Compagnie Générale des Établissements Michelin Société en commandite par actions (ML) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Michelin Conference Call. The conference call will be conducted by Mr. Yves Chapot, General Manager and Group CFO. You are able to download the presentation from Michelin corporate website. I'll now hand over to Mr. Yves Chapot. Gentlemen, please go ahead.

Thank you very much. Good evening, everyone. Welcome to our quarterly conference call. In the next 20 minutes, I'm going to comment our first quarter sales figures and the outlook for the full year. Before the conflict in Ukraine, our operations were already heavily disrupted, and we suffer. As you remember, all along 2021, we have -- we were challenged to operate smoothly our manufacturing and supply chain operations. Ukraine invasion by Russia has put an additional pressure on already tight supply chain. And in this context, we have been able to post a 19% revenue growth at EUR 6.5 billion. The markets where, let's say, generally up in Q1, the passenger car and light truck tire market grew by 2%, with a 6% drop in original equipment, mostly in Europe, when the replacement segment has trended upward at plus 4% globally. The truck tire market expanded by 4% outside China, that has plunged to a steep 37% in China, both in original equipment and replacement. Specialty markets remain robust in all segments, with a strong underlying demand in mining and in a market which is still limited by supply shortages. Overall, if we look at the quarter, January and Feb were pretty dynamic, while March was hit by the impact of the conflict in Ukraine and the resurgence of the COVID in China, against a very strong comparison in March '21, which was very strong because, first, most of the tire manufacturers implemented their first price increase 1st of April 2021. So our 19% growth at EUR 6.5 billion is coming from, of course, a positive currency effect of 3.4 points, triggered by mostly the USD; 11.9% gain from price increases, which were designed to offset further cost increases; a 1.6% increase in the mix effect, reflecting both the growth in the 18-inch and above segments for the SR1 and the favorable original equipment and replacement mix in SR1 the Automotive division. Volume growth was at 0.5%, mostly limited by multiple operational disruptions. We gained 0.8 points coming from external growth, mainly the consolidation from January 1 of Allopneus. And a strong increase, nearly 12% in non-tire sales, which contribute at the rate of 0.7 points to the overall group growth. And the group maintained its guidance for 2022. So we have repeatedly commented about supply chain disruptions, manufacturing operation disruptions in -- during -- let's say since basically September 2020. And the situation has, let's say, intensified during the first quarter. First, at the beginning of the quarter, we were [ paralyzed ] by the Omicron COVID wave in Europe, in North America. And now, of course, with the propagation of the virus in Asia and particularly in China, there is additional bottleneck that has been created in -- both in our own operations and from our suppliers. Transportation is still very tight, maritime shipping but also the scarcity of truck drivers in a lot of regions in the world. The conflict in Ukraine exacerbated the situation as a lot of truck fleet in Europe were relying on Ukrainian drivers. And of course, prices have been up not only in raw materials but also in logistics services, in energy input and in other, let's say, kind of operating costs. In this context, labor shortage have been, let's say, easing and particularly in North America, where we were able to rehire and train people in order to grow our capacity, our achievable capacity in our North American factories. But at the same time, we have seen a lot of disruptions with 3 weeks truck drivers strike in Spain, social unrest most recently in Sri Lanka. If you look at the market forecast that we have shared with you at the beginning of the year when we issue our 2021 full year results, you see that basically, except if we look at the month of February, that both for truck tire and passenger car and light truck tire markets for the 3 first months, we were, let's say, in the lower part of the range that we indicated. And that's across the board, of course, for passenger car and tire market, and excluding China for truck tire market. So looking now at the bridge of our sales. Scope effect is bringing EUR 44 million, so 0.8 points of growth; volume, 0.5 points. We have 13.5 point price and mix effect, of which 11.9 are coming from prices. And it's a major contributor of our growth, EUR 736 million for the quarter. Non-tire businesses contributed to EUR 39 million or 0.7 points. And currency, as I said, mostly U.S. dollar at the rate of EUR 186 million or 3.4 points. Looking at the growth per business segment. The first segment, Automotive, grew by 20.8%, of which volume represents 0.2%. We have implemented in this segment as well as in very dynamic price management. Of course, the segment is penalized by the indexed business in original equipment. And the original equipment market itself has been impacted by the shortage of spare parts and the multiple disruptions, particularly during the second half of the quarter. In the second segment, we have a very strong sales as well, plus 20.6% in revenue and plus 2.6% in volume. Our sales were impaired by responsive pricing management and continued expansions in our fleet management solutions, with a very strong demand in Europe and North America, particularly in the Americas, both North And South, and a focus on high-value market segments. The third segment grew by 13.7% as this segment is mostly built of indexed businesses with a strong lag effect in pricing and, of course, a higher level of disruptions, both from the upstream and downstream supply chain. Just as an example, the mining -- our mining operations are relying mostly on manufacturing from North America and Spain, where we have been recently impacted by the truck driver strikes who have blocked Spanish ports during several weeks, and strong concessions in North America, particularly in the East Coast port. Regarding now the conflict in Ukraine. So as a company, we condemn unequivocally any violations of international laws. And the group has, of course, first, care about these employees in the 2 countries, and their safety has been our first priority. We are fully complying with the sanctions that have been adopted by the international communities in each country where we operate. Our overall exposure in Ukraine and in Russia are the following. We employ nearly 1,000 people, of which 750 are employed in our Davydovo factory nearby in Moscow. The factory itself represents less than 2 million passenger car tires production per year, which is nearly 1% of our group automotive tire worldwide capacity. The plant operations were suspended from mid-March, and the region represents around 2% of our group sales -- represented 2% of our group sales in 2021. Our financial exposure looking at our balance sheet was, at the end of 2021, EUR 200 million, of which EUR 40 million in fixed assets, and this exposure has not fundamentally changed by the end of March. The impact of the conflict is, first, some cut in production that we did -- we decided on a preventive manner in order to anticipate potential disruptions and monitor -- to have monitored shutdown instead of disorganized shutdown around 3 days in average during the month of March. I would like to take the opportunity to underline the huge efforts made by our teams in all departments, factories, logistics, supply chain, upstream, downstream, purchasing, R&D in order to find solutions to resource the raw materials that we were previously importing from Russia, more particularly the carbon black, but also some synthetic rubber grades. And of course, the third impact is the inflation that has been exacerbated by the conflict mostly in raw material and in energy and particularly mostly in the European region. Regarding the guidance. So we have kept for the 3 segments the growth range -- market growth range that we shared with you early February when we disclosed our full year results. So from 0.4% for passenger car and light truck tire with probably continuous supply difficulties that are going to continue to impact the original equipment market. Replacement global demand remained high without, for the time being, significant inventory rebuilding on the dealer side, but we consider that this market range will have probably to look at the lower part of the range. So probably more between 0.2 than between 2.4 for the full year. The truck tire market is expected to grow between 3% to 7% outside China. We also -- we believe that we should more expect to land at the low end of the range for the full year, with very strong demand both in OE and RT, despite some new supply difficulties, particularly on the regional equipment. And Specialties businesses would also grow between 6% to 10%, looking here also at the lower part of the range. Demand should remain robust, particularly for off-the-road tires and mining tires. But we believe that both health crisis and supply chain disruptions will continue to complicate operations and particularly until the end of the first semester. Our 2022 scenario is maintained. We are aiming to grow in line with the market all along the year. We'll have strongly negative cost impact. As I said, the crisis and war in Ukraine is exacerbating the inflation, and we are computing probably an increase of inflation in the range of EUR 1 billion, above what was already expected before the crisis in Ukraine. And we are looking to have a neutral net price/mix raw material, manufacturing and logistics performance effect for the full year. Considering all these elements, we maintain our guidance, which consists in looking to achieve a segment operating income at constant exchange rates above EUR 3.2 billion and a structural free cash flow above EUR 1.2 billion in a context which is pretty challenging. But the group has demonstrated in the overall business its business model, and the way our teams are handling this very difficult and chaotic situation is remarkable. So that's the end of my short presentation, and now I will be available for your questions.

[Operator Instructions] We have our first question from Gabriel Adler from Citi.

My first question is on the logistical issues that you're facing. Could you please provide us an update there on your sourcing of carbon black but also the shipping issues in the mining tires, which negatively impacted the margin last year? An update on when you expect that to be resolved would be very helpful. And then my second question is on the cash flow guidance. The definition of free cash flow excludes the impact of changes in raw mats on working capital, and I suspect that the value of your inventory have been increasing mechanically because of inflation. So could you, therefore, help us understand whether your expectation to see cash flow has changed compared to February if you were to include the impact of inventory valuation? And could you quantify this impact perhaps? And then my final question is on demand. Are you seeing any customers across any of your brands trading down to cheaper tires? And how much price elasticity do you believe still exists in the business at these levels?

Okay. Thank you, Gabriel. It's a lot of questions, very different. So regarding logistics, we had nearly 30% of our carbon black, which was previously sourced from Eastern Europe, and a minor share of some synthetic rubber. So since the beginning of this new crisis, the crisis which is adding to existing ones, our teams have secured new sourcing from, let's say, their existing -- our existing suppliers in, let's say, other regions. I don't want to disclose the regions of these suppliers. And of course, we have on top of that to secure the shipping and the transportation of these materials to our factories that are mostly -- here, we are speaking mostly about the sourcing of our European factories, our factories outside Europe. We are not specifically relying on Russian's raw materials. And of course, it has a slight impact on the sourcing, so that's why we have decided preventively in order not to have to do that in, let's say, under the panic, we have preventively reduced our production by around 3 days during the month of March in Europe in order to manage our operation in the, let's say, smoother manner as it is possible in such a context. Regarding the working capital. So of course, you remember well, last year, we had an impact on the working capital on our free cash flow to add in a range of around EUR 300 million. So it's extremely difficult to anticipate it. We are very well equipped to calculate it afterwards because, of course, you have the impact on the working -- of the prices on the inventories, but you have a positive impact on accounts payable and a slight negative impact on the receivables because of the price increase. So there will be an impact, but we maintain our structural free cash flow guidance. We have not yet -- to answer to your third question, we have not yet seen any trade-off from customers, from Tier 1 towards Tier 2 brands. We are observing in some markets, not everywhere, let's say, a polarization of the market. Tier 1 remaining relatively resilient and some Tier 2 brand being trade-off against Tier 3 offers. But at this stage, we have not observed a huge switch in, let's say, the market tiers.

Next question is from Tom Narayan from RBC.

Tom Narayan, RBC. So pricing obviously was a big factor in the quarter, contributing 12% to the sales growth. Curious if this alone was enough to offset raw material and energy cost inflation in the quarter. And then I believe you did another price increase on April 1, which I think was the fifth price increase and that there could be a sixth one. I know the price increases were staggered in 2021 and 2022, but could you help us understand what level of price growth we could expect for full year 2022 if we do get this sixth price increase? And then secondly, it's a quick one. It's just, could you remind us what the exposure is to the Chinese lockdown situation?

So maybe I will start with the last question, the last part of your question regarding China. So you know that China represents approximately 6% to 7% of our revenue. Our factories there has been shut down, let's say, from mid-March. So one factory already restarted production, the one we have in the North, the biggest one. And the second one that are in -- the 2 second one, one is the steel cord factory, the other one is passenger car tire factory in Shanghai, are still closed for the time being. But we believe that we should be able to restart production early May according to the information we have. So of course, it has an impact. The situation has an impact on the demand in China. Although the demand, at least in some segments, particularly for the passenger car division, was still strong at the -- during the 2 first months of the year. So yes, coming at your question about prices. So we have like close to 12% price effect during the first quarter. Keep in mind that in 2021, we have strong volume effect on Q1, and then we have price effects starting from Q2. So of course, the comparison both for volume and price, will move along the year as we have gradually increased price. We have implemented 3 price increase between Q2 and Q4 in 2021. We have announced and implement price increase in April. And in some business segments, we are going or we have already announced to customers further price increase in May or in June. So that's for the replacement market. We must also take into account that we have roughly, at the group level, 30% of our sales that are coming by contracted index clause. This clause were historically well covering the raw material evolution. And we have been -- and our teams have been renegotiating with, let's say, reasonable success the inclusion of energy and transportation in the different -- with the different customers. So for example, we have a yearly transportation clause that is going to play for the mining business in July, as it played last year already, but in a less larger extent because we have 1 year of transportation inflation behind us. So overall, the first quarter, the price increase covers up inflaters overall, taking into account that we have some businesses with this lag -- the price lag due to the indexation. And we believe that for the full year, inflation should land in a range about around EUR 2.4 billion. When we published the 2021 full year results, we were more in the range of EUR 1.2 billion, slightly above EUR 1.2 billion. The crisis in Eastern Europe has triggered an additional EUR 1 billion of inflation, of which nearly 80% is coming from raw materials and the rest from energy and transportation. So that's the assessment for the full year. And we believe that with the price increase that we have already announced, we are able. Plus the game of the indexation clauses that are going to play during the third and the fourth quarter, we are equipped to fully hedge inflaters. Next question?

Next question is from Giulio Pescatore from BNP Exane.

The first one, I wanted to go back on mining, if that's okay. So you talked about all the issues you faced in Q1, but those issues have been largely restored by now, Spain and North America. You said you've been able to hire people. When can we expect a meaningful acceleration in volume? Is that going to be possible already in Q2 or Q3? Or we have to wait for the end of the year? Then the second question in terms of breakdown of costs. I think you've just given us some numbers. Can you maybe repeat it? Because I didn't quite catch the breakdown of the cost between how much is logistics, how much is raw material, how much is energy. That would be super interesting. And then maybe last question on SR2, on the Truck segment. You mentioned that you've been able to expand the fleet management solutions quite meaningfully. Can you maybe give us -- can you maybe help us quantify the benefit of those activities? And how should we think about margins for those activity compared to the normal tire business?

Okay. So regarding mining, we are expecting a strong volume effect from the Q3. We might be able to see some of that already at the end of the Q2 in June. So we have been able to rehire the workforce that we were lacking in our North American operations, North American factories. But the Charleston port is pretty congested. We had, following the trucker strike in Spain, a lot of containers that were blocked in Spanish port. And you know that the end market for mining are Australia, South Africa, South America, so with a long shipping delay. And also, we -- if we look at our overall inventory situation, at the end of the quarter, we have nearly 30% of our inventories that were on transit, so mostly on boats or in a truck. Inflation breakdown. I mentioned our rough estimation for the full year is around EUR 2.4 billion. Most of it is coming from raw materials. So the first, the increase is since the crisis in Ukraine is around EUR 1 billion, and most of this is coming from raw material. We are expecting an effect on energy in the range of EUR 500 million for the full year. And if you take all transportation inflation, which will be in a range of EUR 300 million to EUR 400 million. So plus some other, like a bit of labor cost inflation or, let's say, other cost of operations, that might represent a bit more than EUR 100 million. Regarding SR2 and fleet management. So in terms of numbers in euro, it does not represent a huge amount. We -- our yearly turnover is in the range of EUR 200 million. But in terms of a number of vehicle under contract, we are now above EUR 1.1 million, and it's an activity which provide us recurring revenue and strong relationships with the fleet.

Next question from Martino De Ambroggi from Equita.

The first question is on the free cash flow guidance, just to understand if you have an underlying assumption of CapEx always in the region of EUR 1.9 billion recovering the roughly EUR 100 million you didn't spend the last year, or if it's embedded already a reduction in CapEx and maybe to offset the working capital you mentioned before?

Okay. No, at this stage, we have not planned to offset the increase of working capital or the free cash flow through the reduction of capital expenditure. At the end of the quarter, we are in line with our yearly plan, which is to spend nearly EUR 1.9 billion. As you mentioned, there is this catch-up effect from the CapEx cost cut that we have implemented in 2020 and 2021. The challenge is also in implementing CapEx due to supply issues. We are ordering a lot of -- we have strong ambition in terms of digitization in our factories manufacturing 4.0, which need a lot of new technologies, a lot of computerized technology. So there is a lot of microcomputers that are today is very difficult to source. So the main challenge regarding CapEx is a bit of inflation in the CapEx and at the same time, some, let's say, operational disruptions in the achievement of the project. That -- at this stage, we did not decided or betting on any reduction in our CapEx for 2022. Next question?

Next question is from Sascha Gommel from Jefferies.

I've got 3. The first one is on inventory levels. In your press release, you stated that there was a bit of prebuying, which is why you underperformed the markets a little bit in SR1 and SR2. Does that imply that the stock levels in the channels are back to normal? Or are there still regions or segments that are not fully stocked? That would be the first. The second one is on pricing. Are still all major tire manufacturers following the price increases? Or do we see first signs that some might actually use -- not to follow as a way of gaining some market share? And then the last one, one of your competitors in winter tires obviously has some major problems related to Russia. Is that giving you an opportunity to gain market share in very profitable segments across Europe?

Okay. I will start by your third question. I think it's far too early to see what will be the supply situation regarding winter tires, particularly in the European market. We are just in April, so that's probably about the question that we'll be able to answer during the summer or at the end of the summer. The stock level. If we observe the stock level at our distributors, they are roughly in line with normative, with some, let's say, quality issue in inventory. So some categories are understocked, and that's creating attention, and we have some backorders and relatively high backorders compared to historical level. And that's true that in Europe, particularly in Europe, during the month, we had a very strong month of December for passenger car and for truck tires. But if we look at the balance between the selling, in the sell-out during the first quarter, this slight, let's say, inventory rebuilding that has been done in end of the 2021 has been absorbed by the growth in demand during the first quarter. So the situation regarding inventory is not particularly worrying from our standpoint. As far as pricing is concerned, we have not seen any -- let's say what we can observe is that generally, price increase, which are announced, are implemented by our competitors. And for the time being, we have not seen any, let's say, major competitors not implementing a price increase.

Next question from Christophe Laskawi from Deutsche Bank.

Two, if I may, please. The first one will be on inventory levels that you keep of raw materials in Europe. Given that you have changed regions from which you saw, for example, carbon black, and usually, you are relying on shipping to get the goods. Do you structurally change the approach to stock inventory at your plants? Should we expect, in the near term at least, elevated inventory levels, which potentially is then towards the end or early next year when the shipping and the available slots for shipping are normalizing? That's the first question. And then the second question would be just because you have, well, so far, faced minor production stops, there might be a potential for competitors to grab a bit of market share. Could you comment if you've seen a slight deterioration of market share in Europe? And if that will be sticky or not into the coming quarters?

Okay. Our inventory, if I look at the raw material, back at, let's say, normative level. But with the challenge is that we are supplying a lot of raw material part with natural rubber, but not only natural rubber from very remote area versus our factories' location. And what we have observed is that because of the overall disruption in the shipping industry, the slowdown of the -- the delay between the different ports, the slowdown of the boat, we have also for raw material, a higher share of our raw materials that are in transit than before the crisis. And we have seen, let's say, this delay increasing the percentage and indicate previously for finished product. Basically, we have seen roughly 10% of our inventories switching from, let's say, in location, in the warehouse 2 in transit. And we have observed, let's say, a similar shift for raw material. It has not today, for the time being, fundamentally changed our inventory policy because we have -- you know that before the crisis, we have a long-term plan in order to reduce our inventory. So that's a strong headwind that we are facing. But at the same time, we are committed to implement the optimization measures that we were planning before the 2020 and now 2022 crisis. Regarding your last question about production. Overall, we have been able to stabilize our market share. Of course, if you look in some segments, we are growing faster than the market in some segment or some geography. We are more penalized by production or shipping disruptions. As we mentioned during previous call, it's probably the third segment that we suffer the most from this operation disruption. But overall, if we look at SR1 and SR2, globally, we're able either to maintain or sometimes to grow our market share.

Next question is from José Asumendi.

Just a couple of questions, please. Can you comment a little bit around the penetration of tires for electric vehicles or the 18-inch-plus segment, how that is evolving within your SR1 division across OE or replacement? If you could give us any numbers there. The second one, are you seeing, as a result of this inflation cost or inflation rising, are you seeing any impact on miles traveled, either on cars, on trucks, or on your customers? Are you starting to see some deceleration of the activity? And 3, If you could comment please within SR3, can you comment please on agriculture and aircraft tires, how the demand is evolving across those 2 divisions, please?

Okay. So regarding EV tires, we are observing the same trend that we have commented during the 2021 full year announcement. We are also observing continuous mix enrichment. And basically, you remember every quarter or every period of the year, we have for the past 5 years, the share of 18-inch and above or premium segment, let's say, increasing by 3 points, 3 to 4 points in our overall sales. We continue to observe a similar trend during the first quarter of 2022. So basically, if I remember well, our share of 18-inch tires in our automation brand in our overall SR1 sales has been topping slightly above 51% during the first quarter, which is 3 to 4 points more than the first quarter of 2021. For the time being, we have not observed -- so of course, except what is happening currently in China with the lockdown, we have not observed a drop in miles traveled due to inflation. Actually, it's too early to detect any kind of such signals. Regarding SR3, I understood that you wanted me to comment the situation in agriculture and construction. These markets are still pretty dynamic. We are also here being penalized by the operational disruptions. For example, we have for both for agriculture, construction and material handling, we have when we acquired Camso, a huge operation in Sri Lanka that has been impacted by the issue there, cut of electricity supply, difficulty to supply. But despite this challenge, the teams are doing their best. And overall, we consider that in this segment of the market, we are also in line with the market trend.

Next question from Thomas Besson from Kepler Cheuvreux.

I have still 2 questions. Firstly, do you still expect the SR3 profitability to rebound during '22, while we may see a slight decline in SR1 and SR2 margins? And have you already seen that inflection? Or should we wait to see the volume rebound you mentioned in mining from June and the transportation indication to get into action to see that? That's the first one. And the second, could you discuss the potential tailwind from the difficult situation of your competitor, Nokian, in Russia. Should you benefit from that in the forthcoming winter tire season? Do you expect the competition including yourself to be able to compensate the potential volume shortfall?

Okay. Thank you, Thomas. For the first one, SR3, we expect -- still expecting that the overall segment profitability will recover during the year and that we will be able to post higher operating margin for the full year of 2022 versus 2021, and we are expecting most of the recovery to happen from July onwards. First, because we believe that we'll have been -- we have -- we are going to put back all the, let's say, supply disruptions that we have been experimenting. Don't forget that, for example, the rehiring of people in our North American operations has not an immediate effect because you have some time for training, and we are now back gradually at the, let's say, achievable capacity that these factories should be able to produce. And second, we'll have -- due to the lag effect, we'll have a strong price effect from -- particularly for the mining business on the second half of the year. Tailwinds. So there is some tailwinds. But honestly, as I said earlier, it's too early to comment what is going to happen, particularly in the European market with the competitors you mentioned. I'm not going to comment anything about this competitor. And it's too early because the winter season for selling is starting, let's say, during the summer, but mostly now in September. And then we will see, let's say, during the month of September, what is going to happen. We -- let's say, the main -- as we did for our pricing for the past 6 quarters, in such a context, agility is a must, and the ability of our teams to benefit from some situation. The difficulties we have, for example, the fact that we stopped delivering, exporting tires to Russia is also providing an opportunity for, particularly, our mining business to redirect these capacities to market where we have important backorders. So it's really in the managing quarter-by-quarter both our supply chain and our pricing that we should be able to achieve our '22 target.

Next question from Philipp Konig from Goldman Sachs.

I've just got 2 left. My first one is just coming back on the pricing against inflation. Very helpful you mentioned earlier that you're seeing a full year impact of around EUR 2.4 billion, which requires around 10% of last year's sales. You've now done a price/mix of 13.5% in the first quarter. I know that the comparable is obviously getting more difficult as the year progresses, but you've just done another round of increases -- price increases in April. You have indexation clauses kicking in, in the second half of the year and a potential comeback of the high-margin mining tires. So is it fair to assume that a neutral effect against the EUR 2.4 billion is more seen as a floor and you potentially could even have a positive effect? And then my second question is just on the sourcing from Russia. You mentioned that you are resourcing the 30% of carbon black that used to come from the region. Can you just comment on when you expect to be fully resourced outside of Russia? And where will you be buying the carbon black from?

Okay. So maybe I'll start with the second half of your question, Philipp. I'm not going to indicate where we are going to source the carbon black. But basically, we should be able to be completely resourced from the month of July, between early and mid -- early -- sorry, month of June. So between early and mid-June, we should be completely resourced and not rely anymore on any raw material coming from Russia. Regarding the price effect. So as I said earlier, we ask our teams to monitor their margin quarter-by-quarter and to make sure that at the beginning of each quarter, we have positioned ourselves in such a way that we are going to hedge inflators. So at the end of the year, we might land with, let's say, a slightly positive effect, but our overall objective is to hedge inflators, and we'll see at the end of the year where we will land. Of course, we try to keep for ourselves part of the mix effect as we did last year. But we have seen, for example, in the last quarter of 2021, a surge in energy prices that were extremely difficult to anticipate or impossible to anticipate. So that's why we are always present on that side, and we prefer to commit to hedging. And if we are able to do more on hedging, it will be welcome.

Next question is from Edoardo Spina from HSBC.

The first one is on the currency, and I wanted to ask how this item will evolve throughout the year according to your current estimates, of course, and also how this is affecting the different segments if possible. And the second question is on the general market share. Looking at your more direct competitors, we may look into the financials and suspect that there is some attempt to gain market share in the Tier 1 segment. Can you confirm if you see any pressure on the upper end of the Michelin brand range in any part of the world?

So regarding the ForEx, as I said, we should have most of the effect during the first 3 quarters as the dollar has already started to evaluate partially versus euro during the last quarter of 2021. Keep in mind that if you look at overall, let's say, revenue, we have a large chunk that is built in USD, similar share coming from euro. And then after, I think you have the Chinese RMB, which represents 6%. And then we are, let's say, in lower shares. So most of the effect should come from the dollar. But at the same time, when the crisis in Ukraine started, we have seen also some currency moving sharply, just to mention, the Turkish lira, for example. Regarding market share, we are basing our overall guidance on the fact that we should be able to grow at the marketplace. We have not yet seen any specific, as I mentioned earlier, any huge switch from Tier 1 to all the market tiers. We rather expect the Tier 1 market to be resilient. As even if, let's say, we are obliged to increase prices to hedge inflators, our Tier 2 and Tier 3 competitors are facing the same situation.

We have a new question from Martino De Ambroggi from Equita.

I had a second question. On the trend -- the market trend, can you provide -- I don't know if it's possible, but could you provide the trend of sales volumes very roughly in March stand-alone, because you had both the war in Ukraine and the lockdown in China. And as you mentioned, March was a different month compared to the other 2, because I don't know if there is a risk. I know you are already guiding at the low end of the ranges for each segment. But do you feel there is some of the 3 divisions that is more at risk than others in terms of volume growth for the full year because of the ongoing trend?

Not partially. There was, of course, in March, the also sort of, maybe particularly in Europe, acceleration effect due to the -- end of February and early March due to the start of the war on the European territory. But at the same time, we have seen, let's say, later on, some market recovering. So as I said earlier, we have started the year on a, let's say, pretty overall positive mood both in Jan and Feb. And there was a, let's say, a slowdown in March, which was mostly if I look at our overall volume coming from Eastern Europe and China. The Chinese situation is going to end probably somewhere during the month of May. So of course, our April revenues will be impacted. And as I said earlier, we should be able to redirect the volumes that we are exporting to Eastern Europe to Russia towards other market. So for the time being, as I said earlier, we are rather now considering the lower part of the range regarding our market growth assumptions and particularly from all the segments. But we still believe that the market will post a positive growth rate at the end of the year, excluding, of course, the truck tire market in China, which was based on a very different comparison. Don't forget that 2021, we have very strong month of March, and then we have a relatively bad third quarter and then a slight rebound in -- at the end of the year. So seasonality from 1 year to another might look very different between 2022 versus 2021. So I think it's last question. So thank you very much, ladies and gentlemen, for your attention. And we are looking forward to meeting you at our shareholders' meeting on the 13th of May, and then, of course, later on for our first half results disclosure at the end of July. Thank you very much.

Thank you, ladies and gentlemen. This concludes the conference call. Thank you all for your participation. You may now disconnect.