Michelin's growth vision proves out in first half of 2024

An unstable environment requires a steady vision for growth. And that's exactly what Michelin says it has.

"It can be summarized by the sentence that 'we want to win where it matters,' " Yves Chapot, Michelin general manager and chief financial officer, told investors during a call July 24. "So we are looking to maximize value creation for our customers as well as for our other stakeholders."

That vision, he said, is playing out.

Even as sales for the first half came in at around $14.6 billion, down slightly from $15.6 billion during the first half of 2023.

The tire maker attributed the sales decline in part to a decline in tire volumes that it said is driven by its approach of focusing more stringently on those high value and in-demand products, regions and segments.

To illustrate the approach, Chapot pointed to the high-value 18-inch and larger rim diameter tires, which continue to represent more of the company's overall sales—both original equipment and replacement. Each year, he said, the share of these tires in Michelin brand tire sales increases by 5 percent.

The strength of Michelin's value-driven approach is evident, the company said, in both segment operating income and segment operating margin. Both increased year-over-year, coming in at $1.93 billion and 13.2 percent, respectively. This compares to first half 2023 segment operating income and operating margin of about $1.84 billion and 12.1 percent, respectively.

"In an economic environment that remains particularly unstable, Michelin achieved a very solid first half," Michelin CEO Florent Menegaux said in a statement. "These results enable us to maintain our guidance for 2024."

Automotive segment sales fell slightly year over year from $7.59 billion to $7.43 billion. At the same time, the segment operating income increased from $936 million in the first half of 2023 to $992 million this year. The operating margin was up more than a point to 13.4 percent.

Road transportation also saw a year-over-year boost, posting about $325 million in operating income for the first half of 2024, up significantly from $181.6 million last year. Sales in the segment were down slightly year over year to $3.54 billion. The operating margin was up more than 4 points to 9.2 percent.

Year-over-year sales fell for the specialty business as well, coming in at $4.02 billion, with a segment operating income of $616.7 million and segment operating margin of 16.8 percent.

First-half replacement tire sales were up 4 percent globally for passenger car and light truck tires when compared to the same period one year earlier. Global OE sales in this segment were flat year over year, down 1 percent.

Globally, truck tires saw a 4-percent year-over-year bump in sales on the replacement side, while OE dropped by 5 percent.

With this in mind, North American sales were a boon for the French tire maker, particularly on the replacement side where both P/LT and truck tires sales increased—by 4 percent and 17 percent, respectively—year over year.

Original equipment sales in North America were fairly flat for passenger vehicles—up just 1 percent year over year—while truck tire OE sales dropped 9 percent when compared to 2023.

Europe saw a slight uptick in P/LT tire sales on the replacement side—up 6 percent year over year—while OE sales fell by 5 percent for the period when compared to 2023. For truck tires, OE sales fell by 17 percent year over year, while replacement sales were down slightly, by 2 percent.

South America's OE truck tire market recovered mightily after a downturn, posting a 27 percent year-over-year increase in OE sales, while replacement truck tire sales grew by 4 percent compared to the first half of 2023.