Michelin posts record annual profit, sees 'marginal' effect from Red Sea crisis

Tyre maker Michelin on Monday reported record results, citing the delayed positive impact of its 2022 price adjustments, but remained cautious for the new fiscal year citing an “uncertain” market environment.

“We are in a market context that remains complicated, a European situation that is not very bright, a China that is starting up again but not with growth as strong as it was a few years ago, and many other unknowns,” CFO Yves Chapot said in an interview with Reuters.

The French group, which makes tyres used in cars, aircraft, bicycles and industrial equipment posted segment operating income, its main profit metric, of a record high €3.57bn (about R72.83bn) for 2023, beating analysts' forecast of €3.42bn (about R69.66bn) in a company-compiled consensus.

Logistics issues linked to the Red Sea crisis weighed on the group's finished product flows, mainly natural rubber, Chapot said, adding the crisis will have a “reasonably marginal” effect on 2024 results.

“It will mostly impact the first quarter or the first semester of 2024,” he said.

Chapot stressed that only 4% of Michelin's shipments, mainly natural rubber, transit through the Suez Canal, as the company also relies on African and South American suppliers.

Many commercial shippers have diverted vessels away from the strategic Red Sea commercial route after attacks by the Iran-backed Houthis, leading Michelin to halt activity in some of its Spanish factories on two occasions.

Michelin said it now expects 2024 segment operating income above €3.5bn (about R71.29bn), below analyst expectations of €3.59bn (about R73.12bn).

The group also announced a share buyback programme of up to €1bn (about R20.37bn) over the period 2024-2026. It will propose a dividend of €1.35 (about R27.50) per share at its next general meeting.

Michelin will hold a Capital Markets day at the end of May to present its new 2026 objectives, Chapot said.