Ladoux, France – Group Michelin expects to outperform the industry through 2020 by growing tire-related revenues 20 percent, doubling revenue from services and solutions and tripling revenue from “mobility-experience” related business, the company’s top executive said this week.
Michelin expecting 'above-market' growth
Speaking at the firm’s Investor Day 6 June at Michelin’s sprawling research and development complex in Ladoux, CEO Jean-Dominique Senard Cited four initiatives Michelin will pursue to ensure its growth:
Putting tire maker’s customers at the heart of its business;
Leveraging the digital revolution;
Simplifying its structures and processes; and
By adhering to these principles, Michelin expects its operating income to grow 16.5 percent over the coming five years to nearly $3.5 billion (€3 billion), according to Marc Henry, CFO and executive vice president, Specialty Products Business Units.
To reach these goals, Michelin is expecting global market demand for passenger/light truck tires to grow 2.5 percent annually through 2020 to 1.69 billion units, and 1.5 percent for truck/bus tires to 200 million units, along with recoveries in the agricultural and OTR/mining sectors.
Henry divulged Michelin’s new operating margin goals for 2016-2020 as: 11 to 15 percent in the consumer segment; 9 to 13 percent in the commercial segment; and 17 to 24 percent in the specialty segment (ag, OTR, aircraft, motorcycle).
In the scenario, Henry said Michelin expects internal manufacturing efficiencies will offset inflation and efficiencies in selling, general and administration will exceed inflation.
The bulk of the operating earnings improvement will come from the effects of above-market sales growth, Henry said.
Other financial targets for the 2016-20 period that the company laid out include:
Nearly double free cash flow to $1.15 billion; and
Raise the return-on-capital-employed ratio nearly three points to 15 percent.
Michelin also expects to boost the number of franchised retail network (Euromaster and Tyre Plus brands) points of sale to about 4,000, up from about 2,225 currently. Growth will include more than doubling to 3,300-plus the number of Tyre Plus franchise locations, predominantly in Asia but also active in Australia, South Africa, Russia, the Middle East and Latin America.