,
Eve Shappell: a drop in replacement, which is mostly coming from other brands such as the camo brand, for example, when at the same time, uh, Missing replacement, for example is growing in a replacement in Aro as well as in mining and Aviation.
Eve Shappell: no moving to the, uh,
Eve Shappell: uh,
to the bridge of the segment operating income.
Eve Shappell: so, uh,
Eve Shappell: so, at the end of the semester, uh,
Our segment operating um at constant Forex is at 1.5 uh billion Euro representing 11.3% of margin. We have nearly 50 uh million euro of negative currency affect mostly triggered by the evolution of the US dollar during the second quarter.
Eve Shappell: Um, and looking at the other elements. So scope effect is not meaningful at that, uh, uh, during the semester
Eve Shappell: The important volume effect is due at 23, by the margin affect driven by the volume 1/3 due to the, uh, inability to absorb the fixed cost linked to this volume drop, uh, which is penalizing, of course, uh, the level of capacity utilization in our factories.
Eve Shappell: The price makes represent nearly 500 uh, million euro.
And looking now at the raw materials and the manufacturing and Logistics. So uh in raw materials you have uh, uh, mostly the effect of the increase of the raw material during the second half.
Eve Shappell: Uh, of 2024.
Eve Shappell: The, for example, the natural rubber the, but again, stay at a pretty high level till basically the month of March. And I started to drop uh after uh, the beginning of April.
Eve Shappell: And in these 240 million, uh, you have nearly 63 million euro which is coming from the tariffs uh implemented in in North America.
when we look at the manufacturing and logistic cost,
Eve Shappell: uh, it include nearly 50 million linked to EU drip implementation. The the premium we pay on natural rubber as although we have decided to implement, uh,
Eve Shappell: According to the directive uh the the E UDR to purchase the UDR, natural rubber, uh, the European Parliament, decided to postpone this regulation at the very end of the last year. Uh, and in this context, if family difficult to repercute this, uh, cost to our customers,
Eve Shappell: And uh, during the first, uh, the first semester, we have some positive effect of the start of some positive effect of those situation, uh, but due to the fact that we are running at a lower capacity than plan, uh, this effect is not fully visible. Yet in our PML
Uh you see that agna are uh well managed because 23 million represent less than the inflation just on the uh payroll and the agna. And we observe a positive contribution of the non Tire business over the semester.
Eve Shappell: Now, looking at, uh, the, uh, profitability across segments. Uh, they are, it's not a surprise, the, the segment, which is the most impacted, uh, By the Drop in volume, is mostly the second segment, uh, where volumes are dragged down by the uh, original equipment market and sales.
Eve Shappell: Minus 9.3%. So consequently, it has a huge impact on the operating margin of this segment.
Eve Shappell: The first segment is showing a stronger resilience, thanks to a very positive, mix effect, both market, and product, and brand effect.
Eve Shappell: And uh, in the I3, uh, we land at 14.5%. So it's
Eve Shappell: Nearly 100 million more than 1 million less than last year. But with very contrasted situation, strong drop in Beyond Road profitability. Due to the original equipment effect and the same impact of factory capacity utilization, but with a a growing contribution from Mining and uh, aircraft tires.
Looking now at the cash generation. Uh,
We end the year with the nearly zero cash uh flow minus 100 million at the end of the semester for. Sorry, it's a semester not the year.
Eve Shappell: Our ebda is globally in line 18.669 with the, uh, the level of the previous years, uh, in percentage. Of course, it's penalized by your volumes.
Eve Shappell: Slightly impacted in, in absolute value.
Eve Shappell: Uh we are now back to let's say the usual seasonality where our working capital is growing during the first semester in reality growing till the end of August.
Eve Shappell: Uh, and then decreasing uh, during the 4 last month of the year. Uh, uh, and particularly at the end of June 2025. Uh, we have in the 1.2 billion increase in change. In working capital, you have nearly 250 million, 60 million, linked to inventories, which is shared between volumes 2/3, and price 1/3
Uh, a contra also increase. And here there is a 1-off effect which is due to the change of our distribution scheme in North America. At the end of last year, we were still working with ATD but with a very constraint uh credit facilities
Eve Shappell: And when we decided to switch, uh, to stop to work with ATD during the, the first half of this year, uh, we are of course working with other customers that are benefiting from. Let's say better conditions.
Eve Shappell: Other elements like capex or restructuring or taxes are quite consistent with the previous year. Uh we just have to notice that in the GV and other financial asset variations we have nearly 90 million euro 100 million dollars of dividends paid by our joint venture TBC following the disposal of the Midas franchise in North America.
Eve Shappell: At the end of June 2025, our debt has slightly decreased versus June 2024 or 300 million. Um
Eve Shappell: Of course, versus the end of the year. It has increased mostly because of the of the dividend paid at the end of May, uh,
Speaker Change: And we have a gearing at 22.2%, so, uh, slightly better than last year at the same period. And I will not further comment on the agency. Rating as Florence, has already explained that we are
Speaker Change: We have 4 a, uh, uh, ratings for our long-term debt, by all the, uh, the agencies.
Speaker Change: so looking looking and in order to try to give you some colors about the, our guidance,
Speaker Change: Uh, we we are in an unpredictable and extremely volatile environment.
Speaker Change: So, when we look at the first segment passenger car and Nitra, uh, we believe the overall the year should land between minus 2 and plus 1%.
uh, with probably a slightly uh, uh, comparing H2 to H1, uh, worst perspective on H2 and H1
Speaker Change: Um, so we believe that the the market should be slightly down in H2 on OE on replacement. We expect the market to be overall flat.
Speaker Change: Uh, probably with less self of uh less non pool brand flows.
Speaker Change: On 1 hand. And as well, a higher comparison, uh, basis in 2024, uh, for example, in Europe, in 2024, we benefit from relatively good winter season, uh, which might not be necessarily the case, uh, in 2025
Speaker Change: As far as the truck and bus segment is concerned. Uh, we expect the market to slightly Rebound in Europe, but we believe that the North American will still be, uh, OE cells will still be depressed. Over the the the second semester
Speaker Change: And the on The Replacements a little bit, the same picture with the market stable versus the second half of last year.
Speaker Change: Especially no major change, uh, at 1 stage. We believe that both Agricultural and construction infrastructure. Original equipment, Market will probably reach a bottom and, uh, we we rather expect a reborn in 2026 of this Market than in the second half of 2025.
Speaker Change: no, before coming back to the, uh, to the guidance I would like to to share with you the fact that despite there is this
Speaker Change: As conditions, we are determined to fight and hence our customer value proposition.
Thanks to several levers.
Speaker Change: The first 1 is obviously our product plan.
Speaker Change: We have major, uh, new product launch during 2025,
Uh I just took 2 example here in the first segment, the new cross climate 3 uh which is initiating a new segment with the cross climate sport uh segment.
Speaker Change: And in the transportation industry, the missing line grip d, uh which will give plus 20% of mileage and plus 20% of rolling resistance uh to the end user.
Speaker Change: Looking now at the volumes in the mining. We, uh, we are now starting to see the the, our sales rebounding. So we expect the second half to be significantly above the the the first half of the year.
Speaker Change: And then beyond Road as well, we are observing some segments of the market where, uh, sales should stabilize during the second half.
Speaker Change: now to give you some other perspective, uh, our presence in China, uh,
We have been in China now for nearly 46 years uh, commercially and nearly 30 years from a manufacturing standpoint.
Speaker Change: China represent roughly 6% of the group sales we have 6,000 employees.
5 factories including our polymer composite solution, factories and R&D Center.
Which is here to serve the local market and particularly the local oems.
Speaker Change: And we are enjoying a premium, uh,
Speaker Change: First position, in a premium Tyre market share both in Ai and Arty on the first segments, the machine brand in China, very strong awareness 89% nearly the level. We have in some Western European countries.
Speaker Change: And uh, our sales are supported by a strong franchise program tire, plus with the 1700, uh, service centers across the country.
Speaker Change: We have as well, very strong position with leading domestic oems.
Speaker Change: Uh, that we we serve in China JD by D Sak. Xiaomi Neo sharpen do to and and more as well.
Speaker Change: In term of, uh, Innovation and ability of the group to, uh, offer the best compromise of performance versus our competitors. I would like to come back on the, the last publication from adak, uh, adak. Summarized in the last June, uh, all the studies they have done in entire abrasion since 2022.
Speaker Change: And uh,
Speaker Change: Looking at real usage. So with Convoy of vehicles, uh
Speaker Change: Uh, Miss stand forward of its premium competitors in term of abrasion, so quantity of particle emitted for 1,000 kilometer. So we are in average 27% better than our premium competitors.
Speaker Change: And 18% better than the.
Speaker Change: The first of this, premium competitors.
Speaker Change: And Ada mentioned that missing continue to offer. By far, the lowest abortion rate were at the same times.
Uh, we offer the best balance of performance. When you look at Energy Efficiency, mileage safely, handling capabilities and Noise.
Speaker Change: Last in composite polymer solution. As you know, we have a choir in the recent year, different activities.
Speaker Change: Generally exposed to different Market than the, uh, automotive. And I just want to share with you 2 example, where our research and development capabilities, uh, allow these companies to accelerate, uh, their Synergy for their mission critical applications.
Um in for example the gang way below. So for trains or Metro uh Missing technology hence the durability, the tear and the UV resistance and the soundproofing of the vehicles.
And in another application, which is linked to uh, expansion tanks for energy Supply. Uh, we are able to improve uh, the continuity and the security of the product and avoid any contamination product contamination. Thanks to the materials that we introduced in these products.
so that's another element, which give us confidence in our ability uh, to further grow in this business segments,
Speaker Change: So now looking to the full year as the floor mentioned and we are in a very uh erratic environment. Both from uh uh the Tariff, the overall economic uh perspective. And uh the foreign exchange rate.
Speaker Change: um,
Speaker Change: so, we have, uh, in the absence of any further deterioration, in this economic environment, during the second half of the year, uh, our outlook for the full year, remain unchanged with a segment, operating income above the 1 of 2024 at ISO 4X,
Speaker Change: And the free cash flow, uh, above 1.7 billion Euro before m&a. But at current Forex
Speaker Change: um,
And and in this, in this uh, uh, context.
Speaker Change: we are going to pursue, uh, and to implement
Speaker Change: From the 1st of August, uh, the second trench of our share buyback program, uh, to be completed by the end of the year, with the program of 20050 million euro, which is uh, consistent with the announcement, we made in February 24, with the 1 million share buyback over 3 years.
Thank you very much for your attention and I think, now we can move to the Q&A session.
Speaker Change: Thank you, sir. Ladies and gentlemen.
Speaker Change: If you wish to ask a.
Speaker Change: Question. Please. Press star and 1 on your telephone keypad. We kindly ask you to ask 2 questions only per analyst or investor and please to ask your questions in English.
First question is from Harry Martin of Bernstein.
Harry Martin: Uh, yes, uh, good evening everyone. Um, and thanks for taking my questions. So, the, the first 1, um, just on the the full year guidance. Uh, so the, the H1 ebit decline was 282 million. You're still maintaining the guide for flat ebit, um, for the full year. So you need to reverse that decline with around 18.
To, to stay in that segment at all. What are the parts of it that that are still attractive? Um, even when you get these past years, um, as well. So thank you very much.
Harry Martin: So, uh, 2 2 elements to understand first, the the normal seasonality of the market is that the second semester is more weighted versus the first semester in term of because, um, vehicles are equipping themselves for the winter season, especially in the B2B real. So it means that, um, normally, uh, it's logical that we have more, um, um, volume and margins in the second semester. So, the first versus the first semester
Harry Martin: Then we mentioned the fact that we have made a lot of restructuring, and those restructuring will pay, uh, dividend in the second semester. Uh, you have, um, for example, we have also Advanced some closures. Um, so you will see the full benefit of that in the second semester. And as Eve mentioned, we have made the assumptions seen from where we are today.
Eve Shappell: Um, with, with all the reasons I mentioned, the profitability in the second semester should be much better than what it is in the first semester, however, there are many uh, uh, hypothesis, uh, that could change because of the environment. So we have made hypotheses on TS. We have many PSIs on many things, but of course in the second semester that for external reasons we may be impacted but today, we don't know.
Now.
Eve Shappell: um, as far as the track business,
Eve Shappell: The fundamental of the truck business. Now are found, we have made the restructuring. I'm sure you've noticed over the past 2 years. We have
Eve Shappell: A address the uh, excess capacity we had and we have also streamline the market where we were selling, of course, it has weighed on our volumes. However, we think now we are in the appropriate conditions.
Eve Shappell: Now we have a c, uh, cyclicality in this business, especially in in, that, is today, hampering our, um, um, the profitability in that segment, but we think it's exceptional, um, the um, Eve mentioned, the truck OEM, uh, have built inventory of trucks over the past few years in anticipation of the regulation that was postponed at the last minute. So now we are dealing with an excess inventory of trucks. But
Eve Shappell: um, uh, we have um,
Uh, all the reasons in the North America. Uh, we were expecting, um, things to improve by the second semester. It would probably be in the first semester of 2026, but however, we see in Europe, uh, the oems truck are getting better. Uh, so that's what we what we, um, we anticipate and on replacement. All what we have done, is paying a dividend, so, the profitability should improve in the second semester, and structurally will improve will improve because we have made this restructuring of our, uh, uh, assets of production. So for those reasons, um, and also figure that in the second semester,
Eve Shappell: we will have less issues in term of fixed cost observations that we had in the first semester. So for all these reasons, um, this is why what we are doing now. We cannot divest from the truck business because we share the semi-finished product. Um, we have dedicated plans for, uh, especially mixing, um, for truck. And it will be very difficult to separate them from the passenger car activities.
Eve Shappell: And you say maybe there is another element of comfort, which is the fact that during the first half of the year, we have a minus 240 million effect on raw material.
That should be nearly in a toll on the second half as the the raw material prices have started to drop in April and uh it should lead to a very positive effect in the last uh 4 months or last quarter of the year.
Eve Shappell: Very clear. Thank you.
Akshat: The next question is from akshat. Caca of JP Morgan.
Akshat Caca: See our full year earnings view as of today. Do you still expect volumes in the full year to be down 2, to 3%? Or should we be thinking about a more negative number?
Akshat Caca: And and within that, volume Outlook. Could you confirm that within Passenger cars? Um, on the replacement side of the business, do you expect to be in line with the market in the second half? Or do you expect to underperform in the second half, please?
Akshat Caca: Um the second question is um on Perris and your strategy in response to those steps. Could you just tell us um and give us some more details on how talents have impacted the business from a cost perspective. In the first half of the year and if you have changed your pricing strategy in any of your business segments going in the second half, please thank you.
Akshat Caca: Um, so, um, um, I will leave, um, on tariff. Um,
Akshat Caca: If to give you more details about what we're doing, except on pricing because we will not make any comments on pricing.
Akshat Caca: um, um, on the volume Outlook, um, we anticipate that, um, the, um, especially the biggest, the big Seline that happen in tier 3 product, uh,
Across all regions will um uh stop in the second semester, which would have a positive effect for us. Now, we have we have shown that. We have also exceptional products that are that have been launched cause climate 3, Primacy, 5 cross climate sport. Those are really, um, um, Market defining products that should have a positive impact on our volume, so we anticipate globally that our volume should be, um, uh,
Akshat Caca: Eddie versus the second semester of last year. Um, that's the hypothesis we made
and on Parish,
Speaker Change: Yeah. And which the disciplines this lead to nearly minus 3% of all the over the year,
Speaker Change: uh, given the, the the performance of the first semester on the Tariff, uh, the impact of of the Tariff during the first half,
Was in term of cash.
Speaker Change: Plus, minus 1, 125 million, and in term of pnl, minus 64 63, or 64 million.
Speaker Change: Uh, why I make the distinction? Because some of these terrorists are seen in the, in our inventory, and will be, uh, uh, booked in the pnl when we will sell
Speaker Change: Product.
Speaker Change: Our expectation. So I'm not comment on the on the strategy, but our expectation.
Speaker Change: At, with the knowledge of the moment.
Speaker Change: Uh, is that the full your effect of the Tariff? On our p&l should be around 200 million. So, basically 1/3 in H1 2/3, in H2, based on what
Speaker Change: based on the knowledge, we had say, at the
Speaker Change: Yesterday morning, yesterday morning.
Speaker Change: Understood, thank you.
Speaker Change: The next question is from Martino droi of equi.
Speaker Change: Thank you. Good evening everybody.
Speaker Change: Uh, the first question is on free cash flow because if you mentioned that the guidance remains with the current uh uh Forex. So I was wondering if there is any Forex uh translation benefit on on this guidance. And uh uh the other components, the main components for the free cash flow in terms of uh working capital. If you can remind us capex for the full year and if there is any restructuring cash out to be taken into account in the current uh, full year guide
Speaker Change: And the second is on tariffs because you just mentioned 200 million impact, uh uh for tariffs.
Speaker Change: So, excluding Forex.
Uh, does it mean that you would be able to offset this 200 million since you are confirming? Uh, the the guidance or I'm missing some something
Speaker Change: on on pricing, we will not make comments.
Speaker Change: So first, uh, the ethics have rather negative impact as the dollar, we are over a long in in dollar in USD, uh, as the US represent, 30% of the group itself. Uh, therefore it means that our revenue and our profit in dollar and the Cash Generator in dollar, uh, is negatively impacted by the evolution of the dollar versus our uh, our functional currency, which is the euro
Speaker Change: Uh, restructuration. So Flora mentioned, it's minus 400 million on the on the full year on the
Speaker Change: on the free flow.
Speaker Change: and in term of working capital overall, uh,
Speaker Change: We have.
Speaker Change: Probably at the end of the year. So, as I mentioned already,
It's in between November and January. It's the moment of the Year where we have the lowest working capital, uh, because our winter sales, we have a strong seasonality of sales, between September and, and October, August and November. I would say
Speaker Change: um,
Speaker Change: Therefore uh, inventories are the lowest level. And the most of uh uh the account receivable uh of the of the peak of our sales have been, uh, have been paid by by our customers. Um, the only effect that we will have, which is slightly negative on the overall free cash flow. This year is due, to what I mentioned during the presentation, is the fact that we reorganized ourselves in the first segment in North America, in the US, uh, with the, with the decision to stop to work with ATD, and to redirect the volume to us Venture and NW, uh, which are benefiting from, I would say normal payment term when, uh, uh, ATD being under chapter 11 during the second half of
Speaker Change: 2024 uh, was managed differently.
Okay, in capex.
Speaker Change: Capex will be in the same range or slightly below than last year, but very similar than last year.
Speaker Change: In the capex in contrary, there will be a positive effects on the effects due to the fact that part of our capex are spend in dollar based countries.
Speaker Change: Yeah, yeah. Thank you.
The next question is from Monica Bozzio.
Monica Bozzio: Yeah, it's a good afternoon and thanks for taking my question. The first 1 is on the track business. I understood that effect should be much better in term of margins.
Monica Bozzio: And those volumes of fully at least for Europe, but I'm still wondering. Are you still confident in achieving? A sustainable margin of 10% in this division? Which was the your indication at the Capital Market day. And I, I, I'm wondering, um, the restructuring actions should bring 200 million of net, positive impacts or 100 120 million.
Monica Bozzio: Uh just a clarification and my second question is on the segment operating income in the first of uh the company had a negative impact from manufacturing and Logistics of roughly 175 million. Can you give us a rough indication of by year end?
Uh, thank you very much and if I may follow up, considering the current environment, do you see opportunities for m&a in the non-tire business? And if yes, any color would be really appreciated. Thank you very much.
Monica Bozzio: So, um, on on the our, um,
Would improve sharply now? Um, You your question gives me the opportunity to to, um, remind you as well that, um,
Monica Bozzio: I forgot to mention that in the second semester, in the first semester of this year, we have we have incurred also this functioning in term of the industrial cost because of the restructuring because we had to make movements, we had to industrialize, we had run down Etc. And the fact that the plants that are especially in truck would be closed, um, earlier will have a bigger benefit in the second semester and it will be benefit mainly truck because that's where truck has been. That's where we have focused most of our restructuring.
Monica Bozzio: um, a a part um, from that
Monica Bozzio: on the the
Monica Bozzio: Um the m&a opportunities. Um and then I will leave the industry to to Eve on the m&a.
Speaker Change: Mishnah to deploy strategy has an m&a chapter. Uh but of course I cannot tell you where we are. Uh and of course, the current environment in every
Speaker Change: Dominant environment. There are opportunities. However, I remind all, always everyone the fact that, um, in order for a transaction to happen, you have to have a buyer Visa is a buyer potential buyer, you have to have a seller and that's um,
Speaker Change: Not obvious, and not evident every every time and that we have and then we have to agree on the price.
Speaker Change: And that's even more challenging. So so, uh, okay, uh we we will see
Okay, thank you.
Speaker Change: the the negative impact of 175 million on the manufacturing and sourcing Logistics, uh, should be nearly, uh,
Slightly positive on the second half of the year.
Speaker Change: As because it's due to the fact that in the second half of the year, we should start to see, uh, more the benefits of the reorganization of our manufacturing footprint.
Speaker Change: Uh and we should have mechanically a better capacity utilization uh than on the first half. Of course it's
Speaker Change: Conditioned to the fact that there is no worsening in the overall economical environment.
Speaker Change: It's based on what we know today.
Speaker Change: Okay, thank you. It's just a clarification on the positive impact from the restructuring. In the second part, could be Quantified in 200 or 120 million. Sorry, I didn't get it.
No, it's 200 million for the year for the full year.
Speaker Change: Okay. Okay, perfect. Thank you. And it's not only for sr2, it's for all the yeah for sure the business segments.
Speaker Change: For sure, thank you very much.
The next question comes from Tomah.
Thank you very much. I'll I'll ask 2 questions, please. Uh, the first is um on on cash returns. Um, I think you are uh confirming. You're going to generate a billion 7 of free cash flow. You, you, you have 4 a ratings and it's difficult to see ma in the in the world. So why not? Uh, go straight to 500 million, share buyback, uh, in the second half with your share price, uh, legging rather than talking about the string 250, uh, that would be the first question. The second question, uh, is on the expected development of your sr1, volumes versus the market. Uh,
You, you've liked your main competitors in the last 18 months, your performance improved clearly in in Q2 versus q1. Uh, do you assume, uh, that, uh, MLS SL1 performance is going to be closer to the market in H2, uh, or or, or should we still expect you to be uh, 1 or 2 points below the market? Thank you.
Speaker Change: Uh, so in on the sr1 on the share. Um, um, question, you have a you have, um, you know, we measure market share on selling, so meaning that um, tires sold by manufacturers to, uh, the retail or the wholesale distribution. Um, you had a very heavy loading of tier 3 brand tier 3, tier 4 Brands all across the world.
Vision of the share will change because of that. And we have a very good, uh, product that have been just announced and launched, uh, between, uh, in the first semester and, uh, especially that they will affect the Winter Market. So, we anticipate the, in the second semester to return to more normal, um, view of our share, we are not really concerned by the share losses. We have especially at Michigan. Brown things are I would say normal. Uh, OE is different. We have a vehicle mix, a customer mix slightly, uh, uh,
Speaker Change: Different. And also your question gives you the opportunity to tell you that in China. We had some issues to, to fix. Um, some of the problems we had in term of positioning and and um, what we were doing in also an unrepresented Market in China, that is over we we we now are back to Google growth. More growth mode in China.
Speaker Change: and as far as the cash, um,
Speaker Change: back um based on what we know today, we think it's 250 million is the right number and of course, if uh, things change uh, towards the second semester then um,
Speaker Change: We will, um, take into consideration, your remark about um, our balance sheet.
Speaker Change: Thank you. Phil.
Speaker Change: The next question is from Stephen benal of BMP.
Speaker Change: Yes, uh, good evening. I just have, uh, 1 remaining question, it's about the guidance because I'm not sure how to reconcile. The confirmed SI guidance, and the 100 million euros adjustment to Provisions for bonuses, that would suggest in my view, uh, uh, bonus, cut, uh, as for your objective won't be achieved. So can you please help us to understand to understand the mechanics uh, between uh uh this uh, positive adjustment and uh the confirmed guidance. Thank you.
Speaker Change: Very simple. Um, we do not the bonus is not triggered on the guidelines.
We have, um, management bonuses that have objectives and we know that we will not reach those objectives. Um,
Because of what we have done in the first semester but the objectives are well above the guidance. So that's why you you may see a difference in in the but you cannot interpret the fact that you have that and um that doesn't give you a flavor on on our ability to reach the guidance.
Speaker Change: so just yeah, if, um, if management bonuses are not based on the guidance,
Speaker Change: Um, so they are based on. I, I guess a long-term objective. So, can you please just elaborate a little bit more on the, how we should? Uh, look at this order. That's this other line in in the a bit bridge for, for H2.
Speaker Change: We have management objective, not we have them on long-term basis, but also on a yearly basis, and we fix those objectives, um, for the year, um, a manager, really, and, um, those objectives are above, well, above the guidance.
Speaker Change: Okay. The the guidance is something we do. Uh, we commit to the market that is different from what we expect out of the management.
Speaker Change: And also, thank you so. So what we should expect for H2
Speaker Change: In terms of bonus, uh, we have made the adjustment on on the bonus that we needed to make.
Speaker Change: Okay, very clear. Thank you.
Speaker Change: The final question is from Kristoff lasavi of Deutsche Bank.
Speaker Change: Good evening. Thank you for taking my question. It's actually, um, just 1 clarification left, uh, on on m&a. Um,
Speaker Change: you said, there's nothing obvious right now, but I think a couple of assets are coming to the market by next year. Um, so if there's a right asset,
Speaker Change: Would you be willing to do larger transactions as well? Or is it something that you currently wouldn't consider?
Speaker Change: What you mean by larger?
Speaker Change: a couple of billion, theoretically,
Speaker Change: In purchasing price.
Sorry. What do you mean by large transactions?
Speaker Change: Uh uh large transactions. In the sense that you would be willing to pay um a couple of billions.
Speaker Change: For 1 deal or is that too big to to even consider at the current state of the market?
I don't think we want to enter into this level of detail. The uh, for the MMA, MMA operations are rather confidential. So, uh, we have you can do 2 billion in 1 transaction, but you can do it in 3, transactions of 700 million. So, um, in fact,
Speaker Change: We we have been clear about where we want to grow, it's mostly in the composite polymer Solutions. Uh it has been shared with with you during the Capital Market Day last year.
We have as well, very strong and demanding uh criteria from a financial standpoint.
Which link link to to Florence previous comment about the price. Uh, uh, so it's not really the size of the transaction which matter is the. It is, the transaction are, are we better Apparent from the for the acquirer activities and are we able to grow it? Uh, and to create value, uh, with this, uh, with this acquisitions.
Speaker Change: It's not a question of the size of the transaction. Yeah.
Speaker Change: Understood. Thank you. Thank you.
Gentlemen, there, any more questions at this time? May I hand it back over to you for any closing remarks?
Speaker Change: Well, thank you very much. Um, I just want to, to remind, um, everyone that, uh, our group fundamentals are very solid and, um, the
External environment is less solid and than mishnah.
So thank you very much. Thank you very much.
Speaker Change: This is gentlemen, this concludes today's Mission conference call. Thank you for your participation you may now disconnect