2012 annual resultsmichelin guide

8/10/2019 2012 Annual ResultsMichelin Guide

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RESULTS

2012


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CONTENTS

1 Press Release 1

Market Review 3

2012 Net Sales and Results 5

Compagnie Gnrale des tablissements Michelin 6

2012 Highlights 6

2 Slideshow 9

Annual Results February 12, 2013 10

Sluggish Markets 12

A solide Performance 16

Robust Balance Sheet 23

Results of the Competitiveness Plan 25

Wide-ranging Product Portfolio and Geographic Exposure 28

Outlook 31

Appendices 37

3 2012 Business Review 42

3.1. Tire Markets 44

3.2. Net Sales 51

3.3. Consolidated Income Statement Review 54

3.4. Consolidated Balance Sheet Review 62

3.5. Consolidated Cash Flow Statement Review 66

3.6. Return on Capital Employed (ROCE) 68

3.7. Outlook 68

3.8. Share Information 69

3.9. Operating Highlights 71

4 Financial Highlights 75

4.1. Sales 76

4.2. Earnings 78

4.3. Reporting Segments 80

4.4. Cost Structure 83

4.5. Cash Flow and Balance Sheet 88

4.6. Consolidated Key Figures and Ratios 92

5 Consolidated Financial Statements

December 31, 2012 95Consolidated Income Statement 97

Consolidated Statement of Comprehensive Income 98

Consolidated Balance Sheet 99

Consolidated Statement of Changes in Equity 100

Consolidated Cash Flow Statement 101

Notes to the Consolidated Financial Statements 102


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1MICHELIN 2012 RESULTS

1

PressRelease

MARKET REVIEW 3

2012 NET SALES AND RESULTS 5

COMPAGNIE GNRALE DES TABLISSEMENTS MICHELIN 6

2012 HIGHLIGHTS 6


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2 MICHELIN 2012 RESULTS

PRESS RELEASE1

Press Release

Clermont-Ferrand February 12, 2013

Financial information for the year ended December 31, 2012

Compagnie Gnrale destablissements Michelin

Strong 2012 earnings in lackluster markets.

More than 1 billion in free cash flow.

2,423 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% to2,423 million, reflecting: an efficient pricing policy; a global footprint; structurally high margins in specialty tires; restored profitability in the Truck tire business, despite a sharpmarket contraction.

Volumes down 6.4%, with demand remaining flat in the second half.

More than 1 billion in free cash flow, demonstrating: the Groups ability to structurally generate cash; the effective integration of value creation into every unitsobjectives.

12.8% return on capital employed. Proposed dividend of 2.40 per share, subject to approval at the

Annual Shareholders Meeting of May 17, 2013.

Outlook for 2013Given 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 350-400 million to operating income. This will bepartly offset, however, by the impact of indexation clauses on the original equipment and earthmover businesses.

The capital expenditure program totaling around 2 billion will support Michelins growth ambitions by bringing new production capacityon stream in the growth regions, whose start-up will weigh on costs. The program is also designed to improve competitiveness in maturemarkets and drive technological innovation.

Confident in its competitive strengths and thanks to the launch of an ambitious project to improve its management systems, Michelinconfirms 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 million) 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 flow (1) 1,075 (19)

Return on capital employed 12.8% 10.9%

Employees on payroll (2) 113,400 115,000

(1) Cash flow from operating activities less cash flow used in investing activities.

(2) At period-end.


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PRESS RELEASEMARKET REVIEW 1

MARKET REVIEW

PASSENGER CAR AND LIGHT TRUCK TIRES

2012% change year-on-year(in number of tires) Europe*

NorthAmerica

Asia(excluding India)

SouthAmerica

Africa-India-Middle East Total

Original equipment -5% +16% +11% +0% -3% +6%

Replacement -10% -2% +2% +2% -3% -4%

Fourth-Quarter 2012% change year-on-year(in number of tires) Europe*

NorthAmerica


SouthAmerica


Original equipment -8% +10% +5% +12% -12% +2%

Replacement -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 theEuropean Union, masked a contrast between the decline inbroadline carmaker sales and the firmer resistance of specialtyand export-driven brands. Markets in Eastern Europe continuedto expand, increasing by 11% over the year.

The North American tire market grew by 16% in 2012, returningto 2007 levels thanks to strong new car sales as buyers replacedaging models.

In Asia (excluding India), demand rose by 11% overall. While stillbuoyant, the Chinese market cooled somewhat, ending the yearup 6%. Demand in Japan (up 18%) 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 measuresintroduced in the autumn.

Replacement In Europe, replacement demand dropped 10% year-on-year in a

highly uncertain economic environment. Western Europe saw arecord decline, steeper even than in 2008, that was accentuatedby dealer inventory drawdowns. The winter tire market dropped16%, as expected, and the high-performance tire segment (17and bigger) slowed to a lesser extent than the European marketaverage, reflecting the sustained improvement in the mix.

Demand in North America retreated 2% as consumer confidenceweakened, despite the relative stability of average miles traveledand fuel prices. After an upturn in 2010, the market has returnedto 2009 levels, with volumes sold noticeably lower than in 2007.Impacted by the significant increase in Chinese imports aftercustoms duties were lifted, the US market declined by 3%.

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

The South American market gained a slight 2% overall, but with

wide variations among countries. Demand expanded by 3% inBrazil as sell-out held firm at 2011 levels.


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PRESS RELEASEMARKET REVIEW1

TRUCK TIRES

2012% change year-on-year(in number of tires) Europe**

NorthAmerica


SouthAmerica


Original equipment* -4% +2% -9% -30% +31% -5%

Replacement* -14% -2% -6% +3% +8% -4%

Fourth-Quarter 2012% change year-on-year(in number of tires) Europe**

NorthAmerica


SouthAmerica


Original equipment* -7% -15% -10% -27% +31% -9%

Replacement* +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 thefirst half, it gained momentum in the second, to 5%, under theimpact of the worsening economic situation in the region.

After surging 17% in the first half, the North American marketslowed precipitously in the second half, to end the year with

just a 2% gain. Economic uncertainty caused by tax issues inthe United States weighed on new truck orders during the year.

In Asia (excluding India), demand retreated by 9% overall, witha fairly steep 15% drop in China as growth in the economy(particularly exports) cooled over the year. The Southeast Asianmarket, which continues to shift to radials, was highly active,up 42%, while the Japanese market rebounded 12%. In bothcases, growth was lifted by prior-year comparatives shaped by,respectively, flooding and the tsunami.

The South American market plunged 30% after Brazil introducedEURO V emissions standards during the year. However, theBrazilian governments introduction of more favorable financingterms helped the market to turn around, with an upturn in thefinal quarter.

Replacement 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 weaktransportation activity and the lackluster economic outlook. InEastern Europe, the market declined by 3%, primarily due todealer destocking.

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 alsobe explained by the sharp growth in original equipment sales andthe availability of retreadable casings.

In Asia (excluding India), markets declined by 6% overall duringthe year. The Chinese market ended 2012 down by 7%, reflectingthe slower growth in the economy and in exports. The Japanesemarket was down 6% off of a high prior-year comparative, whichwas lifted by last years price increases and inventory rebuildingafter the tsunami. Demand in South Korea also declined as theglobal economic slowdown weighed on exports and transportationdemand.

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

SPECIALTY TIRES

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

Agricultural tires:After climbing in the first half, worldwide originalequipment demand declined in the fourth quarter, particularlyin Europe. The replacement market dropped significantly inmature markets during the year, dragged down by the prevailingeconomic uncertainty.

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

Aviation tires:Passenger load factors are continuing to improvein the commercial aviation segment, on both domestic andintercontinental routes, but the cargo market was down for the year.


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PRESS RELEASE2012 NET SALES AND RESULTS 1

2012 NET SALES AND RESULTS

NET SALES

Consolidated net sales amounted to 21,474 millionfor the year,up 3.6% at current exchange rates compared with 20,719 millionin 2011.

Of the total price mix effect, which added 6.2% to growth,1,052 million corresponded to the net impact of the price increasesintroduced in 2011 and the contractual price reductions due tothe raw materials indexation clauses applicable on nearly 30% of

consolidated sales volumes. It also included the 157 million impactof a further improvement in the sales mix, led by the premiumstrategy and the expanding specialty businesses.

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

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

EARNINGS

Consolidated operating income before non-recurring itemsamounted to 2,423 million or 11.3% of net sales, comparedwith 1,945 million and 9.4% in 2011.

This 478-million improvement mainly reflected the positive pricemix (1,209 million, of which 1,052 million from price increases),which favorably combined with the limited negative impact fromraw materials costs (76 million). It also reflected the 504-millionnegative impact of the decline in volumes, the 176 million in outlays

to drive growth (start-up and other costs in the new markets),the 311 million increase in production costs and other expensesand the 3-million positive impact on productivity of productionslowdowns. The currency effect was a positive 268 million. Lastly, theimprovement also included the initial impact of the competitivenessplan launched in early 2012.

In all, net income for the year came to 1,571 million.

NET FINANCIAL POSITIONFree cash flow ended the year at 1,075 million, as availablecash flow and the sale of a property complex in Paris helped tooffset the faster deployment of growth investments.

At December 31, 2012, gearing stood at 12%while net debtamounted to 1,053 million.

SEGMENT INFORMATION

(in million)

Netsales

Operating incomebefore non-recurring items

Operating marginbefore non-recurring items

2012 2011 2012 2011 2012 2011

Passenger car and light truck tiresand 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 tiresand related distributionIn all, net sales in the Passenger car and light truck tires and relateddistribution segment stood at 11,098 million, up 2.9% on 2011.

The sustained firm pricing policy and ongoing improvement in theproduct mix, led by the MICHELIN brands premium positioning,helped to offset the 5.5% decline in volumes. As a result, operatingincome before non-recurring items stood at 1,033 million or 9.3%of net sales, compared with 1,018 million and 9.4% in 2011.


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PRESS RELEASECOMPAGNIE GNRALE DES TABLISSEMENTS MICHELIN1

Truck tires and related distributionNet sales in the Truck tires and related distribution segment amountedto 6,736 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 thedecline in raw materials costs, drove a sharp increase in operatingincome before non-recurring items, to 444 million or 6.6% of netsales from 233 million and 3.5% in 2011.

Specialty businessesNet sales by the Specialty businesses rose by 13.0% to 3,640 millionin 2012.

At 946 million or 26.0% of net sales, operating income before

non-recurring items confirmed these businesses structurally highprofitability. In a particularly favorable currency environment, theybenefitted from the still positive impact of contractual indexationclauses based on raw materials prices, as well as from the 1.7%increase in volumes.

COMPAGNIE GNRALE DES TABLISSEMENTS MICHELIN

Compagnie Gnrale des tablissements Michelin reported a profitof 465 million in 2012.

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

The Managing Partner will call an Annual Shareholders Meeting onFriday, May 17 at 9:00 a.m. in Clermont-Ferrand.

Shareholders will be asked to approve the payment of a dividendof 2.40 a share, with a dividend reinvestment option.

2012 HIGHLIGHTS

Standard & Poors upgrades Michelins credit rating to BBB+

(March 23). Global leadership in Earthmover tires strengthened with the

construction of a new plant and the extension of another inNorth America (April 10).

Moodys upgrades Michelins credit rating to Baa1 (April 24).

First Passenger Car and Light truck tire produced at Pau-Brasilplant (February 9).

In addition to sticker information, the MICHELIN Total Performancestrategy is showcasing all of the benefits of tire technology withthe slogan: Michelin sells performance, not rubber (June 29).

New MICHELIN Restaurants website launched in France (May 25).

The Group celebrates 10 years of Michelin Performance andResponsibility (June 18).

Michelin successfully places 400 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 MINExpoTrade Show in Las Vegas (September 24).

FIA World Rally Championship: a 20 th Drivers Title and a22ndManufacturers 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/finance


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PRESS RELEASE2012 HIGHLIGHTS 1

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 a.m. CET(10:00 a.m. 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 a.m. CET: In France 01 70 77 09 19 (French)

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 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

Valrie Magloire

+33 (0) 1 78 76 45 37

+33 (0) 6 76 21 88 12 (cell)

[email protected]

Alban de Saint Martin

+33 (0) 4 73 32 18 02

+33 (0) 6 07 15 39 71 (cell)

[email protected]

Media Relations

Corinne Meutey

+33 (0) 1 78 76 45 27

+33 (0) 6 08 00 13 85 (cell)

[email protected]

Individual shareholders

Jacques Engasser

+33 (0) 4 73 98 59 08

[email protected]

DisclaimerThis press release is not an offer to purchase or a solicitation to recommend the purchase of Michelin shares. To obtain more detailedinformation on Michelin, please consult the documents filed in France withAutorit des Marchs Financiers,which are also availablefrom the www.michelin.com website.

This press release may contain a number of forward-looking statements. Although the Company believes that these statements arebased on reasonable assumptions as at the time of publishing this document, they are by nature subject to risks and contingencies liableto translate into a difference between actual data and the forecasts made or inferred by these statements.


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2

Slideshow

ANNUAL RESULTS FEBRUARY 12, 2013 10

SLUGGISH MARKETS 12

A SOLIDE PERFORMANCE 16

ROBUST BALANCE SHEET 23

RESULTS OF THE COMPETITIVENESS PLAN 25

WIDE-RANGING PRODUCT PORTFOLIOAND GEOGRAPHIC EXPOSURE 28

OUTLOOK 31

APPENDICES 37


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SLIDESHOWANNUAL RESULTS FEBRUARY 12, 20132

2ANNUAL RESULTS February 12, 2013

2,423m in Operating Income before non-recurring items, up 25%:

An efficient pricing policy.

A global footprint at a time of weak demand, particularly in Europe.

Structurally high margins in Specialty tires. Rebound in operating margin in the Truck tire business, despite a sharp market

contraction.

Volumesdown 6.4%, with demand remaining flat in the second half.

Free cash flow of more than 1 billion, demonstrating:

The Groupsability to structurally generate cash.

The effective integration of value creation into every unitsobjectives.

Strong Earnings - over 1 billion in Free Cash Flow

Sluggish Markets

ANNUALRESULTS

February 12, 2013


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SLIDESHOWANNUAL RESULTS FEBRUARY 12, 2013 2


1

ANNUALRESULTS

February 12, 2013

2

3

4

5

6 OUTLOOK

WIDE-RANGING PRODUCT PORTFOLIO AND

GEOGRAPHIC EXPOSURE

SLUGGISH MARKETS

A SOLID PERFORMANCE

A ROBUST BALANCE SHEET

RESULTS OF THE COMPETITIVENESS PLAN


Financial Highlights

2012 & 2011 figures as reported

*Cash flows from operating activities less cash flows used in investing activities

**Subject to approval by the Annual Shareholders Meeting of May 17, 2013

Net Sales

Operating Incomebefore non recurring items

Operating Marginbefore non recurring items

Net Income

Investment

Net Debt-to-Equity Ratio

Free Cash Flow *

2012 2011

21,474

2,423

11.3%

1,571

1,996

12%

1,075

20,719

1,945

9.4%

1,462

1,711

22%

-19

ROCE 12.8% 10.9%

In millions

Dividend 2.40** 2.10


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SLIDESHOWSLUGGISH MARKETS2


An unfavorable economic environment

Demand down in every segment

Truck tire market excluding Russia

lower than in 2009

Dealer destocking

Dealer inventory levels

Normal for Truck tires and summer Carand Light truck tires

Still high for winter Car and Light truck tires

Sell-out contracted around 50%less than

sell-in

Europe:Sharp Fall-off in Demand,

especially in Replacement Markets

-5%

-10%

-14%

-4%

OE RT

Markets at December 31, 2012/2011(% change YoY, based on number of radial tires)


SLUGGISH MARKETS1

ANNUALRESULTS

February 12, 2013


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SLIDESHOWSLUGGISH MARKETS 2


Asia excluding India: a Year of Transition in

China and the Impact of Slower Growth in Exports

Economic growth in the region has

started to cool

Truck tire market in China down

sharply

Demand in ASEAN countries holds

firm

Technical rebound in Car and Light

Truck OE sales due to 2011 natural

disasters in Japan and Thailand

Dealer inventory drawdowns following

the build-up in 2011

+11%

+2%

-6%

-9%

OE RT



North America:Original Equipment Market

Trending Upwards

Growth in OE demand

Aging car, van and truck fleets need

to be replaced

Truck tire market abruptly turned

downwards, by 15%, in the fourth

quarter

Replacement market below 2007levels

Dealers

Truck tire inventory drawdowns in the

first half

Inventories unchanged in the second

half compared with the first

+16%

-2% -2%

+2%

OE RT



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SLIDESHOWSLUGGISH MARKETS2


Africa India Middle-East: Weak

Car and Light Truck Markets in 2012

Demand dampened by geopolitical

situations in the region

Continued shift to radials in India

-3% -3%

+8%

+31%

OE RT



South America: Limited Growth

Demand up slightly, except for OE

Truck tires, which suffered a technical

decline following the introduction of

Euro V emissions standards

Brazil: market upturn in the secondhalf

Argentina and Venezuela: growth

slowed by customs barriers

+0%+2% +3%

-30%

OE RT



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SLIDESHOWSLUGGISH MARKETS 2


Continued growth in mining markets:

Led by demand for ore, oil and gas

Buoyant market for large tires

OE: adjustment in equipment manufacturer

inventories

Decline in demand for tires used in

infrastructure, especially in Europe

Earthmover Tires: Sustained Growth in Mining

Demand

2009 2010 2011 2012

100

109

121

134

Markets at december 31(% change YoY, based on number of tires)


Unfavorable OE/RT sales mix

Replacement market has fallen back to

2010 levels

Continued growth in the new markets,unlike in mature ones

A Declining Global Market

+6%

-4% -4%-5%

OE RT



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SLIDESHOWA SOLID PERFORMANCE2


A SOLID PERFORMANCE2

ANNUALRESULTS

February 12, 2013


Slow-down in replacement

Drought in the United States

Hesitation in Europe

Firm resistance in OE markets

Agricultural Tires: Mature Replacement Markets

Hurt by Economic Uncertainty

100 100

114

104

2009 2010 2011 2012

Markets at December 31(% change YoY, based on number of tires)


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SLIDESHOWA SOLID PERFORMANCE 2


Q4 Volumes:in Line with Markets

Q4 Price-Mix:Ongoing Positive Effect despite Clauses

Change YoY(in %)

16.5

9.2

3.3

-0.2

12.311.910.3

7.7

-4.8 -4.2

-0.1

2.1

-9.6

13.8

2.2

-7.0

8.5

5.8

Volumes Price-mix Currency

Q1 Q3Q2 Q4

2011

Q1 Q3Q2 Q4

2012

Q1 Q3Q2 Q4

2011

Q1 Q3Q2 Q4

2012

Q1 Q3Q2 Q4

2011

Q1 Q3Q2 Q4

2012

-3.5-5.7

2.70.8

6.6

2.5


Growth in Net Sales Led by Significantly Higher

Prices and an Improved Mix

20,719 - 1,329

Volumes

(-6.4%)

+35,9%

21,474

+1,209

+875

Price-Mix

(+6.2%)

Currency

(+4.2%)

YoY change(in millions)

+3,6%

2011

Net Sales

2012

Net Sales


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1,945 -504

Volumes

+35,9%

2,423+918 +268

Unit gross

margin

Currency

-204

+24.6%

2011

Operating Income

before non-recurring items

2012

Operating Income


YoY Change(in millions)

SG&A

Operating Income Lifted by the Improvement in

Unit Gross Margin


Operating Income Lifted by the Improvement

in Unit Gross Margin

2011

Operating Income


2012

Operating Income


1,945 -504

Volumes

+35,9%

2,423+918 +268

Unit grossmargin

-204


+24,6%

SG&A Currency


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Operating Income Lifted by the Improvement in

Unit Gross Margin

1,945 -504

Volumes

+35,9%

2,423+918 +268

Unit gross

margin

CurrencySG&A

-204

+24.6%


2011

Operating Income


2012

Operating Income



Start-up

costs

Productivity*

Unit Gross Margin Supported by the Efficient

Pricing Policy and Premium Positioning

Price-Mix

o/w price:

1,052m

918

+1,209

Raw materials

inflation 918

-76

-77

Production

cost

inflation

- 168

YoY change in components of unit gross margin(in millions)

OtherMaterials*

+ 35

* Part of the competitiveness plan

-8+3

Total

unit gross

margin

Total

unit gross

margin


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Car and

Light truck

& distribution

Truck

& distribution

Specialty

businessesTotal

+3.5

+21.5

+9.4+9.4+11.3

Solid Results

Operating margin before non-recurring items(as a % of net sales)

2011

2012+9.3

+6.6

+26.0


SG&A Expense: Initial Impact of the

Competitiveness Plan

+35,9%

YoY change in SG&A(in millions)

+152

-204

Cost of driving

growth

(New markets,R&D, communication)

Inflation Other Total

SG&A

OPE

Business

management

program

-37

-77

SG&A

gains*

-99

Total

SG&A

-204

-143

* Part of the competitiveness plan


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Priority focus on turning around the Truck tire business and restoring its margins

Volumes reflect lackluster demand

39 product launches and success of the MultiWay product line

Favorable impact of raw materials costs

Restored Margins in Truck Tires and Related

Distribution

Truck(in millions)

2012 2011 Change

Net SalesVolume growth

6,736-10.8% 6,718 +0.3%

Operating Income(before non-recurring items)

444 233 +90.6%

Operating Margin

(before non-recurring items)6.6% 3.5% +3.1 pt


Firm pricing policy maintained

Application of contractual clauses indexing prices to raw material costs in OE had an unfavorableimpact in the fourth quarter

Sustained improvement in the mix, due to technology and the Michelin brandspremium

positioning

Success of the Michelin Pilot Super Sport, Alpin 4, Defender and other product lines

Solid Margins in Passenger Car and Light

Truck Tires and Related Distribution

Passenger car and Light truck(in millions)

2012 2011 Change

Net Sales

Volume growth11,098-5.5%

10,780 +2.9%


1,033 1,018 +1.5%

Operating Margin

(before non-recurring items) 9.3% 9.4% -0.1 pt


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Net Sales

Operating Income(before non-recurring items

as a % of net sales)

Operating IncomeNon-Recurring Items

Cost of Net Debt

Other Financial Income & Expenses

Tax

Share of Profit from Associates

Net Income

2011

20,719

1,945

9,4%

-1,945

236

(534)

21

1,462

(206)

Strong Growth in Net Income

In millions

Earnings per share 8.14

2012

21,474

2,423

11.3%

462,469

(22)

(736)

15

1,571

(155)

8.62


Still buoyant mining market

Sharp slowdown in Q4 in infrastructure, OE and RT Agricultural tires

Rising impact of higher prices throughout the year

Price effect slightly negative in Q4 following contractual adjustments for lower rawmaterials costs

Highly favorable currency effect

Specialty Businesses:Structurally High Margins

Specialty Businesses(in millions)

2012 2011 Change

Net Sales

Volume growth3,640+1.7%

3,221 +13.0%


946 694 +36.3%

Operating Margin

(before non-recurring items) 26.0% 21.5% +4.5 pts


25/158


SLIDESHOWROBUST BALANCE SHEET 2


ROBUST BALANCE SHEET3

ANNUALRESULTS

February 12, 2013


Return on capital employed (ROCE)

Value Created:Sustained Improvement in ROCE

despite Faster Deployment of the Capex Program

2009 2010 2011 2012

5.4%

10.5% 10.9%

12.8%

9%

Value creation

point


26/158


SLIDESHOWROBUST BALANCE SHEET2


Clear improvement in EBITDA

Structurally high profitability

High capex

A Business that Structurally Generates Free

Cash Flow

WCR impact of raw materials costs (2)

One off (4)

(Sales of Hankook shares in 2011,sale of the Parisian building in 2012)

2012

Reported free cash flow (1)

2011

517

1,075

+ 21

- 19

- 739

WCR year-end volume effect (3)

599

+ 344 - 200

Structural free cash flow (1)(2)(3)(4)

+ 111 + 403

In millions


A Business that Structurally Generates

Free Cash Flow

Change in operating WCR

Restructuration Cash Costs

Other (Increase)/Decrease in Provisions

Other Operating WCR

Taxes and Interest Paid

Routine Capital Expenditure

(Maintenance, IS/IT, Dealerships)

Cash Flow from Operations

Growth Investments

Other Cash Flow from Investing Activities

Free Cash Flow after Capital Expenditure

EBITDA

Avail able Cash Flow

2012 2011In millions

(671)

2,878

(912)

(145)

13

(5)

(19)

(632)

(1,040)

495

526

1,829

(849)

3,445

2,267

276

(93)

(124)

271

(659)

(1,337)

145

1,075

3,775


27/158


SLIDESHOWRESULTS OF THE COMPETITIVENESS PLAN 2


RESULTS OF THECOMPETITIVENESS PLAN4

ANNUALRESULTS

February 12, 2013


Robust Balance Sheet

70

84

55

2022

12

GearingNet debt/equity(in %)

Dec. 31

2007

Dec. 31

2008

Dec. 31

2009

Dec. 31

2010

Dec. 31

2011Dec. 31

2012

S&P and Moodys have upgrated their ratings

to respectively BBB+ et Baa1


28/158


SLIDESHOWRESULTS OF THE COMPETITIVENESS PLAN2


Calculating productivity gains

Principle:

Highlight productivity gains before inflation, non-recurring items, the OPE program,

depreciation and amortization

Volume effect based on growth in unit gross margin before start-up costs and at

constant exchange rates.

Method for valuing gains:

A Disciplined Method for Valuing Gains

Costs*

Year N

Currency

effect

Volume

effect

InflationGains

Costs*

Year N+1=++++

* Before depreciation and amortization charges


2012-2016 competitiveness plan:

1billion(before inflation and including avoided costs)

SG&A

Objective:

Impacts

operating

income in:

Enablers Efficiencyprogram

OPE

Shared Service

Centers, etc.

New lines

New materials

Scrap process

materials, etc.

Best practices

(MMW)

Standardization

Flexibility

SG&A Unit gross

marginUnit gross margin /

Productivity

-200m/

-300m-200m -500m/

-600m

Materials

used

Manufacturing

and Transport


29/158


SLIDESHOWRESULTS OF THE COMPETITIVENESS PLAN 2


100100

103 105 99 105

80

10395

135 125

180

101

141

94

137

2006 2007 2008 2009 2010 20162011 2012

Improving Output per Employee

Tonnes per employee(base 100 in 2006)

2005 / 2010:continuous improvement + industrial footprint

2011 / 2015:continuous improvement + growth

Production Tonnes per employee


Competitiveness Plan:146 million in Gains

in 2012,Held Back by Weak Volumes

SG&A Materials Manufacturing

transport

2012 Annual

objectives

2012 Annual

objectives

2012 Annual

objectives

50m30m

110m

152m

35m

3m


30/158


SLIDESHOWWIDE-RANGING PRODUCT PORTFOLIO AND GEOGRAPHIC EXPOSURE2


Balanced Geographic Exposure

+35,9%

Net sales by region(as a % of net sales and in millions)

2011 Net Sales 2012 Net Sales

Western Europe

North America

Rest of the World32%

31%

37%

20,71921,474

32%

34%

34%


5 WIDE-RANGING PRODUCT

PORTFOLIO AND GEOGRAPHIC

EXPOSURE

ANNUALRESULTS

February 12, 2013


31/158


SLIDESHOWWIDE-RANGING PRODUCT PORTFOLIO AND GEOGRAPHIC EXPOSURE 2


2011 2012

52% 43%

39%

36%

12%18%

A Balanced Business Portfolio

+35,9%

Operating income by business(as a % of million operating income)

Car & Light tr uck tires

Truck tires

Specialty businesses

1,945

2,423


A Vast Network of Franchised Dealers:

2,000 Points of Sale Today to 5,000 by 2017

TYREPLUS Franchi se

1,3853,54

EUROMASTER Franchis e

6281,7

3Pilotot500South

America

50120North

Ameri ca

1 0400Afr ica

India

Middle-East219600ASEAN

8401,700China

173220EasternEurope


32/158


SLIDESHOWWIDE-RANGING PRODUCT PORTFOLIO AND GEOGRAPHIC EXPOSURE2


Factors driving demand

Markets: growth in world population

Michelin strengths: balanced geographic exposure and wide-ranging product

portfolio

Improving profitability

Margin improvement targets for the Truck tires business

Growing contribution from the Specialty Businesses

The highest prices the market will bare

2015 target: 2.9 billion

Michelin is Well Positioned to Capture Global

Market Growth


PC/LT Premium:Strong Growth Opportunity

Seized by Michelin

Source: Michelin

Europe North America

China Brazil

-10-5

4

-2

46

4

2936

3 4

29

Michelin sales

17"Market 17"March totalTotal market

Michelin sales

17"Market 17"Total market

Growth in the replacement Car & Light truck market(2012 vs. 2011 in %)


33/158


SLIDESHOWOUTLOOK 2


2013 Demand:Uncertain in Mature Markets,

Rising in the New Markets

North America New marketsEurope Mining markets

Truck

Car &

Light truck

+Truck

Car &

Light truck

+Truck

Car &

Light truck

+


OUTLOOK6

ANNUALRESULTS

February 12, 2013


34/158


SLIDESHOWOUTLOOK2


1sttire: February 9, 2012

Capacity late 2013: 17,000 tonnes

Itatiaia - Brazil

Car & Light Truck


Raw Materials:350 400 million favorable

impact,mainly in the first half

+35,9%

Michelin assumpt ions for 2013with 1 = 1.311 USD

H1 2012 H2 2012 H1 2013 H2 2013

80

85

90

95

100

105

110

Purchase cost:100

P&L cost :103

Purchase cost:93

P&L cost:99

P&L cost:90

Purchase cost:91

Purchase cost:105

P&L cost:98


35/158


SLIDESHOWOUTLOOK 2


Chennai India

Truck

1stTruck tire:

2ndhalf 2013


Shenyang 2 - China

Truck and Car & Light Truck

1stTruck tire: January 26, 2013

1stCar & Light Truck tire: mid-2013

2013 capacity: 25,000 tonnes


36/158


SLIDESHOWOUTLOOK2


Start-up Costs on the Rise as the New Plants

Come on Stream

+35,9%

Start-up costs(in millions, at current exchange rates)

287

2011 2013 e

115

2012

197


Anderson

1sttire: late 2013

Lexington 1sttire: late 2013

Increasing capacity in line with

market growth

Anderson, SC USA

Earthmover


37/158


SLIDESHOWOUTLOOK 2


Costs of deploying the new OPE business

management program(in millions)

82

37

2013 e2012

Managing the Business:Becoming more

Agile and Competitive

Annual program costs: around 100million over the next five years

Expected outcomes in 2017:

At least a 250 million reduction in

inventory

At least a 200 million reduction in annual

SG&A and supply chain costs


Managing the Business:Becoming more

Agile and Competitive

Deploying new, standardized, cross-functional operating procedures

and information systems

Increase sales and market share by offering customers differentiating

services

Increase the efficiency of accounting & finance, purchasing and sales

administration processes

Significantly improve supply chain responsiveness and reduce inventory

Manage margins more precisely and reduce production costs


38/158


SLIDESHOWOUTLOOK2


2015 Operating Income before non-recurring items: around 2.9bn

Normalized Segment performance:

Car & Light truck operating margin before NR items: 10%-12%

Truck operating margin before NR items: 7%- 9%

Specialty operating margin before NR items: 20%- 24%

2013-2015 capex: 1.8bn - 2.2bn per year

Positive free cash flow every year

ROCE > 10%each year

2015 Outlook Confirmed


Stable volumes

Still favorable impact from prices and raw materials

Slightly unfavorable impact from prices, primarily due to the application of

raw-materials related indexation clauses

30%of net sales are covered by raw materials clauses

Clauses triggered a further downward adjustment in prices in early 2013

Selected tactical repositionings in replacement markets

Lower raw materials costs will save 350-400 million

Stable operating income before non-recurring items, based on todays

exchange rates

Positive free cash flow

Capex of between 1.8 billion and 2.2 billion

ROCE exceeding 10%

Guidance:2013,a year of transition


39/158


SLIDESHOWAPPENDICES 2


APPENDICES

ANNUALRESULTS

February 12, 2013


Benefits of the global, multi-business strategy

Benefits of the positioning in the Specialty and Premium markets

Solid year

Structural generation of free cash flow

2013, a year of transition

Further improvements in operational efficiency in the pipeline

Key Takeaways


40/158


41/158


SLIDESHOWAPPENDICES 2


MICHELIN:Leading the Market in Premium

Tires

2012 Passenger Car and Light Truck tire market by size

(in number of tires)

Global market

21% 79%

MICHELIN brand

35% 65%

1617

1617


Impact on the 2012 Balance Sheet of the Change

in Accounting for Employee Benefits (IAS19)

Non-current assets

of which deferred tax assets

Current assets

Total assets

11,428

1,530

- 22 11,406

- 22 1,508

10,154 - 10,154

21,582 - 22 21,560

Equity

of which employee benefitobligations

Current liabilities

Total Equity and Liabil ities

8,501

4,679

+34 8,535

- 56 4,623

5,437 - 5,437

21,582 - 22 21,560

Non-current liabilities 7,644 - 56 7,588

Account ing

changeIn millions 2012 reported 2012 adjusted

for IAS19


42/158


SLIDESHOWAPPENDICES2


Disclaimer

"This presentation is not an offer to purchase or a solici tation to

recommend the purchase of Michelin shares. To obtain more detailed

information on Michelin,please consult the documentation published

in France by Autorit des marchs financiers available from the

www.michelin.comwebsite.

This presentation may contain a number of forward-looking

statements. Although the Company believes that these statements are

based on reasonable assumptions at the time of the publication of this

document, they are by nature subject to r isks and cont ingencies liable

to translate into a difference between actual data and the forecasts

made or induced by these statements."


Chinese market

17"

Global market

+198%

17"

+14% +10%

15"-16" 14"17"

MICHELIN

brand

Source: Michelin

Average annual growth (20092012)

+16%

+20%

MICHELIN:Leading the Market in Premium

Tires


43/158



44/158


3

2012 BusinessReview

3.1 TIRE MARKETS 443.1.1. A global market worth some $190 billion 443.1.2. Passenger car and light truck tire markets 453.1.3. Truck tire markets 483.1.4. Specialty tire markets 50

3.2 NET SALES 513.2.1. Analysis of net sales 51

3.2.2. Net sales by reporting segment 523.2.3. Currency rates and the currency effect 533.2.4. Net sales by region 53

3.3 CONSOLIDATED INCOME STATEMENT REVIEW 543.3.1. Analysis of consolidated operating income before non-recurring items 553.3.2. Operating income before non-recurring items by reporting segment 553.3.3. Other income statement items 57

3.4 CONSOLIDATED BALANCE SHEET REVIEW 623.4.1. Goodwill 633.4.2. Property, plant and equipment 633.4.3. Non-current financial assets and other assets 633.4.4. Deferred tax assets and liabilities 633.4.5. Working capital requirement 633.4.6. Cash and cash equivalents 643.4.7. Equity 643.4.8. Net debt 643.4.9. Provisions 653.4.10. Employee benefits 65


45/158


3.5 CONSOLIDATED CASH FLOW STATEMENT REVIEW 663.5.1. Cash flow from operating activities 663.5.2. Capital expenditure 673.5.3. Available cash flow and free cash flow 67

3.6 RETURN ON CAPITAL EMPLOYED (ROCE) 68

3.7 OUTLOOK 68

3.8 SHARE INFORMATION 693.8.1. The Michelin Share 693.8.2. Share Data 703.8.3. Per-share data 703.8.4. Capital and Ownership Structure 70

3.9 OPERATING HIGHLIGHTS 713.9.1. Strategy Partnerships Investments 713.9.2. Governance 723.9.3. Products Services Innovations 723.9.4. Michelin Performance and Responsibility 74

3.9.5. Racing 74


46/158


47/158


2012 BUSINESS REVIEWTIRE MARKETS 3

3.1.2. PASSENGER CAR AND LIGHT TRUCK TIRE MARKETS

Volumes in the Passenger car and light trucktire markets were nearly flat over the year, easing back by just 1%, reflecting a 6% increasein original equipment and a 4% decrease in replacement.

THE GLOBAL PASSENGER CAR AND LIGHT TRUCKTIRE MARKET, 2012 VS. 2011

-5%

-10%

+16%

-2%

+11%

+2% +2%

0%

-3% -3%

+6%

-4%

Original Equipment

Replacement

TOTALNorthAmericaEurope

(incl. Russiaand Turkey)

Asia(excluding

India)

SouthAmerica

Africa-IndiaMiddle-East

Michelin estimates.

3.1.2.a) Original equipment

Original equipment demand ended the year up 6% overall, led by gains in every region with the exception of Europe.

Passenger car and Lighttruck marketsOriginal equipment(in millions of tires) 2011 2012/2011

2nd-Half2012/2011

4th-Quarter2012/2011


1st-Half2012/2011

2nd-Quarter2012/2011

1st-Quarter2012/20112012

Europe (1) 92.5 97.3 -5% -6% -8% -5% -4% -6% -1%North America (2) 75.7 65.1 +16% +12% +10% +14% +21% +26% +16%

Asia (excluding India) 178.6 161.0 +11% +5% +5% +6% +17% +23% +11%

South America 21.5 21.4 +0% +7% +12% +3% -7% -9% -5%

Africa India Middle-East 27.9 28.8 -3% -14% -12% -16% +7% +5% +10%

TOTAL 396.2 373.6 +6% +2% +2% +3% +10% +12% +8%

(1) Including Russia and Turkey.

(2) United States, Canada and Mexico.

Michelin estimates.


48/158


2012 BUSINESS REVIEWTIRE MARKETS3

In Europe,tire demand contracted by 5% in 2012. The collapse innew car registrations, which fell to a 17-year low in the EuropeanUnion, masked a contrast between the decline in broadline carmakersales and the firmer resistance of specialty and export-driven brands.

Markets in Eastern Europe continued to expand, increasing by 11%over the year.

THE EUROPEANORIGINAL EQUIPMENT CARAND LIGHT TRUCK TIRE MARKET(in millions of tires moving 12 months excluding Russia)

50

55

60

65

70

75

80

85

90

95

100

2010 2011 2012

Michelin estimates.

The North Americantire market grew by 16% in 2012, returningto 2007 levels thanks to strong new car sales as buyers replacedaging models.

THE NORTH AMERICANORIGINAL EQUIPMENTCAR AND LIGHT TRUCK TIRE MARKET(in millions of tires moving 12 months)

30

35

40

45

50

55

60

65

70

75

80

2010 2011 2012

Michelin estimates.

In Asia (excluding India),demand rose by 11% overall. While still buoyant, the Chinese market cooled somewhat, ending the year up6%, even as new car sales fluctuated on news of the territorial dispute with Japan. Demand in Japan moved back in line with historictrends with an 18% rebound off of a 2011 impacted by the tsunami. The Southeast Asian market soared 38%, again off of low prior-yearcomparatives due to the autumn 2011 floods in Thailand.

The South Americanmarket was stable overall, with a brisk 7% gain in the second half offsetting the 7% decline in the first. Demand inBrazil was lifted by the reduction in the IPI federal excise tax and other government measures introduced in the autumn.

In Africa-India-Middle East,geopolitical conditions pushed original equipment sales down 3% over the year.

3.1.2.b) Replacement

The global replacement market contracted by 4% over the year, with a backdrop of rising economic uncertainty.

Passenger car and Lighttruck marketsReplacement(in millions of tires) 2011 2012/2011

2nd-Half2012/2011



1st-Half2012/2011


1st-Quarter2012/20112012

Europe (1) 311.0 344.3 -10% -9% -9% -8% -11% -11% -11%North America (2) 253.7 259.3 -2% -3% -1% -5% -2% +2% -5%

Asia (excluding India) 222.7 218.7 +2% +4% +4% +3% -0% +1% -1%

South America 63.1 62.1 +2% +3% +4% +1% +1% -0% +2%

Africa India Middle-East 88.2 90.7 -3% -8% -5% -10% +3% -1% +7%

TOTAL 938.7 975.1 -4% -3% -2% -5% -4% -3% -5%



Michelin estimates.


49/158



In Europe,replacement demand dropped 10% year-on-year in ahighly uncertain economic environment. Western Europe saw arecord decline, steeper even than in 2008, that was accentuatedby the year-on-year comparison with first-half 2011, which saw

major dealer buying ahead of significant price increases. However,by the end of 2012, dealer days sales in inventory had moved backin line with demand. Lastly, the winter tire market dropped 16%,as expected, and the high-performance tire segment (17 andbigger) slowed to a lesser extent than the European market average,reflecting the sustained improvement in the mix.

By country, demand fell sharply as expected in Southern Europe(by 26% in Italy and 12% in Spain), as well as in Germany (down15%), the United Kingdom (down 10%) and, to a lesser extent,France (down 7%) and Eastern Europe (by 9% in Poland). On theupside, demand rose by 8% in Turkey and by 7% in Russia, wherethe economic environment is being buoyed by high oil prices anddomestic consumer spending.

THE EUROPEANREPLACEMENT CARAND LIGHT TRUCK TIRE MARKET(in millions of tires moving 12 months excluding Russia)

220

230

240

250

260

270

280

290

300

2010 2011 2012

Michelin estimates.

Demand in North Americaretreated 2% as consumer confidenceweakened, despite the relative stability of average miles traveledand fuel prices. After an upturn in 2010, the market has returnedto 2009 levels, with volumes sold noticeably lower than in 2007.

Impacted by the significant increase in Chinese imports after customsduties were lifted, the US market declined by 3%, while demandfell 6% in Canada and rose 9% in Mexico.

THE NORTH AMERICANREPLACEMENT CARAND LIGHT TRUCK TIRE MARKET(in millions of tires moving 12 months)

220

230

240

250

260

270

280

290

300

2010 2011 2012

Michelin estimates.

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

The South Americanmarket 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, fell a steep 9% in Colombia following the massive importer inventory buildup in 2011, and was unchangedin Argentina despite the customs barriers.

In Africa-India-Middle East,markets declined by 3% overall in an unfavorable geopolitical environment, although demand surged by9% in India.


50/158



3.1.3. TRUCK TIRE MARKETS

In the Truck tiremarkets, the demand for radials declined in both original equipment (by 5%) and in the replacement segment (by 4%),reflecting the economic slowdown felt around the world in 2012.

THE GLOBAL TRUCK TIRE MARKET, 2012 VS. 2011

-4%

-14%

+2%

-2%

-9%

-6%

-30%

+3%

+31%

+8%

-5% -4%

Original Equipment

Replacement

NorthAmericaEurope(incl. Russiaand Turkey)

Asia(excludingIndia)

SouthAmerica Africa-IndiaMiddle-East TOTAL

Michelin estimates Radial market only.

3.1.3.a) Original equipment

The global original equipment marketcontracted by 5%. It trended steadily downward all year, with a steeper decline in the secondhalf, to the extent that December fell below 2010 levels.

Truck markets*Original Equipment(in millions of tires) 2011 2012/2011

2nd-Half2012/2011



1st-Half2012/2011


1st-Quarter2012/20112012

Europe (1) 5.6 5.8 -4% -5% -7% -4% -2% -2% -1%

North America (2) 5.4 5.3 +2% -11% -15% -8% +17% +14% +21%Asia (excluding India) 11.2 12.2 -9% -10% -10% -10% -8% -6% -9%

South America 2.0 2.9 -30% -30% -27% -33% -31% -36% -25%

Africa India Middle-East 2.6 2.0 +31% +30% +31% +28% +32% +29% +35%

TOTAL 26.8 28.2 -5% -9% -9% -8% -2% -2% -1%

* Radial only.



Michelin estimates.


51/158



Demand in Europedeclined by 4%, to below 2007 and 2008levels. Although the fall-off was a relatively limited 2% in the firsthalf, it gained momentum in the second, to 5%, under the impactof the worsening economic situation in the region.

THE EUROPEANORIGINAL EQUIPMENTTRUCK TIRE MARKET(in millions of radial tires moving 12 months excluding Russia)

0

1

2

3

4

5

6

7

2010 2011 2012

Michelin estimates.

After surging 17% in the first half, the North Americanmarketslowed precipitously in the second half, to end the year with just a2% gain. Economic uncertainty caused by tax issues in the UnitedStates weighed on new truck orders during the year.

THE NORTH AMERICANORIGINAL EQUIPMENTTRUCK TIRE MARKET(in millions of radial tires moving 12 months)

0

1

2

3

4

5

6

7

2010 2011 2012

Michelin estimates.

In Asia (excluding India),demand retreated by 9% overall, with a fairly steep 15% drop in China as growth in the economy (particularlyexports) cooled over the year. The Southeast Asian original equipment market, which continues to shift to radials, was highly active, gaining42% thanks in part to favorable prior-year fourth-quarter comparatives due to the flooding in Thailand in late 2011. In Japan, originalequipment demand rebounded 12% off of fairly low prior-year comparatives, impacted by the tsunami, while the South Korean market

was hurt by the decline in exports in the wake of the global economic slowdown.The South Americanoriginal equipment market plunged 30% after Brazil introduced Euro V emissions standards during the year. However,the Brazilian governments introduction of more favorable financing terms helped the market to turn around, with an upturn in the final quarter.

In Africa-India-Middle East,the radial original equipment market remained very brisk, gaining 31%.

3.1.3.b) Replacement

At a time of economic uncertainty, the global replacement marketdrifted steadily downwards over the first three quarters before startingto level off in the fourth thanks to lower prior-year comparatives.

Truck markets*Replacement(in millions of tires) 2011 2012/2011

2nd-Half2012/2011



1st-Half2012/2011


1st-Quarter2012/20112012

Europe (1) 14.6 17.0 -14% -2% +2% -6% -25% -22% -28%

North America (2) 20.1 20.5 -2% +1% +2% +1% -5% -2% -7%

Asia (excluding India) 44.2 47.0 -6% -5% +2% -12% -7% -11% -3%

South America 10.0 9.7 +3% +5% +6% +3% +1% +2% +0%

Africa India Middle-East 12.4 11.4 +8% +7% +6% +7% +10% +9% +11%

TOTAL 101.3 105.6 -4% -1% +3% -5% -7% -7% -7%

* Radial only.



Michelin estimates.


52/158



Demand in Europedropped 14%, with a 25% plunge in the firsthalf due to inventory drawdowns and high bases of comparison.Although prior-year comparatives became more favorable in thesecond half, the market continued to shrink on weak transportation

activity and the lackluster economic outlook. Demand was alsodown in the retread market, but the trend-line is more positive.

In Eastern Europe, the market declined by a fairly significant 3%,primarily due to dealer destocking.

THE EUROPEANREPLACEMENTTRUCK TIRE MARKET(in millions of radial tires moving 12 months excluding Russia)

8

9

10

11

12

13

14

15

2010 2011 2012

Michelin estimates.

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 alsobe explained by the sharp growth in original equipment sales and

the availability of retreadable casings.

THE NORTH AMERICANREPLACEMENTTRUCK TIRE MARKET(in millions of radial tires moving 12 months)

14

15

16

17

18

19

20

21

2010 2011 2012

Michelin estimates.

In Asia (excluding India),markets declined by 6% overall during the year.Although the Chinese market seems to have leveled off in the fourth quarter (YoY), it ended 2012 down by 7%, reflecting the slowergrowth in the economy and in exports. Markets in Southeast Asia, where the shift to radials is gaining speed, rose by 2% over the year. TheJapanese market was down 6% off of a high prior-year comparative, which was lifted by last years price increases and inventory rebuildingafter the tsunami. Demand in South Korea also declined as the global economic slowdown weighed on exports and transportation demand.

The South Americanmarket gained 3% during the year. In Brazil, the stricter application of customs inspections reduced imports and weighedon demand in general, although the first signs of a recovery appeared in the final quarter. In the rest of the region, the continued shift toradials helped to drive sustained market growth, with demand rebounding 6% in the fourth quarter, lifted by the Brazilian governmentsFINAME subsidized financing program.

Markets in Africa-India-Middle Eastcontinued to expand, rising 8% overall despite slower growth at the end of the year. Demand wasdampened by the geopolitical instability afflicting parts of the region. The Indian market was impacted by economic uncertainty.

3.1.4. SPECIALTY TIRE MARKETS

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

Agricultural tires:After climbing in the first half, worldwide originalequipment demand declined in the fourth quarter, particularly inEurope. The replacement market dropped significantly in maturemarkets during the year, dragged down by the prevailing economicuncertainty.

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

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


53/158


2012 BUSINESS REVIEWNET SALES 3

3.2. NET SALES

3.2.1. ANALYSIS OF NET SALES

+3.6%

+5.1%

+6.8%

+5.7%

-2.6%

-6.4%

-9.6%

-7.0%

-3.5%

-5.7%

+6.2%

+13.8%

+8.5%

+2.7%

+0.8%

+4.2%

+2.2%

+5.8%+6.6%

+2.5%

2012 / 2011 (%)

1st-Quarter 2012 / 2011 (%)

2nd-Quarter 2012 / 2011 (%)

3rd-Quarter 2012 / 2011 (%)

4th-Quarter 2012 / 2011 (%)

TOTAL Volumes Price-mix Currency

Consolidated net salesamounted to 21,474 million in 2012, up3.6% at current exchange rates compared with 20,719 millionin 2011.

The increase reflected the combined impact of the following mainfactors:

The unfavorable 1,329-million impact from the 6.4% decline involumes due to weak demand, particularly in European markets.

The positive price mix, which added 1,209 million to net salesand 6.2% to growth. Of the total, 1,052 million correspondedto the net impact of the price increases introduced in 2011

and the contractual price reductions due to the raw materialsindexation clauses applicable on nearly 30% of consolidatednet sales. It also includes the 157 million impact of a furtherimprovement in the sales mix, led by the premium strategy andthe growing contribution from the specialty businesses.

The positive 4.2% currency effect, primarily resulting from gainsin the euro against other currencies.

(in million and %) 20122nd-Half

20124th-Quarter

20123rd-Quarter

20121st-Half

20122nd-Quarter

20121st-Quarter

2012

NET SALES 21,474 10,768 5,332 5,436 10,706 5,402 5,304

vs.the same period in 2011 +755 +154 -141 +295 +601 +344 +257

Volumes -1,329 -489 -310 -179 -840 -355 -485

Price-mix +1,209 +176 +40 +136 +1,033 +404 +629

Currency +875 +467 +129 +338 +408 +295 +113

vs.the same period in 2011 +3.6% +1.5% -2.6% +5.7% +6.0% +6.8% +5.1%

Volumes -6.4% -4.6% -5.7% -3.5% -8.3% -7.0% -9.6%

Price-mix +6.2% +1.7% +0.8% +2.7% +11.1% +8.5% +13.8%

Currency +4.2% +4.5% +2.5% +6.6% +4.0% +5.8% +2.2%


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2012 BUSINESS REVIEWNET SALES3

3.2.2. NET SALES BY REPORTING SEGMENT

(in million and %) 20122nd-Half

20124th-Quarter

20123rd-Quarter

20121st-Half

20122nd-Quarter

20121st-Quarter

2012

GROUP 21,474 10,768 5,332 5,436 10,706 5,402 5,304

Passenger car/Light truckand related distribution 11,098 5,597 2,800 2,797 5,501 2,741 2,760

Truck and related distribution 6,736 3,467 1,692 1,775 3,269 1,665 1,604

Specialty businesses (1) 3,640 1,704 840 864 1,936 996 940

vs.the same period in 2011 +3.6% +1.5% -2.6% +5.7% +6.0% +6.8% +5.1%

Passenger car/Light truckand related distribution +2.9% +1.2% -2.2% +5.0% +4.7% +6.7% +2.9%

Truck and related distribution +0.3% +0.4% -1.8% +2.7% +0.1% +0.3% -0.1%

Specialty businesses (1) +13.0% +4.3% -5.2% +15.5% +22.0% +20.3% +23.8%

(1) Specialty businesses: Earthmover, Agricultural, Two-Wheel and Aircraft tires; Michelin Travel Partner and Michelin Lifestyle.

3.2.2.a) Passenger car and light truck tiresand related distribution Analysisof net sales

In Europe,overall net sales were impacted by contracting demand.Although the original equipment customer mix was unfavorable,the success of the MICHELIN Pilot Super Sport, MICHELIN Alpin 4,MICHELIN Energy Saver + and MICHELIN Primacy 3 lines enabledthe Group to strengthen its positions in the replacement segment,despite the weakness of demand in Southern Europe.

In North America,Michelin sought to control its growth in a sharplyrebounding original equipment market. In the replacement segment,MICHELIN brand sales were lifted by the favorable customer response

to the new MICHELIN Defender and BFGoodrich COMP-2 lines.Net sales in South Americawere dampened by the tighter customsrules that weighed on import tire supply.

In Asia (excluding India),original equipment net sales were liftedby the brands appeal to local carmakers, while replacement salesreflected buoyant demand, except in Japan and South Korea, aswell as the positions held by the MICHELIN brand.

Group sales in Africa-India-Middle Easttracked market trendsand suffered from adverse geopolitical factors.

In all,net sales in the Passenger Car and Light Truck Tires and RelatedDistribution segment stood at 11,098 million, up 2.9% on 2011.The improvement was led by the Groups firm pricing policy overthe period, but partially offset by the 5.5% decline in volumes. In

addition, the sustained improvement in the segment/speed ratingmix helped to enhance the sales mix somewhat, despite the impactof the relative growth in original equipment and replacement salesand a less favorable geographical mix.

3.2.2.b) Truck tires and related distribution Analysis of net sales

In Europe,Group brands delivered a good performance despitethe market decline. In original equipment, the year was shapedby negotiations designed to improve the operating segmentsprofitability. The Group continued to expand in Central Europe,where its product quality, brand identity and dealership networkoffer robust support in driving growth in the region.

Consolidated net sales in North Americabenefitted from thepriority focus on margins, despite a slight slippage in tonnages soldand the unfavorable original equipment/replacement sales mix.

In the South American original equipment market, Michelin

primarily sought to preserve its margins in the face of declining newtruck sales and the sometimes aggressive promotional campaignsdeployed by the competition. In the replacement segment, theGroup capitalized throughout the region on its local operations inBrazil, even though the import barriers introduced in other countriesheld back sales, particularly in Argentina.

Operations in Africa-India-Middle Eastare being confronted witha tighter regulatory and customs environment.

In all,net sales in the Truck Tires and Related Distribution segmentamounted to 6,736 million for the year, virtually unchanged from2011 thanks to the price increases, which offset the impact ofdepressed demand and high prior-year comparatives.

3.2.2.c) Specialty businesses Analysisof net sales

Earthmover tires:Net sales were significantly higher than in 2011,with a slight increase in sales volumes. In the mining and originalequipment segments, the application of contractual indexationclauses based on raw materials prices had a generally positiveeffect over the year, even though the impact turned negative inthe second half. Sales rose in every segment and every geographyexcept Western Europe.


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2012 BUSINESS REVIEWNET SALES 3

Agricultural tires:Despite a slight decline in volumes, net salesrose over the year, led by an improvement in the sales mix and firmprice integrity. New inroads were made in the original equipmentsegment, where Michelin is capturing demand from manufacturers,

particularly of powerful tractors and other farm machinery.On the replacement side, Michelin is maintaining its positions indeclining markets.

Two-Wheel tires:Net sales edged up over the year. In maturemarkets, they were stable at a t ime of declining demand, reflectingmarket share gains driven by the refreshed product line-up, while inemerging markets, positions were strengthened in the ASEAN countries.

Aviation tires:Net sales increased during the year, lifted by theapplication of contractual clauses indexed to raw materials pricesin both the commercial and defense segments.

During the year,Michelin Travel Partnerbrought the new Michelin

Restaurants website onstream in France and Germany. Its resultswere eroded by the steep fall in demand for maps and travel guides,particularly in print format and in Southern Europe.

In all, net sales by the Specialty businesses climbed 13.0%to 3,640 million in 2012, primarily due to the still favorable impactof contractual indexation clauses based on raw materials prices, the1.7% increase in volumes and the highly positive currency effect.

3.2.3. CURRENCY RATES AND THE CURRENCY EFFECT

At current exchange rates, consolidated net sales rose by 3.6% in 2012.

This growth included an 875-million positive currency effect, primarily stemming from the euros decline against the US dollar and, to a

lesser extent, the Canadian dollar, the British pound and the Australian dollar, tempered by its gains against the Brazilian real.

Average exchange rate 2012 2011 % Change

Euro/USD 1.286 1.393 -7.7%

Euro/CAD 1.285 1.377 -6.7%

Euro/MXN 16.905 17.253 -2.0%

Euro/BRL 2.501 2.323 +7.7%

Euro/GBP 0.811 0.868 -6.6%

Euro/JPY 102.524 110.926 -7.6%

Euro/CNY 8.113 8.998 -9.8%

Euro/THB 39.964 42.451 -5.9%

3.2.4. NET SALES BY REGION

(in million) 2012 2012/2011 2nd-Half 2012 1st-Half 2012

GROUP 21,474 +3.6% 10,768 10,706

Europe 8,499 -3.8% 4,280 4,219

Of which France 2,048 -2.8% 1 014 1 034

North America (incl. Mexico) 7,745 +11.6% 3,894 3,851

Other 5,230 +5.8% 2,594 2,636

(in million) 2012 % Of total 2011 % Of total

GROUP 21,474 20,719

Europe 8,499 39.6% 8,832 42.6%

Of which France 2,048 9.5% 2,107 10.2%

North America (incl. Mexico) 7,745 36.1% 6,942 33.5%

Other 5,230 24.3% 4,945 23.9%

Consolidated net sales rose in every geography except Europe, where the economic environment was difficult. Over 60% of net sales aregenerated outside Europe and more than 90% outside France.


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2012 BUSINESS REVIEWCONSOLIDATED INCOME STATEMENT REVIEW3

3.3. CONSOLIDATED INCOME STATEMENT REVIEW

(in million, except per share data) 2012 2011 2012/20112012

(% of net sales)2011

(% of net sales)

Net sales 21,474 20,719 +3.6%

Cost of sales (14,764) (14,821) -0.4% 68.8% 71.5%

Gross income 6,710 5,898 +13.8% 31.2% 28.5%

Sales and marketing expenses (2,068) (1,942) +6.5% 9.6% 9.4%

Research and development expenses (622) (592) +5.1% 2.9% 2.9%

General and administrative expenses (1,468) (1,385) +6.0% 6.8% 6.7%

Other operating income and expenses (129) (34) +279.4% 0.6% 0.2%

Operating income before non-recurring income and expenses 2,423 1,945 +24.6% 11.3% 9.4%

Non-recurring income and expenses 46 - NM - -Operating income 2,469 1,945 +26.9% 11.5% 9.4%

Cost of net debt (155) (206) -24.8% 0.7% 1.0%

Other financial income and expenses (22) 236 -109.3% 0.1% 1.1%

Share of profit from associates 15 21 -28.6% 0.1% 0.1%

Income before taxes 2,307 1,996 +15.6% 10.7% 9.6%

Income tax (736) (534) +37.8% 3.4% 2.6%

Net income 1,571 1,462 +7.5% 7.3% 7.1%

Attributable to shareholdersof the Company 1,570 1,462 +7.4% 7.3% 7.1%

Attributable to non-controllinginterests 1 -

Earnings per share (in ) Basic 8.62 8.14 +5.9%

Diluted 8.41 7.97 +5.5%


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2012 BUSINESS REVIEWCONSOLIDATED INCOME STATEMENT REVIEW 3

3.3.1. ANALYSIS OF CONSOLIDATED OPERATING INCOME BEFORE NON-RECURRING ITEMS

(in million)

1,945

2011operating

income beforenon recurring

items

Volumes Unitmargin

SG&A Currency 2012operating

income beforenon recurring

items

-504

+918 -204 +268 2,423

Consolidated operating income before non-recurring itemsamounted to 2,423 million or 11.3% of net sales in the yearended December 31, 2012, compared with 1,945 million and9.4% in 2011.

This 478-million improvement may be analyzed as follows:

a 504-million decrease from the 6.4% decline in sales volumes;

a 918-million increase from the improvement in unit marginsthat reflected: the 1,209-million positive impact of the price mix (including1,052 million from price increases),

the limited 76-million negative impact of higher raw materialscosts,

the 35-million gain on materials costs, thanks to the compe-titiveness plan,

the 3-million favorable impact of productivity despite productionslowdowns,

the negative 168-million impact of higher labor, energy andother production costs,

the negative 77-million impact of start-up costs,

other unfavorable factors, in an aggregate amount of 8-million; a 204-million decrease related to costs that included:

the negative 143-million impact of inflation, the negative 99-million impact of research, developmentand process engineering, advertising and other expendituresto drive growth in new markets,

the 152-million gain on general and administrative expenses,thanks to the competitiveness plan,

the 37-million cost of deploying the new business managementsystem (OPE),

other unfavorable factors, in an aggregate amount of 77 million;

a 268-million increase from the positive currency effect.

3.3.2. OPERATING INCOME BEFORE NON-RECURRING ITEMS BY REPORTING SEGMENT

(in million) 2012 2011 2nd-Half 2012 1st-Half 2012

Passenger car/Light truck and related distribution

Net sales 11,098 10,780 5,597 5,501

Operating income before non-recurring items 1,033 1,018 452 581

Operating margin before non-recurring items 9.3% 9.4% 8.1% 10.6%Truck and related distribution

Net sales 6,736 6,718 3,467 3,269

Operating income before non-recurring items 444 233 235 209

Operating margin before non-recurring items 6.6% 3.5% 6.8% 6.4%

Specialty businesses

Net sales 3,640 3,221 1,704 1,936

Operating income before non-recurring items 946 694 416 530


Group

Net sales 21,474 20,719 10,768 10,706

Operating income before non-recurring items 2,423 1,945 1,103 1,320



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2012 BUSINESS REVIEWCONSOLIDATED INCOME STATEMENT REVIEW3

3.3.2.a) Operating margin before non-recurring items by reporting segment

2011

2012

9.4% 9.3%

3.5%

6.6%

21.5%

26.0%

9.4%

11.3%

Passenger carLight truck

Truck Specialtybusinesses

Group

Passenger car and light truck tires and related distribution. Truck tires and related distribution. Specialty businesses: Earthmover, Agricultural, Two-Wheel and

Aircraft tires; Michelin Travel Partner and Michelin Lifestyle.

(in million)

1,945 +15

+211

+252 2,423

2011operatingincome (1)

Passenger carLight truck

Truck Specialtybusinesses

2012operatingincome (1)

(1) Before non recurring items.

3.3.2.b) Passenger car and light truck tires and related distribution Analysis of operating incomebefore non-recurring items

Passenger car/Light truckand related distribution(in million) 2012 2011 2012/2011

2012(% of Group total)


Net sales 11,098 10,780 +2.9% 52% 52%

Change in volume -5.5%

Operating income before non-recurring items 1,033 1,018 +1.5% 43% 52%

Operating margin before non-recurring items 9.3% 9.4% -0.1 pt

Operating incomebefore non-recurring items from the Passenger car and light truck tires and related distribution business amountedto 1,033 million or 9.3% of net sales, versus1,018 million and 9.4% in 2011.

The sustained firm pricing policy and ongoing improvement in the product mix, led by the MICHELIN brands premium positioning, helpedto offset the 5.5% decline in volumes and a less favorable geographical mix.


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2012 BUSINESS REVIEWCONSOLIDATED INCOME STATEMENT REVIEW 3

3.3.2.c) Truck tires and related distribution Analysis of operating income before non-recurring items

Truck and related distribution(in million) 2012 2011 2012/2011



Net sales 6,736 6,718 +0.3% 31% 32%Change in volume -10.8%

Operating income before non-recurring items 444 233 +90.6% 18% 12%

Operating margin before non-recurring items 6.6% 3.5% +3.1 pt

Operating incomebefore non-recurring items from the Truck tiresand related distribution business amounted to 444 million or 6.6%of net sales, compared with 233 million and 3.5% in 2011. Thisyear-on-year improvement, particularly in North America, was led by:

the following favorable factors: the price increases introduced throughout 2011, which deliveredtheir full impact in 2012,

the current decline in raw materials costs over the period, the favorable currency effect;

these factors more than offset: the 10.8% decline in volumes and the impact of productionslowdowns, which in particular increased manufacturing costs,

the unfavorable impact on the sales mix of the sharper declinein replacement than original equipment sales.

3.3.2.d) Specialty businesses Analysis of operating income before non-recurring items

Specialty businesses(in million) 2012 2011 2012/2011



Net sales 3,640 3,221 +13.0% 17% 16%

Change in volume +1.7%

Operating income before non-recurring items 946 694 +36.3% 39% 36%

Operating margin before non-recurring items 26.0% 21.5% +4.5pt

At 946 million or 26.0% of net sales, operating incomebeforenon-recurring income and expenses from the Specialty Businessesconfirmed their structurally high profitability. In a particularly favorable

currency environment, they benefitted from the still positive impactof contractual indexation clauses based on raw materials prices, aswell as from the 1.7% increase in volumes.

3.3.3. OTHER INCOME STATEMENT ITEMS

3.3.3.a) Raw materialsThe cost of raw materialsreported in the income statement undercost of sales (6,479 million in 2012 vs.7,019 million in 2011)is determined by valuing raw materials, semi-finished and finishedproduct inventories using the weighted average cost method. Thismethod tends to spread fluctuations in purchase costs over timeand delay their recognition in cost of sales, due to timing differencesbetween the purchase of the raw materials and the sale of thefinished product.

In 2012, the raw materials costs recognized in cost of sales includedthe 76 million impact of higher prices, as well as the volume andcurrency effects.

Changes in spot prices feed through to the income statement fiveto six months later for natural rubber and three months later forbutadiene.

RAW MATERIALS RECOGNIZED IN 2011COST OF SALES (6,479 MILLION)

10%

Chemicals

15%

Fillers

7%

Steelcord36%

Natural rubber

27%

Synthetic rubber

5 %

Textile


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2012 annual resultsmichelin guide

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