5 _337 2023 UNIVERSAL REGISTRATION DOCUMENT_MICHELIN 5 FINANCIAL PERFORMANCE Report of the Managers raw material and shipping cost indexation clauses, 2023 segment operating income was lifted by favorable prior-year comparatives, particularly in the first half. Beyond Road tires: Excluding the currency effect, segment operating income held firm thanks to a highly selective marketing strategy that supported favorable pricing, which offset the lower volumes and the adverse market mix caused by the fast growth in Original Equipment sales. Two-wheel tires: Extensive inventory drawdowns weighed on volumes sold, which declined year-on-year. This was particularly the case in the bicycle tire segment, which has emerged from its post-Covid bubble. Aircraft tires: In a favorable environment shaped by a recovery in air traffic, volumes sold turned in a very good performance and exceeded pre-Covid levels, helping to boost segment operating income. The Conveyor Belt business enjoyed relatively sustained demand over the year, particularly in the first half. Exchange rate movements had a negative impact on segment operating income. 5.1.3 c) Other income statement items Raw materials The cost of raw materials reported in cost of sales has been estimated at €5.9 billion in 2023 versus €6.7 billion in 2022. It is calculated on the basis of: ● the price and mix of the Group’s raw materials purchases; ● sales and production volumes, which fell sharply in 2023, spurred by the steep reductions in inventory; ● the valuation of raw materials, semi-finished and finished product inventories using the weighted average cost method. This method tends to spread fluctuations in purchase costs over time and delay their recognition in cost of sales, due to timing differences between the purchase of the raw materials and the sale of the finished product; ● exchange rate movements, which correspond to (i) the impact of converting local currency purchasing costs into the consolidation currency; and (ii) a residual currency effect resulting from the difference between the purchasing companies’ local currency and the currency used to purchase their raw materials. In 2023, the raw materials costs and the related transportation costs recognized in cost of sales included a €115 million favorable price impact, including a residual exchange rate effect. Changes in natural rubber and butadiene prices feed through to the income statement around three to six months later. Based on estimated 2023 production volumes, the sensitivity of cash purchasing outlays to fluctuations in natural rubber and oil prices is as follows: ● a $0.10 per kg decrease in natural rubber prices would feed through to around an $111 million reduction in fullyear purchasing costs; ● a $1.00 per barrel decline in oil prices would feed through to a $7 million decrease in full-year purchasing costs. RAW MATERIALS RECOGNIZED IN 2023 COST OF SALES (€5.9 BILLION) NATURAL RUBBER PRICES (SICOM) (USD/kg) 21% 7% 24% 15% 10% 23% Natural rubber Textile Fillers Chemicals Steelcord Synthetic rubber RSS 3 TSR 20 0.5 1.0 1.5 2.0 2.5 Jan. 2023 Dec. 2023 Jan. 2019 Jan. 2021 Jan. 2022 Jan. 2020
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