Michelin : Financial Information for the Year Ended December 31, 2012

Tue Feb 12, 2013 1:04am EST

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Clermont-Ferrand - February 12, 2013

Financial Information for the Year Ended December 31, 2012

Strong 2012 earnings in lackluster markets

More than EUR1 billion in free cash flow 

EUR2,423 million in operating income before non-recurring items, up 25%

Operating margin up 2 points, to 11.3% of net sales

* Operating income before non-recurring items up 25% to EUR2,423 million, reflecting:An efficient
pricing policy.A global footprint.Structurally high margins in specialty tires.Restored
profitability in the Truck tire business, despite a sharp market contraction. 
*Volumes down 6.4%, with demand remaining flat in the second half. 
*More than EUR1 billion in free cash flow, demonstrating:The Group's ability to structurally
generate cashThe effective integration of value creation into every unit's objectives 
*12.8% return on capital employed. 
*Proposed dividend of EUR2.40 per share, subject to approval at the Annual Shareholders Meeting of
May 17, 2013.

*Outlook for 2013

Given its global footprint, Michelin expects to hold volumes steady in 2013, in a market
environment that is uncertain in mature markets but still expanding in the new ones.

Raw materials prices are expected to remain stable in the first half, adding a further EUR350-400
million to operating income. This will be partly offset, however, by the impact of indexation
clauses on the original equipment and earthmover businesses.

The capital expenditure program totaling around EUR2 billion will support Michelin's growth
ambitions by bringing new production capacity on stream in the growth regions, whose start-up will
weigh on costs. The program is also designed to improve competitiveness in mature markets and
drive technological innovation.
Confident in its competitive strengths and thanks to the launch of an ambitious project to improve
its management systems, Michelin confirms its 2015 objectives and for 2013 expects to report
stable operating income before non-recurring items at constant exchange rates, a more than 10%
return on capital employed and positive free cash flow.

                       (in EUR millions)                         2012     2011   
 Net sales                                                      21,474   20,719  
 Operating income before non-recurring items                    2,423    1,945   
 Operating margin before non-recurring items                    11.3%     9.4%   
  Passenger Car and Light Truck Tires and Related Distribution   9.3%     9.4%   
                          Truck Tires and Related Distribution   6.6%     3.5%   
                                          Specialty Businesses  26.0%    21.5%   
 Operating income after non-recurring items                     2,469    1,945   
 Net income                                                     1,571    1,462   
 Capital expenditure                                            1,996    1,711   
 Net debt                                                       1,053    1,814   
 Gearing                                                         12%      22%    
 Free cash flow1                                                1,075     (19)   
 Return on capital employed                                     12.8%    10.9%   
 Employees on payroll2                                         113,400  115,000  

1 Cash flow from operating activities less cash flow used in investing activities
2 At period-end 

Market Review 

*Passenger Car and Light Truck tires

          2012           Europe*  North America         Asia         South America  Africa-India-Middle East  Total  
  % change year-on-year                           (excluding India)                                                  
  (in number of tires)                                                                                               
   Original Equipment      - 5%       + 16%             + 11%             + 0%                - 3%             + 6%  
- 10%      
- 2%             
+ 2%            
+ 2%                
- 3%           
- 4%  

   Fourth-Quarter 2012   Europe*  North America         Asia         South America  Africa-India-Middle East  Total  
  % change year-on-year                           (excluding India)                                                  
  (in number of tires)                                                                                               
   Original Equipment      - 8%       + 10%             + 5%             + 12%                - 12%            + 2%  
- 9%       
-  1%            
+ 4%            
+ 4%                
- 5%           
- 2%  

*Including Russia and Turkey

§  Original Equipment

*In Europe, tire demand contracted by 5% in 2012. The collapse in new car registrations, which
fell to a 17-year low in the European Union, masked a contrast between the decline in broadline
carmaker sales and the firmer resistance of specialty and export-driven brands. Markets in Eastern
Europe continued to expand, increasing by 11% over the year.
*The North American tire market grew by 16% in 2012, returning to 2007 levels thanks to strong new
car sales as buyers replaced aging models.
*In Asia (excluding India), demand rose by 11% overall. While still buoyant, the Chinese market
cooled somewhat, ending the year up 6%. Demand in Japan (up 11%) and Southeast Asia (up 38%)
rebounded off of a 2011 impacted by natural disasters.
*The South American market was stable overall, with a brisk 7% gain in the second half offsetting
the 7% decline in the first. Demand in Brazil rose by 3%, lifted by the government measures
introduced in the autumn.

§  Replacement

o    In Europe, replacement demand dropped 10% year-on-year in a highly uncertain economic
environment. Western Europe saw a record decline, steeper even than in 2008, that was accentuated
by dealer inventory drawdowns. The winter tire market dropped 16%, as expected, and the
high-performance tire segment (17" and bigger) slowed to a lesser extent than the European market
average, reflecting the sustained improvement in the mix. 

o    Demand in North America retreated 2% as consumer confidence weakened, despite the relative
stability of average miles traveled and fuel prices. After an upturn in 2010, the market has
returned to 2009 levels, with volumes sold noticeably lower than in 2007. Impacted by the
significant increase in Chinese imports after customs duties were lifted, the US market declined
by 3%.

o    In Asia (excluding India), markets ended the year up 2% overall. Demand rose 4% in China
despite slowing economic growth, but eased back 1% in Japan, where winter tire sales were stable
and volumes moved back in line with recurring trends after the run-up in replacement buying in
2011 following the natural disasters. In South Korea, the market fell 6% in an export-driven
economy hit hard by global economic uncertainty.

o    The South American market gained a slight 2% overall, but with wide variations among
countries. Demand expanded by 3% in Brazil as sell-out held firm at 2011 levels. 

q  Truck tires

          2012           Europe**  North America         Asia         South America  Africa-India-Middle East  Total  
  % change year-on-year                            (excluding India)                                                  
  (in number of tires)                                                                                                
   Original Equipment*     - 4%         + 2%             - 9%             - 30%                + 31%            - 5%  
- 14%       
- 2%             
- 6%            
+ 3%                
+ 8%           
- 4%  

   Fourth-Quarter 2012   Europe**  North America         Asia         South America  Africa-India-Middle East  Total  
  % change year-on-year                            (excluding India)                                                  
  (in number of tires)                                                                                                
   Original Equipment      - 7%        - 15%             - 10%            - 27%                + 31%            - 9%  
+ 2%       
+ 2%             
+ 2%            
+ 6%                
+ 6%           
+ 3%  

*Radial market only
**Including Russia and Turkey

§  Original Equipment

*Demand in Europe declined by 4%, to below 2007 and 2008 levels. Although the fall-off was a
relatively limited 2% in the first half, it gained momentum in the second, to 5%, under the impact
of the worsening economic situation in the region.
*After surging 17% in the first half, the North American market slowed precipitously in the second
half, to end the year with just a 2% gain. Economic uncertainty caused by tax issues in the United
States weighed on new truck orders during the year.
*In Asia (excluding India), demand retreated by 9% overall, with a fairly steep 15% drop in China
as growth in the economy (particularly exports) cooled over the year. The Southeast Asian market,
which continues to shift to radials, was highly active, up 42%, while the Japanese market
rebounded 12%. In both cases, growth was lifted by prior-year comparatives shaped by,
respectively, flooding and the tsunami. 
*The South American market plunged 30% after Brazil introduced Euro V emissions standards during
the year. However, the Brazilian government's introduction of more favorable financing terms
helped the market to turn around, with an upturn in the final quarter. 

§  Replacement

o    Demand in Europe dropped 14%, with a 25% plunge in the first half due to inventory drawdowns
and high bases of comparison. In the second half, the market continued to shrink on weak
transportation activity and the lackluster economic outlook. In Eastern Europe, the market
declined by 3%, primarily due to dealer destocking.

o    The North American market ended the year down just 2%, reflecting fleet manager caution in
the face of economic uncertainty, despite relative robust freight demand. The contraction may also
be explained by the sharp growth in original equipment sales and the availability of retreadable

o    In Asia (excluding India), markets declined by 6% overall during the year. The Chinese market
ended 2012 down by 7%, reflecting the slower growth in the economy and in exports. The Japanese
market was down 6% off of a high prior-year comparative, which was lifted by last year's price
increases and inventory rebuilding after the tsunami. Demand in South Korea also declined as the
global economic slowdown weighed on exports and transportation demand.

o    The South American market gained 3% during the year. In Brazil, the stricter application of
customs inspections reduced imports and dampened demand in general, although the first signs of a
recovery appeared in the final quarter. 

q  Specialty Tires

§  Earthmover tires: The mining sector is continuing to expand, led by sustained demand for ore,
oil and gas, and the market for large tires remains buoyant. After rising in the first half, the
original equipment market contracted in the final quarter, with a particularly steep fall-off in
Europe. Demand for tires used in infrastructure and quarries is shrinking in Western Europe and,
after increasing in the first half, turned downwards in the final quarter in North America.

§  Agricultural tires: After climbing in the first half, worldwide original equipment demand
declined in the fourth quarter, particularly in Europe. The replacement market dropped
significantly in mature markets during the year, dragged down by the prevailing economic

§  Two-Wheel tires: Impacted by the lackluster economy, the motorized segments declined in mature
geographies, except North America, but continued to expand in emerging markets. 

§  Aviation tires: Passenger load factors are continuing to improve in the commercial aviation
segment, on both domestic and intercontinental routes, but the cargo market was down for the year.

2012 Net Sales and Results

* Net sales

Consolidated net sales amounted to EUR21,474 million for the year, up 3.6% at current exchange
rates compared with EUR20,719 million in 2011.

Of the total price mix effect, which added 6.2% to growth, EUR1,052 million corresponded to the
net impact of the price increases introduced in 2011 and the contractual price reductions due to
the raw materials indexation clauses applicable on nearly 30% of consolidated sales volumes. It
also included the EUR157 million impact of a further improvement in the sales mix, led by the
premium strategy and the expanding specialty businesses.

Weak demand, particularly in European markets, dragged sales volumes down by 6.4% over the year.

The positive 4.2% currency effect primarily resulted from gains in the euro against the US dollar.


Consolidated operating income before non-recurring items amounted to EUR2,423 million or 11.3% of
net sales, compared with EUR1,945 million and 9.4% in 2011. 

This EUR478-million improvement mainly reflected the positive price mix (EUR1,209 million, of
which EUR1,052 million from price increases), which favorably combined with the limited negative
impact from raw materials costs (EUR76 million).  It also reflected the EUR504-million negative
impact of the decline in volumes, the EUR176 million in outlays to drive growth (start-up and
other costs in the new markets), the EUR311 million increase in production costs and other
expenses and the EUR3-million positive impact on productivity of production slowdowns. The
currency effect was a positive EUR268 million. Lastly, the improvement also included the initial
impact of the competitiveness plan launched in early 2012.

In all, net income for the year came to EUR1,571 million.

* Net financial position

Free cash flow ended the year at EUR1,075 million, as available cash flow and the sale of a
property complex in Paris helped to offset the faster deployment of growth investments.

At December 31, 2012, gearing stood at 12% while net debt amounted to EUR1,053 million.

q  Segment Information

                         EUR millions                             Net sales      Operating income before non-recurring items     Operating margin before non-recurring items   
                                                                2012    2011            2012                    2011                    2012                    2011           
 Passenger Car and Light Truck Tires and Related Distribution  11,098  10,780           1,033                   1,018                   9.3%                    9.4%           
 Truck Tires and Related Distribution                           6,736   6,718            444                     233                    6.6%                    3.5%           
 Specialty Businesses                                           3,640   3,221            946                     694                    26.0%                   21.5%          
 Group                                                         21,474  20,719           2,423                   1,945                   11.3%                   9.4%           

§  Passenger Car and Light Truck Tires and Related Distribution

In all, net sales in the Passenger car and Light truck tires and related distribution segment
stood at EUR11,098 million, up 2.9% on 2011. 

The sustained firm pricing policy and ongoing improvement in the product mix, led by the MICHELIN
brand's premium positioning, helped to offset the 5.5% decline in volumes. As a result, operating
income before non-recurring items stood at EUR1,033 million or 9.3% of net sales, compared with
EUR1,018 million and 9.4% in 2011.

§  Truck Tires and Related Distribution

Net sales in the Truck tires and related distribution segment amounted to EUR6,736 million,
unchanged from 2011. 

In a depressed market, volumes fell 10.8% as the Group focused on turning the Truck tire business
around and restoring its margins. This strategy, along with the wide array of market launches and
the decline in raw materials costs, drove a sharp increase in operating income before
non-recurring items, to EUR444 million or 6.6% of net sales from EUR233 million and 3.5% in 2011. 

§  Specialty Businesses

Net sales by the Specialty businesses rose by 13.0% to EUR3,640 million in 2012. 

At EUR946 million or 26.0% of net sales, operating income before non-recurring items confirmed
these businesses' structurally high profitability. In a particularly favorable currency
environment, they benefitted from the still positive impact of contractual indexation clauses
based on raw materials prices, as well as from the 1.7% increase in volumes.

Compagnie Générale des Etablissements Michelin

Compagnie Générale des Etablissements Michelin reported a profit of EUR465 million in 2012.

The financial statements were presented to the Supervisory Board at its meeting on February 7,
2013. The audit was completed and the auditors' report was issued on the same date.

The Managing Partner will call an Annual Shareholders Meeting on Friday, May 17 at 9:00 am in

Shareholders will be asked to approve the payment of a dividend of EUR2.40 a share, with a
dividend reinvestment option.


2012 Highlights

*Standard & Poor's upgrades Michelin's credit rating to BBB+ (March 23) 
*Global leadership in Earthmover tires strengthened with the construction of a new plant and the
extension of another in North America (April 10) 
* Moody's upgrades Michelin's credit rating to Baa1 (April 24)  
*First Passenger Car and Light truck tire produced at Pau-Brasil plant (February 9) 
*In addition to sticker information, the MICHELIN Total Performance strategy is showcasing all of
the benefits of tire technology with the slogan: "Michelin sells performance, not rubber". (June
*New MICHELIN Restaurants website launched in France (May 25) 
*The Group celebrates 10 years of Michelin Performance and Responsibility (June 18) 
*Michelin successfully places EUR400 million seven-year notes issue (June 19)  
*Michel Rollier hands over the reins to Jean-Dominique Senard at the Annual Shareholders Meeting
on May 11 
*2015 guidance updated (September 19) 
*First Truck tire produced at the new Shenyang 2 plant in China (September 18) 
*New Truck tire lineup presented at the IAA Show in Hanover (September 20) 
*New Earthmover product lineup for 2012 unveiled at the MINExpo Trade Show in Las Vegas (September
*thndFIA World Rally Championship: a 20 Drivers' Title and a 22 Manufacturers Crown for Michelin
(October 9) 
*Investor Day organized at the Technology Center in Ladoux, France (November 5)

A full description of 2012 highlights
may be found on the Michelin website:  www.michelin.com/corporate
http://www.michelin.com/corporate /finance

Presentation and Conference call
Full-year 2012 results will be reviewed with analysts and investors during a conference call
today, Tuesday February 12, at 11:00 am CET (10:00 am UT). The conference will be in English, with
simultaneous interpreting in French. If you wish to participate, please dial-in one of the
following numbers from 10:50 am CET:

*In France                              01 70 77 09 19 (Français)
*In France                              01 70 77 09 39 (English)
*In the UK                               0203 367 9462 (English)
*In the United States                 +1 866 907 5924 (English)
*From anywhere else                +44 203 367 9462 (English)

Please refer to the website www.michelin.com/corporate http://www.michelin.com/corporate  for
practical information concerning the conference call.

Investor Calendar

*Quarterly information for the three months ended March 31, 2013:

Monday, April 22, 2013 after close of trading

*First-half 2013 net sales and results:

Thursday, July 25, 2013 before start of trading

 Investor Relations                      Media Relations                                                         
 Valérie Magloire                      
 Corinne Meutey                                                        
 +33 (0) 1 78 76 45 37                            +33 (0) 1 78 76 45 27                                          
 +33 (0) 6 76 21 88 12 (cell)                     +33 (0) 6 08 00 13 85 (cell)                                   
 valerie.magloire@fr.michelin.com        corinne.meutey@fr.michelin.com mailto:corinne.meutey@fr.michelin.com    
Individual shareholders                                                
 Alban de Saint Martin                 Jacques Engasser                                                        
 +33 (0) 4 73 32 18 02                            +33 (0) 4 73 98 59 08                                          
 +33 (0) 6 07 15 39 71 (cell)            jacques.engasser@fr.michelin.com                                        


This press release is not an offer to purchase or a solicitation to recommend the purchase of
Michelin shares. To obtain more detailed information on Michelin, please consult the documents
filed in France with Autorité des Marchés Financiers, which are also available from the
www.michelin.com http://www.michelin.com/  website.               
This press release may contain a number of forward-looking statements. Although the Company
believes that these statements are based on reasonable assumptions as at the time of publishing
this document, they are by nature subject to risks and contingencies liable to translate into a
difference between actual data and the forecasts made or inferred by these statements.

2012 FY ENG http://hugin.info/100285/R/1677188/546856.pdf 


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Source: Michelin via Thomson Reuters ONE


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