1 MICHELIN INVESTOR DAY – Shenyang, China – November 1 0 ...
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1 MICHELIN INVESTOR DAY – Shenyang, China – November 1 0, 2014 - Serge Lafon
2 MICHELIN INVESTOR DAY – Shenyang, China – November 1 0, 2014 - Serge Lafon
1. Truck General Overview
2. Customer expectations & Market segmentation
3. Levers for Growth
4. Levers for Profitability
5. Key Takeaways
Outline
3 MICHELIN INVESTOR DAY – Shenyang, China – November 1 0, 2014 - Serge Lafon
4 MICHELIN INVESTOR DAY – Shenyang, China – November 1 0, 2014 - Serge Lafon
From 2008, volatile economies put pressure on transport c ompaniesEconomies expected to grow… stronger in new markets
Source: Global Insight
-10.0
-5.0
0.0
5.0
10.0
15.0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Mature countries
New countries
United States
Western Europe
Russia
China
India
Brazil
GDP growth
5 MICHELIN INVESTOR DAY – Shenyang, China – November 1 0, 2014 - Serge Lafon
Economic crisis reset mature transport demand to lower levels…
94
90
93
94 95
100
90
92
95
90 90
2008 2009 2010 2011 2012 2013
US
Germany
Source: American Trucking Association, Eurostat
Transport Demand (tons-kilometers)Index 100 = 2008
6 MICHELIN INVESTOR DAY – Shenyang, China – November 1 0, 2014 - Serge Lafon
… while truck costs constantly increase as new norms are implemented, adding pressure on transport company costs
Euro VJanuary 2013
Euro VIJanuary 2014
China IVJanuary 2015
+8 to 15% +8 to 12% +15 to 20%
Norm
TruckCost
Increase
7 MICHELIN INVESTOR DAY – Shenyang, China – November 1 0, 2014 - Serge Lafon
Tread market: an annual 2% growth driven by transpo rt demandTransport companies under profitability pressure
0
50
100
150
200
250
2008 2009 2010 2011 2012 2013 2014 2022
New
Retread
CAGR N+R 2011-2022 = +2%In million tires
Source: Michelin estimates Tread market = new OE + new RT + retread
8 MICHELIN INVESTOR DAY – Shenyang, China – November 1 0, 2014 - Serge Lafon
Market expansion driven by new countries
250+2
CAGR 11-22 +0.2%
+58CAGR 11-22 +2.8% 310
200
220
240
260
280
300
320
2011 Mature New 2022
Source: Michelin estimates
In million tires
9 MICHELIN INVESTOR DAY – Shenyang, China – November 1 0, 2014 - Serge Lafon
In 2022, China & India account for 40% of the tread market
27%
27%13%
13%
20%Mature
ChinaIndia
South America
Rest of World
Source: Michelin estimates
10 MICHELIN INVESTOR DAY – Shenyang, China – November 10, 2014 - Serge Lafon
The truck-tire technologies
► Bias, the historicaltechnology (1900’s)
► Flat-rim: radial technology on bias wheel (1950’s)
► Drop-center: radial technology on specific wheel (1970’s)
► Wear life twice as long
► 10% more fuel efficient
► Increased safety (new wheel)
► Global system 10% lighter
11 MICHELIN INVESTOR DAY – Shenyang, China – November 10, 2014 - Serge Lafon
Strong growth of Radial Drop-center driven by moder nization Flat-rim radial still growing in India, South-East Asia & Africa Mid.-East
250
310+50
+10
-12
-15
+27
200
220
240
260
280
300
320
2011 Radial DropCenter
Radial Flat RimIndia/SEA/AFME
Radial Flat RimRest of the World
Bias Retread 2022
Source: Michelin estimates
Total Radial +48MIn million tires
12 MICHELIN INVESTOR DAY – Shenyang, China – November 10, 2014 - Serge Lafon
Pricing tiers: Premium increasing in line with market expansion Intermediate fastest growing segment at expense of Budget
48% 40%
27% 36%
25% 24%
2011 2022
Marketprice
Average
+15%
-15%
Intermediate
Premium
Budget
DEFINITION
Source: Michelin estimates
% = weight of total market(new tires)
13 MICHELIN INVESTOR DAY – Shenyang, China – November 10, 2014 - Serge Lafon
An increasing pressure from Chinese manufacturers
28%
37%38%
36%
40%41%
25%
30%
35%
40%
45%
2008 2009 2010 2011 2012 2013
WW Radial market share(%)
> 100 manufacturers> 300 brands
Source: Michelin estimates
14 MICHELIN INVESTOR DAY – Shenyang, China – November 10, 2014 - Serge Lafon
15 MICHELIN INVESTOR DAY – Shenyang, China – November 10, 2014 - Serge Lafon
3 specific needs segment transport companiesLeading to 3 key tire expectations: TCO, CPK, Price
CPK**
Price
TCO*
*TCO: Total Cost of Ownership **CPK: Cost Per Kilometer
Load Care
Uptime
Cost Control
Saf
ety
Out-of-Pocket ValueCPK Opportunists
16 MICHELIN INVESTOR DAY – Shenyang, China – November 10, 2014 - Serge Lafon
MICHELIN – Best TCO: mileage, fuel efficiency, uptim e, brand equityLeading position in Premium segment
Load Care
Uptime
Cost Control
Out-of-Pocket ValueCPK Opportunists
17 MICHELIN INVESTOR DAY – Shenyang, China – November 10, 2014 - Serge Lafon
Intermediate brands – CPK: wear life, reliability an d priceStrong positions in Europe and North America
Load Care
Uptime
Cost Control
Out-of-Pocket ValueCPK Opportunists
18 MICHELIN INVESTOR DAY – Shenyang, China – November 10, 2014 - Serge Lafon
Strengthen MICHELIN : Best TCO and more affordableExpand Intermediate : CPK, reliability
Load Care
Uptime
Out-of-Pocket ValueCPK Opportunists
Cost Control
North America
South AmericaAfrica / Middle East
Asia
19 MICHELIN INVESTOR DAY – Shenyang, China – November 10, 2014 - Serge Lafon
20 MICHELIN INVESTOR DAY – Shenyang, China – November 10, 2014 - Serge Lafon
Michelin Truck tire offer
X LINE
XMULTI
XWORKS
X FORCEX INCITY
AGILIS
X COACH
XMETRO
LONG HAUL REGIONAL URBAN ON/OFF ROAD OFF ROAD
21 MICHELIN INVESTOR DAY – Shenyang, China – November 10, 2014 - Serge Lafon
MICHELIN brand
Matching customer expectations (wear life and fuel ef ficicency) withinnovation
► Performance lever
► Patent clusters
► Industrial Know-How
INFINICOILTM
Wear lifeFuel efficiencyMass
Xone MultiX Line Tropic
ENERGYFLEXTM
Fuel efficiencyMassRetreadability
X LineX Multi
CARBION TM
Wear lifeFuel efficiency
X Multi
REGENIONTM
Wear lifeFuel efficiencyMass
X Multi X Incity, X Line
22 MICHELIN INVESTOR DAY – Shenyang, China – November 10, 2014 - Serge Lafon
MICHELIN brand
A fast deployment of key technologies
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
2011 2014 2022
INFINICOIL
ENERGY FLEX
REGENION
% of MICHELIN tires equipped
23 MICHELIN INVESTOR DAY – Shenyang, China – November 10, 2014 - Serge Lafon
MICHELIN brand
The best total performance for customers
MICHELIN Xline Energy Z Competitor A Competitor B
Europe: 315/70R22,5 Steer Axle – Long Haul
ROLLING RESISTANCE
ENDURANCE
WEARLIFE
WETGRIP
ROLLING RESISTANCE
ENDURANCE
WEARLIFE
WETGRIP
ROLLING RESISTANCE
ENDURANCE
WEARLIFE
WETGRIP
Reference: Premium Average
Source: Michelin estimates
24 MICHELIN INVESTOR DAY – Shenyang, China – November 10, 2014 - Serge Lafon
MICHELIN brand
A unique panel of Services & Solutions
Sop
hist
icat
ion
Customer Loyalty
Key enablers
Tire sales
TireData& BI
1 - Ready
2 - Monitor
3 - Optimize
We capture the dataand organize “the right service
at the right time”for your tires.
End-to-end Tire Program: “Pay-as-you-go”
EFFITIRE™
EFFIFUEL™ by
Key countries under deployment
Solutions beyond tires
by
25 MICHELIN INVESTOR DAY – Shenyang, China – November 10, 2014 - Serge Lafon
► Intermediate Product Design ■ Product wear life and balance of performance
designed to targeted segments
■ Reliable casing, excellent manufacturing quality
■ Adaptation of material specification to reduce material cost
■ Focus on lower mass & fewer components
► A lean RDI process■ Small and efficient design team
► A lean manufacturing■ Driven by standardization and process optimization
INTERMEDIATE brands
Reliability and Cost per Kilometer 1 st life at low price
26 MICHELIN INVESTOR DAY – Shenyang, China – November 10, 2014 - Serge Lafon
► Resulting in commercial launches from 2013 ■ KORMORAN in South America and Africa-Middle East
■ New ranges for BFGoodrich
■ New ranges for KORMORAN in Europe
■ SIAM Radial in Asia
■ UNIROYAL in North America
INTERMEDIATE brands
Cost per Kilometer 1 st life at low price
27 MICHELIN INVESTOR DAY – Shenyang, China – November 10, 2014 - Serge Lafon
28 MICHELIN INVESTOR DAY – Shenyang, China – November 10, 2014 - Serge Lafon
2.5%
-1.5%
4.4%3.5%
6.6%
7.8%8 - 9%
2008 2009 2010 2011 2012 2013 2014e
A recovering profitability
SR2 Operating margin (before non-recurring items)In % of Net sales
9%
7%
29 MICHELIN INVESTOR DAY – Shenyang, China – November 10, 2014 - Serge Lafon
MICHELIN brand: Less mass/more performance Reduce product complexity
0
20
40
60
80
100
120
2011 2022
Complexity**
0
20
40
60
80
100
120
2011 2022
Performance*Michelin Performance
and Responsability (PRM)
-25%+15%
*PRM index: rolling resistance, wear life, wet grip and mass **Complexity index: number of casing, components
30 MICHELIN INVESTOR DAY – Shenyang, China – November 10, 2014 - Serge Lafon
Cost of production: double average plant output from 2011 to 2022
x 2
31 MICHELIN INVESTOR DAY – Shenyang, China – November 10, 2014 - Serge Lafon
Cost of production: continuing efficiency gains
► Productivity*: 3% annual target
0
20
40
60
80
100
120
140
2008 2014
+18%
*Productivity index / output ratio
32 MICHELIN INVESTOR DAY – Shenyang, China – November 10, 2014 - Serge Lafon
New Automatic Assembly Machine
► Productivity x 3
► Drastic flexibility improvement
► Enable deployment of new technologies
► Improve manufacturing quality
Cost of production: Modernization
33 MICHELIN INVESTOR DAY – Shenyang, China – November 10, 2014 - Serge Lafon
Manufacturing footprint optimization to get closer to ma rkets
In thousands of tiresCapacity closures Capacity additions
Mature markets -1,500(Tours, Budapest)
+925(Marginal capacity)
Growth regions -1,565(Bogota, Alger, bias Thailand, Shenyang1)
+2,200(Campo Grande extension, Chennai,
Shenyang2)
Total -3,065 +3,125
2010-2015
34 MICHELIN INVESTOR DAY – Shenyang, China – November 10, 2014 - Serge Lafon
In € millions 2013 2014e 2015e 2016e 2017e
Total
Non recurring expense (202) (39) (241)
of which cash out (41) (56) (60) (18) 0 (175)
Annual gains after 2017
Productivity gains 0 38 51 66 69 69
Projects deployed in 2013 and 2014 to optimize the t ruck manufacturing footprint will deliver close to €70m in annual gains
35 MICHELIN INVESTOR DAY – Shenyang, China – November 10, 2014 - Serge Lafon
Localization in key expanding markets
Start of large Shenyang2 plant, China 2012
Extension of Campo Grande, Brazil 2011-2013
Start of Chennai, India2013
36 MICHELIN INVESTOR DAY – Shenyang, China – November 10, 2014 - Serge Lafon
► Cost optimization in overheads
■Externalization & pooling
■ IS / IT optimization
■Lean back office processes policy
► Productivity in service centers
■Euromaster operating method and productivity program
■Footprint management
► Development of services to fleets
■Mass-customized IS-based services, extracting more value from preventive maintenance and maximized vehicle uptime
Distribution: Profitability improvements
37 MICHELIN INVESTOR DAY – Shenyang, China – November 10, 2014 - Serge Lafon
Truck division to contribute €400m to Group €1bn 2012 – 2016 competitiveness plan
SG&A Materials Manufacturing – Transport Total
Gains* achieved 2012 – Sept. 2014in million €
*Before inflation and including avoided costs
o/wSR2
Group o/wSR2
Groupo/wSR2
GroupGroup o/wSR2
0
100
200
300
400
500
600
700
308794
263
634
76
284
200
38 MICHELIN INVESTOR DAY – Shenyang, China – November 10, 2014 - Serge Lafon
39 MICHELIN INVESTOR DAY – Shenyang, China – November 10, 2014 - Serge Lafon
Key takeaways
► A growing market… mostly in new markets
► A growth strategy suited to the various market segments■MICHELIN brand: innovative products more affordable and services
■ Intermediate: offer designed to segment, new brands, geographical expansion
► Improve profitability through ■ Product costs reduction, localization, SG&A control and distribution efficiency
Grow MICHELIN share of Premium segmentExpand in Intermediate
Keep improving profitability
40 MICHELIN INVESTOR DAY – Shenyang, China – November 10, 2014 - Serge Lafon