5 _349 2023 UNIVERSAL REGISTRATION DOCUMENT_MICHELIN 5 FINANCIAL PERFORMANCE Report of the Managers 5.1.6 Return on capital employed (ROCE) The return on capital employed by the Group is measured by dividing net operating profit after tax (NOPAT) by the average economic assets employed during the year. In calculating NOPAT, amortization of acquired intangible assets and the Group's share of profit/(loss) from equity-accounted companies are added to segment operating income. For 2023, the theoretical tax liability was calculated at the same 25% standard rate as in prior years, which corresponds to the Group’s normal average effective tax rate. Non-euro currencies are translated at year-end rates for balance sheet items and average rates for income statement items. If ROCE is greater than the weighted average cost of capital (WACC) for the year, then the Group has created value during the period. Based on a theoretical balance between equity and debt, depending on the financed assets, the Group's weighted average cost of capital (WACC) was estimated at 9%, which is in line with external benchmarks. The rates used are determined (i) for equity capital, based on the yield on Michelin shares expected by the stock markets; and (ii) for debt capital, on the market risk-free rate plus the risk premium applied to Michelin by the markets, as adjusted for the tax effect. ROCE rose to 11.4% in 2023, a 0.6-point year-on-year gain led by growth in segment operating income and the share of profit from equity-accounted companies, which was improved in particular by active asset portfolio management during the year. (in € millions) 2023 2022 Segment operating income restated for ROCE calculation 3,608 3,258 Average standard income tax rate used for ROCE calculation 25% 25% Segment operating income after tax (NOPAT) 2,706 2,444 Economic assets at December 31 23,585 24,087 Average economic assets 23,836 22,621 Consolidated ROCE 11.4% 10.8%
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