Michelin shares surge on strong profits and €1bn buyback

Shares in French tyre maker Michelin jumped more than 8% on Tuesday after beat profit forecasts with a record 2023 performance and announced a €1bn share buyback.

However the company, officially known as Compagnie Générale des Établissements Michelin, gave a conservative outlook for the current financial year, pointing to flat profits and a dip in free cash flow.

Michelin, which employs more than 132,000 people worldwide, said segment operating income totalled €3.57bn last year, up from €3.40bn in 2022, as an improved operating margin to 12.6% from 11.9% made up for a slight dip in sales to €28.34bn from €28.59bn.

According to analysts at Citi, second-half operating income of €1.87bn surpassed forecasts by around 9%.

Tyre volumes were down 4.7% over the year, which the company said was a result of "extensive destocking across every segment and value chain as the uncertain economic environment and soaring interest rates prompted dealers and business customers alike to drastically draw down inventory and reduce their standard stock levels".

However, price and mix effects had a 5.7% positive impact on the top line, equal to €1.29bn.

Non-tyre sales – which comprise things like conveyors, fine dining and travel services, and fleet connected mobility solutions – increased by 10%.

Free cash flow jumped to a positive €2.34bn from a negative €180m the year before. Free cash flow before acquisitions would have been €3.0bn.

"Given its structural cash generation and solid financial structure, the group will initiate a share buyback program, which could be worth up to €1 billion over the period 2024-2026," the company said.

Managing chair Florent Menegaux said results were "very strong" despite the challenging business environment. "With these results, our group has demonstrated its ability to deliver the targets set for 2023 within its 'Michelin in Motion 2030' strategy and is looking forward to the next deployment steps."

Looking ahead, Michelin predicted "overall stable" global markets, with above €3.5bn expected in segment operating income at constant exchange rates and more than €1.5bn in reported free cash flow before acquisitions.

The stock was up 8.05% at €33.29 by 1213 CET.