Michelin raises full year financial outlook

Clermont-Ferrand, France – Michelin has revised up its 2020 financial guidance on the back of new market forecasts and the cost reductions linked to the Covid-19 pandemic.

In a “still highly uncertain environment” and in view of the recent change in tire demand, Michelin said it expected passenger car and light truck tire markets to decline by 13-15% over the year.

The figures compare against previous estimates of 15-20% announced in Michelin's first half report.

Here, Michelin expects “further improvement” in demand for original equipment (OE) tire, led by the recovery in China, government incentives in Europe and inventory rebuilding in North America.

Passenger car replacement segment is anticipated to show a “sustained post-lockdown upturn in demand,” occurring at varying speeds depending on the region.

Truck tire markets are anticipated to fall between 12-14% with a “steep fall-off in demand” projected in every region except China, where the market is rebounding strongly. Michelin had previously estimated a fall of 13-17% in demand for the full year.

Replacement segment is expected to come in close to 2019 levels in Europe and North America, up slightly year-on-year in China, and “still sharply down” in other regions.

In the speciality tire markets – covering mining, two-wheeler, farm and aircraft tires – Michelin expects demand to fall by 15% to 19%, higher than the previous estimates of 13-17%.

Mining tires are anticipated to see a slowdown in demand as the Covid recession is felt after a time lag of several months.

Off-the-road demand will be relatively resilient in Agricultural replacement tires, but down sharply in agricultural OE and infrastructure tires, according to Michelin.

Two-wheeler tires are expected to see a rise in demand, as the market is lifted by its image of “a safe form of transportation” amid the Covid crisis.

As for aircraft tires, Michelin expects a “collapse in demand.”

In light of the new forecasts, the French group said it is revising its guidance for 2020 upwards, with segment operating income in excess of €1.6 billion at constant exchange rates and structural free cash flow in excess of €1.2 billion, barring any new systemic effect from Covid-19.

In its first half report, Michelin had anticipated to deliver full-year operating income in excess of €1.2 billion and structural free cash flow of more than €500 million.