PARIS (Reuters) – Michelin on Monday reported weaker-than-expected structural free cash flow for 2022 as the tire group battled record cost inflation last year.
Structural free cash flow stood at 378 million euros, while the Clermont group said in October that it was aiming for 700 million euros, a forecast which it then lowered by almost half.
At the end of December, free cash flow was negative at 180 million euros against a positive amount of 1.357 billion a year earlier.
Inflation of raw materials, energy and labor costs generated a record cost of 2.7 billion euros last year, slightly above Michelin’s forecast who had forecast between 2.5 and 2.6 billion.
“The fourth quarter was penalized by around 300 million euros by a drop in purchases and sales in December greater than forecast, this amount is shifted to the first quarter of 2023”, also argued Michelin to explain the decline in its structural free cash flow.
The group has nevertheless managed to achieve its objective of an operating result of its main activity exceeding 3.2 billion euros, this having reached 3.4 billion in 2022.
The rise in tire prices made it possible to limit the impact on the operating margin, which nevertheless fell to 11.9% against 12.5% ​​in 2021.
It also made it possible to offset the drop in volumes linked to the shutdown of operations in Russia and the disruptions in China due to COVID-19. Michelin’s annual turnover thus increased by 20.2% to 28.6 billion euros.
In Russia, Michelin continues to work “on different disengagement scenarios, including the transfer to third parties”, he said. The process of finding and negotiating with a local buyer is taking longer than initially expected and is still ongoing, the group added.
For 2023, Michelin expects – based on a stable market demand scenario – an operating profit from its main activity of 3.2 billion euros at constant exchange rates and a free cash flow before acquisitions above 1 .6 billion euros.
(Written by Blandine Hénault, edited by Matthieu Protard)
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