Financial Overview

(in million EUR)

	FY ended Dec. 31, 2014	FY ended Dec. 31, 2013	Rate of change (%)	Factor
Overall
Sales	19,553	20,247	(3.4)	1)
Operating income*	2,170	2,234	(2.9)
Passenger Car-Light Truck & Related Distribution
Sales	10,498	10,693	(1.8)	-
Operating income*	1,101	1,086	1.4
Truck & Related Distribution
Sales	6,082	6,425	(5.3)	-
Operating income*	495	503	(1.6)

*Before non recurring items.

Factors
1) Overall sales
-Net sales for 2014 decreased by 3.4% to EUR 19,553 million compared with the previous year. 

• 2.2% negative effect of changes in the price mix (EUR 449 million unfavourable impact)
• Price adjustments trimmed EUR 596 million from net sales, of which around 35% concerned the effect of applying indexation clauses based on raw materials prices
• 1.5% negative currency effect (EUR 304 million unfavourable impact)
• Deconsolidation of Snider, a Truck tire dealer in the United States and the August 29 acquisition of Sascar, Brazil's leading digital fleet management company (unfavourable impact of EUR 75 million or 0.4%).
• 0.7% increase in unit sales achieved in sluggish markets (EUR 134 million favourable impact), attesting to a resilient performance by the MICHELIN brand
• EUR 147 million favourable impact of improvements in the product mix, linked notably to the MICHELIN brand's premium strategy in the Passenger car/Light truck segment

Outlook for 2015
-In 2015, demand in the Passenger car/Light truck and Truck segments should continue to grow in North America and China, and also in Europe albeit at a modest rate, while holding firm to last year's trend in the new markets and rebounding in Southeast Asia.
-The Company has set a 2015 target of delivering an increase in operating income before non-recurring income, beyond exchange rate effect, a return on capital employed in excess of 11%, and structural free cash flow of approximately EUR 700 million, with EUR1.7-1.8 billion in capital expenditure.

New Plant in U.S.

-The Company opened world's first manufacturing plant to build revolutionary Airless Radial Tire, the MICHELIN TWEEL, on November 20, 2014. The new 135,000 square-foot facility in Piedmont, S.C. represents the Company's 10th manufacturing facility in South Carolina and the 16th in the U.S. The Company will invest about USD 50 million in the new plant.

Acquisition in Brazil

-The Company acquired 100% of the shares and voting rights in Sascar, a Brazilian digital fleet management and freight security company, with 870 employees and revenue of BRL 280 million (around EUR 91 million) in 2013. The transaction was closed on August 29, 2014 for BRL1,600 million (around EUR 520 million), as an all-cash offer to acquire all of the outstanding common shares of Sascar Participações S.A. and its affiliated companies. The acquisition of Sascar, whose business model has proven its worth in Brazil (33,000 fleets managed, 190,000 trucks), will enable Michelin to expand its offering in the fleet management business and to speed the growth of its truck tire business in Brazil, while providing Sascar access to major customers in South America through Michelin's distribution network.

Strategy in China

-The Company announced at the plant in Shenyang (China) on November 10, 2014, that the Group aims to more than double its business in China within the next ten years. To help it achieve this objective, the Truck Tire Product Line will be supported by the MICHELIN brand.

-11R22.5 X Coach Energy Z bus tires in China: an upgraded version of the XZA2+Energy, while being the successor to the 295/80R22.5 X Coach Energy that was released at the beginning of 2014. The tire is designed to offer a high level of driving safety for long-distance buses. (From a press release on September 16, 2014)

-On November 12, 2014, Michelin announced that it will provide its X INCITY custom-made tires and tire management services for city buses operated in China. (From news releases issued by multiple sources on November 24, 2014)

Contracts

-Nihon Michelin Tire Co., Ltd. announced that Michelin Primacy LC premium tire featuring serenity and low rolling resistance was chosen as original equipment for the redesigned Nissan Teana. (From an article in the Nikkan Jidosha Shimbun on February 26, 2014)

-Michelin announced that all of the new Volvo S60 and V60 Polestar, which will be sold on four continents around the world from June 2014, will be fitted with 245/35 R 20 MICHELIN Pilot Super Sport ultra-high performance tires as standard. Also, for winter driving, the MICHELIN Pilot Alpin 4 and X-Ice North 3 tires are recommended fitments. (From a press release on April 9, 2014)

R&D Expenditure

(in million EUR)

	FY ended Dec. 31, 2014	FY ended Dec. 31, 2013	FY ended Dec. 31, 2012
Overall	656	643	622

New Products

-MICHELIN Premier A/S, which features unique EverGrip technology: a self-regenerating tire – always safe, even when worn (at the North American International Auto Show in Detroit on January 15, 2014).

-MICHELIN X LINE Energy 80 and 65 series tires: Enhancing safety and mobility with three Peak Snow Flake Mountain (3PMSF) certification. The quietest tire on the market with 69 decibels for the 315/80 R 22.5 tire and 70 decibels for the 385/65 R 22.5 tire. The new tire is manufactured in Michelin plants in Europe, all of which have been certified ISO 14001(March 21, 2014).

-MICHELIN X MULTI line launched in Asia: Several sizes and positions to meet the different needs of every customer (October 7, 2014).

Capital Expenditure

(in million EUR)

	FY ended Dec. 31, 2014	FY ended Dec. 31, 2013	FY ended Dec. 31, 2012
Overall	1,883	1,980	1,996

-Projects to increase capacity, improve productivity or refresh product lines in:

• Passenger car and Light truck tires: Itatiaia (Brazil), Columbia, SC (U.S.), Shenyang (China), Olsztyn (Poland), Cuneo (Italy), Pirot (Serbia) and Thailand
• Truck tires: Shenyang (China), Chennai (India), Campo Grande (Brazil)

-Capital expenditure estimates EUR 1,700 - 1,800 million in 2015, EUR 1,600 - 1,800 million in 2016, EUR 1,500 - 1,700 million in 2017.