Michelin Guide Resultats Annuels 2017 EN-1

2017
RESULTS
CONTENTS
1 PRESS RELEASE 3
Market Review 5
2017 Net Sales and Results 7
Compagnie Générale des Établissements Michelin 9
2017 Highlights 9
2 SLIDESHOW11
2017 Annual Results – February 12, 2018 12
2017: Growth in operating income from recurring activities,
in line with the business plan 21
2018 guidance in line with 2020 objectives 38
Appendices45
3 REPORT OF THE MANAGING PARTNERS 70

3.1 Tire Markets 72
3.2 Net Sales 79
3.3 Consolidated Income Statement Review 83
3.4 Consolidated Balance Sheet Review 93
3.5 Consolidated Cash Flow Statement Review 99
3.6 Return On Capital Employed (ROCE) 102
3.7 Outlook102
3.8 Share Information 103
3.9 Highlights
4 FINANCIAL HIGHLIGHTS 105

4.1 Markets106
4.2 Sales108
4.3 Earnings110
4.4 Reporting Segments 112
4.5 Cost Structure 115
4.6 Cash Flow and Balance Sheet 120
4.7 Consolidated Key Figures and Ratios 124
5 CONSOLIDATED FINANCIAL STATEMENTS

AS AT DECEMBER 31, 2017 125
Consolidated Income Statement 127
Consolidated Statement of Comprehensive Income 128
Consolidated Statement of Financial Position 129
Consolidated Statement of Changes in Equity 130
Consolidated Cash Flow Statement 131
Notes to the Consolidated Financial Statements 132
MICHELIN – 2017 RESULTS 1

2 MICHELIN – 2017 RESULTS
1
PRESS RELEASE
MARKET REVIEW 5
2017 NET SALES AND RESULTS 7
COMPAGNIE GÉNÉRALE DES ÉTABLISSEMENTS MICHELIN 9
2017 HIGHLIGHTS 9

1 Press release

Press release
Clermont-Ferrand – February 12, 2018
Financial information for the year ended December 31, 2017
COMPAGNIE GÉNÉRALE
DES ÉTABLISSEMENTS MICHELIN
2017: Another year of progress, in line with the 2020 objectives
Strong structural free cash flow, at €1.5 billion for the year
€2,742 million in operating income from recurring activities, up €145 million at constant exchange rates
Net income higher year on year, at €1,693 million
2018: Sustained progress, on track to achieve the ambitions set for 2020
Strong structural free cash flow, at €1.5 billion for the year. Proposed dividend of €3.55 per share, representing a payout of
Operating income from recurring activities of €2,742 million, or 36% of consolidated net income excluding non-recurring items in
12.5% of net sales, up €145 million at constant exchange rates. line with the Group’s commitment to shareholders, to be submitted
•• Determined Group strategy to offset the more than €700 million to shareholders at the Annual Meeting on May 18, 2018.
increase in raw materials costs, resulting in a neutral impact Jean-Dominique Senard, Chief Executive Officer, said: “In 2017,
versus raw materials headwind on the non-indexed businesses. the Michelin Group performed in line with its 2020 roadmap. The
•• Sustained market share gains in 18-inch and larger tires strength of its brand and its technological leadership helped to drive
(MICHELIN brand sales up 19% in a segment up 13%), with 2.6% growth and deliver historically high net income of €1,693
a price positioning in line with the brand reputation. million, demonstrating the Group’s agility in a more challenging
•• Competitiveness plan gains exceeded inflation by €36 million, business environment. Michelin is pursuing the acquisitions that
in line with objectives. will support its ambitions for growth and value creation. The
•• Highly competitive markets, especially in Europe, which are introduction of the new organization in early 2018 will deepen
weighing on the dealership operations. employee engagement to enhance customer service, while enabling
Specialty businesses: operating income from recurring activities us to meet our competitiveness objectives. In this way, the Group
up more than 30% and strong growth across every division. is confidently moving into another year of progress in 2018 while
pursuing its strategy in tires, services, experiences and materials.”
Outlook
In 2018, the Passenger car/Light truck and Truck tire markets are expected to experience modest growth over the year, while the mining
tire, agricultural original equipment and earthmover original equipment markets should remain buoyant.
Given the market conditions, price management will make it possible to generate a net positive effect from changes in the price mix and
raw materials costs, assuming an estimated €50 to €100 million increase in raw materials prices. Based on January 2018 exchange rates,
the currency effect would reduce full-year operating income from recurring activities by around €300 million.
In this environment, Michelin’s objectives for 2018 are volume growth in line with global market trends, operating income from recurring
activities exceeding the 2017 figure at constant exchange rates, and structural free cash flow of more than €1.1 billion.

Press release
Market Review 1
(in € millions) 2017 2016
Net sales 21,960 20,907
Operating income from recurring activities 2,742 2,692
Operating margin on recurring activities 12.5% 12.9%
Passenger car/Light truck tires & related distribution 12.4% 13.1%
Truck tires & related distribution 8.1% 9.7%
Specialty businesses 20.6% 18.6%
Operating income/(loss) from non-recurring activities (111) 99
Operating income 2,631 2,791
Net income 1,693 1,667
EBITDA from recurring activities 4,087 4,084
Capital expenditure 1,771 1,811
Net debt 716 944
Gearing 6% 9%
Employee benefit obligations 3,969 4,763
Free cash flow(1) +662 +1,024
Structural free cash flow(2) +1,509 +961
ROCE 11.9% 12.1%
Employees on payroll(3) 114,069 111,708
Earnings per share €9.39 €9.21
Dividend per share (4)
€3.55 €3.25
(1) Free cash flow: net cash from operating activities less net cash used in investing activities less net cash from other current financial assets, before distribution.
(2) Structural free cash flow: free cash flow before acquisitions, adjusted for i) the impact of changes in raw materials costs on trade payables, trade receivables and
inventories; and ii) the payment of interest on the zero-coupon 2017 OCEANE convertible bonds at maturity.
(3) At period-end.
(4) 2017 dividend to be submitted to shareholder approval at the Annual Meeting on May 18, 2018.
MARKET REVIEW
PASSENGER CAR AND LIGHT TRUCK TIRES
Europe
Europe excluding Asia
2017/2016 including Russia & North (excluding South Africa/India/
(in number of tires) Russia & CIS* CIS* America India) America Middle East Total
Original equipment +2% +1% -4% +2% +20% +7% +2%
Replacement +4% +2% 0% +4% +9% +2% +3%
Europe
Fourth quarter 2017/2016 including Russia & North (excluding South Africa/India/
Original equipment +5% +4% -6% -1% 15% +2% 0%
Replacement +2% +2% +1% 0% +10% +3% +2%
* Including Turkey.
In 2017, the global original equipment and replacement Passenger car and Light truck tire market expanded by 3% in number of tires sold.

1 Press release
Market Review
Original equipment Replacement

Demand in Europe rose by 2% overall during the year, reflecting The European market saw a 4% overall increase during the year.
the combined impact of a 1% increase in Western Europe (lifted Demand in Western Europe edged back 1%, as gains in Spain
by a 4% gain in the final quarter) and a robust 14% upsurge in (up 5%), France (up 3%) and Germany (up 1%) were offset by
the Eastern European countries. declines in the United Kingdom (down 8%) and, to a lesser extent,
The North American market ended the year down 4%, as demand the Nordic countries (down 4%). Markets in Central Europe and
tumbled 8% in the second half after holding firm in the first, in Eastern Europe reported robust growth, ending the year up 12%
line with the decline in automobile production. and 16% respectively. Sales of all-season tires remained firm
throughout the year, with strong growth in Europe. Winter tire
Demand in Asia (excluding India) rose by 2% overall in 2017.
demand was boosted by year-end weather conditions.
Growth in China cooled to 2% as a result of both rising SUV and
luxury car sales and declining demand for compact cars following The North American market was flat for the year, although
a reduction in government incentives. Demand was up 5% in after two straight quarters of decline, demand picked up 1%
Japan and stable in South Korea. in the final three months. The 5% contraction in Mexico was
offset by the 7% gain in Canada, while in the United States, the
South American markets delivered a sharp 20% upturn, driven
favorable economic environment failed to move the market off
by both domestic and export sales.
of last year’s levels.
Demand in Asia (excluding India) rose by 4%, as sustained growth
in China (up 7%) made up for the tepid 1% increase in Japan.
The South American market rebounded 9%, with a 15% gain
in Brazil led by a significant, exchange rate-driven increase in
Asian imports.
TRUCK TIRES (RADIAL AND BIAS)
Europe
2017/2016 including Russia & North (excluding South Africa/India/
Original equipment +8% +7% +10% +26% +18% -3% +17%
Replacement +4% +2% +4% 0% +8% -3% +1%
Europe
Fourth quarter 2017/2016 including Russia & North (excluding South Africa/India/
Original equipment +12% +12% +9% +26% +65% +11% +20%
Replacement -3% -3% +2% -3% +12% 0% -1%
* Including Turkey.
Supported by rising demand for overland transport in a favorable economic environment, the number of new radial and bias Truck tires sold
worldwide rose by 4% in 2017. The year was shaped by a sharp 17% surge in original equipment sales and, in the replacement segment,
by heavy buying in the first quarter ahead of the price increases announced across the industry and the subsequent easing of demand in
the following quarters (for a 1% increase overall).
Original equipment Demand for radial and bias tires in Asia (excluding India) jumped
26% overall, led by the very robust 32% growth in China, where
The European market delivered an 8% increase for the year,
legislation limiting truck size and weight drove higher demand
benefiting from low interest rates and truck purchases in response
over the first three quarters. Sustained growth in the Thai market
to the sustained demand for overland transport. In the Eastern
offset softer demand in Japan.
European countries, an improving economy helped to drive a
14% rebound in the market. The South American market bounced back in the second half,
surging 40% and ending the year up 18%, supported by the
In North America, the market enjoyed a rebound during the year,
first signs of an economic recovery in Brazil and by export sales.
gaining 10% as the favorable economic environment encouraged
trucking companies to upgrade their fleets.

Press release
2017 Net Sales and Results 1
Replacement Replacement radial and bias tire markets in Asia (excluding India)
leveled off during the year. Demand edged up just 1% in China,
The European market rose by 4% over the year, led by demand
held back by the robust OE market and by the impact of emissions
from the freight and construction industries. The overall gain
controls. It also improved by 3% in Japan, but declined by 3%
reflected growth in France (up 7%), Turkey (up 9%) and Russia
in Thailand. Radial technology enjoyed another period of strong
(up 10%), flat demand in Germany and declines in Italy (down
growth in the ASEAN markets.
2%) and Spain (down 3%).
The South American radial and bias tire market rebounded by
Demand in North America ended the year up 4%, as a slight
a strong 8% in 2017, thanks in particular to the improving
decline in the first half was offset by a return to sustained growth
economy in Brazil.
in the second, led by the favorable economic environment.
Growth slowed to 2% in the fourth quarter, due to comparison
with year-earlier demand, which was boosted by early buying of
Chinese tires ahead of proposed import duties.
SPECIALTY TIRES
Earthmover tires: after three straight years of decline, the Agricultural tires: original equipment markets ended 2017 up
mining tire markets rebounded by 15% in 2017, as inventory 10%, as the early-year slowdown gave way to a sharp, unexpected
drawdowns bottomed out, production at both multinational upturn in OEM demand in the second quarter.
and mid-sized mining companies recovered, and demand for The replacement markets in mature countries are down over the
outsourcing reappeared. year, the decline seen in the second half of the year exceeding
Original equipment markets turned sharply upwards, by 25% the growth of the beginning of the year fueled by price increases.
excluding China, at a time of low inventory and rising demand Two-wheel tires: motorcycle tire markets are expanding in the
for mining machines. mature regions and are also trending upwards in the emerging
Demand for infrastructure and quarry tires is improving, lifted by economies.
the favorable economic environment. Aircraft tires: demand in the commercial aircraft segment
continued to grow, led by the increase in passenger traffic.
2017 NET SALES AND RESULTS
adjustments following application of raw materials indexation

NET SALES clauses in the indexed businesses. The mix effect added 0.7%
to growth, thanks to the still highly positive product mix and
Net sales stood at €21,960 million for the year, up 5.0% from 2016 the favorable impact of the rebound in the mining tire business,
due to the combined impact of the following factors: which were somewhat dampened by the unfavorable impact
a €543 million increase from the 2.6% growth in volumes; of the relative growth rates of OE and replacement tire sales;
a €668 million or 3.2% increase from the favorable price-mix a €261 million decrease from the currency effect;
effect. As announced, the positive price effect (2.5%) had a a €103 million increase from changes in the scope of consolidation,
rapidly increasing impact over the year, from a negative 1.0% in particularly the first-time consolidation of Levorin, a Brazilian
the first quarter to a positive 2.1% in the second, a positive 4.4% two-wheel tiremaker, and NexTraq, a US telematics solutions
in the third and a positive 4.4% in the fourth, reflecting both the provider.
price increases in the replacement segment and the contractual

1 Press release
2017 Net Sales and Results
RESULTS NET FINANCIAL POSITION

Consolidated operating income from recurring activities Free cash flow ended the year at €662 million, a decrease of
amounted to €2,742 million or 12.5% of net sales, compared with €362 million that reflected the €476 million in acquisition outlays.
the €2,692 million and 12.9% reported in 2016. Operating income/ Based primarily on this free cash flow, less the payment of €585 million
(loss) from non-recurring activities represented a loss of €111 million, in dividends and the €101 million in share buybacks, consolidated
corresponding primarily to costs related to the reorganization and gearing stood at 6% at December 31, 2017, corresponding to
alignment of Group operations, which were partially offset by gains net debt of €716 million, compared with gearing of 9% and net
on changes to the health coverage plan in the United States and debt of €944 million at December 31, 2016.
to the pension plan in the United Kingdom.
When compared with the weighted average cost of capital for the
Operating income from recurring activities was first shaped by growth year, the 11.9% after-tax return on capital employed attests that
in volumes, which contributed €207 million. Higher raw materials Michelin created value in 2017.
prices had a €738 million negative impact, which was almost entirely
covered by effective management of the price mix. The residual
impact was limited to a negative €70 million for the year, stemming
mainly from the delayed application of raw materials clauses in the
indexed businesses. The €315 million in savings from the ongoing
competitiveness plan amply absorbed the €279 million increase in
production costs and overheads. Lastly, unfavorable movements in
exchange rates reduced operating income from recurring activities
by €95 million over the year.
Net income came in at a historically high €1,693 million.
SEGMENT INFORMATION
Operating income from Operating margin on

Net sales recurring activities recurring activities
(in € millions) 2017 2016 2017 2016 2017 2016
Passenger car/Light truck tires & related
distribution 12,479 12,105 1,552 1,585 12.4% 13.1%
Truck tires & related distribution 6,123 5,966 497 580 8.1% 9.7%
Specialty businesses 3,358 2,836 693 527 20.6% 18.6%
GROUP 21,960 20,907 2,742 2,692 12.5% 12.9%
Passenger car/Light truck tires & related In addition to the adverse currency effect, the margin erosion
reflects the priority focus on preserving unit margins and the 2%
distribution decrease in volumes over the year, with the increase in raw materials
Net sales in the Passenger car/Light truck tires & related distribution costs being offset by the favorable impact of higher prices and the
segment rose by 3.1% in 2017, to €12,479 million from €12,105 million improved product mix. Part of the margin contraction was also
in 2016. caused by the dilutive impact of the price increases and unfavorable
Operating income from recurring activities came to €1,552 million exchange rate movements.
or 12.4% of net sales versus the €1,585 million and 13.1% reported
in 2016.
In addition to the unfavorable currency effect, the change in operating
Specialty businesses
margin on recurring activities was primarily attributable to the 2% In all, net sales by the Specialty Businesses increased by 18.4%
growth in volumes and the impact of higher prices and the positive year-on-year, to €3,358 million from €2,836 million in 2016.
product mix, which offset the increase in raw materials costs. Part Operating income from recurring activities amounted to €693 million,
of the margin contraction was also caused by the dilutive impact versus a reported €527 million in 2016, for a margin of 20.6% of
of the price increases and unfavorable exchange rate movements. net sales.
The improvement corresponded to the robust 16% growth in volumes,
led by the sustained rebound in demand for the Group’s mining
Truck tires & related distribution tires and the sharp upturn in Earthmover and Agricultural original
Net sales in the Truck tires & related distribution segment amounted equipment sales. This factor and the price increases introduced in
to €6,123 million in 2017, versus €5,966 million a year earlier. both the indexed and non-indexed businesses amply outweighed the
Operating income from recurring activities amounted to €497 million impact of higher raw materials costs and the negative currency effect.
or 8.1% of net sales, compared with €580 million and 9.7% the
year before.

Press release
2017 Highlights 1
COMPAGNIE GÉNÉRALE DES ÉTABLISSEMENTS MICHELIN
Compagnie Générale des Établissements Michelin ended the year The Chief Executive Officer will call an Annual Shareholders Meeting
with net income of €1,029 million, compared with net income of on Friday, May 18, 2018 at 9:00 am in Clermont-Ferrand.
€1,416 million in 2016. He will ask shareholders to approve the payment of a dividend of
The financial statements were presented to the Supervisory Board €3.55 per share, compared with €3.25 in respect of the previous year.
at its meeting on February 9, 2018. An audit was performed and
the auditors’ reports on the consolidated and company financial
statements were issued on February 12, 2018.
2017 HIGHLIGHTS
Michelin introduces the Pilot Sport 4S, the industry-leading Michelin signs agreement with Ashok Leyland to supply the
sports sedan tire that outperforms all its rivals in track trials new X Guard range of truck radials for the Captain line of long
(January 19, 2017). and medium-distance commercial vehicles (October 10, 2017).
Michelin Sascar expands its fleet services portfolio in Mexico by XPO Logistics awards pan-European tire management contract
acquiring the business assets of Copiloto Satelital (March 2017). to MICHELIN solutions (October 10, 2017).
At the Movin’On summit, Michelin presents the Vision wheel, its Michelin, a brand denoting trust and progress, according to the
concept for future tires designed using its latest innovations (metal Reputation Institute for the third year in a row (September 27,
3D printing, bio-materials and smart solutions) (June 13, 2017). 2017).
Michelin acquires NexTraq, a North American provider of commercial Acquisition of PTG and Téléflow, both industry leaders in tire
fleet telematics (June 14, 2017). pressure control and inflation systems for the agricultural market
With Porsche, Michelin notches up its 20th consecutive victory at (November 13, 2017).
the 24 Hours of Le Mans (June 19, 2017). Michelin sells its stake in Double Coin Warrior Tire Co., its
Michelin and Safran develop the first connected aircraft tire joint-venture with Huayi Group (November 20, 2017).
(June 20, 2017). MICHELIN solutions launches four digital services revolutionizing
Michelin announces a global reorganization project to address the fleet management (November 23, 2017).
emerging expectations of its customers, improve their satisfaction, MICHELIN guide Bangkok released (December 6, 2017).
simplify its operating procedures and speed up its digitalization Issued capital reduced by €100 million through the cancellation of
(June 22, 2017). shares acquired under the buyback program (December 14, 2017).
Michelin acquires a 40% stake in restaurant guide Le Fooding, Michelin and Sumitomo Corporation agree to form a 50-50 joint
whose quirky approach to fine dining fits well with the Michelin venture that will be the second largest wholesale tire dealer in
Guide (September 1, 2017). the United States (January 3, 2018).
In partnership with Maxion, Michelin presents its ACORUS technology Successful issue of $600 million in non-dilutive, cash-settled
that makes tires safer and more durable (September 27, 2017). convertible bonds due 2023 (January 5, 2018).
A full description of 2018 highlights may be found on the Michelin
website: http://www.michelin.com/eng

1 Press release
2017 Highlights
PRESENTATION AND CONFERENCE CALL

Full-year 2017 results will be reviewed with analysts and investors during a presentation today, Monday, February 12, at 6:30 pm CET.
The event will be in English, with simultaneous interpreting in French.
Webcast
The presentation will be webcast live on www.michelin.com/eng
Conference call
Please dial-in on one of the following numbers from 6:20 pm CET:
In France 01 70 71 01 59 (French), access code: 161 690 67#
In France 01 72 72 74 03 (English), access code: 150 572 81#
In the United Kingdom (0) 207 194 3759 (English), access code: 150 572 81#
In North America (844) 286 0643 (English), access code: 150 572 81#
From anywhere else +44 (0)207 194 3759 (English), access code: 150 572 81#
The presentation of financial information for 2017 (press release, presentation, annual report, financial highlights and consolidated financial
statements for the year) may be viewed at http://www.michelin.com/eng, along with practical information concerning the conference call.
INVESTOR CALENDAR
Quarterly information for the three months ending March 31, 2018: Monday, April 23, 2018 after close of trading
First-half 2018 net sales and results: Tuesday, July 23, 2018 after close of trading
Investor Relations Media Relations

Valérie Magloire Corinne Meutey
+33 (0) 1 78 76 45 37 +33 (0) 1 78 76 45 27
+33 (0) 6 76 21 88 12 (cell) +33 (0) 6 08 00 13 85 (cell)
valerie.magloire@michelin.com corinne.meutey@michelin.com
Edouard de Peufeilhoux Individual Shareholders
+33 (0) 4 73 32 74 47 Jacques Engasser
+33 (0) 6 89 71 93 73 (cell) +33 (0) 4 73 98 59 08
edouard.de-peufeilhoux@michelin.com jacques.engasser@michelin.com
Matthieu Dewavrin
+33 (0) 4 73 32 18 02
+33 (0) 6 71 14 17 05 (cell)
matthieu.dewavrin@michelin.com
Humbert de Feydeau
+33 (0) 4 73 32 68 39
+33 (0) 6 82 22 39 78 (cell)
humbert.de-feydeau@michelin.com
DISCLAIMER
This press release is not an offer to purchase or a solicitation to recommend the purchase of Michelin shares. To obtain more detailed
information on Michelin, please consult the documents filed in France with Autorité des marchés financiers, which are also available
on our www.michelin.com/eng website.
This press release may contain a number of forward-looking statements. Although the Company believes that these statements are
based on reasonable assumptions as at the time of publishing this document, they are by nature subject to risks and contingencies
liable to translate into a difference between actual data and the forecasts made or inferred by these statements.

2
SLIDESHOW
2017 ANNUAL RESULTS – FEBRUARY 12, 2018 12
2017: GROWTH IN OPERATING INCOME FROM RECURRING

ACTIVITIES, IN LINE WITH THE BUSINESS PLAN 21
2018 GUIDANCE IN LINE WITH 2020 OBJECTIVES 38
APPENDICES45

2 SLIDESHOW
2017 Annual Results – February 12, 2018
ANNUAL RESULTS
FEBRUARY 12, 2018
2017

2017: another year of progress, in line with the 2020
objectives and the expected scenario
H1 2017 H2 2017 2017 actual 2016
Volumes +3.6% +1.6% +2.6% +2.1%

Price mix +1.4% +4.9% +3.2% -1.8%
€2,742m
Operating income up €145m at
-49 +194 €2,692m
from recurring activities constant exchange
rates
Structural FCF N/A N/A €1,509m €961m
2 2017 ANNUAL RESULTS – February 12, 2018
MICHELIN – 2017 RESULTS

SLIDESHOW
13
2
2
14
SLIDESHOW
Strong €1.5bn in structural FCF and €145m increase

in operating income* at constant exchange rates

● Strong structural free cash flow of €1.5bn
● €2,742m in operating income*, offsetting the more than €700m increase in raw materials costs and
nearly €100m negative currency effect
─ Determined Group strategy to offset the more than €700m increase in raw materials costs, resulting in a neutral
impact versus raw materials headwind on the non-indexed businesses
─ Sustained market share gains in ≥18” tires (MICHELIN brand sales up 19% in a segment up 13%),
with a price positioning in line with the brand reputation
─ Competitiveness plan gains exceeded inflation by €36m, in line with objectives
─ Highly competitive markets, especially in Europe, which are weighing on the dealership operations
● Specialty businesses: operating income* up more than 30% and strong growth across every division
● €1,693m in net income, a historic high
● Proposed dividend of €3.55** per share, representing a payout of 36% of consolidated net income
excluding non-recurring items
*from recurring activities

**subject to shareholder approval at the Annual Meeting on May 18, 2018

A business that structurally generates free cash flow,
supported in 2017 by WCR monitoring
1,509
Structural free cash flow
(in € millions)
961
833
2015 2016 2017

Free cash flow(1) 653 1,024 662
Acquisitions(2) (312) (16) (476)
WCR impact of raw materials costs(3) 132 79 (178)

Capitalized interest paid at maturity on
(193)
OCEANE bonds(4)
Structural free cash flow (1) – (2) – (3) – (4) 833 961 1,509

SLIDESHOW
15
2
2
16
SLIDESHOW
Still strong price effect in Q4, as announced, led by RT

price increases and the application of indexation clauses

(as a % of net sales)
2013 2014 2015 2016 Q1 17 Q2 17 Q3 17 Q4 17

4.4 4.4
2.1
-1.0
-2.2 -2.2
-2.9
-3.7

≥18’’ tires: the market recognizes the power of MICHELIN’s
line-up in the premium segment
Growth in 18” and larger tire sales
(YoY change, markets in units and sales in kt)
+20%
+19%
+17%
+15%
+13%
+9%
2015 2016 2017
Worldwide market MICHELIN

SLIDESHOW
17
2
2
18
SLIDESHOW
Partnerships and acquisitions to support our growth

and value creation strategy

Tires Services Experiences Materials
2015-2020 Net Sales Net Sales Net Sales Capitalize on our
objectives +20% x2 x3 leadership
Recent
partnerships
and
acquisitions

Dividend increase in line with Group gains
Per share data (in €)

3.55*
3.25
2.85
2.40 2.50 2.50
2.10
1.78
2010 2011 2012 2013 2014 2015 2016 2017
2013-2020 payout ratio: ≥ 35 % of consolidated net income

(excluding non-recurring items)
*subject to shareholder approval at the Annual Meeting on May 18, 2018

SLIDESHOW
19
2
2
20
SLIDESHOW
2018 guidance: on the road to our 2020 objectives

2018
Growth in line
Volumes
with the markets
Operating income from recurring activities

at constant exchange rates > 2017
Structural FCF > €1,100m

February 12, 2018
2017 ANNUAL RESULTS
2017: Growth in operating income

from recurring activities, in line
with the business plan

2017: Growth in operating income from recurring activities, in line with the business plan
SLIDESHOW
21
2
2
22
SLIDESHOW
Q4: PC and RT Truck tire markets in line with Q3, robust

Specialty and OE Truck tire markets

2017 PC tires: +3% 2017 Truck tires: +4% 2017 Specialty tires: +10%
+8% +2%
+5% Q2 2017 +4% ● Mining tires: +15%
+1% +1% +1%
Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2017 -1% Q3 2017 Q4 2017
● Earthmover tires: sharp 25%
Fourth quarter: Fourth quarter: upturn in OE, excluding China
● Europe RT: return to long-term trends ● Robust 20% growth in OE demand, ● Agricultural tires: rebounding
after surge in early buying in Q1 particularly in China and South in both OE (+10%)
● North America: Stable, strong America
demand in RT and faster decline in OE ● RT markets down 1%, dampened by ● Growth in demand
● Sharp 8% growth in RT demand in the strong gains in OE in the other businesses
China
● Sustained recovery in South America
and Eastern Europe

Net sales supported by growth in volumes
and price increases
YoY change
(in € millions and %) +5.0%
+668 -261
Group growth 21,960

+3.1%
Currency effect
(-1.3%)
+543
Price mix
(+3.2%)
o/w mix +0.7%
+103
20,907
Organic growth
External growth Volumes
Changes in scope (+2.6%)
of consolidation*
(+0.5%)
2016 2017
*Levorin, NexTraq

SLIDESHOW
23
2
2
24
SLIDESHOW
Q4: Still robust price mix with higher volumes

YoY quarterly change 2017/2016
(in %)
Volumes Price mix Currency effect
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2016 2017 2016 2017 2016 2017

7.3 5.0 4.9
2.8 2.5
4.2 1.3
3.7
2.2
1.4
1.0 -0.1 -0.1
0.0 -1.3 -1.0 -1.3
-1.9 -1.9
-2.7
-0.9
-3.7 -3.7
-4.9

€2,837m in operating income* at constant exchange rates,
led by volume gains, in line with the Group’s roadmap
YoY change in operating income* (in € millions)
+315 -279
+207 -738 -28 2,837

+668 -95
2,692 2,742
Competitive- Inflation Other
ness Currency effect
Volumes
+36
Raw Price mix

materials o/w mix: :
+144
-70
of which indexed
2016 businesses: -57 2017 2017
reported (at constant exchange rates) reported

SLIDESHOW
25
2
2
26
SLIDESHOW
An assertive pricing policy, as announced

Net impact of price mix and raw materials prices on operating income*
(in € millions)
+1,133
+264
+159
+103 +118
non- +49 +67
indexed indexed
non-
indexed indexed
-93 -106 -80
-266 -70
2010 2011 2012 2013 2014 2015 2016 H1 2017 H2 2017

● 2017: Net negative €57m impact of price mix and raw materials prices on indexed businesses

2017 saw a strong rebound in the Specialty businesses
(in € millions) 2017 2016 Variation
RS1 Net sales 12,479 12,105 +3%

Operating income* 1,552 1,585 -2%
Operating margin* 12.4% 13.1% -0.7 pts
RS2 Net sales 6,123 5,966 +3%

Operating income* 497 580 -14%
Operating margin* 8.1% 9.7% -1.6 pts
RS3 Net sales 3,358 2,836 +18%

Operating income* 693 527 +31%
Operating margin* 20.6% 18.6% +2 pts
● RS1 offset the impact of RM prices and currency movements, neutral impact from changes in price mix
and RM prices in RS2, remarkable improvements in RS3

SLIDESHOW
27
2
2
28
SLIDESHOW
Q4 volumes: good performance in PC in a cooling market and brisk gains

in Specialty tires off of rebounding comparatives

YoY quarterly change in volumes
(in % and tonnes)
Passenger car tires* Truck tires* Specialty tires
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2016 2017 2016 2017 2016 2017

19
17
14
13
8
6
5
4
3 3 3
2
1 1
0 0
-1 -1
-2 -3
-3 -3 -3 -4
*and related distribution

≥18’’ tires: the market recognizes the power of Michelin’s
line-up in the premium segment
Growth in ≥18” tire sales Growth in ≥19” tire sales
(YoY change, markets in units and sales in kt) (YoY change, markets in units and sales in kt)
+34%
+20 % +19 %
+17 % +16%
+15 %
+13 %
+9 % Worldwide market
MICHELIN
2015 2016 2017 2017
● Customers who value the MICHELIN brand and its product performance: price positioning in line
with the reputation of the MICHELIN brand
● Sustained growth momentum, made possible by adapting production capacity

SLIDESHOW
29
2
2
30
SLIDESHOW
Addressing planned obsolescence: MICHELIN CrossClimate+

offers top performance regardless of new or worn tread

Results of the Auto Bild all-season tire tests*, November 2017
SAFER ON DRY ROADS SAFER ON WET ROADS
STOP STOP
braking distance braking distance

-5.1 m -3.7m
MICHELIN CROSSCLIMATE+ MICHELIN CROSSCLIMATE+

NEW WORN
Competitor average Competitor average
EXCELLENT TRACTION ON SNOW EXCELLENT PERFORMANCE OVER TIME
+14,120km
+24 % 0 KM
or +39 %
MICHELIN CROSSCLIMATE+ MICHELIN CROSSCLIMATE+
WORN
Competitor average Competitor average
*Comparative tests conducted by Auto Bild on 185/65 R15 tires, published on November 24, 2017. Competitors: GOODYEAR VECTOR 4S GEN-2,
PIRELLI Cinturato all season, VREDESTEIN Quatrac 5, NOKIAN Weatherproof, HANKOOK Kinergy 4 S.
Scales on the graphs are adjusted to improve readability.

Truck: innovative tires and solutions that meet customer
needs, to drive a return to growth
Convoy TripleA
MICHELIN X Multi Energy and connected services
70 launches scheduled for 2018
Europe
Indonesia
MICHELIN X Guard
Brazil
India

SLIDESHOW
31
2
2
32
SLIDESHOW
Specialty tires: customer-aligned solutions

in expanding markets
MICHELIN MEMS

MICHELIN Evolution 4
XDR 3
MICHELIN EVOBIB
2 in 1 technology
● Agricultural tires* (base 100 in 2016, in tonnes) ● Mining tires (base 100 in 2016, in tonnes)
~130
~107 ~110 ~123
100 104 115
100
2016 2017 2018e 2020e 2016 2017 2018e 2020e
*OE & RT in Europe and North America

2017-2020 competitiveness plan on track to deliver
targeted €1.2bn in gains
Target: €300m in average annual gains* Net gain in 2017
+€36m
SG&A Raw Manufacturing
materials Logistics
315
153 279
110
51
2017 Competitiveness Inflation

plan
*before inflation and including avoided costs.

SLIDESHOW
33
2
2
34
SLIDESHOW
Investing to create value

Successfully deploy our priority Capex Closing the gap between Capex
and M&A projects to drive expansion: and depreciation:
(in € billions, at current exchange rates)
2.0
● In growing markets: Premium PC, North
1.9
America and Asia 1.8 1.77
1.7 to 1.8
● In digital services
1.5 to 1.7
● In the dealerships 1.5
● In high-tech materials 1.4 1.4 1.4
1.1
1.0
2012 2014 2016 2017 2018e 2020e

Capex Depreciation and
amortization
Michelin and Sumitomo Corporation to Create Second-
Largest Wholesale Player in the US and Mexico
To create a joint venture owned 50%/50% by
Michelin and Sumitomo Corporation of Americas
● Creating a best-in-class distributor with
KEY FIGURES
─ expanded geographic footprint,
TBC Corporation
─ better availability of products at all price points, across all
product categories • 31m tires in 2016, o/w 25m
─ e-commerce initiatives PC tires
─ shorter delivery and higher efficiency
• Net sales 2016: $3,234m
● Focusing on the growing service and tire needs for fleets
and personal vehicles • EBITDA 2016: $166m
● Taking advantage of TBC’s expertise in the import • 2,411 retail points of sales
of Tier 3&4 brands US & Canada
● Michelin to contribute USD 630m and TCi wholesale
• 102 WH distribution centers
business

SLIDESHOW
35
2
2
36
SLIDESHOW
Mobivia partners with Michelin to expand its A.T.U chain,

the German automotive services market leader

● Mobivia: the largest chain of auto
service and repair centers in Europe
with more than 2,030 workshops and retail
outlets, more than 20,000 employees
KEY FIGURES
and €2.7bn in revenue
A.T.U
● A.T.U (Auto-Teile-Unger), Germany’s leading
nationwide network of auto service centers, • 20% minority stake for €60m
joined Mobivia in December 2016
• 600 auto centers in Germany,
● Mobivia and Michelin will combine their
Austria and Switzerland
expertise, each in their traditional markets, to
improve the customer experience and support
• 10,000 employees
the development of the A.T.U brand in
Germany, Austria and Switzerland

Sustained shareholder return policy: dividends
and share buybacks
● 2017 dividend: €3.55* per share, representing a payout ratio of 36%**
● Share buyback programs
─ 2015-2016: €750m committed and cancellation of 4.5% of outstanding shares
─ 2017: €101m committed and cancellation of 0.5% of outstanding shares
─ 2018 : €75m program to offset the dilution from share-based compensation
● Dividend per share (in €) ● Total Shareholder Return

3.55* €332
3.25
2.85 €300
€300 €275
2.40 2.50 2.50
2.10 €250
€250 €221
1.78
€184 €185
€200
€200 €165
€208
€150 €184
€150 €169
€120 €147 €151
€100
€100
Fin 2011
End-2011 Fin 2012
End-2012 Fin 2013
End-2013 Fin 2014
End-2014 Fin 2015
End-2015 Fin 2016
End-2016 Fin 2017
End-2017
2010 2011 2012 2013 2014 2015 2016 2017
Michelin TSR CAC 40 dividends reinvested
*subject to shareholder approval at the Annual Meeting on May 18, 2018 - ** of consolidated net income excluding non-recurring items

SLIDESHOW
37
2
2
38
SLIDESHOW
February 12, 2018

2017 ANNUAL RESULTS
2018 guidance in line with 2020 objectives
2018 guidance
in line with 2020 objectives

2018 markets: demand down in Q1 from high prior-year
comparatives, before picking up in Q2 and beyond
PASSENGER CAR: +1.5%/+2.5% TRUCK: +0%/+1% SPECIALTY : +5%/+7%
● Strong demand stabilizing in ● Freight demand buoyed by ● Mining tires: sustained

the mature markets the global economy strong demand, led by 5-
● Still buoyant demand in ● OE: demand outside China 10% growth in the global
China leveling off; steep falloff in economy
● Trending upwards in the China following new 2016 ● OE Earthmover + OE

other regions legislation Agricultural tires: steady
● RT: demand lifted by a positive trend
favorable economic
environment

SLIDESHOW
39
2
2
40
SLIDESHOW
2018 guidance: on the road to our 2020 objectives

2018
Growth in line
Volumes
with the markets
Operating income from recurring activities

at constant exchange rates > 2017
Structural FCF > €1,100m

2018 scenario*
2018
Impact from raw materials costs A negative €50-100m
Approx. a negative €300m based on

Currency effect
January 2018 rates**
Impact of US tax reform
Standard ETR reduced to 28%***
on the effective tax rate
Net impact of price mix and raw materials prices Positive
Competitiveness plan gains vs. inflation Positive
*2018 average prices: Natural rubber: $1.86/kg; butadiene (US and Europe): $1,176/t; Brent: $65/bbl; EUR/USD: 1.21
**see slide 40
***based on currently available information

SLIDESHOW
41
2
2
42
SLIDESHOW
2018: on the road to our 2020 objectives

Deliver structural FCF > €1,400m Deliver an after-tax ROCE ≥ 15%
as from 2020 as from 2020
(in € millions) (in %)
>1,400 ≥ 21.7%
1,509
17.3% 17.6% 17.5% 17.2% 17.2%
15.8%
961
833
749 10.0%
12.4%
≥ 15.0%
517
11.9%
10.9% 11.9% 12.2% 12.1%
5.4%
2011 2013 2015 2016 2017 2020 2009 2011 2013 2015 2016 2017 2017 2020
target target*
Standard tax rate = 31% Standard tax rate = 28%
*at constant scope of consolidation excluding goodwill
31 2017 ANNUAL RESULTS – February 12, 2018 ROCE after tax ROCE before tax
SLIDESHOW
2018 guidance in line with 2020 objectives 2
Logo Primacy 4 à rajouter
32

2
44
SLIDESHOW
Investor calendar

● Coming events:
─ April 23, 2018 (after close of trading): First-quarter 2018 net sales
─ May 18, 2018: Annual Shareholders Meeting

─ July 23, 2018 (after close of trading): First-half 2018 results
─ October 22, 2018 (after close of trading): Third-quarter 2018 net sales
● Dividend dates:
─ May 22, 2018: Ex-dividend date
─ May 23, 2018: Record date
─ May 24, 2018: Payment date

February 12, 2018
2017 ANNUAL RESULTS
Appendices

Appendices
SLIDESHOW
45
2
2
46
Appendices
SLIDESHOW
Reported 2017 and 2016 financial highlights

(in € millions ) 2017 2016
Net sales 21,960 20,907
EBITDA from recurring activities 4,087 4,084
EBITDA margin on recurring activities 18.6% 19.5%
Operating margin on recurring activities 12.5% 12.9%
Operating income/(loss) from non-recurring activities (111) 99
Basic earnings per share (in €) 9.39 9.21
Capital expenditure 1,771 1,811
Free cash flow* +662 +1,024
Gearing 6% 9%
*Net cash from operating activities less net cash used in investing activities less net cash from other current financial assets,
before distributions.

PC: Sustained OE demand worldwide except in North America; RT markets
led by early buying in Q1
Passenger car tire market in 2017

(% change YoY, in number of tires)
North America Europe excluding Russia & CIS Europe including Russia & CIS
+8% +10%
<=17’ +4%
+1% +1% +2%
-4% -2% >=18’ <=17’ >=18’
Global Market
+0% +2%
Asie Africa, India, South America

+2% +3%
(excl. India) Middle East
+20%
+7% +9%
+4%
+2% +2%
Source: Michelin
OE RT

Appendices
SLIDESHOW
47
2
2
48
Appendices
SLIDESHOW
Truck: in a favorable economic environment, robust OE demand

and a surge in early buying in Q1

Truck and bus tire markets in 2017
(% change YoY, in number of tires)
North America Europe excluding Russia & CIS Europe including Russia & CIS
+10 % +7% +8%

+4% +2% +4%
China Asia* South Africa, India, Global Market

(excl. India) America Middle East
+33% +17% +1%

+26%
+18%
+1% +0% +8%
-3% -3%
*including China
Source: Michelin
OE RT
A business model strongly linked to consumption
Net sales by drivers
PC RT
48%
PC OE
13% Consumption
Autos
12%
27% Commodities
Manufacturing
2017 net sales by sector

Appendices
SLIDESHOW
49
2
2
50
Appendices
SLIDESHOW
Leading positions with prestige automakers

These two supercars are fitted with
© 2017 BUGATTI AUTOMOBILES S.A.S.

Bugatti Chiron Porsche GT2 RS
0-400-0 km/h in 42 seconds! broke the lap record on the Nürburgring
Nordschleife circuit
FERRARI

2017 net sales by currency and EBIT impact
2017 FY Dropthrough 2017 FY Dropthrough

% of net sales € change vs. Net sales/EBIT* % of net sales € change vs. Net sales/EBIT*
currency currency
ARS 1% +14% 80% - 85% MXN 2% +3% 25% - 30%
AUD 2% -1% 80% - 85% PLN 1% -2% 25% - 30%
BRL 4% -6% -20% / - 30%

RUB 1% -11% 25% - 30%
CAD 3% -0% 25% - 30%
THB 1% -2% -100% / -130%
CNY 6% 4% 25% - 30%
TRY 1% +23% 80% - 85%
EUR 34% NA -
TWD 1% -4% 80% - 85%
GBP 3% +7% 25% - 30%
INR 1% -1% 25% - 30% USD 37% +2% 25% - 30%
JPY 1% +5% 80% - 85% Other 1% 80% - 85%
*actual dropthrough linked to the export/manufacturing/sales base

Appendices
SLIDESHOW
51
2
2
52
Appendices
SLIDESHOW
Raw materials in 2017

in USD/kg
Raw material purchases in 2017 (€5.2bn) 400
300 RSS3
7% €/$ exchange rate:
200
Textiles Average 2016: 1.107
28% 100
9% Natural +2.0% TSR20
Steel cord rubber 0
Average 2017 : 1.129 2013 2014 2015 2016 2017
14% indexed
150 300
Chemicals
Brent, in USD 250
100
26% 200
16% Synthetic 50
Fillers 150 Synthetic rubber
rubber
Manufacturing BLS
0 100
2013 2014 2015 2016 2017 2013 2014 2015 2016 2017

Natural Rubber price trend
At end of December 2017 (per kg, base 100 in Q3’15)

TSR20 in $ RSS3 in $ Quarterly average TSR20 en $ & évolution trimestrielle en %
1.3 1.2 1.2 1.4 1.3 1.7 2.1 1.5 1.5 1.4
-11.6% -10.6% -4.0% +19.7 % -4.2% +26.4% +25.7% -26.9% +0.4% -6.6%
200,0
180,0
160,0
140,0
120,0
100,0
80,0
60,0
40,0
20,0
0,0
Q3’15 Q4’15 Q1’16 Q2’16 Q3’16 Q4’16 Q1’17 Q2’17 Q3’17 Q4’17
Source: SICOM

Appendices
SLIDESHOW
53
2
2
54
Appendices
SLIDESHOW
Brent price trend

At end of December 2017 (per barrel, base 100 au Q3’15)
Brent in $ Quarterly average Brent in $ & quarterly change in %
51 45 35 47 47 51 55 51 52 61
140 -19.3% -12.4% -21.7% +33.2% +0.3% +8.8% +7.2% -7.0% +2.2% +17.9%
120
100
80
60
40
20
Q3’15 Q4’15 Q1’16 Q2’16 Q3’16 Q4’16 Q1’17 Q2’17 Q3’17 Q4’17

Butadiene price trend
At end of December 2017(per ton, base 100 in Q3’15)

Butadiene Europe Quarterly average Butadiene in $ & quarterly change in %
745 628 515 618 670 773 1,363 1,500 783 800
230
+16% -16% -18% +20% +8% +15% +76% +10% -48% +2%
210
190
170
150
130
110
90
70
50
Q3’15 Q4’15 Q1’16 Q2’16 Q3’16 Q4’16 Q1’16 Q2’16 Q3’17 Q4’17
Source: IHS

Appendices
SLIDESHOW
55
2
2
56
Appendices
SLIDESHOW
A robust balance sheet after the share buybacks,

confirmed by the rating agencies

Gearing Solid long-term ratings
Net debt/equity, in %
22
S&P A-2
Short term
Moody’s P-2
12 S&P A-
11 Long term
9 Moody’s A3
7 6
S&P Stable
2 Outlook
Moody’s Stable
2011 2012 2013 2014 2015 2016 2017

A confortable cash position
Debt maturities at Dec. 31, 2017 (carrying amount, in € millions)

3 500 Loans from financial institutions
Securitization
3 000 Bond
CP
2 500
Derivatives and leases
2 000 Cash and cash equivalents
Cash management Financial Assets
1 500 Confirmed Back-up Facilities
1 000
500
0
Treasury 2018 2019 2020 2021 2022 2023 2024 and
and beyond
Back-up lines

Appendices
SLIDESHOW
57
2
2
58
Appendices
SLIDESHOW
Outstanding bond issues (as of February 9, 2018)

Compagnie Générale Compagnie Générale
MICHELIN MICHELIN MICHELIN MICHELIN
Issuer des Etablissements des Etablissements
Luxembourg Luxembourg Luxembourg Luxembourg
MICHELIN MICHELIN
Issue Senior Note Senior Note Senior Note Senior Note Senior Note Senior Note
Type Bond Convertible Bond Convertible Bond Bond
Principal Amount € 400 mn $ 500 mn + TAP $100 mn € 300 mn $ 600 mn € 300 mn € 302 mn
Offering price 99,912% 100% & 103,85% 99,967% 95,50% 99,081% 98,926%
BBB+ (S&P) A- (S&P) A- (S&P) A- (S&P) A- (S&P) A- (S&P)
Rating corporation
Baa1 (Moody's) A3 (Moody's) A3 (Moody's) A3 (Moody's) A3 (Moody's) A3 (Moody's)
at Issuance date
Current coporation rating A- (S&P) ; A3 (Moody's) ; unsolicited A- (Fitch)
ZERO ZERO
Coupon 2,75% p.a 1,125% p.a 1,75% p.a 3,25% p.a
Conv premium 128% Conv premium 130%
Issue Date 11-juin-12 05/jan/2017 & 25/apr/2017 19-mai-15 05/jan/2018 19-mai-15 21/sep/2015 & 27/sep/2016
Maturity 20-juin-19 10-janv.-22 28-mai-22 10-nov.-23 28-mai-27 30-sept.-45

Annual Annual Annual Annual
Interest payment N/A N/A
June 20 May 28 May 28 Sept 30
ISIN XS0794392588 FR0013230745 XS1233732194 FR0013309184 XS1233734562 XS1298728707
€ 1'000 with min. $ 200'000 with min. € 1'000 with min. $ 200'000 with min. € 1'000 with min. € 1'000 with min.
Denomination tradable amount tradable amount tradable amount tradable amount tradable amount tradable amount
€ 1'000 $ 200'000 € 1'000 $ 200'000 € 1'000 € 1'000

Michelin Experiences: Become the global “Selection” benchmark in
the world of gourmet dining and travel services
+++ ● Capitalize on the MICHELIN Guide’s worldwide
reputation in the field of fine dining
Experience
● Expand the geographic and segment footprint
& Exclusivity
with aligned brands/solutions for our customers
─ Destinations
─ Professionals (chefs, winemakers, hoteliers, etc.)
─ Advertisers
─ High-income consumers
Choice
& Quality ● Create and engage a broad, qualified, committed
audience in the digital world to benefit all of our
+ businesses
Selection & Content

Appendices
SLIDESHOW
59
2
2
60
Appendices
SLIDESHOW
Optimizing Working Capital Requirements

● Inventory: ● Payables:
─ At least a €250m reduction expected ─ Further improvement through terms
from OPE by 2020 from 2016 of payment and reverse factoring
69
65.4
64
● Receivables: 59 58.3
54 52.7
─ From 13% to 14% of Net sales 47.7
49 47.3
DPO rolling 12
44 41.8 months
40.2
39

2016-2020 projections: growing worldwide demand
● PC OE&RT market projection (in millions of units) ● TB OE&RT market projection (Radial & Bias
in millions of units)
CAGR 1,690
~ 2.5% CAGR
o/w ≥ 18’ 240
1,579 ~ 1.5%
~ 10% 228
2017 2020e 2017 2020e
● Agricultural tires* (base 100 in 2016, in tonnes) ● Mining tires (base 100 in 2016, in tonnes)
CAGR CAGR
~ 1.5% ~ 6.5% 130
110
100 104 115
100
2016 2017 2020e 2016 2017 2020e

* OE & RT in Europe and North America

Appendices
SLIDESHOW
61
2
2
62
Appendices
SLIDESHOW
2016-2020 organic scenario: profitability levers

Profitable growth
from services &
PC&TB above- solutions
market growth Price offsetting Competitiveness
Mining market Raw materials plan beating
rebound costs: neutral inflation:
+€50m per year
on average
> 3,500
Services
D&A
2,692
Volume &
Mix
2016 2020 At current

FX rates

2017: another year in line with our 2020 roadmap
Group operating income and margin* & ROCE
000
33,000 12.8% 11.1% 12.2% 12.9% 14%
12.5%
11.9% 12.2%
10.9% 11.1% 12%
500
22,500 10.5%
12.1% 11,9%
9.4% 11.3% 11.0% 10%
22,000
000
5.6% 9.5%
8%
500
11,500 5.6% 5.8%
2,577 2,692 2,742 6%
2,423 2,234
000 2,170
11,000 5.4% 1,945
1,695 4%
500
500 920 862 2%
00 0%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Operating profit (in €m) Operating margin (as a % of net sales) ROCE after tax (in %)

Appendices
SLIDESHOW
63
2
2
64
Appendices
SLIDESHOW
Levers for improved PC margins: product innovation, contribution

from the 18” and over strategy, better customer service

RS1 operating income and margin*
(in € millions and %) 15%
1,800
1 800 13.1%
12.4% Target for
1,600
1 600 2016-2020**
11.5%
1,400
1 400
10.4% 10.5%
1,200
1 200 10.2% 11%
9.4% 9.3%
1,000
1 000
8.0%
800 1,585 1,552
1,384
600 1,090
1,014 1,018 1,033 1,010
400 661
200 4.3%
370
0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Operating profit (in €m) Operating margin (as a % of net sales)
**at constant scope of consolidation and raw materials prices, and with markets expanding at a +2.5% CAGR

Truck: priority on competitiveness, product innovation and customer
satisfaction
(in € millions and %)
13%
750 10.4% Target for

9.7% 2016-2020**
650
550 7.8% 8.1% 8.1%
6.6% 9%
450
350 4.4% 645
3.5% 580
250 444 503 495 497
2.5%
150 249 233
50 138
-50 -69
-150 -1.5%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2107
Operating profit (in €m) Operating margin (as a % of net sales)
**at constant scope of consolidation and raw materials prices, and with markets expanding at a +1.5% CAGR

Appendices
SLIDESHOW
65
2
2
66
Appendices
SLIDESHOW
Specialty businesses: all divisions contributing in recovery markets

(in € millions and %)
900 26.0%
800 24%
700 21.5%
20.6% 20.6% Target for
600 19.3% 18.6% 18.6% 2016-2020**
500 17.9% 17.8% 946
400 693
694 645
300 13.3% 574 548 17%
527
200 412 432
100 270
0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Operating profit (in €m) Operating margin (as a % of sales)
*from recurring activities.
**at constant scope of consolidation and raw materials prices, and with markets expanding

Disclaimer
"This presentation is not an offer to purchase or a solicitation to recommend the purchase

of Michelin shares. To obtain more detailed information on Michelin, please consult the
documentation published in France by Autorité des Marchés Financiers available from the
http://www.michelin.com/eng/ website.
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 risks and contingencies
liable to translate into a difference between actual data and the forecasts made or induced
by these statements."

Appendices
SLIDESHOW
67
2
2
68
Appendices
SLIDESHOW
Contacts

Valérie MAGLOIRE
Edouard de PEUFEILHOUX
Matthieu DEWAVRIN
Humbert de FEYDEAU
+33 (0)4 15 39 84 68
27, cours de l’île Seguin

92100 Boulogne-Billancourt - France
investor-relations@michelin.com

3
REPORT OF THE
MANAGING PARTNERS
3.1 TIRE MARKETS 72
3.1.1 A Global Market Worth Some $150 Billion in 2016 72
3.1.2 Tire Markets in 2017 72
3.1.3 Passenger Car and Light Truck Tire Markets in 2017 73
3.1.4 Truck Tire Markets in 2017 76
3.1.5 Specialty Tire Markets in 2017 78
3.2 NET SALES 79

3.2.1 Analysis of Net Sales 79
3.2.2 Net Sales by Reporting Segment 80
3.2.3 Changes in Exchange Rates for the Main Operating Currencies 82
3.2.4 Net Sales by Region 82
3.3 CONSOLIDATED INCOME STATEMENT REVIEW 83

3.3.1 Operating Income from Recurring Activities 84
3.3.2 Operating Income from Recurring Activities by Operating Segment 85
3.3.3 Other Income Statement Items 87
3.4 CONSOLIDATED BALANCE SHEET REVIEW 91

3.4.1 Goodwill 92
3.4.2 Intangible Assets 92
3.4.3 Property, Plant and Equipment 92
3.4.4 Non-current Financial Assets and Other Assets 92
3.4.5 Investments in Associates 92
3.4.6 Deferred Tax Assets and Liabilities 92
3.4.7 Trade Working Capital Requirement 93
3.4.8 Cash and Cash Equivalents 93
3.4.9 Equity 93
3.4.10 Net Debt 94
3.4.11 Provisions 95
3.4.12 Employee Benefits 95

3.5 CONSOLIDATED CASH FLOW STATEMENT REVIEW 96
3.5.1 Cash Flows from Operating Activities 96
3.5.2 Capital Expenditure 97
3.5.3 Available Cash Flow and Free Cash Flow 98
3.5.4 Structural Free Cash Flow 98
3.6 RETURN ON CAPITAL EMPLOYED (ROCE) 99
3.7 OUTLOOK 99
3.8 SHARE INFORMATION 100

3.8.1 The Michelin Share 100
3.8.2 Share Data 101
3.8.3 Per-Share Data 101
3.8.4 Capital and Ownership Structure 101
3.9 HIGHLIGHTS 102

3.9.1 Performance 102
3.9.2 Products – Innovation – Services 102
3.9.3 Sustainable development 104
3.9.4 Competition 104

3 Report of the Managing Partners
Tire Markets
3.1 TIRE MARKETS
3.1.1 A GLOBAL MARKET WORTH SOME $150 BILLION(1) IN 2016
The global tire market totaled $150 billion in 2016(1), with light-vehicle THE GLOBAL TIRE MARKET BY MANUFACTURER
tires accounting for around 60% of sales and truck tires 30%(2). By IN 2016
volume, it represented more than 1.5 billion car and light truck tires
and a little more than 215 million truck and bus tires(2). In all, three 34.1% 14.6%
out of four tires were sold in the replacement market. Other tiremakers(2) Bridgestone
Over the 2015-2020 period, Michelin expects new tire demand
to grow by an average of 2.5% a year in the Passenger car and
14.0%
Light truck segment and by an average 1.5% a year in the new
Truck tire segment. Over the same period, the mining tire market is Michelin
forecast to expand by an average 6.5% a year and the agricultural
tire market by 1.5%. 28.2% 9.0%
Mid-sized tiremakers(1) Goodyear
Longer term, tire demand is likely to expand by 1-2% a year in
mature markets and by 5-10% a year in the new markets.
Source: 2016 sales in US dollars, published in Tire Business, August 2017.
(1) Tiremakers with a 2-7% market share according to the Tire Business ranking.
(2) Tiremakers with less than a 2% market share according to the Tire Business
New standards ranking.
Tire performance ratings displayed on standardized labels have been
mandatory across the European Union since November 2012, with THE GLOBAL TIRE MARKET BY MANUFACTURER
stricter standards introduced in November 2016. Similar legislation IN 2015
has been in effect in South Korea since 2012 (labeling) and 2013
(thresholds) for Passenger car tires and since 2014 for Light truck 34.7% 15.0%
tires, while the standardized labeling introduced in Japan in 2010 is Other tiremakers(2) Bridgestone
being extended to other parameters, such as rolling noise. Legislation
introducing minimum performance standards for rolling resistance
and wet traction was passed in the United States in December 2015 13.8%
and will probably be implemented in 2018, and a new labeling system Michelin
to help consumers is scheduled for launch in 2018. Regulated tire
labeling systems are also under consideration in China and Brazil. 27.2% 9.2%
These trends are favorable to low rolling resistance tires, where Mid-sized Goodyear
tiremakers(1)
Michelin sets the market standard. Original equipment sales of these
tires are expected to increase by around 200 million units between Source: 2015 sales in US dollars, published in Tire Business, August 2016.
2010 and 2020 to a total of nearly 500 million units a year(2). (1) Tiremakers with a 2-7% market share according to the Tire Business ranking.
(2) Tiremakers with less than a 2% market share according to the Tire Business
ranking.
3.1.2 TIRE MARKETS IN 2017
In 2017, the Passenger car/Light truck and Truck tire markets in Methodological note: Tire market estimates reflect sell-in data published
Europe, North America and China were shaped by the surge in by local tiremaker associations, plus Michelin’s own estimates of
buying in the first quarter ahead of the price increases announced sales by tire manufacturers that do not belong to any association.
across the industry and the subsequent easing of demand in the These estimates are based primarily on import-export statistics and
following quarters. The other new markets enjoyed firmer demand are expressed in the number of tires sold. They are regularly adjusted
over the entire year. The specialty tire markets sustained the rebound and may be updated following their initial publication.
that began in the final quarter of 2016, delivering brisk growth led
by the mining businesses and the agricultural tire segment.
(1) Source: Tire Business, August 2017.

(2) Michelin estimates.

Report of the Managing Partners
Tire Markets 3
3.1.3 PASSENGER CAR AND LIGHT TRUCK TIRE MARKETS IN 2017
In 2017, the global original equipment and replacement Passenger car and Light truck tire market expanded by 3% in number of tires sold.
THE GLOBAL PASSENGER CAR AND LIGHT TRUCK TIRE MARKET, 2017 VS. 2016
Original Equipment
Replacement
+20%
+9%
+7%
+4% +4%
+3%
+2% +2% +2% +2%
+0%
-4%
Europe North Asia South Africa, India Total
(incl. Russia America (excl. India) America Middle-East
and Turkey)
Michelin estimates.
3.1.3 a) Original equipment

Worldwide original equipment demand ended the year up 2% in number of tires sold, led by gains in every geography except North America,
where annual performance was dragged down by a sharp contraction in the second half.
Passenger car and Light
truck tire markets Second Fourth Third Second First
Original equipment half quarter quarter First half quarter quarter
(in millions of tires) 2017 2016 2017/2016 2017/2016 2017/2016 2017/2016 2017/2016 2017/2016 2017/2016
Europe (1)
104.4 102.5 +2% +4% +5% +2% +0% -5% +6%
North America(2) 83.8 87.6 -4% -8% -6% -11% -0% -2% +2%
Asia (excluding India) 215.7 210.9 +2% +1% -1% +5% +3% +1% +5%
South America 16.4 13.7 +20% +21% +15% +27% +19% +18% +21%
Africa/India/Middle East 35.5 33.3 +7% +4% +2% +6% +10% +7% +12%
TOTAL 455.7 447.9 +2% +1% -0% +2% +3% -0% +6%
(1) Including Russia and Turkey.
(2) United States, Canada and Mexico.
Michelin estimates.

Tire Markets
Demand in Europe rose by 2% overall during the year, reflecting The North American market ended the year down 4%, as demand
the combined impact of a 1% increase in Western Europe (lifted tumbled 8% in the second half after holding firm in the first, in line
by a 4% gain in the final quarter) and a robust 14% upsurge in with the decline in automobile production.
the Eastern European countries.
THE OE PASSENGER CAR AND LIGHT TRUCK
THE OE PASSENGER CAR AND LIGHT TRUCK MARKET IN NORTH AMERICA
MARKET IN EUROPE
(in millions of tires – moving 12 months)
(in millions of tires – moving 12 months – excluding Russia) 100
100
95
95 90
90 85
85 80
80 75
75 70
70 65
65 60
60 55
55 50
50 2015 2016 2017
2015 2016 2017 Michelin estimates.
Michelin estimates.
Demand in Asia (excluding India) rose by 2% overall in 2017. Growth in China cooled to 2%, reflecting rising sales of both SUVs and
luxury cars, with demand for compact cars declining following a reduction in government incentives. Demand was up 5% in Japan and
stable in South Korea.
South American markets delivered a sharp 20% upturn, driven by both domestic and export sales.
In the Africa/India/Middle East region, demand climbed 7% on the back of a 7% increase in the Indian market, where vehicle sales rose
in an economy that remains strong despite the government’s demonetization drive in late 2016.
3.1.3 b) Replacement
The worldwide replacement tire market rose by 3% over the year, primarily due to gains in the new markets, with demand in the European,
North American and Chinese markets slowing in the second and third quarters following significant first-quarter buying ahead of price
increases. The size mix continued to improve, while entry-level brand sales enjoyed stronger growth in Europe, North America and South
America.
Passenger car and Light
truck tire markets Second Fourth Third Second First
Replacement half quarter quarter First half quarter quarter
Europe(1) 363.1 350.8 +4% +3% +2% +3% +4% +1% +8%
North America(2) 289.0 288.7 +0% -0% +1% -1% +0% -2% +3%
Asia (excluding India) 280.3 270.0 +4% +2% +0% +5% +5% +4% +7%
South America 82.6 76.0 +9% +10% +9% +11% +7% +7% +6%
Africa/India/Middle East 108.2 105.9 +2% +2% +2% +2% +2% +2% +2%
TOTAL 1,123.2 1,091.4 +3% +2% +2% +3% +3% +1% +6%
Michelin estimates.
The European market saw a 4% overall increase during the year. Europe reported robust growth, ending the year up 12% and 16%
Demand in Western Europe edged back 1%, as gains in Spain (up respectively. Sales of all-season tires remained firm throughout the
5%), France (up 3%) and Germany (up 1%) were offset by declines year, with strong growth in Europe. Winter tire demand was boosted
in the United Kingdom (down 8%) and, to a lesser extent, the by year-end weather conditions.
Nordic countries (down 4%). Markets in Central Europe and Eastern

Tire Markets 3
The following table shows the change in demand by major country, with growth varying in the non-euro geographies depending on export
sales.
Passenger car and Light truck tires – Replacement Year-on-year change
WESTERN EUROPE +2%
France +3%
Spain +5%
Italy -2%
United Kingdom -8%
Germany +1%
Poland +15%
Turkey +12%
EASTERN EUROPE +16%
Russia +22%
THE REPLACEMENT PASSENGER CAR AND LIGHT THE REPLACEMENT PASSENGER CAR AND LIGHT
TRUCK TIRE MARKET IN EUROPE TRUCK TIRE MARKET IN NORTH AMERICA
(in millions of tires – moving 12 months – excluding Russia) (in millions of tires – moving 12 months)
310 300
300 290
290
280
280
270
270
260
260
250
250
240 240
230 230
220 220
2015 2016 2017 2015 2016 2017
Michelin estimates. Michelin estimates.
The North American market was flat for the year, although after two straight quarters of decline, demand picked up 1% in the final three
months. The 5% contraction in Mexico was offset by a 7% gain in Canada, while in the United States, the favorable economic environment
failed to move the market off of last year’s levels.
Demand in Asia (excluding India) rose by 4%, as sustained growth in China (up 7%) made up for the tepid 1% increase in Japan.
The South American market rebounded 9%, with a 15% gain in Brazil led by a significant, exchange rate-driven increase in Asian imports.
The Africa/India/Middle East market rose by 2%, with a strong 7% increase in India at a time of economic transition, and more modest
gains in Africa and the Middle East due to political instability in certain countries and weakness in the oil-price dependent economies.

Tire Markets
3.1.4 TRUCK TIRE MARKETS IN 2017
Supported by rising demand for overland transport in a favorable economic environment, the number of new radial and bias Truck tires sold
worldwide rose by 4% in 2017. The year was shaped by a sharp 17% surge in original equipment sales and, in the replacement segment,
by heavy buying in the first quarter ahead of the price increases announced across the industry and the subsequent easing of demand over
the rest of the year (for a 1% increase overall).
THE GLOBAL TRUCK TIRE MARKET, 2017 VS. 2016

Original Equipment
Replacement
+26%
+18%
+17%
+10%
+8% +8%
+4% +4%
+1%
+0%
-2%
-3%
Europe North Asia South Africa, India Total

(incl. Russia America (excl. India) America Middle-East
and Turkey)
Michelin estimates – new tire market only.
3.1.4 a) Original equipment

In 2017, the global OE Truck tire market, as measured by the number of new radial and bias tires sold, rose by 17% off of low comparatives,
led by a rebound in demand in China, North America, South America and Eastern Europe.
Truck tire markets Second Fourth Third Second First
Original equipment half quarter quarter First half quarter quarter
Europe(1) 7.0 6.5 +8% +9% +12% +7% +7% +4% +11%
North America (2)
5.8 5.3 +10% +17% +9% +26% +4% +14% -6%
Asia (excluding India) 28.6 22.7 +26% +28% +26% +30% +24% +25% +24%
South America 1.1 0.9 +18% +40% +65% +22% -1% +5% -6%
Africa/India/Middle East 5.2 5.3 -3% +10% +11% +8% -14% -25% -3%
TOTAL 47.7 40.7 +17% +22% +20% +23% +13% +13% +13%
Michelin estimates.

Tire Markets 3
The European market, which gained momentum at year-end to In North America, the market enjoyed a rebound during the year,
deliver an 8% overall increase for the year, benefited from low interest gaining 10% as the favorable economic environment encouraged
rates and truck purchases in response to the sustained demand for trucking companies to upgrade their fleets.
overland transport. In the Eastern European countries, an improving
economy helped to drive a 14% rebound in the market. THE OE TRUCK TIRE MARKET IN NORTH AMERICA
THE OE TRUCK TIRE MARKET IN EUROPE (in millions of new tires – moving 12 months)
7
(in millions of new tires – moving 12 months – excluding Russia)
7 6
6 5
5 4
4 3
3 2
2 1
1 0
2015 2016 2017
0
Michelin estimates.
2015 2016 2017
Michelin estimates.
Demand for radial and bias tires in Asia (excluding India) jumped 26% overall, led by the very robust 32% growth in China, where
legislation limiting truck size and weight drove higher demand over the first three quarters. Sustained growth in the Thai market offset
softer demand in Japan.
The South American market bounced back in the second half, surging 40% and ending the year up 18%, supported by the first signs of
an economic recovery in Brazil and by export sales.
The Africa/India/Middle East radial and bias tire market retreated by 3%, reflecting (i) a 4% falloff in demand in India despite a timid
upturn at year-end thanks to the new carbon emissions standards; and (ii) stable markets in Africa and the Middle East due to local economic
and geopolitical issues.
3.1.4 b) Replacement
The global replacement market rose by 1%, on very brisk gains in every geography, except Africa/India/Middle East, led by early-year
buying ahead of price increases.
Truck tire markets Second Fourth Third Second First
Replacement half quarter quarter First half quarter quarter
Europe(1) 24.4 23.6 +4% +0% -3% +4% +7% +3% +12%
North America(2) 25.4 24.5 +4% +9% +2% +15% -1% -7% +5%
Asia (excluding India) 84.9 84.5 +0% -2% -3% -0% +3% -2% +9%
South America 14.1 13.0 +8% +11% +12% +10% +5% +4% +7%
Africa/India/Middle East 31.0 31.8 -2% -1% -0% -2% -4% -3% -4%
TOTAL 179.9 177.5 +1% +1% -1% +3% +2% -2% +6%
Michelin estimates.

Tire Markets
The European market rose by 4% over the year, led by demand Demand in North America ended the year up 4%, as a slight
from the freight and construction industries. The overall gain decline in the first half was offset by a 9% upsurge in the second,
reflected growth in France (up 7%), Turkey (up 9%) and Russia (up buoyed by the favorable economic environment. Growth slowed
10%), flat demand in Germany and declines in Italy (down 2%) to 2% in the fourth quarter, due to comparison with year-earlier
and Spain (down 3%). demand, which was boosted by early buying of Chinese tires ahead
of proposed import duties.
THE REPLACEMENT TRUCK TIRE MARKET IN EUROPE
THE REPLACEMENT TRUCK TIRE MARKET
(in millions of new tires – moving 12 months – excluding Russia)
IN NORTH AMERICA
17
(in millions of new tires – moving 12 months)
16
26
15
14 24
13
22
12
11 20
10
18
9
8 16
2015 2016 2017
14
Michelin estimates.
2015 2016 2017
Michelin estimates.
Replacement radial and bias tire markets in Asia (excluding India) leveled off during the year. Demand edged up just 1% in China, held
back by the robust OE market and by the impact of emissions controls. It also improved by 3% in Japan, but declined by 3% in Thailand.
Radial technology enjoyed another period of strong growth in the ASEAN markets.
The South American radial and bias tire market rebounded by a strong 8% in 2017, thanks in particular to the improving economy in Brazil.
In the Africa/India/Middle East region, the radial and bias market fell back 3%, in an economic environment that was at best stable over
the year, with the exception of a few sub-Saharan countries. In India (down 3%), local economic and tax reforms dampened demand for
freight transport and, by extension, truck tires.
3.1.5 SPECIALTY TIRE MARKETS IN 2017
Earthmover tires: after three straight years of decline, the mining Agricultural tires: original equipment markets ended 2017 up
tire markets rebounded by 15% in 2017, as inventory drawdowns 10%, as the early-year slowdown gave way to a sharp, unexpected
bottomed out, production at both multinational and mid-sized mining upturn in OEM demand in the second quarter.
companies recovered, and demand for outsourcing reappeared. The replacement markets in mature countries are down over the
Original equipment markets turned sharply upwards, by 25% year, the decline seen in the second half of the year exceeding
excluding China, at a time of low inventory and rising demand for the growth of the beginning of the year fueled by price increases.
mining machines. Two-wheel tires: motorcycle tire markets are expanding in the
Demand for infrastructure and quarry tires is improving, lifted by mature regions and are also trending upwards in the emerging
the favorable economic environment. economies.
Aircraft tires: demand in the commercial aircraft segment continued
to grow, led by the increase in passenger traffic.

Net Sales 3
3.2 NET SALES
3.2.1 ANALYSIS OF NET SALES

2017 / 2016
1st Quarter 2017 / 2016
2nd Quarter 2017/ 2016
3rd Quarter 2017 / 2016
4th Quarter 2017 / 2016
+9.9%
+7.3%
+5.0% +5.1% +5.0% +4.9%

+3.0% +3.2%
+2.4% +2.6% +2.2% +2.8% +2.5%
+0.7%
+1.0% +1.3% +0.5% +0.9%
+0.2%
+0.0% -0.1% +0.1%
-1.3%
-3.7%
-4.9%
Total Volumes Price-mix Currency Perimeter
Net sales stood at €21,960 million for the year, up 5.0% from favorable impact of the rebound in the mining tire business,
€20,907 million in 2016 due to the combined impact of the which were somewhat dampened by the unfavorable impact
following factors: of the relative growth rates of OE and replacement tire sales;
a €543 million increase from the 2.6% growth in volumes, led by the currency effect, which after holding positive in the first half,
the sharp rebound in the mining tire businesses and the Group’s ended the year at a negative 1.3%, trimming €261 million from
sales performance; net sales. It primarily reflected the euro’s unfavorable moves
a €668 million or 3.2% increase from the price mix, primarily against the US dollar, Turkish lira and Chinese yuan, which were
stemming from the €524 million or 2.5% improvement in prices, only partially offset by more favorable movements against the
which, as announced, had a rapidly increasing impact over the Brazilian real and the Russian ruble;
year, from a negative 1.0% in the first quarter to a positive a €103 million or 0.5% increase from changes in the scope of
2.1% in the second, and a positive 4.4% in the third and fourth consolidation, including (i) the first-time consolidation of Levorin,
respectively. This reflected the implementation of all of the a Brazilian two-wheel tiremaker acquired in December 2016,
announced price increases in the replacement segment and the and NexTraq, a US truck fleet telematics solutions provider
contractual adjustments following application of raw materials acquired in July 2017; and (ii) the disposal of TCi dealerships in
indexation clauses in the indexed businesses. The mix effect added the United States.
€144 million to net sales, or 0.7% to growth, thanks to (i) the
Note that net sales of tire-related services and solutions totaled
highly positive product mix, primarily led by the 19% growth in
€1,112 million in 2017, versus €1,059 million in 2016.
volumes in the premium 18-inch and larger segment; and (ii) the

Net Sales
Fourth Third Second

Second half quarter quarter First half quarter First quarter
(in € millions) 2017 2017 2017 2017 2017 2017 2017
NET SALES 21,960 10,901 5,566 5,335 11,059 5,492 5,567
Year-on-year change +1,052 +285 +129 +156 +767 +265 +502
Volumes +543 +171 +119 +52 +372 +1 +371
Price mix +668 +523 +265 +259 +145 +148 -3
Currency effect -262 -460 -267 -193 +198 +70 +128
Scope of consolidation +103 +51 +12 +38 +52 +46 +6
Year-on-year % change +5.0% +2.7% +2.4% +3.0% +7.5% +5.1% +9.9%
Volumes +2.6% +1.6% +2.2% +1.0% +3.6% +0.0% +7.3%
Price mix +3.2% +4.9% +4.9% +5.0% +1.4% +2.8% -0.1%
Currency effect -1.3% -4.3% -4.9% -3.7% +2.0% +1.3% +2.5%
Scope of consolidation +0.5% +0.5% +0.2% +0.7% +0.5% +0.9% +0.1%
3.2.2 NET SALES BY REPORTING SEGMENT
Fourth Third Second

Second half quarter quarter First half quarter First quarter
(in € millions) 2017 2017 2017 2017 2017 2017 2017
CONSOLIDATED TOTAL 21,960 10,901 5,566 5,335 11,059 5,492 5,567
Passenger car/Light truck tires
& related distribution 12,479 6,216 3,237 2,979 6,263 3,062 3,201
Truck tires & related
distribution 6,123 3,082 1,518 1,564 3,041 1,523 1,518
Specialty businesses(1) 3,358 1,603 811 792 1,755 907 848
Year-on-year % change +5.0% +2.7% +2.4% +3.0% +7.5% +5.1% +9.9%
Passenger car/Light truck tires
& related distribution +3.1% +0.4% +0.4% +0.5% +5.9% +1.4% +10.5%
Truck tires & related
distribution +2.6% +0.8% -0.5% +2.0% +4.6% +3.1% +6.2%
Specialty businesses(1) +18.4% +17.3% +18.4% +16.1% +19.5% +24.1% +14.9%
(1) Specialty businesses: Earthmover, Agricultural, Two-Wheel and Aircraft tires; Michelin Travel Partner, BookaTable and Michelin Lifestyle.
3.2.2 a) Passenger car/Light truck tires by the MICHELIN CrossClimate+ and MICHELIN Pilot Sport 4S lines.
In Eastern Europe, the other Group brands helped to drive a strong
& related distribution – Analysis rebound in sales as demand turned upwards again.
of net sales In North America, where markets remain highly import-driven, net
Volumes in the Passenger car/Light truck tires & related distribution sales edged back slightly over the year, demonstrating resilience in
business increased by 2% in 2017, with an especially robust 8% the weakening OE segment and holding steady on the replacement
gain in the first quarter driven by buying ahead of the price increases side, supported by the new MICHELIN Pilot Sport 4S, MICHELIN
applied in every geography. This was followed by a 2% contraction Defender and MICHELIN Primacy XC lines.
in the second quarter as demand eased before recovering in the The decline in net sales in South America reflected the Group’s
second half, with gains of 1% in the third quarter and 2% in the priority focus on maintaining margin integrity and a firm pricing
fourth. During the year, the Group further strengthened its positions policy, particularly in the 18-inch and larger segment.
in the original equipment segment.
In Asia (excluding India), net sales in China are expanding, thanks
In the aggressively competitive European market, sales in Western to a deepening presence with local OEMs and growth in line with
Europe rose solidly in the OE segment, while replacement volumes the market in the replacement segment. Positions in Southeast Asia
felt the impact of higher prices, albeit with a growing proportion are being consolidated in both the OE and replacement segments
of 18-inch and larger tires in the mix and a successful performance by enhancing the product offering and continuing to optimize the
dealership network.

Net Sales 3
Sales volumes were unchanged in the Africa/India/Middle East In the Africa/India/Middle East region, sales in India were lifted
region, where the Group’s positions improved somewhat in India and by the improving economy, the start-up of the original equipment
business in the rest of the region felt the impact of local geopolitical contract with Ashok Leyland and the popularity of the MICHELIN
and economic difficulties. X Guard tire. Business in the rest of the region remains fragile in
In all, net sales in the Passenger car/Light truck tires & related an uncertain geopolitical environment.
distribution segment rose by 3.1% in 2017, to €12,479 million In all, net sales in the Truck tires & related distribution segment
from €12,105 million the year before. The 2% increase in volumes amounted to €6,123 million in 2017, a 2.6% increase from the
was dampened by the geographic mix in the original equipment €5,966 million reported a year earlier. The performance reflected
segment. Prices generally ended the period higher, lifted by the (i) the negative currency effect; (ii) the priority focus on margins,
increases introduced in response to rising raw materials costs. The with price increases introduced to offset, particularly in the second
still favorable mix effect reflected the success of the MICHELIN half, the rise in raw materials costs; and (iii) the 2% decline in sales
CrossClimate+ and MICHELIN Pilot Sport 4S lines, as well as the volumes.
19% growth in sales of MICHELIN brand 18-inch and larger tires
in a segment that expanded by 13% over the year.
3.2.2 c) Specialty businesses –
Analysis of net sales
3.2.2 b) Truck tires & related distribution –
Earthmover tires: net sales climbed sharply, lifted by the rebound
Analysis of net sales in mining operations around the world and the application of raw
Volumes in the Truck tires & related distribution business slipped materials indexation clauses.
2% in 2017, with a robust 3% gain in the first quarter driven by Agricultural tires: net sales rose over the year, led by the growth
buying ahead of the price increases announced in every geography, in volumes as demand for farm machinery recovered.
followed by a 3% contraction in each of the following quarters,
Two-wheel tires: The slight increase in net sales (excluding Levorin)
reflecting the priority focus on preserving margins and maintaining
was driven by the growth in volumes, which was evenly spread
higher prices.
between the recreational and commuting segments. The consolidation
In the highly competitive Western European market, the first of Levorin is supporting the growth strategy in South America.
quarter saw very strong growth in sales of new Group tires, driven
Aircraft tires: net sales edged up over the year, with gains in the
by dealer buying ahead of the price increases, even when these
commercial radial segment thanks to the demand for NZG technology.
were scheduled for introduction at a later date. The rest of the year
was shaped by price pressure stemming from the downturn in raw Michelin Travel Partner’s net sales performance was mainly shaped
materials prices. This competitive environment also weighed on the by (i) further market share gains in the persistently difficult print
performance of the integrated dealership networks. B2C markets; (ii) sustained growth in B2B revenue thanks to the
monetization of MICHELIN Guide launches; and (iii) stable revenue in
In North America, where the market was shaped by a favorable
the digital segment where the online business has slowed. Michelin
economic environment, strong growth in original equipment
Restaurants now operates as part of BookaTable. Michelin Travel
sales and a decline in imports, Group volumes suffered from the
Partner is sharpening its strategic focus on dining and travel as part
price increases and a certain number of supply chain issues. The
of the Michelin Experiences line, which brings together all of the
development of fleet services continued apace.
businesses that offer customers an outstanding mobility experience.
In South America, where growth in the replacement market is In 2017, the unit pursued its targeted acquisition strategy, purchasing
being driven by the economic recovery and imports (which led to successively (i) Alliance Réseaux and One Shop Pay (and indirectly
a decline in the premium segment in Brazil), Michelin is focusing Mon Tour En France) in April to expand its travel services portfolio;
on margin integrity by maintaining higher prices. The intermediate (ii) a 40% stake in Robert Parker Wine Advocate, the world’s most
brands are enjoying sustained growth and Sascar’s telematics services widely read wine tasting and rating guide, in June; (iii) the assets of
remain highly popular. Streetwise, a North American laminated map publisher, in August;
In Asia (excluding India), net sales in China contracted during and (iv) a 40% stake in Le Fooding, a website specialized in hot
the year, despite the launch of the MICHELIN X Guard tire and the new restaurants and trendy bars, in October.
fact that Michelin tires deliver energy efficiency in line with the In all, net sales by the Specialty Businesses increased by 18.4%
government’s commitment to reducing emissions in urban areas. The year-on-year, to €3,358 million from €2,836 million in 2016. The
Group’s share of the Southeast Asian market rose slightly thanks to increase corresponded to the robust 16% growth in volumes, which
sales of the MICHELIN brands and the BFGoodrich intermediate lines. offset the unfavorable currency effect thanks to the continued
rebound in mining tire sales and the sharp upturn in the Earthmover
and Agricultural original equipment business. Net sales were
also lifted by the price increases applied in both the indexed and
non-indexed businesses.

Net Sales
3.2.3 CHANGES IN EXCHANGE RATES FOR THE MAIN OPERATING CURRENCIES

At current exchange rates, consolidated net sales rose by 5.0% in 2017.
This performance reflected a €261 million negative currency effect resulting primarily from the euro’s unfavorable moves against the US
dollar, the Chinese yuan, the Turkish lira, the British pound, the Japanese yen, the Argentine peso and the Mexican peso. On the other
hand, the rebounds in the Russian and Brazilian economies had a favorable impact on their currencies’ exchange rates against the euro.
Average exchange rate 2017 2016 Change
Euro/USD 1.129 1.107 +2.0%
Euro/CAD 1.465 1.466 -0.1%
Euro/MXN 21.307 20.615 +3.4%
Euro/BRL 3.601 3.841 -6.2%
Euro/GBP 0.877 0.816 +7.4%
Euro/JPY 126.630 120.077 +5.5%
Euro/CNY 7.631 7.351 +3.8%
Euro/THB 38.311 39.070 -1.9%
Euro/AUD 1.473 1.488 -1.0%
Euro/ZAR 15.021 16.237 -7.5%
Euro/ARS 18.624 16.290 +14.3%
Euro/TRY 4.114 3.333 +23.4%
Euro/RUB 65.879 73.887 -10.8%
Net sales break down as follows by currency:

Currency % Currency %
ARS 1%
AUD 2% JPY 1%
BRL 4% MXN 2%
CAD 3% PLN 1%
CLP 1% RUB 1%
CNY 6% THB 1%
EUR 34% TRY 1%
GBP 3% USD 37%
INR 1% Other currencies 1%
TOTAL 100%
3.2.4 NET SALES BY REGION
(in € millions) 2017 2017/2016 Second half 2017 First half 2017
GROUP 21,960 +5.0% 10,901 11,059
Europe 8,315 +2.6% 4,209 4,106
of which France 1,984 +3.5% 1,004 980
North America (incl. Mexico) 8,056 +3.4% 3,955 4,100
Other regions 5,589 +11.5% 2,736 2,853
(in € millions) 2017 % of total 2016 % of total

GROUP 21,960 20,907
Europe 8,315 37.9% 8,101 38.7%
of which France 1,984 9.0% 1,917 9.2%
North America (incl. Mexico) 8,056 36.7% 7,792 37.3%
Other regions 5,589 25.5% 5,014 24.0%
At a time of rising raw materials prices, consolidated net sales rose in every geography despite unfavorable currency movements.
More than 60% of consolidated net sales were generated outside Europe and more than 90% outside France.

Consolidated Income Statement Review 3
3.3 CONSOLIDATED INCOME STATEMENT REVIEW
2017 2016
(in € millions, except per-share data) 2017 2016 2017/2016 (as a % of net sales) (as a % of net sales)
Net sales 21,960 20,907 +5.0%
Cost of sales (14,815) (13,810) +7.3% 67.5% 66.1%
Gross income 7,145 7,097 +0.7% 32.5% 33.9%
Sales and marketing expenses (1,861) (1,907) -2.4% 8.5% 9.1%
Research and development expenses (641) (718) -10.6% 2.9% 3.4%
General and administrative expenses (1,866) (1,759) +6.1% 8.5% 8.4%
Other operating income and expenses (35) (21) +64.5% 0.2% 0.1%
Operating income from recurring activities 2,742 2,692 +1.9% 12.5% 12.9%
Operating income/(loss) from non-recurring
activities (111) 99 -211.8% 0.5% 0.5%
Operating income 2,631 2,791 -5.7% 12.0% 13.3%
Cost of net debt (176) (203) -13.5% 0.8% 1.0%
Other financial income and expenses 0 20 -100.5% 0.0% 0.1%
Net interest on employee benefit obligations (115) (139) -17.0% 0.5% 0.7%
Share of profits and losses from associates 14 (5) nm 0.1% 0.0%
Income before taxes 2,354 2,464 -4.5% 10.7% 11.8%
Income tax (661) (797) -17.0% 3.0% 3.8%
Net income 1,693 1,667 +1.5% 7.7% 8.0%
Attributable to shareholders of the Company 1,700 1,676 +1.4% 7.7% 8.0%
Attributable to non-controlling interests (7) (9)
Earnings per share (in €)
Basic 9.39 9.21 +2.0%
Diluted 9.34 9.03 +3.4%

Consolidated Income Statement Review
3.3.1 OPERATING INCOME FROM RECURRING ACTIVITIES

(in € millions)
+315
+207 +668
2,692 2,742
-279 -28 -95
-738
2016 Volume Raw Price Competitiveness Inflation Other Currency 2017

Operating materials mix Operating
income income
Operating income from recurring activities amounted all, the net decrease came to €57 million for businesses whose
to €2,742 million or 12.5% of net sales in the year ended prices are indexed to raw materials costs and €13 million for
December 31, 2017, versus a reported €2,692 million and 12.9% non-indexed businesses;
in 2016. Operating income/(loss) from non-recurring activities €315 million in gains from the competitiveness plan, in line with
represented a loss of €111 million, corresponding primarily to costs the implementation schedule. These included €110 million in
related to the reorganization and alignment of Group operations, general cost savings, €51 million in materials cost savings and
which were partially offset by gains on changes to the retiree health €153 million in manufacturing and logistics productivity gains,
coverage plan in the United States and to the pension plan in the which together exceeded the €279 million adverse impact of
United Kingdom. inflation on production costs and overheads;
Growth for the year may be analyzed as follows: a €28 million decrease from other unfavorable cost factors;
a €207 million increase from the 2.6% growth in volumes; a €95 million decrease from the currency effect.
a €70 million net decrease from changes in the price mix and raw
For the full year, Michelin has therefore achieved its target of
materials costs. Changes in the price mix added €668 million to
generating operating income from recurring activities in an amount
operating income for the period, of which €524 million stemmed
exceeding the 2016 figure at constant exchange rates. In 2017,
from the price increases introduced to offset higher raw materials
operating income from recurring activities totaled €2,837 million
costs, which had a €738 million adverse impact over the year. In
at constant exchange rates, a €145 million improvement on the
€2,692 million reported in 2016.

3.3.2 OPERATING INCOME FROM RECURRING ACTIVITIES BY OPERATING SEGMENT
(in € millions) 2017 2016 Second half 2017 First half 2017
Passenger car/Light truck tires & related distribution
Net sales 12,479 12,105 6,216 6,263
Operating income from recurring activities 1,552 1,585 752 800
Operating margin on recurring activities 12.4% 13.1% 12.1% 12.8%
Truck tires & related distribution
Net sales 6,123 5,966 3,082 3,041
Operating income from recurring activities 497 580 268 229
Specialty businesses
Net sales 3,358 2,836 1,603 1,755
Operating income from recurring activities 693 527 329 364
Group
Net sales 21,960 20,907 10,901 11,059
Operating income from recurring activities 2,742 2,692 1,349 1,393
3.3.2 a) Operating margin on recurring activities by operating segment

2016 (in € millions)
2017
2,692 +166 2,742
20.6%
18.6% -33 -83
13.1% 12.9%12.5%
12.4%
9.7%
8.1%
Passenger car Truck Speciality Group 2016 Passenger car Truck Speciality 2017
Light truck business Light truck business
Passenger car/Light truck tires & related distribution.

Truck tires & related distribution.
Specialty businesses: Earthmover, Agricultural, Two-wheel and
Aircraft tires; Michelin Travel Partner, BookaTable and Michelin
Lifestyle Ltd.

3.3.2 b) Passenger car/Light truck tires & related distribution – Analysis of operating income
from recurring activities
Passenger car/Light truck tires & related
distribution 2017 2016
(in € millions) 2017 2016 2017/2016 (% of consolidated total) (% of consolidated total)
Net sales 12,479 12,105 +3.1% 57% 58%
Change in volumes +2%
Operating income from recurring activities 1,552 1,585 -2.1% 57% 59%
Operating margin on recurring activities 12.4% 13.1% -0.7 pt
Operating income from recurring activities came to €1,552 million relative growth rates of OE and replacement tire sales and an
or 12.4% of net sales versus the €1,585 million and 13.1% reported unfavorable geographic mix. It reflected the success of the MICHELIN
in 2016. CrossClimate+ and MICHELIN Pilot Sport 4S lines, which drove
At a time of sharply rising raw materials costs, the Group successfully sales gains of 2% for MICHELIN brand tires, with a 19% increase
maintained margins in its Passenger car/Light truck tires business, for 18-inch and larger tires. Sales of other Group brands rose by
excluding the currency effect, by pursuing an agile pricing policy 3% over the year. The 0.7-point contraction in operating margin
that delivered a positive price-mix/raw materials effect with a 2% was primarily caused by the dilutive impact of the price increases
increase in volumes. The mix effect remained positive despite the introduced to offset the impact of higher raw materials costs and
adverse exchange rate movements.
3.3.2 c) Truck tires & related distribution – Analysis of operating income from recurring activities
Truck tires & related distribution 2017 2016
Net sales 6,123 5,966 +2.6% 28% 29%
Change in volumes -2%
Operating income from recurring activities 497 580 -14.3% 18% 22%
Operating margin on recurring activities 8.1% 9.7% -1.6 pt
Operating income from recurring activities amounted to €497 million the MICHELIN X Multi, MICHELIN X Works, MICHELIN X-Guard
or 8.1% of net sales, compared with €580 million and 9.7% the and BFGoodrich tire lines, strong sales of Tire Care services and
year before. the growing popularity of Sascar solutions in South America. The
The decrease first of all reflected the steep increase in raw materials effects of a very positive manufacturing performance in 2017,
costs, offset by the pricing policy implemented to preserve unit particularly in Asia, partially offset the cost of programs to adjust the
margins. In this regard, given a more competitive environment, manufacturing base in Europe, particularly in retreading operations.
the decline was mainly attributable to reduced volumes and the The 1.6-point contraction in operating margin was partially caused
negative currency effect. New products and services continued to by the dilutive impact of the price increases introduced to offset
be introduced over the year, which was shaped by the success of the impact of higher raw materials costs and adverse exchange
rate movements.
3.3.2 d) Specialty businesses – Analysis of operating income from recurring activities

Specialty businesses 2017 2016
Net sales 3,358 2,836 +18.4% 15% 14%
Change in volumes +16%
Operating income from recurring activities 693 527 +31.5% 25% 20%
Operating margin on recurring activities 20.6% 18.6% +2.0 pt
Operating income from recurring activities amounted to €693 million, The improvement corresponded to the robust 16% growth in volumes,
versus a reported €527 million in 2016, for a margin up two points led by the sustained rebound in demand for the Group’s mining
to 20.6% of net sales. tires and the sharp upturn in Earthmover and Agricultural original
equipment sales. This factor and the price increases introduced in
both the indexed and non-indexed businesses amply outweighed the
impact of higher raw materials costs and the negative currency effect.

3.3.3 OTHER INCOME STATEMENT ITEMS
3.3.3 a) Raw materials In 2017, the raw materials costs recognized in cost of sales included
the €738 million gain from price adjustments, as well as the residual
The cost of raw materials reported in the income statement under
currency effect. Changes in prices feed through to the income
“Cost of sales” has been estimated at €5.2 billion in 2017 versus
statement five to six months later for natural rubber and around
€4.3 billion in 2016.
three months later for butadiene.
It is calculated on the basis of:
the price and mix of the Group’s raw materials purchases; RAW MATERIALS RECOGNIZED IN 2017 COST
production and sales volumes; OF SALES (€5.2 BILLION)
the valuation of raw materials, semi-finished and finished
26%
product inventories using the weighted average cost method.
This method tends to spread fluctuations in purchase costs over Synthetic rubber
16%
time and delay their recognition in cost of sales, due to timing
differences between the purchase of the raw materials and the Fillers
sale of the finished product;
28%
exchange rate movements, which correspond to (i) the impact
Natural rubber 14%
of converting the cost of purchases made in local currencies into
the consolidation currency; and (ii) an untracked residual currency Chemicals
effect resulting from the difference between the purchasing 7% 9%
companies’ local currency and the currency used to purchase Textile Steelcord
their raw materials.
NATURAL RUBBER PRICES (SICOM) BUTADIENE PRICES

(USD/kg)
RSS 3 US Gulf (USD/t)

TSR 20 Europe (EUR/t)
5 3,000
2,500
4
2,000
3
1,500
2
1,000
1 500
0 0
Jan. Jul. Jan. Jul. Dec. Jan. Jul. Jan. Jul. Dec.
2016 2016 2017 2017 2017 2016 2016 2017 2017 2017
3.3.3 b) Employee benefit costs and number of employees

At €5,871 million, employee benefit costs represented 26.7% of net sales in 2017, unchanged from the year before. In addition to
inflation in the emerging economies and North America, the increase in these costs primarily resulted from the consolidation of companies
acquired in late 2016 and throughout 2017 (especially Levorin in Brazil and NexTraq in the United States). Group-wide, the inflation rate
stood at 2.05% for the year.
(in € millions and number of people) 2017 2016 Change
Total employee benefit costs 5,871 5,542 +5.9%
As a % of net sales 26.7% 26.5% +0.2pt
Employees on payroll at December 31 114,100 111,700 +2.1%
Number of full time equivalent employees at December 31 107,800 105,700 +2.0%
Average number of full time equivalent employees 106,800 106,200 +0.6%

NUMBER OF EMPLOYEES
(in thousands)
Total workforce
Number of full time equivalent employees
114 114 115

114
113 112
112 112 112
112 112 112
108.0 108.0 108.3

107.8
106.4 106.8 106.6 106.4
105.7 105.8 106.0 106.0
January Febuary March April May June July August Sept Oct. Nov. Dec.
2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017
3.3.3 c) Depreciation and amortization

(in € millions) 2017 2016 Change
Depreciation and amortization 1,345 1,392 -3.4%
As a % of additions to intangible assets and property, plant and equipment 76% 77%
Depreciation and amortization charges decreased by €47 million or 3.4% to €1,345 million for the year. The improvement reflected
the results of research and development programs that increased the useful lives of the Group’s tire curing molds, resulting in longer
depreciation periods. This factor (+€80 million) more than offset the steady growth in depreciation charges due to the temporary increase
in capital expenditure committed in recent years to support the Group’s growth. Given the projects currently underway, depreciation and
amortization charges are expected to continue to increase in the years ahead.
(As a % of net sales)

Capital expenditure
Depreciation and amortization
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
2013 2014 2015 2016 2017

3.3.3 d) Transportation costs
Transportation costs 1,183 1,152 +2.7%
As a % of net sales 5.4% 5.5%
Transportation costs stood at €1,183 million, up 2.7% year-on-year, reallocation of certain R&D expenses to corporate overheads, as
mainly due to (i) the increase in sales volumes, particularly in the well as the costs of organizing the global Movin’On sustainable
mining businesses; (ii) the faster growth in intercontinental transport mobility summit and of deploying the project to reorganize the
costs required to serve growing markets; and (iii) higher fuel prices. Group’s worldwide operations.
3.3.3 e) Sales and marketing expenses 3.3.3 h) Other operating income and expenses
Sales and marketing expenses represented 8.5% of net sales from recurring activities
in 2017, or 0.6 point lower than the year before. In value, they Other operating income and expenses from recurring activities
declined by €46 million to €1,861 million as a result of the greater represented a net expense of €35 million in 2017 versus the net
efficiency in spending and the favorable currency effect. expense of €21 million reported in 2016. Most of the 2017 expense
corresponded to various taxes, acquisition costs and expenses on
stock option grants in France.
3.3.3 f) Research and development expenses
Research and development expenses stood at €641 million, a
10.6% year-on-year reduction that reflected (i) the commitment 3.3.3 i) Operating income/(loss)
to optimizing the R&D and engineering teams to improve the from non-recurring activities
efficiency of R&D activities; and (ii) the reassignment of some of
these teams to corporate services, reducing the budget by around Operating income/(loss) from non-recurring activities represented
€40 million over the year. a loss of €111 million in 2017, versus income of €99 million in 2016
(primarily reflecting the €271 million gain from a change in the
As a percentage of net sales, R&D expenses declined to 2.9% from retiree health coverage plan in the United States).The loss mainly
3.4% in 2016. corresponded to a provision set aside in respect of a dispute with
URSSAF, the French government agency responsible for collecting
social security and other contributions, and to the costs of reorganizing
3.3.3 g) General and administrative expenses Group operations. It was partially offset by gains on changes to the
At €1,866 million, general and administrative expenses retiree health coverage plan in the United States and to the pension
represented 8.5% of net sales, versus €1,759 million and 8.4% plan in the United Kingdom.
in 2016. The €107 million increase primarily stemmed from the
3.3.3 j) Cost of net debt

Cost of net debt 176 203 -27
At €176 million, the cost of net debt was down €27 million •• a €1 million net increase from a variety of factors, including
compared with 2016, primarily as a result of the following factors: the negative carry, corresponding to the effect of investing
a €30 million decline in net interest expense, to €172 million, cash and cash equivalents at a rate below the Group’s average
reflecting the net impact of: borrowing cost;
•• a €4 million decrease due to the reduction in average net debt a €16 million negative result on interest rate derivatives (-€9 million
to €1,199 million in 2017 from €1,294 million the year before, compared to 2016) mainly due to the variation of Chinese
•• a €28 million decrease from the decline in the average gross interest rates;
interest rate on borrowings to 6.2% in 2017 from 7.1% in 2016, a €6 million decrease from capitalizing borrowing costs;
a €6 million net decrease from other factors.
3.3.3 k) Other financial income and expenses

Other financial income and expenses 0 20 -20
There were no other financial income and expenses recognized in 2017. The €20 million in income reported in 2016 stemmed mainly
from the recognition of a gain on the renegotiation of a pension insurance contract in Spain.

3.3.3 l) Income tax

Income before taxes 2,354 2,464 -110
Income tax (661) (797) -136
Current tax (478) (665) -187
Withholding tax (81) (84) -3
Deferred tax (102) (48) +54
Income tax amounted to €661 million in 2017, a €136 million year-on-year decrease that reflected not only the decline in income before
taxes, but also a number of positive factors, such as (i) lower tax rates in Poland and the United States, which had a positive impact on
deferred taxes; (ii) the reduction in losses at companies whose deferred tax assets have not yet been recognized; and (iii) the reimbursement
of the 3% tax on dividends in France.
The effective tax rate was 28.1%, versus 32.3% the year before.
3.3.3 m) Consolidated net income and earnings per share

Net income 1,693 1,667 +26
As a % of net sales 7.7% 8.0% -0.3pt
Attributable to shareholders of the Company 1,700 1,676 +24
Attributable to non-controlling interests (7) (9) +2
Basic 9.39 9.21 +0.18
Diluted 9.34 9.03 +0.31
Net income came to €1,693 million, or 7.7% of net sales, compared •• the €19 million improvement in the Group’s share of profit
with the €1,167 million reported in 2016. The €26 million increase from associates, which swung to a €14 million profit from a
reflected the following factors: €5 million loss in 2016,
favorable factors: •• the €136 million reduction in income tax;
•• the €50 million increase in operating income from recurring unfavorable factors:
activities, •• the €210 million negative swing in operating income/(loss)
•• the €27 million reduction in cost of net debt, from non-recurring activities, to a loss of €111 million from
•• the €24 million decrease in interest on employee benefit income of €99 million in 2016,
obligations, •• the €20 million decrease in other financial income and expenses,
to 0 in 2017 from income of €20 million in 2016.

Consolidated Balance Sheet Review 3
3.4 CONSOLIDATED BALANCE SHEET REVIEW
ASSETS
Total Currency
(in € millions) December 31, 2017 December 31, 2016 change effect Movement
Goodwill 1,092 963 +129 -104 +233
Intangible assets 785 630 +155 -41 +196
Property, plant and equipment 10,883 11,053 -170 -647 +476
Non-current financial assets and other assets 479 323 +156 -18 +174
Investments in associates 356 309 +47 -18 +65
Deferred tax assets 890 1,191 -301 -48 -253
Non-current assets 14,485 14,469 +16 -875 +891
Inventories 4,508 4,480 +28 -298 +326
Trade receivables 3,084 3,042 +42 -171 +213
Current financial assets 285 303 -18 -2 -16
Other current assets 1,132 1,202 -69 -9 -60
Cash and cash equivalents 1,773 1,826 -53 -15 -39
Current assets 10,782 10,853 -71 -495 +424
TOTAL ASSETS 25,267 25,322 -55 -1,370 +1,315
EQUITY AND LIABILITIES
Total Currency
(in € millions) December 31, 2017 December 31, 2016 change effect Movement
Share capital 359 360 -1 - -1
Share premiums 2,942 3,024 -82 - -82
Reserves 7,925 7,215 +710 -528 +1,238
Non-controlling interests 35 47 -11 -4 -7
Equity 11,261 10,646 +615 -532 +1,148
Non-current financial liabilities 2,366 1,773 +592 -29 +621
Employee benefit obligations 3,969 4,763 -794 -180 -614
Provisions and other non-current liabilities 1,676 1,604 +72 -79 +150
Deferred tax liabilities 113 117 -3 -10 +7
Non-current liabilities 8,124 8,257 -133 -297 +164
Current financial liabilities 493 1,320 -827 -218 -609
Trade payables 2,501 2,364 +137 -121 +258
Reverse factoring contracts 503 339 +163 -45 +208
Other current liabilities 2,385 2,396 -11 -130 +118
Current liabilities 5,882 6,419 -537 -513 -24
TOTAL EQUITY AND LIABILITIES 25,267 25,322 -55 -1,342 +1,287

Consolidated Balance Sheet Review
3.4.1 GOODWILL
Excluding the negative €104 million impact of translation adjustments, goodwill rose by €233 million to €1,092 million at December 31,
2017, primarily due to the recognition of goodwill on NexTraq, a leading US telematics solutions provider, and Levorin, Brazil’s largest
two-wheel tire manufacturer.
3.4.2 INTANGIBLE ASSETS

Intangible assets amounted to €785 million, a €196 million increase from December 31, 2016 before the €41 million negative translation
adjustment. The increase was primarily due to the consolidation of the intangible assets of NexTraq, Levorin and Sascar Mexico.
3.4.3 PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment amounted to €10,883 million, in fast growing markets (the premium Passenger car segment, North
a €476 million increase from December 31, 2016 before taking America and Asia), and in products for the premium and entry-level
into account negative translation adjustments of €647 million, The segments. Additions to property, plant and equipment exceeded
increase was primarily led by the ongoing investment in new capacity depreciation expense for the year.
3.4.4 NON-CURRENT FINANCIAL ASSETS AND OTHER ASSETS
Non-current financial assets and other assets stood at €479 million, €55 million in premium payments and fair value adjustments to
an increase of €174 million excluding the €18 million negative the derivatives on the non-dilutive, cash-settled convertible bonds
currency effect that was mainly due to: issued in the first quarter;
a €10 million increase from fair value adjustments to available- a €23 million increase from fair value adjustments to other
for-sale financial assets; derivative instruments;
a €112 million increase in available-for-sale financial assets, a €35 million decrease due to the consolidation of Levorin and
including among others the equity interests held in Smartdrive, Restaurantes, whose shares had been recognized in available-for-sale
Lehigh Technologies, PTG and Téléflow; financial assets at December 31, 2016;
a €9 million increase from other movements.
3.4.5 INVESTMENTS IN ASSOCIATES
Excluding the €18 million negative translation adjustment, investments Le Fooding. This impact was partially offset by the disposal of
in associates increased by €65 million in 2017, reflecting the Group’s the Group’s interest in the Warrior joint venture in China and a
raised stake in SIPH, as well as a number of equity investments in €10 million reduction in dividends received.
such companies as Robert Parker Wine Advocate, T&W Tire and
3.4.6 DEFERRED TAX ASSETS AND LIABILITIES
At December 31, 2017, the Group held a net deferred tax the year on employee benefit obligations, particularly in the United
asset of €777 million, representing a decrease of €260 million Kingdom and the United States; (ii) timing differences, essentially
compared with the amount reported at end-2016 (before taking on property, plant and equipment in the United States; and (iii) the
into €38 million in negative translation adjustments). The decrease first-time consolidation of Levorin and NexTraq.
was mainly attributable to (i) the actuarial gains recognized during

3.4.7 TRADE WORKING CAPITAL REQUIREMENT
2017 2016
(in € millions) December 31, 2017 December 31, 2016 Change (as a % of net sales) (as a % of net sales)
Inventories 4,508 4,480 +27 20.5% 21.4%
Trade receivables 3,084 3,042 +42 14.0% 14.6%
Trade payables (2,501) (2,364) -137 11.4% 11.3%
Reverse factoring contracts (503) (339) -163 2.3% 1.6%
TRADE WORKING CAPITAL
REQUIREMENT 4,588 4,819 -232 20.9% 23.1%
Trade working capital requirement decreased by €232 million Excluding translation adjustments, trade receivables rose by
compared with December 31, 2016, chiefly due to the €304 million €213 million year-on-year to €3,084 million at December 31, 2017,
currency effect. Excluding that effect, trade working capital requirement primarily as a result of the increase in net sales in the final quarter.
rose by €72 million over the year, in line with the growth in business, As a percentage of net sales, they declined by 0.6 point, to 14.0%
as the increase in trade payables only partially offset the increase from 14.6% a year earlier.
in receivables and inventories. It represented 20.9% of net sales at The growth in net sales, particularly in the final months of the year,
December 31, compared with 23.1% at year-end 2016. also had the effect of increasing trade payables, which ended the
Inventories amounted to €4,508 million, representing 20.5% of year up €467 million at €3,004 million (including €503 million in
net sales for 2017. Excluding translation adjustments, they were reverse factoring contracts but before €166 million in translation
€326 million up on year-end 2016, primarily due to the higher adjustments).
prices of their raw materials component and the 4% increase in
raw material and semi-finished tonnages, with finished product
tonnages remaining unchanged over the year.
3.4.8 CASH AND CASH EQUIVALENTS
Excluding the currency effect, cash and cash equivalents declined decreases from:
by €39 million year-on-year to €1,773 million, reflecting the net •• the payment of €612 million in dividends, including tax on the
impact of the following factors: distribution of cash dividends,
increases from: •• the outlay of €101 million for share buybacks during the year,
•• the €662 million in free cash flow, after the investment of •• the acquisition of cash management instruments for €18 million,
€476 million in acquisitions (mainly all outstanding shares of •• the €68 million reduction in debt during the year.
NexTraq),
•• the €35 million in proceeds from the issue of new shares on
the exercise of stock options, the granting of performance
shares and the repayment in 2017 of loans granted to Group
employees in 2016 under the Employee Share Ownership Plan,
•• other factors in an amount of €63 million;
3.4.9 EQUITY
Including the negative €532 million in translation adjustments, •• €17 million in proceeds from the issue of 348,063 new shares
consolidated equity increased by €615 million to €11,261 million on the exercise of stock options and the grant of performance
at December 31, 2017 from the €10,646 million reported a year shares,
earlier, primarily as a result of the following factors: •• €7 million in service costs on performance share-based
increases: payment plans;
•• €1,304 million in comprehensive income for the year, including: decreases:
-- net income of €1,693 million, •• €612 million in dividends and other distributions,
-- the €131 million favorable impact of actuarial gains and •• €101 million committed to the buyback and cancellation of
losses, after deferred taxes, 893,197 Michelin shares under the shareholder-approved plan.
-- €13 million in unrealized gains on available-for-sale financial At December 31, 2017, the share capital of Compagnie Générale
assets, net of deferred tax, des Établissements Michelin stood at €359,041,974, comprising
-- the €532 million negative impact from the translation of 179,520,987 shares corresponding to 247,029,830 voting rights.
foreign currencies,
-- an aggregate €1 million net decrease from other factors,

Consolidated Balance Sheet Review
3.4.10 NET DEBT
Net debt stood at €716 million at December 31, 2017, down €193 million in capitalized interest expense on the zero-coupon
€229 million year-on-year, primarily as a result of the following factors: OCEANE convertible bonds;
€11 million in net cash flow, corresponding to: €203 million in other factors increasing net debt, of which:
•• €662 million in free cash flow generated during the year, less •• €135 million corresponding to new finance leases,
•• €651 million in dividends, net share buybacks and other outlays; •• €51 million arising on changes in the scope of consolidation,
€227 million in positive translation adjustments; •• €17 million in other factors increasing net debt.
CHANGES IN NET DEBT

At January 1 944 1,008
Free cash flow(1) -662 -1,024
Distributions and other +651 +780
Interest expense on the zero-coupon convertible bonds -193 +34
Translation adjustments -227 +107
Other +203 +39
AT DECEMBER 31 +716 +944
CHANGE -229 -64
(1) Free cash flow corresponds to cash flows from operating activities less cash flows used in investing activities, adjusted for net cash flows used in cash management
instruments and loan guarantees.
3.4.10 a) Gearing
Gearing declined to 6% at December 31, 2017, from 9% at year-end 2016, reflecting the strong generation of free cash flow over the
year and the favorable impact of currency movements on net debt.
3.4.10 b) Credit ratings

The solicited corporate credit ratings of Compagnie Générale des Établissements Michelin (CGEM) and Compagnie Financière Michelin
SCmA (CFM) are as follows:
CGEM CFM
Short term Standard & Poor’s A-2 A-2
Moody’s P-2 P-2
Long term Standard & Poor’s A- A-
Moody’s A3 A3
Outlook Standard & Poor’s Stable Stable
Moody’s Stable Stable
On January 29, 2016, Standard & Poor’s upgraded Michelin’s Note that CGEM and CFM have also been issued unsolicited credit
long-term credit rating to A- from BBB+, while affirming its A-2 ratings by Fitch Ratings:
short-term rating and stable outlook.
CGEM CFM
On March 20, 2015, Moody’s upgraded Michelin’s long-term credit
Short term F2 F2
rating to A3 from Baa1, with a stable outlook, while affirming
its P-2 short-term rating. Long term A- A-
Outlook Stable Stable

3.4.11 PROVISIONS
Provisions and other non-current liabilities amounted to of the reorganization and alignment of the Group’s operations in
€1,676 million, versus €1,604 million at December 31, 2016. Europe, along with a provision set aside in respect of a dispute with
Excluding the currency effect, they increased by €150 million over URSSAF, the French government agency responsible for collecting
the year, primarily due to the commitments undertaken as part social security and other contributions.
3.4.12 EMPLOYEE BENEFITS
CHANGE IN THE FAIR VALUE OF THE NET DEFINED BENEFIT OBLIGATION
Pension Other defined

(in € millions) plans benefit plans 2017 2016
At January 1 2,742 2,021 4,763 4,888
Translation adjustments (79) (101) (180) 1
Contributions paid to the funds (190) - (190) (74)
Benefits paid directly to the beneficiaries (32) (122) (154) (156)
Changes in scope of consolidation - - - (55)
Net cost recognized in operating expenses
Current service cost 58 62 120 127
Actuarial (gains) or losses recognized on other long term benefit obligations - - - -
Past service cost arising from plan amendments (20) (36) (56) (262)
Past service cost arising from plan curtailments and settlements - - - (19)
Employee benefit costs included in provisions for the reorganization and
adaptation of activities (88) (95) (183) (19)
Other items - - - (1)
Costs recognized below the line
Net interest on the net defined benefit obligation (asset) 60 55 115 139
Costs recognized in other comprehensive income
Actuarial (gains) or losses (332) 36 (296) 377
Portion of unrecognized asset due to the application of the asset ceiling 30 - 30 (183)
NET OBLIGATION AT DECEMBER 31 2,149 1,820 3,969 4,763
The net defined benefit obligation recognized in the consolidated translation adjustments for €(180) million, linked to the rise in the
balance sheet at December 31, 2017 stood at €3,969 million, a euro against the Canadian and US dollars and the pound sterling.
decrease of €794 million that was led by the following main factors:
The amount recognized in the income statement in respect of
actuarial gains of €(296) million, mainly due to: defined benefit plans represented a gain of €4 million in 2017,
•• an actual rate of return on plan assets that was higher than versus a gain of €35 million in 2016.
the discount rate, for €(415) million,
The amount recognized in operating income came to €120 million,
•• the change in actuarial assumptions, for €189 million, and
compared to €174 million in 2016. Net interest on the net defined
experience gains for €(72) million;
benefit obligation, reported below the line, represented €115 million
a €239 million decrease from plan amendments, curtailments in 2017, versus €139 million in 2016.
or settlements, primarily consisting of the €(24) million gain on
The cost recognized in respect of defined contribution plans amounted
amendments to the pension scheme in the United Kingdom, a
to €220 million in 2017, up €7 million year on year, mainly due to
€(39) million gain on a change in the health coverage plan in
increases in plan costs in North America.
the United States, and a €(182) million gain relating to the early
retirement plan in France;

Consolidated Cash Flow Statement Review
Total payments under defined benefit plans amounted to €344 million Actuarial gains recorded in 2017 in the amount of €(296) million
in 2017, versus €230 million the year before, including: corresponded to:
contributions paid to fund management institutions for €190 million, €372 million in actuarial losses on defined benefit obligations,
up €116 million from €74 million in 2016, mainly due to the resulting mainly from reductions in discount rates;
payment during the year of €124 million in pension fund front- €(181) million in actuarial gains on defined benefit obligations,
loading contributions in the United Kingdom and United States; mainly resulting from revised mortality tables;
benefits paid directly to employees for €154 million, versus €(72) million in experience gains on defined benefit obligations;
€156 million in 2016.
€(415) million in actuarial gains on plan assets, due to an actual
Total payments under defined contribution plans amounted to rate of return on plan assets that was higher than the discount rate.
€220 million in 2017, versus €213 million the previous year.
3.5 CONSOLIDATED CASH FLOW STATEMENT REVIEW
3.5.1 CASH FLOWS FROM OPERATING ACTIVITIES

EBITDA from recurring activities 4,087 4,084 +3
Change in inventories (311) (83) -228
Change in trade receivables and prepayments (317) (319) +2
Change in trade payables and prepayments 404 289 +115
Restructuring cash costs (100) (99) -1
Other changes in provisions (246) (107) -139
Tax and interest paid (936) (911) -25
Other operating working capital 160 (89) +249
CASH FLOWS FROM OPERATING ACTIVITIES 2,741 2,765 -24
At €4,087 million, EBITDA from recurring activities was unchanged •• the €317 million increase in trade receivables, compared to
year-on-year, as the growth in operating income from recurring a €319 million increase in 2016, reflecting in particular the
activities, to €2,742 million from €2,692 million in 2016, offset growth in net sales in the final quarter of the year,
the decline in depreciation and amortization charges for the year. •• the €404 million decline in trade payables, compared to a
Cash flows from operating activities fell by €24 million, to €2,741 million €289 million decrease in 2016, primarily due to the €164 million
from €2,765 million in 2016, primarily as a result of: increase in payables covered by reverse factoring contracts;
the firm EBITDA performance (up €3 million); the increase in costs related to the reorganization and realignment
of business operations, to €100 million from €99 million in 2016;
the negative impact of the increase in trade working capital
requirement, which rose by €224 million in 2017 after rising by the increase in tax and interest paid during the year, from
€113 million in 2016, reflecting: €911 million in 2016 to €936 million in 2017, including the
•• the €311 million increase in inventories, versus an €83 million payment of interests on the zero-coupon 2017 OCEANE convertible
increase in 2016, primarily due to the rise in raw materials bonds at maturity ;
prices and, to a lesser extent, the growth in raw materials and The variation in the other operating working capital generated
semi-finished product tonnages, a positive impact of €249 million mainly due to one-time effects
relating to the deferred payment or reimbursement of various
taxes and social debts.

Consolidated Cash Flow Statement Review 3
3.5.2 CAPITAL EXPENDITURE
2017 2016
(in € millions) 2017 2016 2017/2016 (as a % of net sales) (as a % of net sales)
Gross purchases of intangible assets and PP&E 1,771 1,811 -40 8.1% 8.7%
Investment grants received and change in capital
expenditure payables (103) 4 -107 0.5% 0.0%
Proceeds from sales of intangible assets and PP&E (65) (89) +24 0.3% 0.4%
NET ADDITIONS TO INTANGIBLE ASSETS
AND PROPERTY, PLANT AND EQUIPMENT 1,603 1,726 -123 7.3% 8.3%
Additions to intangible assets and property, plant and equipment CHANGE IN ACTUAL AND ESTIMATED PURCHASES
amounted to €1,771 million during the year, compared with OF INTANGIBLE ASSETS AND PROPERTY, PLANT
€1,811 million in 2016. As a result, total capital expenditure AND EQUIPMENT
represented 8.1% of net sales versus 8.7% the year before. Growth
investments accounted for €739 million of the total for the year. (in € billions)
By Product Line, the main capital projects completed during the 1.9
year or still underway are as follows: 1.8 1.8 1.77
1.8
Passenger car and Light truck tires:
1.6 1.6
Projects to increase capacity, improve productivity or refresh
product lines in: 1.4
•• León, Mexico,
•• Roanne, France,
•• Shenyang, China,
•• Pirot, Serbia;
Truck tires:
Projects to increase capacity, improve productivity or refresh
product lines in:
•• Romania,
•• Thailand, 2014 2015 2016 2017 2018 2020
•• France, Note that the Group’s financing depends on its ability to generate
•• Poland, cash flow as well as on market opportunities. As a result, there
•• India; is generally no direct link between financing sources and capital
Specialty products: expenditure projects.
•• Agricultural tires,
•• Aircraft tires.
In addition, Michelin is actively investing in the following areas:
fast growing markets, such as premium Passenger car and Light
truck tires, North America and China;
customer service (information systems, logistics hubs, etc.);
distribution and digital services;
high-tech materials.
The amounts expected to result from this capital expenditure strategy
are illustrated below.

Consolidated Cash Flow Statement Review
3.5.3 AVAILABLE CASH FLOW AND FREE CASH FLOW
Available cash flow corresponds to cash flow from recurring Free cash flow, which is stated before dividend payments and
operating activities, i.e. after routine capital expenditure but before financing transactions, corresponds to cash flows from operating
growth investments. activities less cash flows used in investing activities (excluding net cash
flows used in cash management instruments and loan guarantees).

Cash flows from operating activities 2,741 2,765
Routine capital expenditure (maintenance, IT, dealerships, etc.) (1,032) (985)
AVAILABLE CASH FLOW 1,709 1,780
Growth investments (739) (826)
Acquisitions (476) (16)
Other 168 86
FREE CASH FLOW 662 1,024
After deducting €1,032 million in routine capital expenditure, (SIPH, Lehigh Technologies), solutions (NexTraq and Copiloto
available cash flow was strongly positive in 2017, at €1,709 million. Satelital) and Experiences (40% of Robert Parker Wine Advocate
Lifted by the available cash flow, free cash flow ended the year and 40% of Le Fooding).
at €662 million, after €739 million in growth investments and
€476 million in acquisitions, primarily in such areas as materials
3.5.4 STRUCTURAL FREE CASH FLOW

To track its intrinsic performance, Michelin has set targets based on its structural free cash flow, which is defined as free cash flow before
acquisitions, adjusted for the impact of raw materials prices on trade receivables, trade payables and inventories, and the payment of
interests on the zero-coupon 2017 OCEANE convertible bonds at maturity.
FREE CASH FLOW 662 1,024
Acquisitions 476 16
FREE CASH FLOW EXCLUDING ACQUISITIONS & DISPOSALS 1,138 1,040
Impact of raw materials costs on working capital requirement 178 (79)
Interest paid at maturity on the zero-coupon OCEANE 2017 convertible bonds 193 0
STRUCTURAL FREE CASH FLOW 1,509 961

Return On Capital Employed (ROCE) 3
3.6 RETURN ON CAPITAL EMPLOYED (ROCE)
Achieving an annual return on capital employed (ROCE) after tax Non-euro currencies are translated at year-end rates for balance
and at constant scope of consolidation of at least 15% by 2020 is sheet items and average rates for income statement items.
one of Michelin’s strategic objectives. If ROCE is greater than weighted average cost of capital (WACC)
ROCE is measured as: for the year, then the Group has created value during the period.
net operating profit after tax (NOPAT), calculated at a standard The Group’s weighted average cost of capital (WACC) is based on
tax rate of 31%, corresponding to the Group’s average effective a theoretical balance between equity and debt. The rates used are
tax rate; determined (i) for equity capital, based on the yield on Michelin
divided by the average economic assets employed during the shares expected by the stock markets; and (ii) for debt capital, on the
year, i.e., all of the Group’s intangible assets, property, plant market risk-free rate plus the risk premium applied to Michelin by
and equipment, loans and deposits, and net working capital the markets, as adjusted for the tax effect. Based on this calculation
requirement. method, 2017 WACC remained below the 9% target the Group
uses to assess its value creation.

Average standard income tax rate used for ROCE calculation 31% 31%
Net operating profit after tax (NOPAT) 1,892 1,857
Intangible assets and property, plant and equipment 12,760 12,646
Loans and deposits 74 70
Investments in associates and joint ventures 356 309
Total non-current financial assets 13,191 13,025
Working capital requirement 2,708 2,873
Economic assets at December 31 15,899 15,898
Average economic assets 15,898 15,405
Consolidated ROCE 11.9% 12.1%
Passenger car/Light truck tires & related distribution ROCE 12.5% 12.9%
Truck tires & related distribution ROCE 6.7% 8.1%
Specialty businesses ROCE 22.2% 17.9%
Given the evolutions so far known in the US tax law, the standard tax rate is reduced to 28%, and the ROCE thus measured is 12.4%.
3.7 OUTLOOK
In 2018, the Passenger car/Light truck and Truck tire markets are increase in raw materials prices. Based on January 2018 exchange
expected to experience modest growth over the year, while the rates, the currency effect would reduce full-year operating income
mining tire, agricultural original equipment and earthmover original from recurring activities by around €300 million.
equipment markets should remain buoyant. In this environment, Michelin’s objectives for 2018 are volume growth
Given the market conditions, price management will make it possible in line with global market trends, operating income from recurring
to generate a net positive effect from changes in the price mix and activities exceeding the 2017 figure at constant exchange rates, and
raw materials costs, assuming an estimated €50 to €100 million structural free cash flow of more than €1.1 billion.

Share Information
3.8 SHARE INFORMATION
3.8.1 THE MICHELIN SHARE
Traded on the NYSE Euronext Paris stock Average daily trading volume
exchange 503,534 shares since January 1, 2017.
Compartment A;
Eligible for the SRD deferred settlement system; Indices
ISIN: FR 0000121261; The Michelin share is included in two leading stock market indices.
Par value: €2.00; As of December 31, 2017, it represented:
Traded in units of: 1. 1.87% of the CAC 40 index;
0.82% of the Euronext 100 index.
Market capitalization Michelin is also included in the main Socially Responsible Investing
(SRI) Indices:
€21,452 million at December 31, 2017.
Dow Jones Sustainability Index (DJSI) Stoxx for European sustainability
leaders and DJSI World for global sustainability leaders;
Ethibel Sustainability Index (ESI) Europe.
SHARE PERFORMANCE
(Closing price at December 31, 2017)
Monthly trading volume Michelin CAC 40 DJ Stoxx Auto Millions

of shares
260 50
240
220
40
200
180
160
30
140
120
100 20
80
60
10
40
20
0 0
Dec. June Dec. June Dec. June Dec. June Dec. June Dec.
2012 2013 2013 2014 2014 2015 2015 2016 2016 2017 2017

Share Information 3
3.8.2 SHARE DATA
Share price (in €) 2017 2016 2015 2014 2013 2012

High 128.40 106.80 103.90 94.33 84.71 72,58
Low 98.93 77.40 71.60 65.10 57.23 45,32
High/low ratio 1.30 1.38 1.45 1.45 1.48 1,60
Closing price, end of period 119.55 105.70 87.90 75.27 77.25 71,59
Average share price over the period 115.65 91.97 90.26 82.10 72.28 57.15
Change over the period 13.10% +20.3% +16.8% -2.6% +7.9% + 56,74 %
Change in the CAC 40 index over the period 9.26% +4.9% +8.5% -0.5% +18.0% + 15,23 %
Market value (at end of period, in € billion) 21.45 19.03 15.98 13.98 14.35 13,07
Average daily trading volume over the period 503,534 554,262 719,709 662,063 719,464 913,167
Average shares outstanding 182,212,806 182,122,667 185,960,394 185,954,390 184,901,269 181,099,501
Volume of shares traded over the period 128,401,095 142,445,218 184,245,619 168,826,055 183,463,371 233,770,814
Share turnover ratio 71% 78% 99% 91% 99% 129%
3.8.3 PER-SHARE DATA
(in € per share, except ratios) 2017 2016 2015 2014 2013
Net assets per share 62.7 59.1 52.5 51.3 49.8
Basic earnings per share 9.39 9.21 6.28 5.52 6.08
Diluted earnings per share(1) 9.34 9.03 6.19 5.45 5.98
Price-earnings ratio 12.7 11.5 14.0 13.6 12.7
Dividend for the year 3.55* 3.25 2.85 2.50 2.50
Pay-out ratio 36.0% 36.5% 37.0% 40.6% 35.0%
Yield(2) 3.0% 3.1% 3.2% 3.3% 3.2%
(1) Earnings per share adjusted for the impact on net income and on average shares outstanding of the exercise of outstanding dilutive instruments.
(2) Dividend/share price at December 31.
* To be submitted to shareholder approval at the Annual Meeting on May 18, 2018.
The goal of the Group’s dividend policy is to pay out at least 35% of consolidated net income excluding non-recurring items for the year.
3.8.4 CAPITAL AND OWNERSHIP STRUCTURE

At December 31, 2017, Michelin’s share capital amounted to €359,041,974.
At December 31, 2017 At December 31, 2016
Number of Shares Voting rights Number of Shares Voting rights
shareholders outstanding outstanding shareholders outstanding outstanding
French institutional investors 25.3% 27.3% 22.7% 25.4%
Non-resident institutional 2,923 5,023
investors 60.3% 60.3% 63.1% 61.4%
Individual shareholders 94,337 12.4% 9.7% 109,410 12.1% 10.6%
Employee Shareholder Plan 74,397 2.0% 2.7% 79,284 2.1% 2.6%
247,029,830 241,849,548
179,520,987 VOTING 180,066,121 VOTING
TOTAL 171,657 ACTIONS* RIGHTS 193,717 SHARES* RIGHTS
* All fully paid up.
Shares held in the same name for at least four years carry double voting rights.

Highlights
3.9 HIGHLIGHTS
3.9.1 PERFORMANCE
Michelin has purchased NexTraq, a telematics solution Our reputation is based on several cornerstones: the quality of our
for utility vehicles products, the fruit of our innovation, the many services designed
(June 14, 2017) – Michelin has purchased NexTraq, a subsidiary of to make our customers’ lives easier and our commitments to a
Fleetcor Technologies. NexTraq provides solutions which improve responsible future.
driver safety, fuel management and fleet productivity. It has around
Capital reduction
7,000 fleet management customers and 116,000 private subscribers
in North America. This purchase bolsters our presence in fleet (December 14, 2017) – In 2017, Michelin continued its share buyback
services, currently a flourishing market. programme for €101 million.
The redeemed shares have been cancelled in full. On December 15,
A global reorganization project to better serve 2017, the share capital was reduced to 179,438,277 shares.
our customers
(June 22, 2017) – On March 16, 2017 Michelin launched a new Michelin and Sumitomo Corporation to form second
organization project to reinforce its growth. The objective is to largest wholesaler in US and Mexico
meet new customer expectations, improve satisfaction, simplify our (January 3, 2018) – To ensure better availability of their products
operating methods and accelerate the Group’s digital technology. and improved delivery to their customers in the United States and
This new organization will encourage close relations with our Mexico, Michelin and Sumitomo Corporation of Americas are
customers all over the world and will focus on recruiting highly announcing the merger of their wholesale and retail activities. This
skilled professionals in high-tech and digital equipment. will create the second largest tire wholesaler on North American
soil, in a joint venture held in equal parts. The entity will operate
Michelin and Robert Parker’s Wine Advocate join forces under a new identity, NTW.
(July 5, 2017) – Michelin purchased 40% of Robert Parker’s Wine
Advocate (RPWA), world leader in wine tasting and scoring. Founded Success for the non-dilutive convertible bond issue
by American Robert Parker in 1978, RPWA is today the international by Michelin
reference for wine reviews with its famous scoring system from (January 5, 2018) – Michelin announced the launch of another
50 to 100 points. With this purchase, Michelin is bolstering its non-dilutive convertible bond issue maturing January 10, 2023 for
position on the fine food market, beginning with the Asian and a nominal amount of USD 600 million. They will be redeemable in
North American markets. cash only, and will therefore not give rise to the issue of new shares
or the hand-over of existing Michelin shares.
The MICHELIN brand: trust and progress
(July 27, 2017) – For the third consecutive year, the Reputation Institute,
which ranks the world’s brands according to their reputation, has
put Michelin at the head of the French rankings and 13th worldwide.
3.9.2 PRODUCTS – INNOVATION – SERVICES
3.9.2 a) Passenger car and Light truck tires MICHELIN CrossClimate+: better performance every
season, for longer
and related distribution
(February 27, 2017) – Like its predecessor, the new MICHELIN
MICHELIN Pilot Sport 4S: a premium tire in every sense CrossClimate+ tire provides the qualities of a summer tire plus greater
(January 19, 2017) – Designed on the back of our competition traction on snow-covered ground thanks to innovative rubber, a
experience and partnerships with manufacturers, the MICHELIN unique tread and high performance siping. But is its performance
Pilot Sport range is now a benchmark for sports sedans. Today it consistent from the first to the last kilometre? The answer is yes!
is joined by a new model, the MICHELIN Pilot Sport 4S, which is
Concept tires: our Vision for the future
ahead of all its rivals in track trials. This is a premium tire right down
to its look and is available in 35 different sizes. (June 13, 2017) – Michelin presented its Vision wheel concept for
future tires at Movin’On. This wheel was designed using our latest
innovations (3D metal printing, bio-materials and smart solutions).
It is an airless wheel, completely connected, with a “rechargeable”
tread, produced on demand by 3D printing.

Highlights 3
MICHELIN ACORUS: a wheel that bends but won’t 3.9.2 c) Specialty businesses
break
(September 27, 2017) – Our engineers have developed the MICHELIN // Earthmover tires
ACORUS technology to make tires safer and more resistant. Rubber
expanders are fitted to a slightly narrower wheel. In partnership MICHELIN unveils its new generation of civil
with Maxion, world leader in wheels, today we are offering a new engineering tire management systems
“flexible” wheel. It means the wheel-tire block is more shock-resistant (October 4, 2017) – Michelin presents the latest generation of its tire
and reduces the risks of puncture. management system for the mining industry: MEMS®4. Michelin is
transforming its current offering into a comprehensive monitoring
MICHELIN sells its stake in Double Coin (Anhui) Warrior and reporting platform for tires and trucks integrating vehicle
Tire Co. Ltd. cycle analysis. Based on an approved data capture tool (readable
(November 20, 2017) – In order to strengthen their respective by Android mobile devices) that interfaces with a new web-based
brands, Michelin and Huayi Group have decided to separate and software platform, this improvement was made feasible by the
terminate the joint venture Double Coin (Anhui) Warrior Tire addition of real-time accelerometer and GPS data.
Co. Ltd, established in 2011, to help the Warrior brand improve
its competitiveness in the market. This transaction is in the best MICHELIN® X®TRA LOAD: record productivity for rigid
interests of Michelin, Double Coin and Warrior Tire Co. Ltd and dump trucks
will contribute to the sustainable growth of each. (July 3, 2017) – Productivity is the number one challenge for rigid
dump truck users. With the new MICHELIN® X®TRA LOAD range,
we offer an increase in load capacity and an extended lifespan.
3.9.2 b) Truck tires and related distribution Operators in quarries and mines can therefore transport a tonnage
rate never reached before, continuously.
MICHELIN X® FORCE™ ZL: the new, genuinely tough
all-terrain tire.
// Agricultural tires
(February 14, 2017) – Designed for light civilian and military vehicles
(fire trucks, tactical vehicles, etc.), the new MICHELIN X® FORCE™ MICHELIN ROADBIB: the farming tire fond of road
ZL 335/80R20 tire is the toughest of its kind. More damage-resistant,
it can drive flat over 100 km and can support up to 3,350 kg of (June 13, 2017) – Michelin has co-designed its new agricultural
load per tire, or 775 kg more than its predecessor at identical tire with contractors to meet their specific requirements. The new
performance levels! MICHELIN ROADBIB tire, unique in its category, takes into account
the fact that tractors travel on the road 50% of the time for those
Michelin Sascar Expands its Fleet Services in Mexico customers. Its revolutionary tread increases of 60% the footprint
on the road compared to a traditional agricultural lugs’ tire. This
(March 2017) – Following the acquisition of the commercial fleet
tire provides stability, comfort and 25% more longevity.
management assets of Copiloto Satelital, Michelin Sascar Mexico
has become the service provider for Copiloto’s fleet management MICHELIN acquires PTG and Teleflow
customers.
(November 13, 2017) – Michelin announces the acquisition of
Based in Mexico, Copiloto offers fleet management solutions such PTG and Teleflow, two industry leaders in the field of central tire
as surveillance, accident prevention, cost control and other services inflation systems (CTIS), enabling farmers to manage their tire
to commercial fleet customers in Mexico, primarily through its pressures depending on the terrain and conditions of use. With
proprietary Internet platform. these acquisitions, Michelin is becoming the leader of CTIS, with
a huge challenge in terms of soils protection and productivity for
MICHELIN X® MULTI™: a new generation of heavy truck agriculture. The first concrete fruit of this collaboration is MICHELIN
tires to go even further ZEN@TERRA solution, presented during Agritechnica fair in Hannover.
(May 22, 2017) – The MICHELIN X® MULTI™ range of heavy truck
tires for short and mid-distance transport companies offers tires // Two-wheel tires
designed to combine the lowest cost per mile with exceptional grip
in all weather conditions. Equipped with an RFID chip, MICHELIN Four new MICHELIN mountain bike tire ranges
X® MULTI™ tires provide access to a range of digital services for
(March 13, 2017) – In terms of mountain bike tires, our philosophy
tracking operations carried out on each tire.
of “one use, one terrain, one tire” has led us to design four new
Michelin solutions launches four digital services, ranges, two dedicated to cross-country and two to all mountain.
revolutionizing fleet management Developed with competition riders, these two type-of-use ranges
cutting-edge technology and make sure that everyone can find
(November 23, 2017) – At Solutrans 2017, MICHELIN solutions the best performing and most suitable tire for how they ride their
presented four innovative digital services designed to help drivers mountain bike.
and fleet managers get the most out of their assets and their
businesses. MyBestRoute chooses the best route; MyInspection
digitizes and standardizes vehicle inspections; MyTraining facilitates
driver training; MyRoadChallenge makes driving fun and motivates
drivers to drive safely.

Highlights
MICHELIN Enduro: a new range with more grip tire’s pressure information can now be seen on a reader connected
for the long-term to a smartphone and a database. PresSense helps accelerate and
(August 28, 2017) – Rocks, sand, grass... The Enduro is torture for simplify all the necessary maintenance operations.
tires. To cope with these tests, Michelin has developed a new range
of Enduro bike tires, making good use of our latest innovations. // Michelin Travel Partner
The result: better grip, of course, but also an improved lifespan
and greater robustness. Available in medium and hard to adapt to Michelin in the Fooding® era
different terrains, they will take you even further. (September 1, 2017) – Since 2000, the Guide du Fooding® has
offered a different approach to gastronomy, which complements
// Aircraft tires the Michelin Guide. Today, Michelin has acquired a 40% share in
the Guide du Fooding®, establishing a natural partnership. We can
Michelin and Safran develop the first smart tire now recommend exclusive and diverse gastronomic experiences to
for planes our customers.
(June 20, 2017) – Inspection operations for plane tires have always
been complex. PresSense, a pressure sensor integrated in the tire
developed by Michelin and Safran, is changing everything. The
3.9.3 SUSTAINABLE DEVELOPMENT
General Motors and Michelin: a shared vision Rubberway: an app for mapping good practices
of sustainable rubber cultivation in the natural rubber industry
(May 18, 2017) – General Motors has published guidelines to make sure (September 7, 2017) – Michelin promotes responsible and sustainable
that tire suppliers privilege responsible rubber cultivation. We praise natural rubber throughout the world. To measure the application of
this decision which reflects our own commitments: implementation of good practices throughout the value chain - production, processing,
a responsible and natural rubber policy, assessment of our suppliers’ transport - we have developed the Rubberway phone app. It picks up
CSR performance, mapping operators in the sector’s value chain, information on working methods from all involved in the industry, in
reforestation project in partnership with the WWF... Our approaches complete transparency, encouraging genuine traceability of rubber
converge to lead all of the industry towards virtuous practices. from plantation to factory.
3.9.4 COMPETITION
Roborace: a race for intelligence our Motorsports teams’ ability to adapt to the constant changes in
(January 25, 2017) – This year there will be autonomous electric regulations and vehicles. As it is every year, the 24 Hours of Le Mans
vehicle races in parallel with the Formula-E championship. Michelin race was a forum for successfully testing the latest tire innovations
is one of the three official partners to the competition called which will be transferred from track to road over the coming years.
“Roborace”. Competition vehicles must use tires that can be
FIM Moto-e World Cup joins forces with Michelin
fitted to mass-produced vehicles, making this new championship
a laboratory for vehicles of the future. (December 14, 2017) – After MotoGP comes Formula-E... Michelin
becomes the official tire supplier of the FIM (International Motorcycle
24 Hours of Le Mans: 20/20 Federation) Moto-e World Cup, the first sports discipline for fully
(June 19, 2017) – With its victory in the 2017 edition of 24 Hours electric motorcycles with zero emissions and which will kick off in
of Le Mans, the No. 2 Hybrid Porsche 919 gave Michelin its 2019. This will be a valuable development laboratory for innovations
20th consecutive win in Sarthe. 20 years of victories testifying to that will be found in the standard Michelin tires of tomorrow.

4
FINANCIAL HIGHLIGHTS
4.1 MARKETS 106
4.2 SALES 108
4.3 EARNINGS 110
4.4 REPORTING SEGMENTS 112

4.4.1 Passenger Car and Light Truck Tires and Related Distribution 112
4.4.2 Truck Tires and Related Distribution 113
4.4.3 Specialty Businesses 114
4.5 COST STRUCTURE 115
4.6 CASH FLOW AND BALANCE SHEET 120
4.7 CONSOLIDATED KEY FIGURES AND RATIOS 124

4 Financial highlights
Markets
4.1 MARKETS
THE ORIGINAL EQUIPMENT CAR THE REPLACEMENT CAR

AND LIGHT TRUCK TIRE MARKET BY REGION AND LIGHT TRUCK TIRE MARKET BY REGION
(in millions of tires) (in millions of tires)
Europe(1) South America Europe(1) South America

North America(2) Africa India Middle-East North America(2) Africa India Middle-East
Asia (excluding India) Asia (excluding India)
250 400
225
350
200
300
175
150 250
125 200
100
150
75
100
50
25 50
0 0
2013 2014 2015 2016 2017 2013 2014 2015 2016 2017
1) Including Russia and Turkey. (1) Including Russia and Turkey.
(2) United States, Canada and Mexico. (2) United States, Canada and Mexico.
THE ORIGINAL EQUIPMENT TRUCK TIRE MARKET THE REPLACEMENT TRUCK TIRE MARKET
BY REGION BY REGION
(in millions of new tires) (in millions of new tires)
Europe(1) South America Europe(1) South America

North America(2) Africa India Middle-East North America(2) Africa India Middle-East
Asia (excluding India) Asia (excluding India)
35 100
30
80
25
60
20
15
40
10
20
5
0 0
2013 2014 2015 2016 2017 2013 2014 2015 2016 2017
(1) Including Russia and Turkey. (1) Including Russia and Turkey.
(2) United States, Canada and Mexico. (2) United States, Canada and Mexico.

Financial highlights
Markets 4
THE EARTHMOVER MINING TIRE MARKET THE EARTHMOVER INFRASTRUCTURE

(base 100 in 2013 in number of tires) & ORIGINAL EQUIPMENT TIRE MARKET
(base 100 in 2013 in number of tires)
120 120
100 100
80 80
60 60
40 40
20 20
0 0
2013 2014 2015 2016 2017 2013 2014 2015 2016 2017
THE AGRICULTURAL TIRE MARKET

(base 100 in 2013 in number of tires in Europe and North America)
120
100
80
60
40
20
0
2013 2014 2015 2016 2017
Michelin estimates.

Sales
4.2 SALES
SALES VOLUME
(in tons)
+13.4%
+6.7%
+3.2%
+2.1% +2.6%
+0.7%
-0.0%
-2.9%
-6.4%
-14.8%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
NET SALES NET SALES BY REPORTING SEGMENT – BREAKDOWN

(in € million) (in value)
Passenger car/Light Truck*

Truck*
21,960 Specialty businesses
21,199 20,907
20,247 2017 57% 28% 15%
19,553
2016 58% 28% 14%
-1.4% +5.0%
+8.4% 2015 57% 29% 14%
-3.4%
2014 54% 31% 15%
2013 53% 32% 15%

2013 2014 2015 2016 2017 * And related distribution.

Sales 4
NET SALES BY REGION – BREAKDOWN SALES BY REGION – BREAKDOWN

(in value) (in tons)
Europe (incl. Central and Eastern) Europe (incl. Central and Eastern)
North America (incl. Mexico) North America (incl. Mexico)
Other Other
2017 38% 37% 25% 2017 36% 36% 27%
2016 39% 37% 24% 2016 34% 38% 28%
2015 39% 38% 23% 2015 37% 38% 25%
2014 41% 35% 24% 2014 36% 38% 26%
2013 40% 35% 25% 2013 36% 37% 27%
BREAKDOWN OF SALES BETWEEN MATURE* AND FAST-GROWING MARKETS

(in tons)
Mature markets
Fast-growing markets
2017 64% 36%
2016 65% 35%
2015 67% 33%
2014 67% 33%
2013 66% 34%
* Mature markets: United States, Canada, Western Europe and Japan.

Earnings
4.3 EARNINGS
ANALYSIS OF OPERATING EXPENSES

(as a % of 2017 net sales)
12.5% 23.6%
Operating income Raw materials
from recurring activities
25.7% 26.7%
Other costs Employee
benefit costs
6.1% 5.4%
Depreciation, amortization, Transportation of goods
impairment charges
OPERATING INCOME OPERATING MARGIN

FROM RECURRING ACTIVITIES FROM RECURRING ACTIVITIES
(in € million) (as a % of net sales)
2,692 2,742 12.9%

2,577 12.2% 12.5%
11.0% 11.1%
2,234 2,170
+1.9%
+4.5%
+18.8%
-2.9%
2013 2014 2015 2016 2017 2013 2014 2015 2016 2017

Earnings 4
NET INCOME BASIC EARNINGS PER SHARE

(in € million) (in €)
1,667 1,693 9.21 9.39
1,127 1,163 6.28

6.08
1,031 5.52
2013 2014 2015 2016 2017 2013 2014 2015 2016 2017
DIVIDEND PER SHARE

(in €)
3.55*
3.25
2.85
2.50 2.50
2.40
2.10
1.78
1.00 1.00
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
* Subject to approval by the Annual Meeting of May 18, 2018.

Reporting Segments
4.4 REPORTING SEGMENTS
4.4.1 PASSENGER CAR AND LIGHT TRUCK TIRES AND RELATED DISTRIBUTION
BREAKDOWN OF SALES BETWEEN MATURE* NET SALES

AND FAST-GROWING MARKETS (in € million)
(in tons)
Mature markets
2017 68% 32% 12,028 12,105 12,479

10,693 10,498
2016 70% 30%
+0.6% +3.1%
+14.6%
2015 73% 27%
-1.8%
2014 75% 25%
2013 74% 26%
* Mature markets: United States, Canada, Western Europe and Japan. 2013 2014 2015 2016 2017

1,585 13.1%
1,552 12.4%
1,384 11.5%
10.2% 10.5%
1,086 1,101
-2.1%
+14.6%
+25.7%
+1.4%
2013 2014 2015 2016 2017 2013 2014 2015 2016 2017

Reporting Segments 4
4.4.2 TRUCK TIRES AND RELATED DISTRIBUTION

(in tons)
Mature markets
6,425 6,229
2017 63% 37% 6,082 5,966 6,123
2016 62% 38%
2015 63% 37% -5.3% +2.4% -4.2% +2.6%
2014 60% 40%
2013 58% 42%

645 10.4%
9.7%
580
503 495 497 7.8% 8.1% 8.1%
-10.1%
+30.3%
-14.3%
-1.6%
2013 2014 2015 2016 2017 2013 2014 2015 2016 2017

Reporting Segments
4.4.3 SPECIALTY BUSINESSES

(in tons)
Mature markets
2017 48% 52% 3,358

3,129
2,973 2,942 2,836
2016 50% 50%
2015 51% 49% +18.4%

-5.0%
-1.0% -3.6%
2014 53% 47%
2013 53% 47%

20.6% 20.6%
693 19.3% 18.6% 18.6%
645
574 548 527
+31.4%
-11.0%
-4.5%
-3.8%
2013 2014 2015 2016 2017 2013 2014 2015 2016 2017

Cost Structure 4
4.5 COST STRUCTURE
RAW MATERIAL COST

(in €, in 2017)
26%
Synthetic rubber
16%
Fillers
28%
Natural rubber 14%
Chemicals
7% 9%
Textile Steelcord
RAW MATERIAL COST RAW MATERIAL COST

28.0%
5,668 25.4%
5,172 23.6%
4,958 22.2%
4,711 20.6%
4,316
-12.5%
-5.0% +19.8%
-8.4%
2013 2014 2015 2016 2017 2013 2014 2015 2016 2017

Cost Structure
NATURAL RUBBER PRICES* BUTADIENE PRICES*

(in $/kg)
RSS 3 US Gulf (USD/t)

TSR 20 Europe (EUR/t)
7 4,500
6 4,000
3,500
5
3,000
4
2,500
3 2,000
1,500
2
1,000
1
500
0 0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
* Monthly average. * Monthly average.
BRENT OIL PRICES* STYRENE PRICES*

(in $/bbl) (in €/ton)
160 1,800
140 1,600
120 1,400
1,200
100
1,000
80
800
60
600
40 400
20 200
0 0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
* Monthly average. * Monthly average.

Cost Structure 4
EMPLOYEE BENEFIT COSTS EMPLOYEE BENEFIT COSTS

5,785 5,871 27.1% 27.3%

5,542 26.1% 26.5% 26.7%
5,292 5,292
-4.2% +5.9%
+9.3%
+0.0%
2013 2014 2015 2016 2017 2013 2014 2015 2016 2017
NUMBER OF EMPLOYEE
(full-time equivalent employees at December 31)
107,800
106,700
105,700 105,800 105,700
+2.0%
+0.9% -0.8%
-0.1%
2013 2014 2015 2016 2017

Cost Structure
EMPLOYEES BY REGION
(full-time equivalent employees at December 31)
2017 2016 2015 2014 2013

Europe 61,900 61,200 61,400 61,300 62,100
North America 21,800 22,000 21,700 21,900 21,300
Asia (excluding India) 15,000 14,800 15,000 15,400 15,400
South America 7,400 6,000 6,000 6,300 5,100
Africa India Middle-East 1,700 1,700 1,700 1,800 1,800
TOTAL 107,800 105,700 105,800 106,700 105,700
including mature countries(1) 64% 67% 67% 66% 68%
including fast-growing countries 36% 33% 33% 34% 32%
(1) Mature countries: United States, Canada, Western Europe, Japan.
EMPLOYEES BY JOB CATEGORY

(total workforce at December 31)
2017 2016 2015 2014 2013

Production workers 61.9% 61.5% 61.5% 62.4% 61.4%
Administrative and technical staff 29.4% 30.0% 30.3% 30.0% 31.0%
Managers 8.7% 8.5% 8.2% 7.6% 7.6%

Cost Structure 4
TRANSPORTATION COSTS TRANSPORTATION COSTS

1,152 1,183 5.5%

1,129 5.3% 5.4%
5.1% 5.2%
1,030 1,020
+2.7%
+2.1%
+10.7%
-0.9%
2013 2014 2015 2016 2017 2013 2014 2015 2016 2017
RESEARCH AND DEVELOPMENT COSTS RESEARCH AND DEVELOPMENT COSTS

718 3.4% 3.4%

689 3.2% 3.3%
643 656 641
2.9%
+5.0% +4.2% -10.7%

+2.0%
2013 2014 2015 2016 2017 2013 2014 2015 2016 2017

Cash Flow and Balance Sheet
4.6 CASH FLOW AND BALANCE SHEET
EBITDA FROM RECURRING ACTIVITIES(1) EBITDA FROM RECURRING ACTIVITIES(1)

4,084 4,087 19.5%

3,934 18.6% 18.6%
16.2% 16.8%
3,285 3,286
+3.8% +0.1%
+19.7%
+0.0%
2013 2014 2015 2016 2017 2013 2014 2015 2016 2017
CASH FLOWS FROM OPERATING ACTIVITIES CASH FLOWS FROM OPERATING ACTIVITIES
3,089 15.3%
2,695 2,765 2,741 13.2%

12.9% 12.7% 12.5%
2,522
2013 2014 2015 2016 2017 2013 2014 2015 2016 2017
(1) This indicator is as defined in note 3.7.2 to the consolidated financial statements.

Cash Flow and Balance Sheet 4
INVENTORIES INVENTORIES
4,480 4,508 21.5% 21.4%

4,203 4,289 20.2% 20.5%
3,979 19.7%
+4.5% +0.6%
+5.6% +2.1%
2013 2014 2015 2016 2017 2013 2014 2015 2016 2017
TRADE RECEIVABLES TRADE RECEIVABLES

3,042 3,084 14.6%

14.0%
2,743 13.1% 12.9%
2,517 2,569 12.4%
+1.4%
+10.9%
+6.8%
+2.1%
2013 2014 2015 2016 2017 2013 2014 2015 2016 2017

Cash Flow and Balance Sheet
CAPITAL EXPENDITURE CAPITAL EXPENDITURE

(in € million €) (as a % of net sales)
1,980 9.8% 9.6%

1,883
1,804 1,811 1,771 8.7%
8.5%
8.1%
-4.9%
-4.2%
+0.4% -2.2%
2013 2014 2015 2016 2017 2013 2014 2015 2016 2017
FREE CASH FLOW(1) (AFTER CAPITAL EXPENDITURE STRUCTURAL FREE CASH FLOW(1)
AND BEFORE PAYMENT OF DIVIDENDS) (in € million)
(in € million)
1,154 1,509
1,024
961
653 662 833
749 717
322
2013 2014 2015 2016 2017 2013 2014 2015 2016 2017
(1) This indicator is defined in section 3.5.3 of the present document.

Cash Flow and Balance Sheet 4
NET DEBT(1) NET DEBT-TO-EQUITY RATIO(1)

(in € million)
1,008 11%
944
9%
707 716
7%
6%
2%
142
2013 2014 2015 2016 2017 2013 2014 2015 2016 2017
NET DEBT(1)-TO-EBITDA RATIO(2) RETURN ON CAPITAL EMPLOYED(3)

(after tax)
11,9% 12.2% 12.1% 11.9%

11.1%
0.26
0.23
0.22
0.18
0.04
2013 2014 2015 2016 2017 2013 2014 2015 2016 2017
(1) This indicator is defined in note 26 to the consolidated financial statements.

(2) This indicator is defined in note 3.7.2 to the consolidated financial statements.
(3) This indicator is defined in section 3.6 of the present document.

Consolidated Key Figures and Ratios
4.7 CONSOLIDATED KEY FIGURES AND RATIOS
(in € million) 2017 2016 2015 2014 2013

Net sales 21,960 20,907 21,199 19,553 20,247
% change +5.0% -1.4% +8.4% -3.4% -5.7%
Total employee benefit costs 5,871 5,542 5,785 5,292 5,292
as a % of sales 26.7% 26.5% 27.3% 27.1% 26.1%
Number of employees (full time equivalent) 107,800 105,700 105,800 106,700 105,700
Research and development expenses 641 718 689 656 643
as a % of sales 2.9% 3.4% 3.3% 3.4% 3.2%
EBITDA from recurring activities (1) 4,087 4,084 3,934 3,286 3,285
Operating income from recurring activities 2,742 2,692 2,577 2,170 2,234
Operating margin from recurring activities 12.5% 12.9% 12.2% 11.1% 11.0%
Operating income 2,631 2,791 2,207 1,991 1,974
Operating margin 12.0% 13.3% 10.4% 10.2% 9.7%
Cost of net debt 176 203 184 130 94
Other financial income and expenses (0) 20 (30) (43) (15)
Income before taxes 2,354 2,464 1,869 1,651 1,702
Income tax 661 797 706 620 575
Effective tax rate 28.1% 32.3% 37.8% 37.5% 33.8%
Net income 1,693 1,667 1,163 1,031 1,127
as a % of sales 7.7% 8.0% 5.5% 5.3% 5.6%
Dividends(2) 585 522 463 464 438
Cash flows from operating activities 2,741 2,764 2,695 2,522 3,089
as a % of sales 12.5% 13.2% 12.7% 12.9% 15.3%
Gross purchases of intangible assets and PP&E 1,771 1,811 1,804 1,883 1,980
as a % of sales 8.1% 8.7% 8.5% 9.6% 9.8%
Net debt (3) 716 944 1,008 707 142
Equity 11,261 10,646 9,542 9,523 9,256
Gearing 6% 9% 11% 7% 2%
Net debt(3) / EBITDA(1) 0.18 0.23 0.26 0.22 0.04
Cash flows from operating activities / Net debt(3) NS NS NS NS NS
Operating income from recurring activities / Net interest charge(4) 15.9 13.3 12.8 16.0 15.7
Free cash flow(5) 662 1,024 653 322 1,154
ROE(6) 15.0% 15.7% 12.2% 10.8% 12.2%
ROCE(7) 11.9% 12.1% 12.2% 11.1% 11.9%
Per share data (in €)
Net assets per share(8) 62.7 59.1 52.5 51.3 49.8
Basic earnings per share 9.39 9.21 6.28 5.52 6.08
Diluted earnings per share 9.34 9.03 6.19 5.45 5.98
Price-earnings ratio(9) 12.7 11.5 14.0 13.6 12.7
Dividend for the year(10) 3.55 3.25 2.85 2.50 2.50
Pay-out ratio(11) 36.0% 36.5% 37.0% 40.6% 35.0%
Yield(12) 3.0% 3.1% 3.2% 3.3% 3.2%
Share turnover rate(13) 71% 78% 99% 91% 99%
(1) As defined in note 3.7.2 to the consolidated financial statements.
(2) Including the dividends paid in shares.
(3) Net debt: financial liabilities - cash and cash equivalents (excluding cash flows from cash management financial assets and borrowing collaterals) +/- derivative assets,
as defined in note 26 to the consolidated financial statements.
(4) Net interest charge: interest financing expenses - interest income from cash and equivalents.
(5) Free cash flow: cash flows from operating activities - cash flows from investing activities (excluding cash flows from cash management financial assets and borrowing
collaterals), as defined in section 3.5.3.
(6) ROE: net income attributable to shareholders/shareholders’ equity excluding non-controlling interests.
(7) ROCE: Net Operating Profit After Tax (NOPAT)/capital employed (intangible assets and PP&E + long-term financial assets + working capital requirement), as defined
in section 3.6.
(8) Net assets per share: net assets/number of shares outstanding at the end of the period.
(9) P/E: Share price at the end of the period/basic earnings per share.
(10) Subject to approval at the Annual Shareholders Meeting on May 18, 2018.
(11) Distribution rate: Dividend/Net income.
(12) Dividend yield: dividend per share/share price at December 31.
(13) Share turnover rate: number of shares traded during the year/average number of shares outstanding during the year.

5
CONSOLIDATED
FINANCIAL STATEMENTS
AS AT DECEMBER 31, 2017
Consolidated Statement of Comprehensive Income 128
Consolidated Statement of Changes in Equity 130

5 Consolidated Financial Statements as at December 31, 2017
CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2017
DETAILED SUMMARY OF THE NOTES OF THE CONSOLIDATED STATEMENTS
Note 1 General Information 132 Note 19 Inventories164

Note 2 Basis of Preparation 132 Note 20 Trade Receivables 164
Note 3 Accounting Policies 135 Note 21 Current Financial Assets 165
Note 4 Financial Risk Management 143 Note 22 Other Current Assets 165
Note 5 Segment Reporting 148 Note 23 Cash and Cash Equivalents 165
Note 6 Expenses by Nature 149 Note 24 Share Capital and Share Premiums 166
Note 7 Employee Benefits Costs 150
Note 25 Reserves167
Note 8 Other Operating Income and Expenses
Note 26 Financial Liabilities 168
from Recurring Activities 150
Note 9 Operating Income/(loss) from Non-Recurring Note 27 Employee Benefit Obligations 171
Activities150 Note 28 Share-Based Payments 185
Note 10 Cost of Net Debt and Other Financial Note 29 Provisions and Other Non-Current Liabilities 187
Income and Expenses 151
Note 30 Other Current Liabilities 188
Note 11 Income Tax 152
Note 31 Details of the Cash Flow Statement 189
Note 12 Earnings per Share 153
Note 32 Commitments and Contingencies 190
Note 13 Goodwill and Intangible Assets 154
Note 14 Property, Plant and Equipment 157 Note 33 Change in the Scope of Consolidation
and in the Percentage of Interest 191
Note 15 Non-Current Financial Assets
and Other Assets 158 Note 34 Related Party Transactions 192
Note 16 Derivative Financial Instruments 159 Note 35 Events after the Reporting Date 193
Note 17 Equity Method Investments 162 Note 36 List of Main Group Companies 194
Note 18 Taxes162 Note 37 Statutory auditors’ fees 197

Consolidated Financial Statements as at December 31, 2017
CONSOLIDATED INCOME STATEMENT
Year ended Year ended

(in € million, except per share data) Note December 31, 2017 December 31, 2016
Net sales 5 21,960 20,907
Cost of sales (14,815) (13,810)
Gross income 7,145 7,097
Sales and marketing expenses (1,861) (1,907)
Research and development expenses (641) (718)
General and administrative expenses (1,866) (1,759)
Other operating income and expenses from recurring activities 8 (35) (21)
Operating income from recurring activities 5 2,742 2,692
Operating income/(loss) from non-recurring activities 9 (111) 99
Operating income/(loss) 2,631 2,791
Cost of net debt 10 (176) (203)
Other financial income and expenses 10 - 20
Net interest on employee benefit obligations 27.1 (115) (139)
Share of profit/(loss) from associates 14 (5)
Income/(loss) before taxes 2,354 2,464
Income tax 11 (661) (797)
NET INCOME/(LOSS) 1,693 1,667
Attributable to the shareholders of the Company 1,700 1,676
Attributable to the non-controlling interests (7) (9)
Earnings per share (in €) 12
Basic 9.39 9.21
Diluted 9.34 9.03
The notes 1 to 37 are an integral part of the consolidated financial statements.

Consolidated Statement of Comprehensive Income
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(in € million) Note December 31, 2017 December 31, 2016
Net income/(loss) 1,693 1,667
Post-employment benefits 27.1 266 (194)
Tax effect – Post-employment benefits 18 (135) (8)
Other items of comprehensive income that will not be reclassified
to income statement 131 (202)
Available-for-sale financial assets – Change in fair values 15.1 10 57
Tax effect – Available-for-sale financial assets – Change in fair values 18 3 (9)
Available-for-sale financial assets – Gain)/loss recognized in income statement - -
Currency translation differences (532) 317
Other (1) -
Other items of comprehensive income that may be reclassified
to income statement (520) 365
Other comprehensive income (389) 163
COMPREHENSIVE INCOME 1,304 1,830
Attributable to the shareholders of the Company 1,315 1,838
Attributable to the non-controlling interests (11) (8)

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

Goodwill 13 1,092 963
Intangible assets 13 785 630
Property, plant and equipment (PP&E) 14 10,883 11,053
Non-current financial assets and other assets 15 479 323
Investments in associates 17 356 309
Deferred tax assets 18 890 1,191
Non-current assets 14,485 14,469
Inventories 19 4,508 4,480
Trade receivables 20 3,084 3,042
Current financial assets 21 285 303(1)
Other current assets 22 1,132 1,202
Cash and cash equivalents 23 1,773 1,826(1)
Current assets 10,782 10,853
TOTAL ASSETS 25,267 25,322
Share capital 24 359 360
Share premiums 24 2,942 3,024
Reserves 25 7,925 7,215
Non-controlling interests 35 47
Equity 11,261 10,646
Non-current financial liabilities 26 2,366 1,773
Employee benefit obligations 27.1 3,969 4,763
Provisions and other non-current liabilities 29 1,676 1,604
Deferred tax liabilities 18 113 117
Non-current liabilities 8,124 8,257
Current financial liabilities 26 493 1,320
Trade payables 2,501 2,364
Trade payables under factoring contracts 3.26 503 339
Other current liabilities 30 2,385 2,396
Current liabilities 5,882 6,419
TOTAL EQUITY AND LIABILITIES 25,267 25,322
(1) See note 21.

Consolidated Statement of Changes in Equity
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Share Non-

capital premiums Reserves controlling
(in € million) (note 24) (note 24) (note 25) interests Total
At January 1, 2016 364 3,222 5,903 53 9,542
Net income/(loss) - - 1,676 (9) 1,667
Other comprehensive income - - 162 1 163
Comprehensive income - - 1,838 (8) 1,830
Issuance of shares 3 96 - - 99
Purchase of shares - - (301) - (301)
Cancellation of shares (7) (294) 301 - -
Dividends and other allocations - - (538) - (538)
Share-based payments – Cost of services rendered - - 5 - 5
Other - - 7 2 9
At December 31, 2016 360 3,024 7,215 47 10,646
Net income/(loss) - - 1,700 (7) 1,693
Other comprehensive income - - (385) (4) (389)
Comprehensive income - - 1,315 (11) 1,304
Issuance of shares 1 16 - - 17
Purchase of shares - - (101) - (101)
Cancellation of shares (2) (99) 101 - -
Dividends and other allocations - - (612) - (612)
Share-based payments – Cost of services rendered - - 7 - 7
Other - 1 - (1) -
AT DECEMBER 31, 2017 359 2,942 7,925 35 11,261

CONSOLIDATED CASH FLOW STATEMENT

Adjustments
Cost of net debt 10 176 203
Other financial income and expenses 10 - (20)
Net interest on benefits 27.1 115 139
Income tax 11 661 797
Amortization, depreciation and impairment of intangible assets and PP&E 6 1,345 1,392
Operating income/(loss) from non-recurring activities 9 111 (99)
Share of loss/(profit) from associates (14) 5
EBITDA from recurring activities 3.7.2 4,087 4,084
Operating income and expenses from non-recurring activities (cash) and
change in provisions 31 (346) (206)
Cost of net debt and other financial income and expenses paid 31 (373) (146)
Income tax paid 18.2 (563) (765)
Change in working capital, net of impairments 31 (64) (202)
Cash flows from operating activities 2,741 2,765
Purchases of intangible assets and PP&E 31 (1,668) (1,815)
Proceeds from sale of intangible assets and PP&E 65 89
Equity investments in consolidated companies, net of cash acquired (396) (2)
Disposals of equity investments in consolidated companies, net of cash sold 28 -
Purchases of available-for-sale financial assets (91) (25)
Proceeds from sale of available-for-sale financial assets 5 11
Cash flows from other financial assets 31 (3) (159)(1)
Cash flows from investing activities (2,060) (1,901)
Proceeds from issuances of shares 24 17 99
Purchase of shares 24 (101) (301)
Dividends paid to the shareholders of the Company 24 (584) (515)
Cash flows from financial liabilities 31 (68) (19)
Other cash flows from financing activities 17 (63)
Cash flows from financing activities (719) (799)
Effect of changes in exchange rates (15) 4
INCREASE/(DECREASE) OF CASH AND CASH EQUIVALENTS (53) 69
Cash and cash equivalents at January 1 1,826 1,757(1)
Cash and cash equivalents at December 31 23 1,773 1,826(1)
(1) See note 21.

Notes to the Consolidated Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 GENERAL INFORMATION
Compagnie Générale des Établissements Michelin (CGEM or the The Company is listed on Euronext Paris (Eurolist Compartment A).
“Company”) and its subsidiaries (together “the Group”) manufacture, After a review by the Supervisory Board, these consolidated financial
distribute and sell tires throughout the world. statements were authorized for issue by the Managing Chairman
The Company is a société en commandite par actions (Partnership on February 9, 2018.
Limited by Shares) incorporated in Clermont-Ferrand (France). Except as otherwise stated, all amounts are presented in € million.
NOTE 2 BASIS OF PREPARATION
2.1 Statement of compliance 2.4 Newly published standards, amendments

The consolidated financial statements: and interpretations to existing standards
are prepared in accordance with the International Financial that are not yet effective
Reporting Standards (IFRS) as adopted by the European Union
at closing date with a mandatory application (available on the // 2.4.1 IFRS 9
internet website: http://ec.europa.eu/internal_market/accounting/
ias/index_en.htm); IFRS 9, “Financial instruments”, published in July 2014, endorsed
by the European Union in November 2016, is applicable from
are also in accordance with the International Financial Reporting accounting period beginning on January 1, 2018 and replaces IAS 39.
Standards (IFRS) published by the International Accounting The new standard contains the requirements for the classification
Standards Board (IASB); and and measurement of financial assets, including the introduction
have been prepared under the historical cost convention, as of a new expected loss impairment model for financial assets. For
modified by the measurement of available-for-sale financial assets financial liabilities, the standard retains most of the requirements
and financial assets and liabilities (including derivatives) at fair value of IAS 39. IFRS 9 also sets new principles for the use of hedge
through profit and loss or other items of comprehensive income. accounting. For the Group the changes will impact mainly the
accounting of Equity instruments and the evaluation of the trade
receivable impairments.
2.2 Accounting policies According to the analysis performed, the implementation of IFRS 9
The accounting policies applied in the preparation of the Group will not have any significant impact on the consolidated financial
consolidated financial statements are set out in note 3 “Accounting statements of the Group.
policies”. These policies have been consistently applied to all the The Group will classify its financial assets in the “fair value” or
years presented with the exception of the change in estimate “amortized cost” categories according to the business model used
described in note 2.6. to manage those financial assets and their contractual cash flows.
Non-consolidated investments in equity instruments need to be
measured at fair value through Profit and Loss. However, there is an
2.3 New standards, amendments irrevocable option, for each investment, to account for the fair value
and interpretations to existing variations in the other comprehensive income. At transition date,
standards effective from January 1, 2017 the Group will choose this option for most of the non-consolidated
equity investments.
in the European Union
Due to the restrictive investment criteria used by the Group and
The Group adopted IAS 7’s amendments, which require more detailed
as described in the note 4 “financial risk management”, the
disclosures of the evolution of financial liabilities included in the
implementation of the expected credit loss model will not generate
financing activities of the cash-flow statement. This information is
any significant change in value on the financial assets of the Group.
presented in note 26 “Financial liabilities”.
For the trade receivables, due to the risk management procedures
There are no other new standards or major amendments, applicable
put in place by the Group, the implementation of the expected loss
for the accounting periods beginning on January 1, 2017 having
model will not have any significant impact.
an effect on the consolidated financial statements of the Group.
Finally, the implementation of the new hedge accounting model
will not have any impact as the operations qualifying for hedge
accounting under IAS39 will continue to be qualified for hedge
accounting under IFRS 9.

// 2.4.2 IFRS 15 and their treatment in the financial statements of both lessees and
IFRS 15, “Revenue from Contracts with Customers”, published in lessors. It supersedes IAS 17 Leases and its associated interpretative
May 2014 and endorsed by the European Union in October 2016 guidance.
as well as the amendment ”Clarifications to IFRS 15” are applicable The new standard applies a control model for the identification
from accounting period beginning on January 1, 2018. Their scope of leases, distinguishing between leases and service contracts on
includes all the contracts with customers, except leases, insurance the basis of whether there is an identified asset controlled by the
contracts and financial instruments, which are covered by other customer.
standards. The standard defines new revenue recognition principles Significant changes to lessee accounting model are introduced as
and disclosure requirements. It establishes the fundamental the current distinction between operating and finance leases will
principle that the revenue recognition must depict the transfer of disappear. The lessee must recognize an asset, corresponding to the
the promised goods or services to customers in an amount that right of use, and a liability corresponding to the lease commitment.
reflects the consideration to which the entity expects to be entitled Limited exceptions for short-term leases and/or leases of low value
in exchange for those goods or services. assets are allowed. The Group will adopt it from the accounting
The Group prepared to apply the standard from January 1, 2018 period beginning on January 1, 2019.
and kept following the structured approach started in 2016 with The project launched in 2016 to assess the impacts of this standard
the objective of assessing the potential impacts of the standard and manage all aspects of the transition will continue until the
on the consolidated financial statements. Based on 2016 net sales end of 2018. The Group is progressing with the identification and
total amount, a typology of activities and contracts with customers analysis of its contracts in order to collect the necessary information,
has been drawn up. The analysis has allowed splitting the contracts to be ready to comply with the requirements of the new standard.
contributing to the Group net sales into several categories with
common characteristics for the purpose of this standard. For each
// 2.4.4 IFRIC 22
category, a representative sample of contracts has been defined
and each contract has been analysed using a tool that reflects the According to IFRIC Interpretation 22 “Foreign currency transactions
five steps of the comprehensive model outlined by the standard. and advance consideration”, purchase or sale transactions must
The objective was to identify potential differences with the current be translated at the exchange rate prevailing on the date the asset
accounting policies, assess them, and define the new accounting or liability is initially recognized. In practice, this is usually the date
principles. on which the advance payment is paid or received. In the case of
multiple advances, the exchange rate must be determined for each
Sales of tires on the replacement market or to vehicle manufacturers
payment and collection transaction.
constitute the major part of the revenue for the Group. In this kind
of commercial relationship, the Group is acting as a principal and The interpretation is mandatory for financial years beginning on
not as an agent. Furthermore, supply of tires constitutes the single or after January 1, 2018, subject to its adoption by the European
or the main performance obligation in these contracts. As sales Union. Its implementation is not expected to have a significant
conditions include payment terms which are less than one year, impact on the Group’s consolidated financial statements.
promised amounts of consideration will not need to be adjusted
for the effects of a significant financing component. The warranties // 2.4.5 IFRIC 23
provided to buyers of tires and the management of deferred rebates IFRIC Interpretation 23 “Uncertainty over income tax treatments”
granted notably to tires dealers on the replacement market were clarifies the recognition and valuation principles applicable to income
also assessed under the requirements of the standard. tax risks. These risks arise when there is uncertainty related to a tax
Thus, the analysis for sales of tires on the replacement market or to position adopted by the Group that could be challenged by the
vehicle manufacturers is completed and the Group concluded that the tax administration.
implementation of the standard will not have any significant impact. This interpretation is applicable for financial years beginning on
The other categories of revenue include mainly management of January 1, 2019, subject to its adoption by the European Union and
tires for fleets of vehicles and provision of telematics solutions for subject to retrospective application, with or without comparative
commercial fleets, improving fuel management and enhancing information restatement for the first year of application. Studies
fleet productivity. For these categories of clients, the Group has not are underway to analyze the possible impacts of this interpretation.
identified any provision of the standard that might have a significant There are no other new standards, updates and interpretations
impact on the revenue recognition. published but not yet effective whose impact could be significant
As a consequence, the Group considers that the implementation for the Group.
of IFRS 15 will not have any significant impact on the consolidated
financial statements.
With regard to the transition requirements, the Group will apply 2.5 Critical accounting estimates
IFRS 15 retrospectively with the cumulative effect of initially applying and judgments
the standard recognized as at January 1, 2018 as an adjustment to The preparation of the consolidated financial statements in conformity
the opening balance of retained earnings. with IFRS requires that management use assumptions and estimates
reflected in the value of assets and liabilities at the date of the
// 2.4.3 IFRS 16 consolidated statement of financial position and in the amount of
IFRS 16 “Leases”, published in January 2016, endorsed by the income and expenses for the reporting period. The actual results
European Union in November 2017, is applicable at the latest from could differ from those estimates.
accounting period beginning on January 1, 2019. It provides a The main critical accounting estimates requiring key assumptions
comprehensive model for the identification of lease arrangements and judgments are the impairment of non-financial assets, the
employee benefit obligations and the income taxes.

// 2.5.1 Impairment of non-financial assets The actual data (such as inflation, mortality and real return on
The cash generating units’ (CGU) future cash flows used in the assets) may differ from the long term actuarial assumptions used.
calculation of value in use (note 3.17 “Impairment of non-financial The resulting difference is recognized as a gain or loss in other
assets”) are derived from the Group’s five-year strategic plan. The comprehensive income.
construction of the strategic orientations is an exercise involving the Quantitative information is provided in note 27 “Employee benefit
various actors within the CGUs and the projections are validated by obligations”.
the Managing Chairman. It requires critical estimates and judgments,
especially in the determination of market trends, raw material costs // 2.5.3 Income taxes
and pricing policies. Consequently, the actual cash flows may differ
Significant judgment and estimates are required in determining
from the estimates used in the calculation of CGU’s value in use.
the income tax expense.
Quantitative information is provided in note 13.2 “Goodwill”.
The expected reversal of tax losses is based on the forecast of
future results validated by the local management and reviewed by
// 2.5.2 Employee benefit obligations the Group Tax and Accounting Departments. The analyses are also
The Group plans are defined contribution plans which generally performed in order to ensure the coherence of these forecasted
require, on top of the part financed by the Group, a contribution from future results with the strategic plans of the Group, validated by the
each salaried employee defined in percentage of the compensation. Managing Chairman. Analyses to support the deferred tax positions
Some subsidiaries also book in their accounts liabilities for various are performed periodically, at a date as close as possible to closing.
pension plans, jubilees and other post-employment benefits linked The period of reversal of tax losses carried forward is based on a
to rights acquired by the employees in these subsidiaries pension reasonable horizon taking into account the specific circumstances
plans or to some legal obligations. of each Group company, such as:
The valuation of these benefits is carried out annually with the the origin of the historical tax losses (generally exceptional and
assistance of independent actuaries. The actuarial method used is non-recurrent: restructuring, significant increases in production
the Projected Unit Credit Method. capacity...);
According to this method, statistical information and various the forecasted future results;
assumptions are used in calculating the expense, the liability and the the tax planning opportunities;
asset related to the benefit plans. Assumptions include mainly the
the possibility of internal reorganizations; and
discount rate, the inflation rate, the long term salary increase rate
and the expected rate of growth in future medical costs. Statistical the time limit for the recovery of historical losses.
information is mainly related to demographic assumptions such as Quantitative information is provided in note 18 “Taxes”.
mortality, employee turnover, disability and retirement age.
Assumptions and statistical information are determined according
to internal guidelines in consultation with the actuaries. 2.6 Change in accounting estimates
The discount rates are determined using tools from the actuaries The Group has changed in 2017 the expected useful life of the
having the same maturity as the liabilities. curing molds. These pieces of equipment are used in the final stage
The rate of salary increases is determined by each country based on of production, during which the tires acquire their final shape and
a long term salary policy and includes all elements related to market technical properties.
practices as well as career development, promotion and seniority. Recent and gradual technological improvements in the design and
The inflation rates having standard maturities are determined using manufacturing process of the curing molds have contributed to
several methods: increasing the useful life of this type of equipment. Conversely, the
economic life of tires ranges, in particular for Passenger Car tires,
by using the tools from the actuaries based on target rates
is becoming shorter. Consequently, the life cycle of the different
published by Central Banks, forecasts from the Consensus ranges of tire products is becoming a key factor in assessing the
Economics organization and inflation swap curves; useful life of curing molds assets.
by taking the spread between inflation-linked bonds and
From January 1, 2017, based on the studies carried out in light
conventional securities. The rates are then adjusted with a spread of economic factors described above, the useful life of the curing
which represents the liquidity and risk premium embedded in the molds has been increased from two to three, five or seven years,
inflation-linked bonds; depending on the type of tires to which they are destined.
based on historical averages.
The Group assesses this change as a change in accounting estimate,
The other assumptions (retirement age, employee turnover, health as defined by IAS8, and therefore recognizes its impacts prospectively.
care cost trend, mortality, disability) reflect the demographic and The effect, for the year 2017, represents a reduction in depreciation
economic situation of the countries and subsidiaries in which the costs of around €80 million.
plans are in force.

NOTE 3 ACCOUNTING POLICIES
3.1 Consolidation entities in which the Group has a shareholding between 20% and
50% of the voting rights.
The Group consolidated financial statements include all subsidiaries,
joint arrangements and associates of Compagnie Générale des Investments in joint ventures and associates are accounted for
Établissements Michelin. using the equity method and are initially recognized at cost.
The Group investment in joint ventures and associates includes
The Group treats transactions with non-controlling interests, as
goodwill identified at acquisition date and are presented net of
long as they do not result in a change of control from the Group
any accumulated impairment losses.
over the entities (no loss or gain of control), as equity transactions
having no impact on the comprehensive income. Expenses occurring The Group share of its joint ventures’ or associates’ post-acquisition
from these operations are directly accounted for in equity. At the profits and losses is recognized in the income statement and its share
date the Group gains control of an entity, the carrying amount of of post-acquisition movements in other comprehensive income is
previously held non-controlling interests, if any, is adjusted to fair recognized in other comprehensive income until the date that significant
value and the difference is recognized in the income statement. influence ceases. The cumulative post-acquisition movements are
All other related items that were recognized in the comprehensive adjusted against the carrying amount of the investment.
income are reclassified in the income statement. When the Group When the Group share of losses in an associate or a joint venture
loses control over an entity but keeps some non-controlling interests equals or exceeds its interest in the investee, the Group does not
in the entity, such a transaction is analyzed as an exchange, i.e. recognize future losses, unless it has incurred obligations or made
the disposal of a controlling interest and the acquisition of a payments on behalf of the associate.
non-controlling interest. Unrealized gains on transactions between the Group and its joint
Shareholdings in companies which are not subsidiaries, joint ventures and associates are eliminated to the extent of the Group
arrangements or associates are not consolidated. They are accounted interest in the investee. Unrealized losses are also eliminated
for as non-derivative financial assets (note 3.18 “Non-derivative unless the transaction provides evidence of an impairment of the
financial assets”). transferred asset.
// 3.1.1 Subsidiaries
3.2 Segment reporting
Subsidiaries are all entities (including structured entities) that the
Group controls. The Group controls an entity when it has: Operating segments are reported in a manner consistent with the
internal reporting provided to the Group’s Management.
power over the investee;
The Managing Chairman regularly examines segment operating
exposure, or rights, to variable returns from its involvement with income to assess their performance. He has therefore been identified
the investee; as the chief operating decision maker of the Group.
the ability to use its power over the investee to affect the amount
of the investor’s returns.
The financial statements of subsidiaries are included in the consolidated
3.3 Foreign currency
financial statements from the date that control commences until
the date that control ceases. // 3.3.1 Presentation and functional currency
Intercompany transactions and balances as well as unrealized gains The financial statements of the Group entities are measured using
on transactions between Group companies are eliminated. Unrealized their functional currency, which is the currency of the primary
losses are also eliminated unless the transaction provides evidence economic environment in which they operate and corresponds for
of an impairment of the transferred asset. most of them to their local currency.
Accounting policies of subsidiaries have been changed where necessary The consolidated financial statements are presented in €, which is
to ensure consistency with the policies adopted by the Group. the Company’s functional currency.
// 3.1.2 Joint ventures and associates // 3.3.2 Transactions

Joint ventures are joint arrangements (arrangements of which the Foreign currency transactions are translated into the functional
Group has control jointly with one or more other parties) in which currency using the exchange rate prevailing at the transaction date.
the Group has rights to the net assets. Joint control is defined as Foreign exchange gains and losses resulting from the settlement of
the contractually agreed sharing of control over an arrangement, such transactions and from the translation at closing exchange rates
which exists only when decisions about the relevant activities require of monetary assets and liabilities denominated in foreign currencies
the unanimous consent of the parties sharing control. are recognized in the income statement.
Associates are all entities over which the Group has significant Exchange differences on equity investments classified as available-
influence. Significant influence is the power to participate in the for-sale financial assets are included in other items of comprehensive
financial and operating policy decisions of the investee but is not income until the investment is sold.
control or joint control of those policies. Generally, associates are

// 3.3.3 Translation Cash flows are also translated at the average rate of the period. When
The financial statements of the Group entities whose functional an entity is disposed of, the translation differences accumulated in
currency is different from the Group’s presentation currency are other items of comprehensive income are recycled in the income
translated into Euros as follows: assets and liabilities are translated at statement as part of the gain or loss on disposal.
the closing rate at the date of the consolidated statement of financial On the acquisition of an entity, goodwill and fair value adjustments
position, income and expenses are translated at the average rate of recognized are treated as assets and liabilities of the acquired entity
the period (as it is considered a reasonable approximation to actual and translated at the spot rate on the transaction date.
rates at transaction date), and all resulting exchange differences are
recognized in other items of comprehensive income.
// 3.3.4 Exchange rates of major currencies

Closing rates Average rates
Against €: 2017 2016 2017 2016
US dollar (USD) 1.193 1.046 1.129 1.107
Canadian dollar (CAD) 1.505 1.415 1.465 1.466
Mexican peso (MXN) 23.502 21.628 21.307 20.615
Brazilian real (BRL) 3.956 3.436 3.601 3.841
British pound (GBP) 0.888 0.854 0.877 0.816
Chinese yuan (CNY) 7.808 7.275 7.631 7.351
Indian rupee (INR) 76.579 71.225 73.522 74.389
Thai baht (THB) 38.917 37.614 38.311 39.070
3.4 Derivative financial instruments Fluctuations of these derivatives’ fair values are therefore accounted
for in the income statement. For example, foreign currency derivatives
Derivative financial instruments are used to manage financial exposures.
that are used to hedge the currency exposure of financial assets and
All derivatives are initially recognized at fair value on the date a liabilities are not designated as hedging instruments.
derivative contract is entered into and are subsequently measured
At the inception of the transaction, the Group documents the
at their fair value. The method of recognizing the resulting gain or
relationship between the hedging instrument and the hedged
loss depends on whether the derivative is designated as a hedging
item, as well as its risk management objectives and strategies.
instrument, and if so, the nature of the item being hedged (see
The Group also documents its assessment, both at inception and
hedging policy below).
on an ongoing basis, of whether the derivatives that are used in
All changes in fair value of derivatives not designated as hedging hedging transactions are highly effective in offsetting changes in
instruments are recorded as financial income or expense in the fair values of hedged items.
period in which they arise.
Changes in the fair value of derivatives are accounted for differently
Fair values are based on market values for listed instruments or on depending on the type of hedge:
mathematical models, such as option pricing models and discounted
cash flow calculations for unlisted instruments. These models take
// 3.5.1 Fair value hedges
into account market data.
Changes in fair value of derivatives are recorded in the income
Embedded derivatives are recognized separately if not closely related
statement, together with any changes in the fair value of the
to the host contract.
hedged assets or liabilities that are attributable to the hedged risk.
3.5 Hedging // 3.5.2 Cash flow hedges

Some derivative financial instruments are eligible for hedge accounting The effective portion of changes in the fair value of derivatives is
and are therefore designated as either: recognized in other items of comprehensive income. The ineffective
portion of the gain or loss is recognized immediately in the income
hedges of the fair value of recognized assets or liabilities or a
statement. Amounts accumulated in other items of comprehensive
firm commitment (fair value hedges); or
income are recycled in the income statement in the period when
hedges of highly probable forecast transactions (cash flow hedges). the hedged item affects the income statement. When a hedging
Some other derivatives, while providing effective economic hedges instrument expires or is sold, or when a hedge no longer meets the
under the Group financial policies, cannot qualify or have not been criteria for hedge accounting, any cumulative gain or loss existing
designated for hedge accounting (see derivatives policy above). in other items of comprehensive income at the time is immediately
recognized in the income statement.

3.6 Fair value of financial instruments 3.7 Definition of certain indicators presented in
The fair value measurements are disclosed by level of the following the consolidated financial statements
fair value measurement hierarchy:
Level 1: Quoted prices in active markets. The fair value of financial // 3.7.1 Net debt
instruments traded in active markets is based on quoted market Net debt is made up of current and non-current financial liabilities as
prices at the date of the consolidated statement of financial they appear on the consolidated statement of financial position less:
position. A market is regarded as active if quoted prices are
cash and cash equivalents as they appear on the consolidated
readily and regularly available from an exchange, dealer, broker,
statement of financial position;
industry group, pricing service, or regulatory agency, and those
prices represent actual and regularly occurring market transactions derivative instruments included in “Current financial assets and
on an arm’s length basis. The quoted market price used for Non-current financial assets” on the consolidated statement of
financial assets held by the Group is the current bid price. These financial position;
instruments (essentially cash and cash equivalents as well as cash management financial assets included in “Current financial
quoted available-for-sale financial assets) are included in level 1. assets” on the consolidated statement of financial position (these
Level 2: Inputs other than quoted prices included within level 1 assets are highly liquid, little affected by the interest rate risk and
that are observable for the asset or liability, either directly (that is, by the foreign currency risk); and
as prices) or indirectly (that is, derived from prices). The fair value borrowing collaterals included in “Current financial assets and
of financial instruments that are not traded in an active market Non-current financial assets” on the consolidated statement of
(for example, over-the-counter derivatives) is determined by financial position.
using valuation techniques. These valuation techniques maximize
the use of observable market data where it is available and rely
as little as possible on entity specific estimates. If all significant // 3.7.2 EBITDA from recurring activities
inputs required to fair value these instruments are observable, The Group defines EBITDA from recurring activities as operating
these instruments (essentially cash management financial assets income from recurring activities less depreciation of property, plant
and derivative instruments) are included in level 2. and equipment and amortization of intangible assets.
Level 3: Inputs for assets or liabilities that are not based on
observable market data (that is, unobservable inputs). If one or
more of the significant inputs is not based on observable market 3.8 Revenue recognition
data, the instrument (essentially non-quoted available-for-sale Revenue is measured at the fair value of the consideration received,
financial assets) is included in level 3. or receivable, taking into account the amount of any trade discounts
allowed by the Group entities or any commercial incentives linked
Specific valuation techniques used to value, generally internally, to sales. Deferred rebates are accrued based on past experience
financial instruments include: and expected payments.
quoted market prices or dealer quotes for similar instruments Sales are recognized as follows:
(level 1);
Revenue from sales of goods is recognized when the Group
the fair value of interest rate swaps calculated internally as has transferred to the buyer the significant risks and rewards of
the present value of the estimated future cash flows based on ownership of the goods, retains neither continuing managerial
observable yield curves (level 2); involvement to the degree usually associated with ownership nor
the fair value of forward foreign exchange contracts determined effective control over the goods sold and will receive the economic
internally using forward exchange rates at the date of the benefits associated with the transaction. Due to the nature of
consolidated statement of financial position, with the resulting the products, the general sales conditions, the logistics incoterms
value discounted back to present value (level 2). and the insurance contracts, revenue is usually recognized when
the goods leave the Group premises.
Other techniques, such as discounted cash flow analysis, are
used internally to determine fair value for the remaining financial Revenue from sales of services is recognized by reference to
instruments (level 3). the stage of completion of the transaction at the date of the
consolidated statement of financial position, to the extent that
When observable yield curves include negative interest rates, those
this stage can be measured reliably and the economic benefits
are used without change to determine the fair value of derivatives.
associated with the transaction will flow to the Group.
The Group assesses the counterparty risk included in the fair value of
its OTC (over-the-counter) derivatives for which there is no exchange Financial income is recognized as follows:
of collaterals. The Group includes the effect of its exposure to the Interest income is recognized on an accrual basis using the
credit risk of the counterparty or the counterparty’s exposure to effective interest method.
the credit risk of the Group. The valuation for long term derivatives Dividend income is recognized when the right to receive payment
with no exchange of collaterals is based on discounted cash flows is established.
using a rate including the counterparty credit risk.

3.9 Cost of sales Current tax is based on the results of Group companies and is
calculated according to local rules, including any adjustments to
Cost of sales comprises the costs of manufacturing products and
tax payable in respect of previous years.
the cost of goods purchased for resale.
Deferred tax is recognized, using the liability method, on temporary
It includes the purchase cost of raw materials, production costs
differences arising between the tax bases of assets and liabilities
directly related to the manufactured products and all production
and their carrying amount in the consolidated financial statements,
overheads, based on the normal capacity of production facilities.
using enacted or substantially enacted tax rates that are expected
Production overheads include depreciation of property, plant and to prevail when the temporary differences reverse.
equipment, amortization of intangible assets relating to production
A deferred tax asset or liability is recognized on initial recognition
and write-downs of inventories.
of transactions arising from business combinations and impacting
Cost of sales also includes a relevant portion of general overheads the accounting or taxable result.
to the extent that they are directly attributable to bringing the
Deferred tax assets are recognized to the extent that it is probable
manufactured products to their present location and condition.
that future taxable profits will be available against which the tax
losses carried forward and the temporary differences can be offset.
3.10 Research and development Deferred tax is calculated on temporary differences arising from
investments in subsidiaries, joint ventures, and associates: deferred
Research costs cannot be capitalized. Development cost are capitalized
tax assets are recognized if the reversal is both under the entity’s
as intangible assets when the conditions relating to the commercial
control and it is probable. Deferred tax liabilities are recognized
and technical feasibility of the project, the ability to allocate the
unless their reversal is controlled and not probable.
costs reliably and the probability of generating future economic
benefits are fulfilled.
Development costs are reviewed annually in order to determine 3.14 Business combination and goodwill
whether the criteria for recognition as intangible assets are met.
When the Group obtains control of an entity, the business combination
is valuated and accounted for by applying the acquisition method.
Goodwill is computed at acquisition date as the difference between:
3.11 Operating income from recurring activities
the fair value of the consideration transferred including, if any,
In order to improve the understanding and the analysis of its
the fair value of contingent consideration;
operational performance, the Group has decided in 2016 to
display the “Operating income from recurring activities” balance. the fair value at the acquisition date of the identifiable acquired
It includes all the incomes and expenses which are directly related assets, the liabilities and contingent liabilities assumed.
to the recurring activity of the Group. Goodwill is carried at cost less any accumulated impairment losses.
Costs directly attributable to the business combination are expensed
3.12 Operating income/(loss) from as incurred and booked as other operating income and expenses
from recurring activities in the consolidated income statement.
non‑recurring activities
The valuation period for a business combination does not exceed
“Operating income/(loss) from non-recurring activities” includes
twelve months after acquisition date.
unusual, abnormal or non-frequent significant items of income and
expenses that are not considered inherent to the Group’s recurring Goodwill is allocated to cash-generating units (CGUs) or groups
activity. The balance includes, in particular, costs for reorganizations of CGUs for the purpose of impairment testing. The allocation is
and adaptation of activities and costs relating to major litigations made to those cash-generating units or groups of CGUs that are
(as well as adjustments in the corresponding provisions), in addition expected to benefit from the synergies of the combination and that
to impairment of goodwill. Furthermore, are included gain/loss on reflect the level at which the Group manages goodwill. Goodwill
disposals and changes in impairment of tangible and intangible is tested for impairment annually.
assets, acquisition price adjustments as well as the cost of benefits
for retired personnel. They are detailed in note 9 “Operating income/
(loss) from non-recurring activities”. 3.15 Intangible assets
Intangible assets are recognized at cost. The cost of an intangible
asset acquired as part of a business combination is its fair value at
3.13 Income tax the acquisition date.
Current and deferred taxes, plus any withholding tax on royalties and Intangible assets with indefinite useful lives are not amortized but
on distributions of retained earnings within the Group, are included are tested annually for impairment. Those with finite useful lives
in the income statement except if they relate to items recognized are amortized on a straight-line basis over their estimated useful
either in other comprehensive income or directly in equity, in which life. Software are amortized over three or seven years.
case they are also recognized, respectively, in other comprehensive
income or directly in equity.
3.16 Property, plant and equipment
Property, plant and equipment are measured at cost less accumulated
depreciation and, when necessary, impairment.

The gross carrying amount includes the cost of acquisition or Whether there is an indication of impairment or not, an annual
production cost and other costs directly attributable to the acquisition impairment test for goodwill, intangible assets with indefinite
or the construction of the asset (including borrowing costs). useful life and intangible assets not ready for use is performed by
Investment grants are initially accounted for as deferred income comparing their carrying amount with their recoverable amount.
and are subsequently recognized as income over the useful life of At individual asset level, indications of impairment generally come
the related asset. from a fall in market value, technical obsolescence or an anticipated
Repair and maintenance costs are expensed as incurred. Other change of use. The recoverable amount is usually based on the
subsequent expenditures are included in the asset’s carrying amount market value.
or recognized as a separate asset if the recognition criteria are met. At Group level, non-financial assets are combined for impairment
Property, plant and equipment are depreciated on a straight-line testing purposes at the lowest level for which there are separately
basis, except land which is not depreciated. Depreciation on property, identifiable cash flows (Cash Generating Units – CGUs).
plant and equipment reflects the pattern in which the asset’s future The CGUs are defined according to the way the Group operations are
economic benefits are expected to be consumed. Depreciation is managed: it could be the crossings of Product Lines and Geographic
allocated to cost of sales, sales and marketing expenses, research Zones (for example: CGU North America Passenger car and light
and development expenses or general and administrative expenses. truck), the Distribution Networks (for example: CGU Euromaster)
The following depreciation periods, based on the expected useful or the Business Subsidiaries (for example: CGU Michelin Travel
lives of the respective assets, are applied throughout the Group: Partner). This approach allows having CGUs with cash flows that
Buildings and general installations are separately identifiable from cash flows of other CGUs.
of land and buildings: 25 years CGUs to which goodwill have been allocated are tested annually
Industrial and commercial equipment: 2-12 years or more frequently if events or changes in circumstances indicate
a potential impairment. Those without goodwill are tested if there
Computer and telecommunication equipment: 5 years
is a specific indication of impairment.
Vehicles:5 years
The recoverable amount is the higher of the value in use and the
Other:5-12 years fair value less cost of disposal.
The useful lives of the assets and their respective residual values For most CGUs or group of CGUs, recoverable amount is based on
are reviewed annually. value in use, which is equal to future discounted cash flows using
When assets are sold or otherwise disposed of, the difference between the Weighted Average Cost of Capital (WACC) as a discount rate.
the net proceeds and the net carrying amounts of the assets is Future cash flows are mainly based on the CGU’s five-year cash flow
recognized in operating income/(loss) from non-recurring activities. forecasts plus a terminal value, measured by dividing projected cash
flows by the WACC. The discount rate is based on the cost of equity
Property, plant and equipment which are financed by leases giving capital derived from the market-expected return on the Company’s
the Group substantially all of the risks and rewards of ownership shares, the cost of financial debt and a risk premium reflecting the
are capitalized at the lower of the fair value of the leased asset and risks of the countries where the assets are located. The gearing and
the present value of the minimum lease payments at the inception the beta are based on data from comparable segments and take
of the lease. The leased assets are depreciated over the shorter of into account specificities of certain activities.
the lease term and the useful life of the leased assets if the transfer
of ownership of the leased assets is uncertain. The recoverable amount of the distribution CGUs on the other
hand is measured at fair value less costs of disposal. Since most of
The obligations arising from future finance lease payments are these assets are land and buildings, external appraisals or other real
discounted and recognized as a financial liability in the consolidated estate valuation techniques are applied to measure their fair value.
statement of financial position. The payments related to operating
leases are expensed on a straight-line basis over the lives of the Any impairment loss is recognized first against goodwill and any
contracts. remaining amount is allocated among the other non-current assets,
based on their net carrying amounts at the closing date.
When the circumstances which previously caused non-financial assets
3.17 Impairment of non-financial assets to be impaired no longer apply, the impairment losses are reversed
When there is any indication that the recoverable amount of an accordingly. However, goodwill impairment can never be reversed.
asset (goodwill, intangible assets or property, plant and equipment) Changes in impairment losses are recognized in operating
may be lower than its carrying amount, the recoverable amount of income/(loss) from non-recurring activities.
the asset is measured and if needed, an impairment is recognized.

3.18 Non-derivative financial assets // 3.18.4 Impairment

The Group assesses at each consolidated statement of financial
// 3.18.1 Asset categories position date whether there is objective evidence that a financial
The Group classifies its non-derivative financial assets in one of asset or a group of financial assets is impaired. In the case of equity
the following categories: loans and receivables, available-for-sale securities classified as available-for-sale, a significant or prolonged
financial assets, financial assets at fair value through profit or loss. decline in the fair value of the security below its cost is considered
The classification depends on the purpose for which the assets are in determining whether the securities are impaired. If any such
acquired as well as its nature. The Group determines the classification evidence exists for available-for-sale financial assets, the cumulative
of its non-derivative financial assets at initial recognition and reviews loss – measured as the difference between the acquisition cost and
this designation at every reporting date. the current fair value, less any impairment loss on that financial asset
previously recognized in profit or loss – is removed from other items
Loans and receivables are non-derivative financial assets with fixed of comprehensive income and recognized in the income statement.
or determinable payments that are not quoted in an active market. Impairment losses on equity instruments recognized in the income
They arise when the Group provides money, goods or services statement cannot be reversed.
directly to a debtor with no intention of trading the receivable.
They are included in current assets, except for maturities greater
than 12 months after the date of the consolidated statement of 3.19 Inventories
financial position.
Inventories are carried at the lower of cost and net realizable value.
Available-for-sale financial assets are usually non-monetary securities.
They are included in non-current assets unless management The cost of raw material, supplies and purchased finished goods
intends to dispose of the investment within 12 months of the includes the purchase price and other costs directly attributable to
date of the consolidated statement of financial position. the acquisition. The cost of work in progress and manufactured
finished goods comprises direct labor cost, other direct costs and
Financial assets at fair value through profit or loss have two production overheads based upon normal capacity of production
sub-categories: financial assets held for trading, and those designated facilities. Borrowing costs are expensed as incurred. The measurement
at fair value through profit or loss at inception. A financial asset of inventories and of cost of sales with the standard cost method put
is classified in this category if it is acquired principally for the in place by the Group is close, after taking variances into account,
purpose of being sold in the short term or if it is so designated to what would be obtained using the actual cost method.
by the Group. Assets in this category are classified as current if
they are either held for trading or are expected to be realized Net realizable value is the estimated selling price less the estimated
within 12 months of the date of the consolidated statement of costs of completion and sale.
financial position. An impairment loss is recognized when net realizable value is
lower than cost and is reversed when it becomes apparent that the
circumstances which previously caused inventories to be written
// 3.18.2 Transactions down below cost no longer exist.
Purchases and sales of non-derivative financial assets are recognized
on the trade-date – the date on which the Group commits to
purchase or sell the asset. Non-derivative financial assets are initially 3.20 Trade receivables
recognized at fair value plus transaction costs for all financial assets Trade receivables are recognized initially at fair value and subsequently
not carried at fair value through profit or loss. measured at amortized cost using the effective interest method,
Non-derivative financial assets are derecognized when the rights less impairment.
to receive cash flows from the assets have expired or have been When payment terms are shorter than one year, the initial fair value
transferred and the Group has transferred substantially all risks and and the subsequent amortized cost are considered as being equal
rewards of ownership. to the nominal amount.
When securities classified as available-for-sale are sold, the accumulated An impairment loss is recognized when there is objective evidence
fair value gains or losses, including the fair value adjustments that the Group will not be able to collect all amounts due according
previously recognized in other comprehensive income, are included to the original terms of the receivables. Bankruptcy, legal creditor
in the income statement. protection processes, manifest insolvency of the debtor, disappearance
of the debtor, more than six months overdue, economic or political
// 3.18.3 Measurement risk in the debtor country, adverse change in the debtor’s credit
Available-for-sale financial assets are measured at fair value determined situation are considered indicators that the trade receivable is
essentially by reference to a published price quotation in an active impaired. The amount of the impairment charge is the difference
market. Loans and receivables are measured at amortized cost using between the asset’s carrying amount and the present value of
the effective interest method. Realized and unrealized gains and estimated future cash flows, discounted at the original effective
losses arising from changes in the fair value of financial assets at fair interest rate. Prior to recognizing an impairment loss, the quality
value through profit or loss are included in the income statement in of any guarantees, as well as the ability to realize them, have to
the period in which they arise. Unrealized gains and losses arising be assessed. The impairment charge is recognized under sales and
from changes in the fair value of available-for-sale financial assets marketing expenses.
are recognized in other items of comprehensive income unless When a trade receivable is uncollectible, it is written off against
these assets are part of fair value hedges and therefore included the corresponding previously recognized impairment. Subsequent
in the income statement for the hedged risk in the period in which recoveries of amounts previously written off are credited against
they arise. sales and marketing expenses in the income statement.

3.21 Cash and cash equivalents The Group provides post-employment benefits under defined
contribution plans and defined benefit plans.
Cash and cash equivalents include cash in hand, demand deposits
with banks and other short-term highly liquid investments with In the case of defined contribution plans, the Group pays fixed
original maturities of three months or less. Term deposits maturing contributions to fund managers or insurance companies. Once the
in more than three months, but with early withdrawal terms of less contributions have been paid, the Group has no legal or constructive
than three months with guaranteed capital and negligible withdrawal obligation to make further contributions if the fund does not hold
costs are also classified as cash and cash equivalents. sufficient assets to pay the benefits expected by the beneficiaries.
The regular contributions are recognized as an expense for the year
in which they are due and, as such, are included in cost of sales,
3.22 Share capital sales and marketing expenses, research and development expenses
Ordinary shares are classified as equity. or general and administrative expenses.
Incremental costs directly attributable to the issue of new ordinary Group management policies regarding post-employment benefits
shares are shown in equity as a deduction, net of tax, from the have led to the transformation of defined benefit plans to defined
proceeds. contribution benefit plans since the early 2000’s. Nevertheless a
significant part of the post-employment benefit plans are still defined
Treasury shares are presented separately in reserves. The amount of
benefit plans. They are either externally funded plans (mainly pension
the consideration paid, which includes directly attributable costs,
plans), for which the plan assets are held separately in independently
net of any tax effects, is recognized as a deduction from equity.
administered funds, or unfunded plans such as healthcare benefit
When treasury shares are sold, the amount received is recognized
plans and retirement bonus plans.
as an increase in equity and the resulting surplus or deficit on the
transaction is presented within retained earnings. The post-employment benefit liabilities, and the related current
service cost, are measured using the Projected Unit Credit Method.
A defined benefit plan is a plan that defines an amount of benefits
3.23 Non-derivative financial liabilities that the Group is committed to pay to current and former employees.
Borrowings are classified as current liabilities unless the Group has All defined benefit plans are subject to actuarial calculations carried
an unconditional right to defer settlement of the liability for at least out annually for the largest plans and on a regular basis for other
12 months after the consolidated statement of financial position date. plans. These actuarial valuations are carried out with the help of
Non-derivative financial liabilities are recognized initially at fair value, independent actuaries. Actuarial assumptions, primarily discount
net of transaction costs, and subsequently at amortized cost. Any rates, projected rates of remuneration growth, inflation rates and
difference between the issue proceeds (net of transaction costs) and expected increase of healthcare costs are incorporated in the actuarial
the redemption value is recognized in the income statement over valuations and reviewed annually.
the period of the borrowing using the effective interest method. The liability or the asset recognized in the consolidated statement of
The fair value of the liability portion of a convertible bond is determined financial position in respect of defined benefit plans is the present
using a market interest rate for an equivalent non-convertible value of the defined benefit obligation at the consolidated statement
bond. This amount is recorded as a liability at amortized cost. The of financial position date less the fair value of plan assets. They
remainder of the proceeds is allocated to the conversion option. take into account any unrecognized assets not available in form of
This is recognized in equity, net of income tax effects. refunds or reduction in future contributions.
To the extent that borrowings are hedged by qualifying fair value The present value of the defined benefit obligation is determined by
hedges, the carrying value of the hedged item is adjusted for the discounting the estimated future cash outflows using interest rates
change in fair value attributable to the risk being hedged. of high-quality corporate bonds in the currency of the obligation
that have maturities approximating the duration of the related
benefit liability.
3.24 Employee benefits A net asset is recognized only to the extent that it represents a future
Wages, salaries, social security contributions, payments to defined economic benefit which is actually available to the Group in the
contribution plan, annual leave and sick leave payments, bonuses form of refunds from the plan or reductions in future contributions
and non-monetary benefits are recognized in the year in which the to the plan.
associated services are rendered by the employees.
Where employee benefits, such as pension, other post-employment
benefits and other long-term benefits, are provided by the Group,
a liability or an asset and the related costs are recognized.
// 3.24.1 Pension and other post-employment

benefits
Post-employment benefits are benefits payable after the completion
of employment. The Group provides retirement benefits for most
of its employees, either directly or by contributing to independently
administered funds. The benefits provided by the Group vary
according to the legal, tax and economic situation in each country
and are usually based on one or more factors such as employees’
remuneration, age and years of service. The obligations relate both
to current retirees and to entitlements of future retirees.

When a defined benefit plan is subject to a Minimum Funding The total compensation cost is based on the fair value of the
Requirement (MFR), the Group determines whether paying these performance shares and the estimated number of shares that will
contributions may give rise to a surplus in that defined benefit plan. finally be issued. This cost is recognized over the vesting period and
To the extent that the surplus in the plan exceeds the economic is booked in Other operating income and expenses from recurring
benefits available, the Group recognizes immediately a decrease in activities.
the defined benefit asset or an increase in the defined benefit liability.
Actuarial gains and losses arising from experience adjustments Employee share purchase plans
and changes in actuarial assumptions are recognized in other The Group may offer to most of its employees the opportunity to
comprehensive income in the period in which they arise. subscribe to a share purchase plan that allows them to purchase
Past service costs may arise when new defined benefit plans are set Company shares.
up, when changes to benefits payable under an existing defined These shares, which are subject to certain restrictions relating to their
benefit plan are introduced or when curtailments occur. They are sale or transfer, are purchased by the employees at a subscription
recognized immediately in the income statement. price based on the market prices of the Company shares set with
The Group net benefit plan cost recognized in operating income a discount. The benefit of the employees equals the difference
consists of current service cost, curtailment and settlements gains and between the fair value of the purchased shares (after allowing for
losses, past service cost as well as actuarial gains and losses arising the five-year lock-up cost) and the price paid by the employee,
under other long term benefit plans. Net interest on the net defined multiplied by the number of shares subscribed.
benefit liability (asset) is recognized outside the Operating Income. The benefit granted to the employees is immediately expensed by the
Group, as no vesting period applies, and is booked under Employee
// 3.24.2 Share based payments benefit costs – Share-based payments, within the Operating income
from recurring activities.
Employee share option plans
Benefits related to share options which can be granted to some 3.25 Provisions
Group employees are measured at grant date using a binomial model.
Provisions are recognized when a legal or constructive obligation has
The grant date is the date when the Managing Chairman decides been incurred which will probably lead to an outflow of resources
on the plan list of beneficiaries and the number of options granted that can be reasonably estimated.
to them.
The provisions for reorganizations and adaptation of activities are
The binomial model is based on the spot price for Company shares, recognized when the Group has a detailed formal plan that has
the exercise price, the historical volatility (over a period equal to the been announced.
expected lifetime of the option), a risk-free interest rate (zero coupon
government bonds with a maturity equal to the expected lifetime of Provisions are recorded at the net present value of the estimated
the option), and a dividend stream based on market expectations. cash outflows.
Benefits are spread over the period during which the services are
rendered. They are recognized in Other operating income and 3.26 Trade payables
expenses from recurring activities.
Trade payables are recognized initially at fair value and subsequently
Performance share plans measured at amortized cost using the effective interest method.
The Group may adopt plans to grant free shares of the Company The Group has put in place paying agent contracts with some
to certain of its employees. financial institutions. Under these agreements, the financial
institution acts as a paying agent with respect to invoices due to
The grant date is the date when the Managing Chairman decides
our suppliers who have entered into a bilateral agreement with the
on the plan list of beneficiaries and the number of performance
financial institution in order to be in position to factor their trade
shares granted to them.
receivables from the Group.
The fair value of the performance shares is based on the spot price
Given the nature of these contracts, the total balance of trade
of the Company’s share at grant date, less the present value of
payables to such suppliers is presented on a separate line of the
expected dividends that will not be received by grantees during
consolidated statement of financial position “Trade payables under
the vesting period.
factoring contracts”.
The number of shares that will finally be issued at the end of the
In the consolidated cash flow statement, these operations are
vesting period depends on the realization of Group performance
included in operating activities.
and service conditions.

NOTE 4 FINANCIAL RISK MANAGEMENT
4.1 Financial risk management policy Except in the case of particular obligations related to the specific
features of local financial markets, the Group companies are financed
in accordance with the following model:
// 4.1.1 Organization of financial risk
cash pooling with the Group for the management of day to day
management
liquidity requirements;
Financial risk control, measurement and supervision are carried out
intercompany credit lines and loans to meet medium and long
under the responsibility of the Corporate Financing Department, at
term requirements.
the subsidiary, geographic zone level as well as at the Group level.
It reports directly to the Group Financial Department. Short term financing for subsidiaries that do not participate in the
One of the Corporate Financing Department’s ongoing missions is cash pooling is under the responsibility of the local treasurer.
the formulation of financial risk management policies, monitored The management of liquidity risk is supported by a forecasting
on the basis of a full array of internal standards, procedures and system of short and long term financing requirements based on
authoritative literature. Geographic zone finance managers oversee business forecasts and the strategic plans of the operating entities.
the implementation of the Group’s financial risk management As a matter of prudent financial policy, the Group guards against
policies by the finance managers of the companies in their zone. In the inclusion in its financial contracts of covenants providing for
addition, compliance with financial risk policies is assessed through ratios or “material adverse change” clauses that could affect its
internal audit reviews to evaluate risk control efficiency and identify ability to mobilize credit lines or affect their term. At closing date
means of improvement. no such clause featured in Group loan agreements. With regard to
All strategic decisions regarding Group financial risk hedging policy clauses in financial contracts relating to default or acceleration, the
are taken by the Group Financial Department. As a general rule, probability of such circumstances arising is low and their possible
the Group strictly limits the use of derivatives to the sole purpose impact on the financial situation of the Group is not significant.
of hedging clearly identified exposures.
A Financial Risks Committee has for mission the establishment and // 4.1.3 Currency risk
the validation of policies governing the management of financial risks,
the identification and evaluation of these risks and the validation 4.1.3.1 Risk factors
and control of financial hedging instruments. The Financial Risks Currency risk is defined as the impact on financial indicators of
Committee meets on a monthly basis and includes members of fluctuations in the exchange rates of foreign currencies used in
the Group Financial Department and of the Corporate Financing the normal course of business. The Group is exposed to currency
Department. risks on its foreign currency transactions (transaction risk) and
also on the translation of its net investment in foreign subsidiaries
// 4.1.2 Liquidity risk (translation risk).
Foreign currency transaction risk arises from the monetary assets
4.1.1.1 Risk factors and liabilities of the Group and its subsidiaries (mainly cash and
Liquidity is defined as the ability to repay borrowings when they cash equivalents, receivables, payables and borrowings) that are
fall due and to find new stable sources of financing so that there denominated in foreign currencies. It corresponds to the risk of a
is always sufficient money to cover expenses. In the course of its change in the exchange rate between the date when these monetary
business, the Group is exposed to the risk of having insufficient liquid assets and liabilities are recorded in the accounts and the date when
resources to finance its operations and make the investments needed they are recovered or settled.
to drive its growth. It must therefore manage its cash reserves and Foreign currency translation risk arises from the Group’s net investment
committed lines of credit on a continuous basis. in foreign subsidiaries. It corresponds to the risk of a change in the
exchange rate used to translate the net investment in the foreign
4.1.1.2 Risk management processes
subsidiary into Euros during the consolidation process.
The Corporate Financing Department is responsible for the Group’s
financing and liquidity at the lowest cost. The Group raises financing 4.1.3.2 Risk management processes
on the capital markets through long-term financial instruments
(bond issues), as well as through bank resources (loans and credit Currency transaction risk
lines), commercial paper programs and securitization of accounts Foreign currency transaction risk is monitored by the Corporate
receivable. The Group has also negotiated committed back-up credit Financing Department.
lines and maintains cash reserves that are calibrated in order to Each Group companies continually calculate its accounting foreign
ensure the refinancing of the short term debt. Long term financing exchange exposure in relation to its functional currency and
and committed back-up credit lines are essentially concentrated hedges it systematically. A number of temporary exemptions can,
at the level of the financial holding companies, in particular the however, be granted by the Group Financial Department when it
Compagnie Financière Michelin SCmA, which acts as the financing is not possible to hedge a currency or when it is justified under
hub for the Group. exceptional market conditions.
Foreign currency payables and receivables of the same type and
with equivalent maturities are netted off and only the net exposure
is hedged. This is normally carried out through the financial holding
company, or, alternatively, through a bank. The financial holding

company in turn assesses its own resulting exposure and hedges it Equity investments are made for strategic rather than trading
with its banking partners. The main hedging instruments used are purposes. Equities are held under a medium or long term strategy,
forward currency contracts. The structural part of the exposure is and not for short term trading portfolio management.
hedged with long term instruments (ten years maturity maximum)
and the operating part is hedged with short term instruments 4.1.5.2 Risk management processes
(generally maturity is shorter than or equal to three months). The Group Investment Committee, which includes representatives
Currency risk monitoring and hedging is based on Group internal of the Financial, Legal and Corporate Finance Departments, is
standards and procedures. A transactional currency risk alert system responsible for the application of the investments’ monitoring
is implemented throughout the Group under the responsibility of rules. It therefore makes an annual review of the investments to
the Corporate Financing Department. These exposures are tracked assess the risk level and the evolution of the results compared to
on a monthly basis on a detailed management report. defined targets.
Currency translation risk
The Group does not use hedging instruments to actively manage // 4.1.6 Counterparty risk
this risk.
4.1.6.1 Risk factors
Investments in foreign subsidiaries are booked in the functional
Counterparty risk is the risk of a debtor refusing or being unable to
currency of the parent company and are not included in the latter’s
fulfil all or part of its obligations. The Group is exposed to counterparty
foreign exchange position.
risk on its contracts and financial instruments. Counterparty risk
may lead to an impairment loss or a loss of liquidity. The Group is
// 4.1.4 Interest rate risk exposed to the risk of impairment losses arising from the investment
of available cash in money market instruments and other marketable
4.1.4.1 Risk factors securities, as well as on finance receivables, derivative instruments
The Group’s income statement may be affected by interest rate and third party guarantees. It is exposed to the risk of a loss of
risk. An unfavorable change in interest rates may adversely affect liquidity on its undrawn committed lines of credit.
future finance costs and cash flows. The Group is in a net debt
position and is exposed to the risk of an increase in interest rates 4.1.6.2 Risk management processes
on the portion of debt at variable rate. It may also be exposed The Group chooses its banks extremely carefully, particularly when
to an opportunity risk in the case of a fall in interest rates, if too it comes to the management of its cash investments. As it would be
great a proportion of debt is at fixed rates, as well as on financial inappropriate to add financial risk to the industrial and commercial
investments, depending on their interest terms. risks that are associated with its operations, the Group gives priority
to the security and the liquidity of all its cash investments. Cash
4.1.4.2 Risk management processes investments consist of (i) financial instruments that are subject to
The objective of interest rate management is to minimize financing no risk or an insignificant risk of changes in value purchased from
costs whilst protecting future cash flows against unfavorable a sufficiently diversified group of leading banks, and (ii) unrestricted
movements in interest rates. For this purpose, the Group uses units in diversified money market funds or short-term bond funds.
various derivative instruments available in the market, but restricts As well as cash investments, counterparty risk is borne on the value
itself to the use of “plain vanilla” instruments (interest rate swaps, of the assets of derivative instruments used for hedging purposes.
caps, collars, etc). These amounts and their distribution by bank are tracked weekly
Interest rate exposure is analyzed and monitored by the financial risks by the Group Treasury and monitored monthly by the Financial
committee using monthly performance indicators and management Risks Committee.
reports. In order to mitigate the counterparty risk on its derivatives instruments,
The interest rate position is centralized by currency by the Corporate the Group realizes exchange of collaterals with its main banks.
Financing Department that is the only department permitted to
undertake hedging operations. Interest rate hedging is concentrated // 4.1.7 Credit risk
on the main currencies. The Financial Risk Committee determines
the limits for hedging by currency, by taking into consideration 4.1.7.1 Risk factors
the Group debt ratio (hedging needs evolving in line with the level
Credit risks may arise when the Group grants credit to its customers.
of the debt).
If a customer becomes insolvent or files for bankruptcy, it may
default on the receivables held by the Group and this may have a
// 4.1.5 Equity risk negative impact on the Group’s income statement.
4.1.5.1 Risk factors
The Group owns shares in listed companies whose share price
fluctuates, among other things, in line with changes in the global
stock markets, the multiples applied by the markets to the industries
in which these companies operate and their specific economic and
financial metrics.

4.1.7.2 Risk management processes for credit and collection. The main policies and procedures are
The Credit Department, which is part of the Group Financial defined at Group level and are monitored and controlled at both
Department, sets the maximum payment terms and customer the geographical zone and Group level. A monthly credit reporting
credit limits to be applied by the operating companies. It manages system operates within the Group.
and controls credit activity, risk and results, and is also responsible
4.2 Financial risk data
// 4.2.1 Liquidity risk

At December 31, 2017, the repayment schedule of financial debts (interest included) as well as the ageing balance of undrawn confirmed
credit lines are as follows:
2024
and
(in € million) 2018 2019 2020 2021 2022 2023 beyond
Bonds 199 415 16 16 780 14 832
Loans from financial institutions and other 286 3 7 6 5 91 117
Obligation under finance lease 20 29 29 29 29 29 83
Derivative instruments - (12) (9) - 56 (1) (2)
Repayment schedule of financial debts 505 435 43 51 870 133 1,030
Long-term undrawn confirmed credit lines - - - 1,500 - - -
This table shows debt principals plus interests according to their The refinancing risk of the Group short term debt is covered by the
payment date, as projected with available market data at closing amount of the undrawn confirmed credit lines (€1,500 million), cash
date (interests are computed in each currency on the basis of the available (€1,773 million) as well the cash management financial
market rates, and converted in Euros at closing rates). Thus displayed assets (€180 million).
amounts are not discounted. In 2014, the Group renewed its syndicated credit line with a maturity
of five years. In 2015 and 2016 the Group exercised its two extension
options, extending the maturity from 2019 to 2021.
// 4.2.2 Currency risk

Transactional currency risk
The following table set forth the Group transactional foreign currency accounting exposures (when a monetary asset or liability is denominated
in a currency other than the functional currency), before and after hedging:
December 31, 2017 December 31, 2016
(in € million) AUD EUR SEK HUF CNY Other AUD EUR SEK HUF CNY Other
Monetary assets 223 659 148 26 774 6,243 226 719 121 6 869 6,418
Monetary liabilities (105) (1,681) (117) (38) (113) (5,347) (117) (1,687) (79) (4) (102) (5,420)
Net position before
hedging 118 (1,022) 31 (12) 661 896 109 (968) 42 2 767 998
Hedges (104) 1,032 (39) (4) (679) (926) (106) 857 (49) (1) (766) (1,082)
NET POSITION
AFTER HEDGING 14 10 (8) (16) (18) (30) 3 (111) (7) 1 1 (84)
At December 31, 2016, a subsidiary had net exposure in EUR for (2016: €1 million) in the consolidated income statement for every
€107 million, due to the change of its functional currency as of cent change. A favorable change would have a totally symmetrical
January 1, 2017. This exposure is being hedged from the beginning impact. This relatively low sensitivity to the transaction currency risk
of January 2017. is due to the objective described in paragraph 4.1.3 “Currency risk”.
An unfavorable change in each of the foreign currencies mentioned Because of the low volume of cash flow hedge derivatives
in the table above against the functional currencies of the companies (note 16 “Derivative financial instruments”), the equity sensitivity
which have the currency transaction exposure would have a to currency risk is not significant.
negative aggregate impact, after hedging, of less than €1 million

Currency translation risk

A breakdown of equity by currency is provided in the following table:
(in € million) December 31, 2017 December 31, 2016
EUR 6,400 5,429
USD 1,962 1,760
BRL 979 1,063
THB 526 661
CNY 407 430
CAD 333 417
INR 236 252
GBP 121 (137)
Other 297 771
TOTAL 11,261 10,646
// 4.2.3 Interest rate risk

Net debt at December 31, 2017 by type of hedges and currencies can be detailed as follows:
Net debt after currency
hedging but before Interest rate
Net debt before hedging Currency interest rate hedging hedging Net debt after hedging
hedging
(in € million) Fixed Variable Total Fixed Variable Total Fixed Variable Fixed Variable Total
EUR 1,155 (1,267) (112) (2,044) 1,658 (3,814) (2,156) (354) 354 1,304 (3,460) (2,156)
CNY - (37) (37) 885 - 848 848 380 (380) 380 468 848
USD 465 143 608 (171) (38) 475 437 323 (323) 285 152 437
THB - 68 68 329 - 397 397 226 (226) 226 171 397
BRL 6 44 50 307 6 351 357 225 (225) 231 126 357
MXN - (1) (1) 168 - 167 167 - - - 167 167
Other currencies 16 92 108 526 16 618 634 146 (146) 162 472 634
Total before
derivatives 1,642 (958) 684 - 1,642 (958) 684 946 (946) 2,588 (1,904) 684
Fair value of
derivatives
included in net
debt 32 32 32
NET DEBT
(NOTE 26) 716 716 716
A 1-point parallel shift in the yield curves applied to the net debt components would represent as at December 31, 2017:
Fair value impact
Annualized cash impact Booked in other
booked in income Booked in income comprehensive
(in € million) statement statement(1) income(2) Not booked(3) Total
1-point downward shift (19) (26) (2) 113 85
1-point upward shift 19 25 2 (113) (86)
(1) The Group interest rate policy aims at hedging perfectly identified future cash flows. However, some derivative instruments do not qualify for a hedge accounting
under IFRS rules and are measured at fair value through profit or loss.
(2) For derivatives qualifying for hedge accounting (cash flow hedges).
(3) Some fair value impacts are not accounted for since the underlying net debt component is not booked at fair value but at amortized cost.
// 4.2.4 Equity risk

Equity risk is the risk of a 10% unfavorable change in the price of the Group investment portfolio.
Carrying amount (note 15.1) 285 208
Impact on equity of a 10% unfavorable change in the price
of the Group investment portfolio (20) (13)

// 4.2.5 Counterparty risk At the same date, 67 customers (2016: 64) have been granted credit
At December 31, 2017, 54% of cash and cash equivalents (including limits in excess of €10 million. Out of these, 32 are located in Europe,
cash management financial assets) is invested in money market or 20 in North America, 4 in Asia, 10 in Africa, India or Middle-East
short term bond funds to allow for a maximum diversification of the and 1 in South America. There was no significant collateral received
counterparty risk. The balance is invested directly in international to limit credit risk. In 2017, credit losses represented 0.09% of sales
bank institutions which meet the counterparty risk management (2016: 0.07%).
criteria defined by the Group.
Furthermore, most of the derivatives are contracted with the same // 4.2.7 Commodities derivatives
banking groups. In 2017, the Group did not have any significant hedges of commodities
purchases (note 16.3 “Derivative contractual amounts”).
// 4.2.6 Credit risk
At December 31, 2017, net receivable balances from the ten largest
customers amounted to €543 million (2016: €572 million). Seven of
these customers are located in Europe and three in North America.
4.3 Capital risk management

The Group’s objectives when managing its capital is to safeguard its ability to continue as a going concern and to ensure its development,
so that it can provide returns for shareholders and benefits for other stakeholders.
The Group monitors its capital on the basis of the gearing ratio, corresponding to the ratio of net debt to total equity.
Net debt (note 26) 716 944
Total equity 11,261 10,646
GEARING RATIO 0.06 0.09
4.4 Fair value measurement hierarchy

The following tables present the Group assets and liabilities that are measured at fair value at December 31, 2017 and 2016 by level of
the fair value measurement hierarchy:
(in € million) Level 1 Level 2 Level 3 Total 2017
Cash and cash equivalents 1,323 - - 1,323
Deposits borrowing collaterals 42 - - 42
Derivatives (note 16.1) - 148 - 148
Available-for-sales financial assets (note 15.1) 32 - 253 285
TOTAL ASSETS 1,397 148 253 1,798
TOTAL LIABILITIES - 180 - 180
(in € million) Level 1 Level 2 Level 3 Total 2016

Cash and cash equivalents(1) 1,293 - - 1,293
Deposits borrowing collaterals 77 - - 77
Available-for-sales financial assets (note 15.1) 43 - 165 208
TOTAL ASSETS 1,413 84 165 1,662
TOTAL LIABILITIES - 181 - 181
(1) See note 21.
There has been no significant transfer during these two years between level 1 and level 2.

The following table presents the changes in level 3 instruments for the year ended December 31, 2017:
(in € million)
At January 1, 2017 165
Additions(1) 118
Disposals (2)
(41)
Transfers from other level to level 3 -
Transfers from level 3 to other levels -
Gains or losses for the year included in net income 1
Gains or losses for the year included in other comprehensive income 21
Others (11)
AT DECEMBER 31, 2017 253
(1) Of which €55 million correspond to the acquisitions described in note 33.1.2.
(2) Of which €12 million correspond to the 2016 acquisitions consolidated in 2017 (note 13.1).
NOTE 5 SEGMENT REPORTING
The Group is organized into Product Lines, each one dedicated to an This measurement basis excludes the effects of income and expenses
area of activity, with its own marketing, development, production and from non-recurring activities from the operating segments. Group
sales resources. The Group has three operating segments as follows: financing (including the cost of net debt and other financial income
Passenger car and Light truck tires and related distribution; and expenses), result sharing from associates and income tax are
managed on a Group basis and are not allocated to operating
Truck tires and related distribution; and
segments.
Specialty businesses.
Segment assets consist of goodwill, intangible assets, property, plant
Specialty businesses include the Specialty tire business activities and equipment, trade receivables and finished products inventories.
(Earthmover, Agricultural, Two-wheel and Aircraft tires) and the Corporate intangible assets and property, plant and equipment are
activities Michelin Travel Partner, Michelin Lifestyle and BookaTable. allocated to each segment in proportion of directly attributed assets.
The operating segments performance is measured on operating The amounts provided to the Managing Chairman with respect to
income from recurring activities and it is based on the same principles segment assets are measured in a manner consistent with that of
applied to the Group’s consolidated income statement. the consolidated financial statements. Capital expenditure consists
of additions of property, plant and equipment and intangible assets.
No operating liabilities are allocated to the segments in the Group
internal reporting.
The segment information is as follows:

2017 2016
Passenger Passenger
car and car and
Light truck Light truck
tires and Truck tires tires and Truck tires
related and related Specialty related and related Specialty
(in € million) distribution distribution businesses Total distribution distribution businesses Total
Profit and loss information
Net sales 12,479 6,123 3,358 21,960 12,105 5,966 2,836 20,907
Operating income from
recurring activities 1,552 497 693 2,742 1,585 580 527 2,692
In percentage of net sales 12.4% 8.1% 20.6% 12.5% 13.1% 9.7% 18.6% 12.9%
Depreciation and amortization (760) (362) (223) (1,345) (778) (383) (231) (1,392)
Segment assets
Goodwill, Intangible assets and
PP&E 6,974 3,821 1,965 12,760 6,935 3,648 2,063 12,646
Finished products inventories 1,495 896 490 2,881 1,508 839 477 2,824
Trade receivables 1,653 998 433 3,084 1,666 1,048 328 3,042
Total of segment assets 10,122 5,715 2,888 18,725 10,109 5,535 2,868 18,512
Other information
Capital expenditure 1,080 476 215 1,771 1,080 520 211 1,811

In 2017, the impairment recognized in the operating income amounts to the Truck tires and related distribution operating segment and
to €54 million (2016: €158 million), of which €10 million (2016: €39 million (2016: €65 million) to the Specialty businesses. Note 9
€27 million) pertaining to the Passenger car and Light trucks tires and provides further details on these impairments.
related distribution operating segment, €5 million (2016: €66 million)
Segment reporting assets are reconciled to total Group assets as follows:

Segment assets 18,725 18,512
Non-current financial assets and other assets 479 323
Investments in associates and joint ventures 356 309
Deferred tax assets 890 1,191
Other net inventories (raw materials and supplies, work in progress) 1,627 1,656
Current financial assets 285 303(1)
Other current assets 1,132 1,202
Cash and cash equivalents 1,773 1,826(1)
TOTAL GROUP ASSETS 25,267 25,322
(1) See note 21.
The geographic information is broken down by zone hereunder:

2017 2016
North North
(in € million) Europe America Other Total Europe America Other Total
Net sales 8,315 8,056 5,589 21,960 8,101 7,792 5,014 20,907
Goodwill, Intangible assets and
PP&E 5,804 3,217 3,739 12,760 5,674 3,036 3,936 12,646
Capital expenditure 866 533 372 1,771 943 413 455 1,811
Europe includes western and eastern European countries. North America Approximately 80% of the North American net sales are done in
includes Mexico. Asian, South-American, Middle-Eastern, Oceanic the United States of America during these two years.
and African countries are included in Other. No single external customer amounted to 10% or more of the
The Group sales information is based on the location of the customer. Group net sales in 2017 and 2016.
The net sales in France amounted to €1,984 million
(2016: €1,917 million). The intangible assets and PP&E located in
France amounted to €2,298 million (2016: €2,164 million).
NOTE 6 EXPENSES BY NATURE
The following operating costs from recurring activities are allocated to the appropriate headings of expenses by function in the income
statement:
Raw materials and consumables used and changes in finished products inventories (8,072) (7,130)
Employee benefit costs (5,909) (5,814)
Transportation of goods (1,183) (1,152)
Depreciation and amortization (1,345) (1,392)
Other expenses (2,709) (2,727)
EXPENSES BY NATURE (19,218) (18,215)

NOTE 7 EMPLOYEE BENEFITS COSTS
The charges for employee benefits are allocated to the appropriate headings of expenses by function in the income statement:
Wages and salaries (4,617) (4,529)
Payroll taxes (963) (950)
Defined benefit plan costs (note 27.1) (64) 155
Defined contribution plan costs (note 27.2) (220) (213)
Share-based payments – Cost of services rendered (note 25) (7) (5)
EMPLOYEE BENEFIT COSTS (5,871) (5,542)
The average number of employees in 2017 is 114,438 (2016: 112,088).
NOTE 8 OTHER OPERATING INCOME AND EXPENSES FROM RECURRING ACTIVITIES
Other operating income and expenses from recurring activities are recognized within in the income statement:
Acquisition costs linked to business combinations (10) -
Employee shareholder plan cost - (16)
Share-based payments – Cost of services rendered (note 25) (7) (5)
Other operating income/(expenses) (18) -
OTHER OPERATING INCOME AND EXPENSES FROM RECURRING ACTIVITIES (35) (21)
NOTE 9 OPERATING INCOME/(LOSS) FROM NON-RECURRING ACTIVITIES
The income and expenses from non-recurring activities are detailed in the table below:
Reorganization and adaptation of activities (note 9.1) (55) (80)
Impairment of fixed assets (note 9.2) (54) (129)
Retiree benefit costs (note 9.3) 37 272
Other operating income/(expenses) (note 9.4) (39) 36
NON-RECURRING INCOME AND EXPENSES (111) 99
9.1 Reorganizations and adaptation In Germany a competitiveness improvement plan has been announced
in December concerning passenger car tire, truck tire and semi-
of activities finished production activities within five industrial sites. To support
On June 22, 2017, the Group announced the project of the new the consequent reductions in workforce, some departure assistance
global organization to better serve its customers. In France, the measures have been put in place which resulted in a provision of
implementation of this new organization will have repercussions on €16 million.
the workforce headcount, especially within the Clermont-Ferrand In 2016, the Group announced the reorganization of the Process
sites. A voluntary pre-retirement scheme for managers and employees engineering function and the closure, before the end of 2017, of a
of the sites concerned has been proposed and has been agreed retreading facility in Clermont-Ferrand. A provision covering the
with the unions. In addition, for those employees who cannot social costs as well as the impairment of non-reusable equipment
enter this pre-retirement scheme, the Group has extended by one had been recorded for a total amount of €45 million.
year the term of the GPEC agreement concluded in 2016 and
increased the possibility to be eligible to the scheme. The result of A three-year agreement, known as the GPEC, was concluded in
these two schemes is a net cost of €27 million, taking into account September 2016 with the unions, in anticipation of a large number
the amounts already provisioned for retirement benefits of the of employees’ retirements in the coming years within some of the
populations concerned. Group’s French subsidiaries. In return for better visibility provided

by the employees on the expected date of their retirement, the Additional disclosure on this topic is provided in note 27. The
companies concerned will grant them specific benefits. A provision of income is partially offset notably by the introduction of new plans
€30 million had been set aside to cover the cost of this agreement. in Hungary and in Canada and by the retirees’ benefits costs in the
United States of America.
In 2016, a change in the American medical cover for the Group’s
9.2 Impairment of fixed assets retired employees has reduced significantly the present value of the
Impairment losses on previously recognized goodwill totaled obligation, allowing a provision reversal for €271 million.
€36 million in 2017. They concern mainly the BookaTable CGU.
Impairment losses on non-reusable assets, due to the competitiveness
improvement plan in Germany and the ongoing restructuring in 9.4 Other operating income and expenses
Italy, amount to €12 million. A French subsidiary of the Group received formal notice, in 2013
In 2016, the fixed assets impairments were mainly due to the and 2016, from the administration responsible for the collection of
equipment of the Tweel CGU for €45 million, some semi-finished social security contributions, to pay a total amount of €114 million
production capacity of the Chennai site in India for €54 million and (excluding late payments fees).
the land right-of-use, as well as the site preparation investments The claims not accepted for which a provision had not been set aside
already undertaken, in China for an amount of €25 million. by the Group as of December 31, 2016 amounted to €34 million
for which appeals or litigation were initiated. A first adverse
judgment was rendered in September 2017. The Group pursues
9.3 Retiree benefit costs its recourse but has recognized the risks related to these claims in
In 2017, an income amounting to €62 million is generated by the consolidated financial statements at December 31, 2017, for
evolution of provisions for employee benefits and is related to the an amount of €39 million.
pension plans in the United Kingdom and the healthcare plan in In 2016, an agreement was reached, with the local authorities of
the United States of America. Shenyang in China, to return a land in exchange for a payment
of €34 million.
NOTE 10 COST OF NET DEBT AND OTHER FINANCIAL INCOME AND EXPENSES
Cost of net debt and other financial income and expenses are broken down in the table below:
Interest expenses (177) (209)
Interest income 5 6
Interest rate derivatives (16) (7)
Fees on credit lines (5) (5)
Capitalized borrowing costs 17 12
COST OF NET DEBT (176) (203)
Net income from financial assets (other than cash and cash equivalents and
cash management financial assets) 19 21
Currency remeasurement (including currency derivatives) (14) (18)
Other (5) 17
OTHER FINANCIAL INCOME AND EXPENSES - 20

10.1 Derivatives not accounted for using hedge Although these transactions provide effective economic hedges,
they do not qualify for hedge accounting under IFRS (and therefore
accounting they cannot be recognized as cash flow hedges as described in
As described in the financial risk management policy, the Group note 3.5 “Hedging”). Fluctuations in the derivatives’ fair values are
financing activities are mostly centralized (note 4.1.2 “Liquidity risk”) therefore accounted for in the income statement. The decrease in
and the interest rate risk is managed through the use of “plain fair value during the year amounted to €17 million (2016: decrease
vanilla” derivative instruments (note 4.1.4 “Interest rate risk”). As of €8 million) and is included in “Interest rate derivatives (Cost of
a consequence: net debt)”.
borrowings are essentially raised in Euros (note 26 “Financial
liabilities”);
part of these borrowings is subsequently swapped into foreign 10.2 Ineffective hedges
currencies to finance the foreign subsidiaries; and As in 2016, no ineffective portion of fair value hedges was recognized
derivatives are contracted to manage the foreign currency interest in the income statement in “Interest rate derivatives (Cost of net
rates (note 16 “Derivative financial instruments”). debt)” nor cash flow hedge ineffectiveness was recognized in the
income statement.
This process is described in the summary table in note 4.2.3 “Interest
rate risk”.
NOTE 11 INCOME TAX
Income tax expense is detailed as follows:

Current tax expense (note 18.2) (559) (749)
Deferred tax income/(expense) (note 18.1) (102) (48)
INCOME TAX (661) (797)
Current tax includes €81 million of withholding tax on royalties and distribution of retained earnings between Group companies
(2016: €84 million).
Reconciliation of the Group effective income tax:
Income before tax 2,354 2,464
Tax calculated using domestic tax rates applicable to income in the respective
countries (631) (669)
Tax effect from:
untaxed transactions (9) 15
deferred tax assets not recognized during the year (36) (81)
net change in unrecognized deferred tax assets 8 5
changes in tax rates 25 (2)
taxes with no tax base (tax credits, withholding tax, etc.) (52) (76)
other items 34 11
INCOME TAX (661) (797)
The Group has operations in various countries that have different The tax reform that came into force in the United States at the end
tax laws and rates. The weighted average domestic tax rate of of December 2017 resulted in a decrease in the deferred tax expense
Group companies may therefore vary from year to year depending recorded in the consolidated income statement of €25 million over
on the relative size of taxable incomes. the year. The decrease in the tax rate, from 38.0% (including local
The French Constitutional Council pronounced, by a decision entered taxes) to 24.8%, is taken into account to value the outstanding
into force on October 8, 2017, the total invalidation of the contribution deferred taxes of the Group’s US subsidiaries at December 31, 2017.
of 3% on the distributions of result introduced in 2012. Therefore This outstanding amount stems mainly from taxable temporary
and in application of IAS 12, a tax income has been recognized for differences relating to the depreciation of property, plant and
an amount of €47 million which corresponds to the total value of equipment and recognition at fair value at the date of acquisition
the contributions paid in respect of financial years 2012 to 2016 of assets acquired during business combinations.
included. In addition, remunerative interest of €5 million has been The remaining difference between the Group’s effective and
recognized in financial income. These sums were paid by the tax theoretical tax rates can be explained mainly by deferred tax assets
authorities before the end of the financial year. The effect of this not recognized during the year and by withholding taxes, tax credits
refund is presented on the “other items” line in the above table. and other taxes whose base is not the income before tax.

NOTE 12 EARNINGS PER SHARE
Basic earnings per share are calculated by dividing income attributable (OCEANEs). They expired on January 1, 2017 as detailed in
to the shareholders of the Company by the weighted average note 26.1. For the stock options and when they are dilutives at
number of shares outstanding during the year, excluding shares closing date, a calculation is done to determine the number of
purchased by the Group and held as treasury shares. shares that could have been acquired at fair value (determined as
Diluted earnings per share are calculated by adjusting the weighted the average annual market share price of the Company’s shares)
average number of shares outstanding to assume conversion of all based on the monetary value of the subscription rights attached
dilutive potential shares. On December 31, 2017, the Company has to outstanding stock options. The number of shares calculated as
two types of dilutive potential shares: stock options (note 28.1 “Stock above is compared with the number of shares that would have been
option plans”) and performance shares (note 28.2 “Performance issued assuming exercise of the stock options. Since performance
share plans”). On December 31, 2016, the Company had a third shares are granted free of charge and are dilutives by definition,
dilutive instrument: bonds convertible in existing or new shares the number of shares that are expected to be issued is determined
at closing date based on estimate.
Components of the basic and diluted earnings per share calculations are presented in the table below:
Net income/(loss) (in € million), excluding the non-controlling interests 1,700 1,676
Less, estimated grants to the General Partners (11) (12)
Net income/(loss) attributable to the Shareholders of the Company used
in the calculation of basic earnings per share 1,689 1,664
Plus, interest expenses on convertible bonds - 28
Net income/(loss) attributable to the Shareholders of the Company used
in the calculation of diluted earnings per share 1,689 1,692
Weighted average number of shares (in thousands of shares) outstanding used
in the calculation of basic earnings per share 179,889 180,685
Plus, adjustment for share option plans 257 422
Plus, adjustment for convertible bonds - 5,598
Plus, adjustment for performance shares 689 729
Weighted average number of shares used in the calculation of diluted earnings
per share 180,835 187,434
Basic 9.39 9.21
Diluted 9.34 9.03
Taking into account the evolution of the average share price in 2017, No transaction on shares having an impact on the weighted average
all the stock option plans as described in the note 28.1 “Stock number of shares entering in the calculation of basic earnings per
option plans” are dilutive. share and diluted earnings per share has occurred after the 2017
reporting period.

NOTE 13 GOODWILL AND INTANGIBLE ASSETS
Changes in goodwill and intangible assets are as follows:

(in € million) Goodwill Intangibles Total
Gross carrying amounts at January 1, 2016 832 1,795 2,627
Translation adjustments 58 28 86
Additions (including new emission rights: €4 million) - 162 162
Disposals - (54) (54)
Changes in scope of consolidation 104 20 124
Transfers and other (1) 5 4
Gross carrying amounts at December 31, 2016 993 1,956 2,949
Translation adjustments (106) (84) (190)
Additions (including new emission rights: €4 million) - 190 190
Disposals - (73) (73)
Changes in scope of consolidation 269 156 425
Transfers and other (2) 29 27
Gross carrying amounts at December 31, 2017 1,154 2,174 3,328
Amortization and impairment at January 1, 2016 (29) (1,174) (1,203)
Translation adjustments - (19) (19)
Amortization - (144) (144)
Net impairment (2) (6) (8)
Disposals - 17 17
Changes in scope of consolidation - - -
Transfers and other 1 - 1
Amortization and impairment at December 31, 2016 (30) (1,326) (1,356)
Translation adjustments 2 42 44
Amortization - (154) (154)
Net impairment (36) (3) (39)
Disposals - 56 56
Changes in scope of consolidation 2 (2) -
Transfers and other - (2) (2)
Amortization and impairment at December 31, 2017 (62) (1,389) (1,451)
NET CARRYING AMOUNTS AT DECEMBER 31, 2017 1,092 785 1,877
Net carrying amounts at December 31, 2016 963 630 1,593
13.1 2016 Acquisitions At December 31, 2016, this acquisition was provisionally reported as

“Non-current financial assets and other assets” in the consolidated
On December 15, 2016 the Group acquired Levneo, the holding
statement of financial position.
of a group of Brazilian companies producing and commercializing
motorbike and bicycle tires under the Levorin trademark. The company At the acquisition date, the fair value of the consideration transferred
is specialized in the “commuting” segment and operates in the amounted to €9 million.
Brazilian market. During 2017, the Group has finalized the price allocation and the
related acquisition accounting entries.

The assets acquired and liabilities assumed measured at fair value are detailed in the following table:
(in € million) At acquisition date
Intangible assets(1) 26
Property, plant and equipment (PP&E) 51
Non-current financial assets and other assets -
Deferred tax assets 14
Non-current assets 91
Inventories 13
Trade receivables and other current assets(2) 15
Cash and cash equivalents 4
Current assets 32
Non-current financial liabilities -
Provisions and other non-current liabilities (31)
Non-current liabilities (31)
Current financial liabilities (46)
Trade payables and other current liabilities (70)
Current liabilities (116)
TOTAL FAIR VALUE OF NET ASSETS ACQUIRED (24)
(1) The fair value of intangible asset has been measured, with the assistance of an external consultant, using the royalty relief method for the trademark while using an
income approach for the customer relationships. The Levorin trademark has been valued at €17 million and its useful life is indefinite. The fair value of the customer
relationships has been measured at €9 million. It will be amortized over its remaining useful life of seven years.
(2) At the acquisition date, the trade receivables amounted to €8 million and they have been kept at the same value.
The purchase price allocation, after the measurement of identifiable assets acquired and liabilities assumed, led to the recognition of goodwill
for an amount of €33 million, calculated as follows:
Fair value of consideration transferred (1) 9
Fair value of net liabilities assumed (2) 24
GOODWILL (1) + (2) 33
With this acquisition, Michelin is consolidating its presence in Levorin is allocated to the operating segment Specialty businesses.
Brazil and reinforcing the global development of its two-wheel tire Furthermore, the Group completed the price allocation for Reservas
ranges. In particular, the Group is strengthening its position in the de Restaurantes, S.L.; a Spanish company operating in the online
“Commuting” segment, a significant and expanding market, and restaurant reservation business acquired in December 2016. The
is extending the range of tires currently offered, historically oriented business combination has been accounted for in 2017 by applying
to the high-end two-wheel leisure market. These aspects led to the the acquisition method. No identifiable intangible asset and no
decision to test the goodwill, amounting to €33 million, together goodwill was recognized in the consolidated statement of financial
with the Two-wheel CGU. position as at December 31, 2017.
In 2017, Levorin has contributed to the Group’s net sales for an
amount of €101 million, to the operating result for -€7 million and
to the net result for -€15 million.

13.2 Goodwill
The amounts allocated to the CGUs are as follows:
CGU Passenger car and light truck tires Southeast Asia / Australia 121 125
CGU Passenger car and light truck tires North America 115 128
CGU Passenger car and light truck tires Europe 112 113
Group of CGUs Truck tires South America(1) 202 233
Group of CGUs Truck tires North America(1)(2) 273 88
Group of CGUs Truck tires Europe(1) 109 115
CGU BookaTable 61 88
Other CGUs 99 73
GOODWILL 1,092 963
(1) In 2015, the synergies identified at Sascar’s acquisition, reflecting the opportunity for Sascar to have access to the Group’s customers in Brazil and to expand its service
offering in other geographical zones led the Group to allocate the goodwill to three groups of CGUs (comprising Truck tire, fleet services and digital activities) in South
America, in North America and in Europe.
(2) At December 31, 2017, the goodwill recognized in relation to the acquisition of Nextraq is allocated to this group of CGUs (note 33.1.1).
The impairment tests have been carried out taking into account The rates used to discount the CGUs’ future cash flows are based
the following two main assumptions: on after-tax WACC (Weighted Average Cost of Capital) and are
The terminal value takes into account an annual growth rate applied on after-tax cash flows. They are determined In relation
which depends on the nature of the activities and the countries with the geographical zones and the activities features.
where the assets are located.
After-tax discount rates and perpetual growth rates used in 2017 for the valuation of the terminal value are presented in the table below:
(in percent) After-tax WACC Perpetual growth rate
Cash Generating Units Tires – Europe 6.3 1.5
Cash Generating Units Tires – North America 7.2 1.5
Cash Generating Units Tires – South America 12.3 3.0
Cash Generating Units Tires – Asia 8.3-12.0 3.0
Cash Generating Unit BookaTable 13.4 2.8
Cash Generating Units Digital activities – South America(1) 14.3 4.5
(1) Mainly Brazil.
The results of the test carried out on the CGU BookaTable led the // 13.3.2 Trademarks
Group to recognize an impairment of goodwill for an amount of
At December 31, 2017 the net carrying amount of trademarks was
€24 million.
€77 million (2016: €61 million), of which €42 million related to
As the recoverable amount of the other CGUs and group of CGUs trademarks with indefinite useful lives. These amounts correspond
is in excess of their assets value, no sensitivity analysis is disclosed, mainly to the fair value of trademarks recognized as part of business
with the exception of the group of CGU Truck tires South America combinations.
for which a WACC increase of 100 basis points would lead to an
impairment of €56 million.
// 13.3.3 Emission rights
The emission rights granted or purchased are recognized as an
13.3 Intangible assets intangible asset at their price on the transaction date. A government
grant is recognized in liabilities for the same value as the emission
In 2017, additions to intangible assets, amounting to €190 million
rights granted. The cost and the related liability for actual emissions
(2016: €162 million) break down into the following categories:
consumed and the income corresponding to the use of the government
Software€175 million grant are accounted for using the price in force at the acquisition
Emission rights – allowances granted €4 million date. The balance of the rights granted at December 31, 2017
Other€11 million amounts to 1.9 million metric tons (2016: 1.9 million metric
tons) representing a value of €11 million (2016: €12 million). The
liability related to actual emissions in 2017 amounts to 0.9 million
// 13.3.1 Software metric tons (2016: 0.8 million metric tons) representing a value of
The net carrying amount of software at December 31, 2017 was €5 million (2016: €5 million). It will be offset by the delivery of the
€511 million (2016: €455 million). Software is initially recognized allowances granted.
at cost. Cost includes cost of acquisition or production cost and
other costs directly attributable to the acquisition or production.

// 13.3.4 Development costs of a market for the output of the intangible asset. The existence of
In 2017 and 2016, no development costs were capitalized since a market is demonstrated only when the Group has obtained OEM’s
the criteria for recognition as intangible assets were not met. To be approval and when the level of profitability generated from the
recognized as an asset, the development costs incurred for a new business plan proposed by the manufacturers is in line with Group
product or a significant product renewal project must fulfil six criteria. objectives. In practice, the corresponding development costs are
One of these criteria requires the entity to demonstrate the existence incurred at a stage of the project which is prior to OEM’s approval.
NOTE 14 PROPERTY, PLANT AND EQUIPMENT
Changes in property, plant and equipment are as follows:

Plant and
Lands and Industrial Other
(in € million) Buildings Equipment Equipment Total
Gross carrying amounts at January 1, 2016 6,287 17,745 1,462 25,494
Translation adjustments 128 468 34 630
Additions (including finance leases: €42 million) 470 1,119 106 1,695
Disposals (199) (471) (68) (738)
Changes in scope of consolidation - - 1 1
Transfers and other 5 (10) - (5)
Gross carrying amounts at December 31, 2016 6,691 18,851 1,535 27,077
Translation adjustments (351) (1,065) (80) (1,496)
Additions (including finance leases: €135 million) 444 1,149 127 1,720
Disposals (60) (376) (83) (519)
Changes in scope of consolidation 33 47 2 82
Transfers and other (26) 3 (5) (28)
Gross carrying amounts at December 31, 2017 6,731 18,609 1,496 26,836
Depreciation and impairment at January 1, 2016 (2,789) (11,176) (997) (14,962)
Translation adjustments (49) (281) (20) (350)
Depreciation (175) (997) (76) (1,248)
Net impairment (53) (78) (16) (147)
Disposals 155 465 65 685
Changes in scope of consolidation - - (1) (1)
Transfers and other 1 (1) (1) (1)
Depreciation and impairment at December 31, 2016 (2,910) (12,068) (1,046) (16,024)
Translation adjustments 136 661 53 850
Depreciation (175) (928) (88) (1,191)
Net impairment (3) (8) (1) (12)
Disposals 39 346 67 452
Changes in scope of consolidation (4) (25) (2) (31)
Transfers and other 1 1 1 3
Depreciation and impairment at December 31, 2017 (2,916) (12,021) (1,016) (15,953)
NET CARRYING AMOUNTS AT DECEMBER 31, 2017 3,815 6,588 480 10,883
Net carrying amounts at December 31, 2016 3,781 6,783 489 11,053
PP&E under construction amounted to €2,186 million The borrowing costs capitalized in 2017 in PP&E amounted to
(2016: €2,027 million). €17 million (2016: €12 million).
Accumulated impairment losses amounted to €332 million PP&E held under finance leases amounted to €263 million
(2016: €355 million). (2016: €165 million). The gross carrying amounts of these assets
totaled €325 million (2016: €222 million).

The future minimum payments under finance leases by maturity are shown in the following table:
(in € million) Present value Undiscounted value Present value Undiscounted value
Within one year 20 24 16 19
Between one and five years 116 125 61 73
More than five years 112 120 70 77
TOTAL FUTURE MINIMUM
PAYMENTS (NOTE 26) 248 269 147 169
The minimum future payments increase between the two years is due mainly to the introduction in 2017 of new finance leases for the
construction of a logistics center in the United States.
NOTE 15 NON-CURRENT FINANCIAL ASSETS AND OTHER ASSETS
The carrying amount of the non-current financial assets and other assets is analyzed in the table below:
Available-for-sale financial assets (note 15.1) 285 208
Loans and deposits (note 15.2) 71 62
Derivative instruments (note 16.1) 119 45
Other 4 8
NON-CURRENT FINANCIAL ASSETS AND OTHER ASSETS 479 323
15.1 Available-for-sale financial assets

Available-for-sale financial assets consist essentially of a portfolio of shares of non-listed companies (note 4.4).
Movements in the portfolio during the year are broken down in the table below:
(in € million) 2017 2016
At January 1 208 243
Translation adjustments (11) 3
Additions(1)(2) 118 25
Exit(1) (41) (116)
Impairment reversal 1 (4)
Fair value changes 10 57
AT DECEMBER 31 285 208
(1) Available-for-sale financial assets at December 31, 2016 included €12 million related to the acquisition on December 15, 2016 of Levorin and on December 29, 2016
of Reservas de Restaurantes, which have been consolidated in 2017 (note 13.1).
(2) Available-for-sale financial assets at December 31, 2017 include €55 million related to acquisitions performed in the last months of 2017 which will be consolidated in
2018 (note 33.1.2).
15.2 Loans and deposits

The carrying amount of loans and deposits is analyzed in the table below:
Gross loans and deposits 111 102
Impairments (40) (40)
TOTAL 71 62
The balance includes loans to employees and customers.

NOTE 16 DERIVATIVE FINANCIAL INSTRUMENTS
As mentioned in note 3.5 “Hedging”, some derivatives, while complying with the Group financial risk management policies, do not qualify
or have not been designated as hedging instruments for hedge accounting purposes.
16.1 Derivatives recognized in assets

Contractual Contractual
(in € million) Fair values amounts Fair values amounts
Interest-rate derivatives qualifying as fair value hedging instruments 14 383 18 383
Derivatives qualifying as cash flow hedging instrument
Currency derivatives 5 80 4 61
Interest-rate derivatives - - - -
Other derivatives - - - -
Derivatives not qualifying for hedge accounting
Interest-rate derivatives - 20 - -
Other derivatives(1) 55 503 - -
Non-current derivative instruments (note 15) 119 1,573 45 614
Interest-rate derivatives qualifying as fair value hedging instruments - - - -
Derivatives qualifying as cash flow hedging instrument
Currency derivatives 2 36 - 16
Other derivatives - 5 1 3
Currency derivatives 27 1,682 38 1,765
Interest-rate derivatives - 42 - 143
Current derivative instruments (note 21) 29 1,765 39 1,927
TOTAL ASSETS 148 3,338 84 2,541
(1) Corresponds to the financial instruments acquired to hedge the optional component of convertibles bonds (note 26.1).
The Group grants cash collaterals to mitigate its credit risk associated with its derivative assets. The amount of collaterals transferred is
€42 million as of December 31, 2017 (December 31, 2016: €77 million).

16.2 Derivatives recognized in liabilities

Contractual Contractual
(in € million) Fair values amounts Fair values amounts
Interest-rate derivatives qualifying as fair value
hedging instruments - - - -
Derivatives qualifying as cash flow hedging
instrument
Interest-rate derivatives - 200 2 198
Other derivatives(1) 55 503 - -
Non-current derivative instruments (note 26) 151 1,627 100 926
Interest-rate derivatives qualifying as fair value
hedging instruments - - - -
Derivatives qualifying as cash flow hedging
instrument
Other derivatives 1 3 1 5
Currency derivatives 26 1,900 73 1,968
Interest-rate derivatives - 167 - 199
Current derivative instruments (note 26) 29 2,106 81 2,237
TOTAL LIABILITIES 180 3,733 181 3,163
(1) Corresponds to the optional components of convertible bonds (note 26.1).
The Group holds cash collaterals to guarantee its own credit risk associated with its derivatives liabilities. The amount of collaterals received
is €15 million as of December 31, 2017 (2016: €7 million).

16.3 Derivative contractual amounts (2016: €145 million), in CNH and CNY for €270 million (2016:
€365 million) and in THB for €270 million (2016: €220 million). The
The Group concluded long term currency derivative contracts
currencies bought forward against the euro with a more than one
with maturities between one and ten years for a total amount
year maturity are denominated in USD for €506 million (2016: nil).
of €1,591 million (2016: €958 million). The nominal amounts by
major currencies sold against the euro are denominated in USD The maturity of the other currency derivative contracts does not
for €326 million (2016: €147 million), in BRL for €135 million generally exceed one year.
The contractual amounts of the currency derivatives are presented by currency in the table below:
Currencies purchased forward Currencies purchased forward
(in € million) EUR USD THB CAD BRL Other Total EUR USD THB CAD BRL Other Total
Currencies sold
forward
EUR - 919 34 161 4 198 1,316 - 72 29 213 6 746 1,066
USD 694 - 180 2 51 49 976 382 - 195 4 78 35 694
CNY 872 8 - - - 13 893 1,051 23 - - - 24 1,098
THB 485 59 - - - 5 549 279 49 - - - 2 330
BRL 354 7 - - - - 361 363 15 - - - - 378
MXN 137 11 - 17 - - 165 69 - - 20 - - 89
GBP 143 - - - - - 143 30 - - - - - 30
Other 706 132 4 - - - 842 982 91 2 - - 13 1,088
TOTAL 3,391 1,136 218 180 55 265 5,245 3,156 250 226 237 84 820 4,773
Currency hedges in CNY include off-shore derivatives denominated in CNH.

The contractual amounts of other derivative financial instruments are presented by currency and by maturity in the table below:
Between Between
Less than 1 and More than Less than 1 and More than
(in € million) 1 year 3 years 3 years Total 1 year 3 years 3 years Total
EUR 100 583 - 683 100 483 - 583
INR 42 20 - 62 24 24 - 48
THB 26 - - 26 27 26 - 53
USD 41 - - 41 191 48 - 239
Interest-rate
derivatives 209 603 - 812 342 581 - 923
EUR 5 - - 5 7 - - 7
USD 2 1 - 3 1 - - 1
Other - - 1,006 1,006 - - - -
Other derivatives 7 1 1,006 1,014 8 - - 8
TOTAL 216 604 1,006 1,826 350 581 - 931
At December 31, 2017, the Group has outstanding short term futures contracts on natural rubber with a liability market value of €1 million
(2016: asset of €4 million) which has been fully cashed in through the daily margin calls. The contractual values of these futures are
€15 million (2016: €15 million).

NOTE 17 EQUITY METHOD INVESTMENTS
Investments in joint ventures and associates amounts to €356 million On November 20, 2017, the 40% stake that the Group held in
(2016: €309 million). These include essentially Allopneus SAS in the Chinese joint venture Double Coin Group (Anhui) Warrior Tire
France, E.A. Juffali & Brothers for Tyres in Saudi Arabia, MC Projects Co., Ltd. was sold to the two companies Huayi Group (Hong Kong)
B.V. in the Netherlands, Royal Lestari Utama in Indonesia, Wine Limited and Double Coin Tire Group Ltd. This disposal had no
Advocate Pte. Ltd in Singapore and SIPH Group in France, where significant effect on the Group’s consolidated financial statements.
the Group’s shareholding percentage has changed in 2017 following
the public tender offer detailed in note 33.2.
The financial statements of equity method investments include the following amounts:
(in € million) 2017 2016
Assets 1,440 1,259
Liabilities 734 646
Net sales 1,530 1,374
Net income 32 (23)
NOTE 18 TAXES
18.1 Deferred taxes

Deferred taxes in the consolidated statement of financial position are as follows:
Deferred tax assets 890 1,191
Deferred tax liabilities (113) (117)
NET DEFERRED TAX ASSET 777 1,074
Deferred tax assets and liabilities at the end of the period, before netting, are as follows:
Employee benefits 783 1,084
Inventories 115 186
Financial instruments 62 109
Provisions 70 97
Unused tax losses 90 68
Unused tax credits 7 9
Goodwill & Intangible assets 4 26
Property, plant and equipment (450) (631)
Other 96 126
NET DEFERRED TAX ASSET 777 1,074
The change in the net deferred tax asset over the year is as follows:
(in € million) 2017 2016
At January 1 1,074 1,141
Translation adjustments (38) 1
Deferred tax income/(expense) (note 11) (102) (48)
Tax recognized in other comprehensive income (132) (17)
Changes in scope of consolidation (26) (3)
Other 1 -
AT DECEMBER 31 777 1,074
In 2017, excluding the effect of tax recognized in comprehensive income and translation adjustments, the reduction in the net deferred tax
asset is due essentially to variations of temporary differences on fixed assets and the impact of the US tax reform.

In 2016, excluding the effect of tax recognized in comprehensive income and translation adjustments, the reduction in the net deferred
tax asset was due essentially to variations of temporary differences on employee benefits.
The deferred income tax recognized in other items of comprehensive income is as follows:
Post-employment benefits 431 566
Available-for-sale financial assets (21) (24)
Financial instruments 1 (13)
TOTAL DEFERRED TAX INCOME RECOGNIZED IN OTHER COMPREHENSIVE
INCOME 411 529
The tax reform that came into force in the United States at the end value the outstanding deferred taxes of the Group’s US subsidiaries
of December 2017 resulted in a deferred tax adjustment recognized at December 31, 2017. In 2017, the tax rate change generated a
in other comprehensive income. The decrease in the tax rate, from decrease of €78 million in other comprehensive income.
38.0% (including local taxes) to 24.8%, is taken into account to
The detail of unrecognized deferred tax assets is as follows:

Deductible temporary difference 106 123
Tax losses
of which expiring in less than one year 16 10
of which expiring between one to five years 112 111
of which expiring in more than five years 30 57
of which no expiration 274 296
Total tax losses 432 474
Tax credits 2 1
TOTAL UNRECOGNIZED DEFERRED TAX ASSETS 540 598
18.2 Current taxes

Current taxes in the consolidated statement of financial position are as follows:
(in € million) 2017 2016
Taxes receivables (note 22) 438 360
Taxes payables (note 30) (188) (126)
Net total at January 1 250 234
Current tax expense (note 11) (559) (749)
Income tax paid 563 765
Translation adjustments and other (14) -
Total changes (10) 16
Taxes receivables (note 22) 426 438
Taxes payables (note 30) (186) (188)
NET TOTAL AT DECEMBER 31 240 250

NOTE 19 INVENTORIES
Inventories include the following:

Raw materials and supplies 1,158 1,227
Work in progress 512 474
Finished goods 2,923 2,879
Total gross inventory 4,593 4,580
Write-downs on raw materials and supplies (42) (44)
Write-downs on work in progress (1) (1)
Write-downs on finished goods (42) (55)
Total write-downs (85) (100)
NET INVENTORY 4,508 4,480
Movements in inventory write-downs were as follows:

(in € million) 2017 2016
At January 1 (100) (93)
Translation adjustments and other 6 (2)
Write-downs of inventories recognized as an expense in the period (28) (42)
Reversals of write-downs 37 37
AT DECEMBER 31 (85) (100)
NOTE 20 TRADE RECEIVABLES
The carrying amount of trade receivables is analyzed in the table below:

Gross trade receivables 3,188 3,156
Impairment (104) (114)
TRADE RECEIVABLES 3,084 3,042
All trade receivables are due within twelve months.

The following table presents an ageing analysis of trade receivables as at December 31, 2017:
(in € million) Gross Impairment Net
Current trade receivables 2,785 (23) 2,762
Overdue
from less than three months 265 (3) 262
between three and six months 32 (3) 29
from more than six months 106 (75) 31
Overdue trade receivables 403 (81) 322
TRADE RECEIVABLES 3,188 (104) 3,084
Movements in impairment are broken down in the table below:

(in € million) 2017 2016
At January 1 (114) (112)
Translation adjustments 6 (4)
Impairment charges (39) (44)
Impairment reversals 45 46
Changes in scope of consolidation (2) -
AT DECEMBER 31 (104) (114)
Impairment reversals in 2017 include write-offs of €19 million (2016: €14 million).

NOTE 21 CURRENT FINANCIAL ASSETS
The carrying amount of the current financial assets is broken down in the table below:
Loans and deposits 76 102
Cash management financial assets (note 26) 180 162
Derivative instruments (note 16.1) 29 39
CURRENT FINANCIAL ASSETS 285 303
In 2017, bank deposits that have maturities greater than three The characteristics of the cash management financial assets, although
months, but provide for early withdrawal clauses of less than three being highly liquid, little affected by the interest rate risk and by the
months with guaranteed capital and negligible withdrawal costs, foreign currency risk (mainly invested in Euros or hedged), do not
have been reclassified from “Current financial assets” to “Cash strictly meet those of cash and cash equivalent (note 3.21 “Cash
and cash equivalents”. Balances at December 31, 2016 have been and cash equivalents”). They are accounted for at amortized cost
restated for comparative purposes for an amount of €330 million. (note 3.18 “Non-derivative financial assets”).
Loans and deposits include collaterals with financial institutions of
€42 million (2016: €77 million) that are not freely available.
NOTE 22 OTHER CURRENT ASSETS
The carrying amount of other current assets is broken down in the table below:
Suppliers – Advances 137 173
Current tax – Advance payments 426 438
Other taxes receivable 296 304
Other 278 293
Less impairment (5) (6)
OTHER CURRENT ASSETS 1,132 1,202
Other tax receivables mainly relate to VAT.
NOTE 23 CASH AND CASH EQUIVALENTS
The carrying amount of cash and cash equivalents is broken down in the table below:
Cash at bank and in hand 250 287
Short-term bank deposits of less than three months and other cash equivalents (money
market funds essentially)(1) 1,523 1,539
CASH AND CASH EQUIVALENTS 1,773 1,826
(1) See note 21.
The average effective interest rate on short-term bank deposits was The less easily available amounts to meet the needs of the Group
0.28% in 2017 (2016: 0.38%). are mainly related to prudential rules in Ireland specific to captive
Cash and cash equivalents are essentially held in Euros (2017: 93% insurance companies (2017: €81 million, 2016: €83 million).
after hedge, 2016: 90%).

NOTE 24 SHARE CAPITAL AND SHARE PREMIUMS
(in € million) Share capital Share premiums Total

At January 1, 2016 364 3,222 3,586
Issuance of shares from the exercise of share options and
performance shares 3 96 99
Cancellation of shares (7) (294) (301)
Other - - -
At December 31, 2016 360 3,024 3,384
performance shares 1 16 17
Cancellation of shares (2) (99) (101)
Other - 1 1
AT DECEMBER 31, 2017 359 2,942 3,301
(number of shares) Share issued Treasury shares Shares outstanding

At January 1, 2016 181,902,182 - 181,902,182
performance shares 1,503,749 - 1,503,749
Purchase of shares - (3,347,040) (3,347,040)
Disposal of shares - - -
Reduction in capital (3,347,040) 3,347,040 -
Other 7,230 - 7,230
At December 31, 2016 180,066,121 - 180,066,121
performance shares 348,063 - 348,063
Purchase of shares - (893,197) (893,197)
Disposal of shares - - -
Reduction in capital (893,197) 893,197 -
Other - - -
AT DECEMBER 31, 2017 179,520,987 - 179,520,987
The par value per share amounts to €2 (unchanged from 2016). The Managing Chairman will recommend to the Shareholders the
All outstanding shares are fully paid and registered. Shares held for payment of a dividend of €3.55 per share in 2018 for the year 2017.
more than four years have a double voting right.
In 2017, the dividend payable for the year 2016 to the shareholders
was €3.25 per share (2016: €2.85 per share). It has been fully settled
in cash for a net amount of €584 million.

NOTE 25 RESERVES
Translation Treasury Other Retained

(in € million) reserve shares reserves earnings Total
At January 1, 2016 (308) - 120 6,091 5,903
Dividends and other allocations - - - (538) (538)
Share-based payments – cost of services rendered (notes 7 and 8) - - - 5 5
Purchase of shares - (301) - - (301)
Cancellation of shares - 301 - - 301
Other 3 - (1) 5 7
Transactions with the shareholders of the Company 3 - (1) (528) (526)
Net income/(loss) attributable to the shareholders of the Company - - - 1,676 1,676
Post-employment benefits - - - (194) (194)
Tax effect – Post-employment benefits - - - (8) (8)
Other items of comprehensive income that will not be reclassified to
income statement - - - (202) (202)
Available-for-sale financial assets – Change in fair values - - 57 - 57
Tax effect – Available-for-sale financial assets – Change in fair values - - (9) - (9)
Available-for-sale financial assets – (Gain)/loss recognized in income
statement - - - - -
Currency translation differences 314 - 2 - 316
Other - - 3 (3) -
Other items of comprehensive income that may be reclassified to income
statement 314 - 53 (3) 364
Comprehensive income 314 - 53 1,471 1,838
At December 31, 2016 9 - 172 7,034 7,215
Dividends and other allocations - - - (612) (612)
Share-based payments – Cost of services rendered (notes 7 and 8) - - - 7 7
Purchase of shares - (101) - - (101)
Cancellation of shares - 101 - - 101
Other - - - - -
Transactions with the shareholders of the Company - - - (605) (605)
Net income/(loss) attributable to the shareholders of the Company - - - 1,700 1,700
Post-employment benefits - - - 266 266
Tax effect – Post-employment benefits - - - (135) (135)
Other items of comprehensive income that will not be reclassified to
income statement - - - 131 131
Available-for-sale financial assets – Change in fair values - - 10 - 10
Tax effect – Available-for-sale financial assets – Change in fair values - - 3 - 3
Available-for-sale financial assets – (Gain)/loss recognized in income
statement - - - - -
Currency translation differences (528) - - - (528)
Other 23 - (86) 62 (1)
Other items of comprehensive income that may be reclassified to income
statement (505) - (73) 62 (516)
Comprehensive income (505) - (73) 1,893 1,315
AT DECEMBER 31, 2017 (496) - 99 8,322 7,925
Following the repayment of the convertible bond on January 2, 2017 Under the share buyback program authorized at the May 13, 2016
(note 26.1 “financial liabilities”), the equity part of the zero coupon Annual Shareholders Meeting, an agreement was signed in February
convertible bond (note 26 “Financial debts”) for €65 million 2017 by which the Group undertook to buy back from an investment
(2016: €65 million) after‑tax was reclassified from other reserves services provider a variable number of shares before November 24,
to retained earnings. 2017, for a maximum amount of €100 million. The average unit
price of the 891,476 shares acquired during the year 2017 was
€112.17. All the shares were cancelled during the year.

In April 2015, the Group announced a share buyback program of The average purchase price of the 3,347,040 shares acquired
€750 million over a period of 18 to 24 months. during 2016 was €89.63. All the shares were cancelled during 2016.
During 2016, the Group concluded with an investment services
provider two payback conventions that committed the Group to
repurchase a variable number of shares within the limit of a total
amount of €300 million before December 15, 2016.
NOTE 26 FINANCIAL LIABILITIES
The carrying amount of financial liabilities is presented in the table below:

Bonds 1,770 1,310
Loans from financial institutions and other 217 232
Finance lease liabilities 228 131
Derivative instruments 151 100
Non-current financial liabilities 2,366 1,773
Bonds and commercial paper 172 903
Current financial liabilities 493 1,320
FINANCIAL LIABILITIES 2,859 3,093
The Group net debt is analyzed in the table below:

Financial liabilities 2,859 3,093
Derivatives recognized as assets (note 16.1) (148) (84)
Borrowing collaterals (note 32.3.2) (42) (77)
Cash management financial assets (note 21) (180) (162)(1)
Cash and cash equivalents (note 23) (1,773) (1,826)(1)
NET DEBT 716 944
(1) See note 21.
The fair value of non-current financial liabilities, calculated in accordance with note 3.6 “Fair value of financial instruments”, is presented
in the table below:
Bonds 1,848 1,388
FAIR VALUE OF NON-CURRENT FINANCIAL LIABILITIES 2,444 1,851

Changes in financial liabilities and derivatives are detailed by flow in the table below:
Cash flows Non-cash variations
from
financial Translation
(in € million) At January 1, 2017 liabilities adjustments Other At December 31, 2017
Bonds, loans from financial institutions
and other 1,542 464 (16) (3) 1,987
Finance lease liabilities 131 (18) (10) 125 228
Derivative instruments 100 43 (2) 10 151
Non-current financial liabilities 1,773 489 (28) 132 2,366
Bonds, loans from financial institutions
and other 1,223 (421) (216) (142) 444
Finance lease liabilities 16 (6) (1) 11 20
Derivative instruments 81 (60) (1) 9 29
Current financial liabilities 1,320 (487) (218) (122) 493
FINANCIAL LIABILITIES 3,093 2 (246) 10 2,859
Derivatives recognized as assets (84) (70) 5 1 (148)
Net impact net in the consolidated
cash flow statement (68)

26.1 Bonds and commercial paper

Bonds and commercial paper issued by the Group have the characteristics mentioned in the table below:
(in € million) Current Non-current Current Non-current
Bonds issued by Michelin Luxembourg SCS
nominal value of €302 million (2016: €302 million)
issued in September 2015 and September 2016 and due in September 2045
nominal interest rate of 3.25%
effective interest rate of 3.02% - 316 - 316
nominal value of €300 million
issued in May 2015 and due in May 2027
nominal interest rate of 1.75% (1.68% after hedging)
effective interest rate of 1.86% (1.80% after hedging) - 297 - 297
nominal value of €300 million
issued in May 2015 and due in May 2022
nominal interest rate of 1.125%
effective interest rate of 1.17% - 299 - 299
Liability component of zero-coupon convertible bonds issued
by Compagnie Générale des Établissements Michelin
nominal value of $600 million
issued in January 2017 ($500 million at par) and April 2017
($100 million at 103.5%) and due in January 2022
nominal interest rate of 0%
effective interest rate of 1.98% (-0.38% after hedging)
conversion price at December 31, 2017 of €133.51 - 464 - -
nominal value of €383 million (2016: €383 million)
issued in June 2012 and due in June 2019
nominal interest rate of 2.75% (1.09% after hedging)
hedged through a €383 million interest rate swaps (2016: €383 million)
expiring in June 2019 (fair value hedge) (note 16) - 394 - 398
Liability component of zero-coupon convertible bonds (OCEANEs) issued
by Compagnie Générale des Établissements Michelin
net proceeds received of €694 million
annual gross yield of 3.07%
effective interest rate of 4.76%
conversion and/or exchange ratio of 1 bond for 1.036 ordinary share
issued in March 2007 and reimbursed in January 2017
amount reimbursed at maturity date: €753 million - - 753 -
Commercial paper issued by Compagnie Générale des Établissements Michelin
nominal value in € equivalent: €110 million, £28 million, $34 million
(2016: €74 million, £23 million, $53 million)
effective interest rate of 0.16% at December 31, 2017 172 - 150 -
TOTAL 172 1,770 903 1,310
At December 31, 2017, the weighted average nominal interest rate for bonds and commercial paper is 2.00% (1.10% after hedging).

The zero coupon convertible bonds (OCEANEs) issued on This set of transactions, which were hedged by euro-denominated
March 21, 2007 became due on January 1, 2017. swaps, provides the Group with the equivalent of classic euro-
5,396,099 outstanding OCEANEs for which the option of conversion denominated bond financing at an advantageous cost.
into shares was not exercised were reimbursed on January 2, 2017, These operations have been accounted for in accordance with the
first working day after the due date, at €139.57 per OCEANE. The accounting policies described in sections 3.4 to 3.6 of note 3 of
total amount reimbursed was €753 million including €193 million the consolidated financial statements.
of interests paid. The optional components of convertible bonds and the financial
In January 2017, the Group issued exclusively cash-settled five year instruments subscribed for hedging purposes are recorded under
convertible bonds with a total face value of 500 million USD. These “Non-current financial assets and other assets” and “Non-current
bonds were issued at par. financial liabilities”.
In April 2017, the Group issued additional convertible bonds with
a total face value of 100 million USD. These bonds were issued at
103.50% of their face value. 26.2 Loans from financial institutions and other
Those bonds are redeemable at par (if they are not converted) and Loans from financial institutions and other include mainly amounts
do not bear interest. drawn on credit lines, borrowings secured by trade receivables as
mentioned in note 32.3.3 “Trade receivables”.
In addition to these issues, the Group subscribed to financial
instruments with the same maturity, enabling it to fully hedge its
exposure to any positive or negative changes in the share price.
Loans from financial institutions and other at December 31, 2017 have the characteristics mentioned in the tables below (before hedging):
(in € million) EUR THB BRL Other Total
Fixed rates - - 32 - 32
Floating rates 245 73 20 119 457
LOANS FROM FINANCIAL INSTITUTIONS AND OTHER 245 73 52 119 489
Average effective interest rate paid in 2017 0.56% 1.79% 8.68% 10.17% 4.25%
The contractual re-pricing of the interest rates of these loans is generally less than six months.
NOTE 27 EMPLOYEE BENEFIT OBLIGATIONS
According to the laws and regulations applicable in each country, Since 2005 the Group has a governance body, the Global Employee
as well as in application of its social responsibility policy, the Group Benefit Board, that monitors benefits. This board defines Group
takes part mainly in pension, healthcare, death and disability and policies in term of benefits and ensures that local benefit programs
end of service benefits, for which the amount of benefits paid varies comply with them (validation of the changes, introduction of new
based on a number of factors including the employee’s years of benefits, etc.), monitors asset returns and benchmarks, as well
service, salary, accumulated funds with an independent manager as the de-risking policies put in place by local boards or Trustees,
or contributions paid to insurers. and proposes an audit plan. The board is assisted by two teams,
Such plans can be either defined benefit plans or defined contribution the Global Benefit Policy Team composed of members from the
plans. In the case of defined benefit plans, Group commitments accounting, finance and human resources departments and the
are measured using the Projected Credit Unit method. These Global Benefit Investment Team composed of the chairmen of the
commitments are calculated with the help of independent actuaries. investment committees or Chief Investment officers of the main
In the case of defined contribution plans, liabilities correspond to funded pension plans and Group experts. In countries with substantial
the contributions due. benefit obligations similar organization exists.
Since 2003 the Group has been closing its defined benefit plans to
new entrants and also, in some cases, to future accruals in order to 27.1 Defined Benefit Plans
reduce the risk on the Group’s consolidated statement of financial
position and has put in place new defined contribution plans or These plans are retirement plans and retiree healthcare plans, the
has improved the existing ones. vast majority of which are now closed to new entrants, even to
future accruals, as well as some minor plans such as long service
awards or end-of-service benefits.

In Europe, the discount rates are determined using the actuary’s for some pensions is set using historical averages, central banks
yield curve models. These rates are based on the yield of high quality targets as well as implied inflation (differential between indexed
corporate bonds and have the same durations as the liabilities. and non-indexed bonds).
The discount rate in the USA is based on the actuary’s AA Only The salary increase assumptions can be either spreads above inflation
Bond yield curve rates. The discount rate in Canada is based on (either RPI or CPI) or absolute values. These assumptions take into
the Canadian Institute of Actuaries Canadian Corporate Aa Bond account expected long-term yearly average salary increases as well
yield curve rates. For countries having several plans (but only one as the effects of promotions. In some cases, assumptions by category
material plan) the assumption of the main plan is used for all plans. of personnel can be used.
For countries having several plans of comparable size but quite
The post-employment mortality assumptions used for the pension
different durations, several rates are used.
plans which are funded through insured contracts are the insurers’
The inflation assumptions are set using different methods. For tables. For the other main post-employment plans the following
the Euro zone, the actuary tool is used with reference to different tables have been used: (i) USA: RP-2014 Aggregate table using
sources of information as the target inflation set by the Central Scale MP-2016; (ii) Canada: 95% of CPM 2014 Private – Scale B;
Banks, the forecasts from the Consensus Economics organization and (iii) UK: Generational S2PA CMI_2016 with a 1.5% p.a. long term
inflation swap curves. In the UK, the market implied inflation rate is rate of improvement with a weighting of 116% for males and 102%
also considered (differential between gilts and indexed linked gilts for females and (iv) Germany: Heubeck RT 2005 G.
less a spread). In the USA and Canada, the cost of living increases

USA Canada UK Germany USA Canada UK Germany
Life expectancy for males at
65 at the end of the reporting
period 19.2 22.1 21.1 18.8 19.4 22.0 22.1 18.8
Life expectancy for males at 65
(15 years after the end of the
reporting period) 20.3 22.9 22.3 20.7 20.7 22.9 23.1 20.7
Life expectancy for females at
65 at the end of the reporting
period 21.1 24.5 24.0 22.8 21.4 24.5 24.8 22.8
Life expectancy for females at
65 (15 years after the end of the
reporting period) 22.2 25.2 25.4 24.8 22.7 25.2 26.1 24.8
The financial position of the main defined benefit plans is summarized below:
(in € million) Pension plans Other plans December 31, 2017 December 31, 2016
Present value of fully or partly funded
obligations 7,444 - 7,444 8,203
Fair value of plan assets (6,367) - (6,367) (6,520)
Funded status deficit/(surplus) 1,077 - 1,077 1,683
Present value of unfunded obligations 999 1,820 2,819 3,034
Unrecognized asset due to application of
asset ceiling 73 - 73 46
NET DEFINED BENEFIT OBLIGATION 2,149 1,820 3,969 4,763
Amounts recognized in the balance sheet:
As assets in Non-current financial assets
and other assets (note 15) - -
As liabilities in Employee benefit
obligations 3,969 4,763
NET LIABILITY 2,149 1,820 3,969 4,763

At December 31, 2017, the present value of the defined benefit The Group does not recognize as an asset any surplus in excess of
obligation is made up of €4,098 million relating to active employees, the present value of any economic benefits available in the form
€1,210 million relating to deferred members and €4,955 million of refunds from the plan or reductions in future contributions to
relating to members in retirement (2016: respectively €4,450 million, the plan. If a defined benefit plan is subject to a Minimum Funding
€1,263 million and €5,524 million). Requirement (MFR), the Group immediately recognizes a liability for
At December 31, 2017, the present value of the defined benefit any surplus resulting from the contributions paid under the MFR
obligation is made up of €8,050 million relating to vested benefits which would not be fully recoverable through economic benefits
and €2,213 million relating to non-vested benefits (2016: respectively available to the Group.
€8,772 million and €2,465 million). Any reduction in assets or increase in liabilities resulting from the
Actuarial gains and losses on post-employment defined benefit plans asset ceiling application is recognized in other comprehensive income.
are recognized in other comprehensive income when they occur.
The movements in net defined benefit obligations recognized in the consolidated statement of financial position are shown below:
(in € million) Pension plans Other plans 2017 2016
At January 1 2,742 2,021 4,763 4,888
Contributions paid to the funds (190) - (190) (74)
Benefits paid directly to the beneficiaries (32) (122) (154) (156)
Other movements - - - (55)
Items recognized in operating income
Current service cost 58 62 120 127
Actuarial (gains) or losses recognized on other long term benefit plans - - - -
Past service cost resulting from plan amendments (20) (36) (56) (262)
Effect of plan curtailments or settlements - - - (19)
Effect of plan curtailments recognized within reorganizations and
adaptation of activities (88) (95) (183) (19)
Items recognized outside operating income
Net interest of the net defined benefit liability (asset) 60 55 115 139
Items recognized in other comprehensive income
Translation adjustments (79) (101) (180) 1
Actuarial (gains) or losses (332) 36 (296) 377
Portion of unrecognized asset due to the application of the asset ceiling 30 - 30 (183)
AT DECEMBER 31 2,149 1,820 3,969 4,763
The amount of actuarial gains or losses presented in the statement of comprehensive income and recognized in equity is detailed in the
table below:
(in € million) Pension plans Other plans 2017 2016
At January 1 2,048 501 2,549 2,368
Actuarial (gains) or losses recognized during the year related
to demographic assumptions:
Due to change in assumptions (236) (7) (243) (73)
Due to experience (3) (28) (31) (51)
Actuarial (gains) or losses recognized during the year related
to financial assumptions:
Due to change in assumptions 350 90 440 819
Due to experience (443) (19) (462) (317)
Unrecognized asset due to application of asset ceiling 30 - 30 (183)
Change in the scope of consolidation - - - (14)
AT DECEMBER 31 1,746 537 2,283 2,549
Of which actuarial gains or (losses) 1,673 537 2,210 2,503
Of which asset ceiling effect 73 - 73 46

In 2017, the net amount recognized in the consolidated income statement was an income of €4 million (2016: income of €35 million),
broken down as follows:
Pension Other Year ended Year ended
(in € million) plans plans December 31, 2017 December 31, 2016
Cost of services rendered during the year 58 62 120 127
Net interest on the defined benefit liability (asset) 60 55 115 139
Actuarial (gains) or losses recognized during the year
on other long term defined benefit plans - - - -
Past service cost recognized during the year:
Due to the introduction of or modifications
to defined benefit plans (20) (36) (56) (262)
Due to curtailments of defined benefit plans - - - -
Effect of defined benefit plans settlements - - - (19)
Portion of defined benefit expenses recognized
within reorganizations and adaptation of activities costs (88) (95) (183) (19)
TOTAL RECORDED IN THE INCOME STATEMENT 10 (14) (4) (35)
Annual charges are determined with the assistance of independent The plan was closed to new entrants as of January 1, 2004. Accruals
actuaries at the beginning of each financial year based on the were frozen under the plan as of December 31, 2016. These
following factors: participants have been enrolled in a defined benefit contribution plan.
charge corresponding to acquisition of an additional year of rights The Plan sets the normal retirement age at 65. However, employees
(“cost of services rendered during the year”); who have reached age 55 and have completed at least 10 years of
charge/income corresponding to the discounting adjustment to vesting service are eligible for early retirement provisions.
reflect the impact of the passage of time (“net interest”); In the event of early retirement a reduction is applied to the calculation
income or charge from annual recognition of actuarial gains or of the pension but a supplemental benefit may be granted for
losses on other long term defined benefit plans (“Actuarial (gains) employees reaching age 55 and who have completed 30 years
or losses recognized during the year”); of service until the employee is eligible for social security benefit.
gain/loss resulting from changes or introduction of benefit plans The plan provides a guaranteed monthly benefit at retirement
(“past service cost recognized during the year”); based on a defined formula (with a lower accrual rate on the social
security wage bases) that takes into consideration the years of plan
gain/loss resulting from curtailments of any benefit plans (“past
membership and total pensionable recurring earnings.
service cost recognized during the year”);
The plan includes provision for death in service benefits as well as
gain/loss resulting from settlements of any benefit plans (“past
provision for spouse reversion benefit and orphan’s pension upon
service cost recognized during the year”).
death of retirees. The plan also includes provision for disability benefits.
The plan provides a cost-of-living adjustment of the pension only
// 27.1.1 Pension plans for employees hired before January 1, 1991.
The Group offers to its employees different pension plans that vary The plan is funded solely by employer contributions.
according to applicable laws and regulations in each country and
in accordance with the respective collective bargaining agreements Canada
relevant to each subsidiary. There is one major defined benefit plan in Canada, Michelin Retirement
Under defined benefit plans, future level of benefits are defined Plan (MRP). Other minor defined benefit plans which are closed to
by the plan regulations. The valuation of such defined benefit new entrants are valued but not detailed further.
plans is carried out with the assistance of independent actuaries The Michelin Retirement Plan (MRP) was closed to new entrants as
using actuarial techniques. Defined benefit pension plans can be from January 1, 2005. After this date new entrants are enrolled in a
funded through payments to external funds or insurers specialized defined contribution plan. Accruals for most of the participants were
in managing these assets. In the case of unfunded plans such as frozen under the plan as of December 31, 2015. These participants
the German pension plans, a provision is made in the consolidated are enrolled in a defined benefit contribution plan.
The main pension plans provided within the Group are as follows:
USA
The defined benefit plan in USA is the Michelin Retirement Plan
(MRP). The provisions applicable to the main population are
described below.

The plan sets the normal retirement age at 65. However, employees Germany
having 30 years of service or who have reached the age 55 are There is one major defined benefit retirement plan in Germany,
eligible for early retirement provisions. the “Versorgungsordnung 1979 (VO 1979)” of MRW (Michelin
In the event of early retirement a reduction is applied to the calculation Reifenwerke AG).
of the pension but a supplemental bridge is granted for employees The plan was closed to new entrants as from January 1, 2000. After
having 30 years of service to partially compensate early retirement. this date new entrants are enrolled in defined contribution plans.
The plan provides a guaranteed monthly annuity at retirement based The plan sets the normal retirement age at 65.
on a defined formula that takes into consideration the years of plan
membership and total pensionable recurring earnings. The plans provide lifetime monthly annuity which are based on the
employee pensionable compensation.
The plan includes provision for death in service benefits as well as
provision for spouse reversion benefit or a beneficiary pension upon A flat rate applies to the compensation exceeding the social security
death of retirees. The plan also includes provision for disability benefits. ceiling and an additional rate takes into account the years of service
on the total pensionable earnings.
The plan provides an annual increase of the pension based on a
percentage inferior to Consumer Price Index. The plan includes provision in case of death in service provisions as
well as post-retirement spouse and orphan’s pensions and disability
The plan is funded solely by employer contributions. provisions.
United Kingdom There is a legal obligation to adjust every three years the pension
annuity by the inflation up to the average increase of the employees’
The defined benefit retirement plan in the UK is the Michelin Pension
salaries.
and Life Assurance Plan.
The plan was closed to new entrants as from March 31, 2005 and France
replaced by a defined contribution plan and as of January 1, 2009 There is one major pension defined benefit plan in France, “Régime
it was closed for all future accruals. de retraite supplémentaire MFPM”.
Accruals up to December 31, 2008 are frozen but pensions are still In order to be eligible, employees must reach 10 years of service
linked to the average final salary at retirement. and be present at the retirement date.
The Plan sets the normal retirement age at 65. However, employees This plan had been set up in 1996 in order to grant an additional
who have reached age 55 are eligible for early retirement with the retirement benefit to all employees when the retirement replacement
Group’s consent. In the case of early retirement, the accrued benefit ratio of the mandatory state plans is below the trigger threshold
is reduced by an actuarial reduction factor. of 55%. At this point an additional benefit is calculated based on
The plans provide for an annual pension based on the employee’s service and pensionable earnings (capped additional plan).
pensionable earnings. Most employees take the maximum amount If mandatory state pension plus additional benefit from this plan
allowed by tax legislation in the form of a lump sum. reaches 55% of pensionable salary, the annuity paid by the plan
The plan includes provision for death in service benefits, provision is capped at this level. Closure of the plan being not possible for
for spouse reversion benefit as well as disability benefits. new entrants, the threshold of 55% is decreasing progressively until
The plan provides an indexation of the pension benefit based on a 2046 where it will be nil. In return, employees must participate to
capped inflation rate for members who did not choose the pension a defined contribution plan (Article 83) and can also participate in
increase exchange which was proposed in 2017. another defined contribution plans (PERCO).
The plan is funded solely by employer contributions. The plan includes provision in case of post-retirement spouse’s
pensions and disability provisions.
Plan is insured for the retirees and covered by two insurance companies.
Adjustments or increase of annuity are possible but not automatic
and are based on the reserves available.

The following table analyzes changes in the financial position of the Group defined benefit pension plans:
2017 2016
North North
(in € million) America Europe Other Total America Europe Other Total
Present value of the obligations at the beginning
of the year 4,449 4,715 52 9,216 4,274 4,543 35 8,852
Translation adjustments (479) (116) (5) (600) 216 (413) 7 (190)
Changes in scope of consolidation - - - - - 8 - 8
Current service cost 3 42 1 46 16 40 1 57
Interest cost on the defined benefit obligation 163 105 3 271 176 128 3 307
Administration costs 9 4 - 13 7 4 - 11
Plan reorganization costs generated
during the year:
Past service cost due to the introduction of or
modifications to defined benefit plans 4 (24) - (20) 2 - - 2
Past service cost due to curtailments of defined
benefit plans - (88) - (88) - (5) - (5)
(Gains) or losses on settlements of defined
benefit plans - - - - - (20) - (20)
Benefits paid (255) (220) (4) (479) (264) (181) (4) (449)
Other items - - 1 1 - (1) 3 2
Actuarial (gains) or losses generated
during the year 123 (40) - 83 22 612 7 641
Present value of the obligations
at the end of the year 4,017 4,378 48 8,443 4,449 4,715 52 9,216
Fair value of plan assets at the beginning of the
year 3,974 2,509 37 6,520 3,813 2,610 25 6,448
Translation adjustments (426) (93) (9) (528) 198 (340) 8 (134)
Changes in scope of consolidation - - - - - (1) - (1)
Interest income on plan assets 144 64 5 213 156 85 3 244
Contributions paid to the plans 44 146 1 191 2 71 1 74
Benefits paid by the plans (254) (189) (2) (445) (263) (151) (2) (416)
Other items - - 1 1 (2) - 3 1
Actual return on plan assets excluding interest
income 257 148 10 415 70 235 (1) 304
Fair value of plan assets
at the end of the year 3,739 2,585 43 6,367 3,974 2,509 37 6,520
Deficit/(Surplus) at the end of the year 278 1,793 5 2,076 475 2,206 15 2,696
Deferred items at the beginning of the year (46) - - (46) (210) - (3) (213)
Translation adjustments 4 - 1 5 (9) - - (9)
Unrecognized asset due to application of the asset
ceiling generated during the year (24) - (8) (32) 173 - 3 176
Deferred items at the end of the year (66) - (7) (73) (46) - - (46)
NET LIABILITY/(ASSET) RECOGNIZED IN THE
BALANCE SHEET AT THE END OF THE YEAR 344 1,793 12 2,149 521 2,206 15 2,742

France For Canadian pension plans, the Group does not have any rights to
As at June 22, 2017, the Group has announced a global reorganization a refund of the plan surplus. The economic benefits available are
project aimed to better serve the customers. A voluntary pre-retirement measured as the present value of future service cost. These pension
plan has been offered to the salaried employees and managers who plans are subject to a minimum funding requirement. The surplus
are based at the Clermont-Ferrand site and for which an agreement recognized as an asset is the sum of:
with the personnel’s representative bodies has been issued. any prepaid amount that would reduce the future minimum
The pension plan obligation has been reduced for an amount of funding requirement; and
€88 million. A provision for reorganizations and adaptation of the estimated future service cost in each period less the estimated
activities has been recognized for an equivalent amount. minimum funding requirement contributions that would be
required for future service.
United Kingdom
Any amount exceeding this limit is immediately recognized within
In the United Kingdom, the pension plan implemented a pension the other comprehensive income.
increase exchange (PIE) exercise whereby pensioner members were
offered an immediate uplift in their pension in return for giving In 2017, the amount recognized resulting from the effect of the
up their future pension increases. The exercise of this option by asset ceiling was €30 million (2016: -€183 million)
the pension plan retiree’s members has generated a negative past
service cost resulting in a reduction of the obligation for an amount
of €24 million.
In 2017, the present value of defined benefit pension obligations decreased by €773 million. This change was due to:
(in € million) 2017 2016
Effect of changes in exchange rates for the US dollar, British pound and Canadian dollar
against the euro 600 190
Actuarial gains or (losses) from changes in actuarial assumptions and difference
between assumptions and actual experience (83) (641)
Difference between the costs (service cost and interest cost) and the benefits paid
during the year 149 74
Changes in plan regulations 108 23
Changes in the scope of consolidation - (8)
Other items (1) (2)
The fair value of plan assets amounted to €6,367 million at December 31, 2017, showing a decrease of €153 million compared to
December 31, 2016. The factors behind this variation were as follows:
(in € million) 2017 2016
Effect of changes in exchange rates for the US dollar, British pound and Canadian dollar
against the euro (528) (134)
Difference between the contributions paid to the funds and the benefits paid by the funds (254) (342)
Actual return on plan assets 628 548
Changes in the scope of consolidation - (1)
Other items 1 1
The present value of the defined benefit obligation, the fair value of the plan assets, the surplus or deficit in the plan and the experience
adjustments are as follows for 2017 and the previous four periods:
(in € million) 2017 2016 2015 2014 2013
Defined benefit obligation (8,443) (9,216) (8,852) (8,440) (7,079)
Plan assets 6,367 6,520 6,448 6,142 5,182
SURPLUS/(DEFICIT) (2,076) (2,696) (2,404) (2,298) (1,897)
Experience adjustment to:
plan liabilities 32 38 75 32 (43)
plan assets 415 315 (107) 538 166

The experience adjustments in percentage of the present value of the obligation and the fair value of plan assets are presented in the table
below:
2017 2016 2015 2014 2013
Experience adjustment to:
the plan liabilities in percentage of the
present value of the obligation (DBO) -0.38% -0.41% -0.85% -0.38% 0.61%
to the plan assets in percentage of the fair
value of the assets 6.52% 4.83% -1.66% 8.76% 3.20%
The main actuarial weighted average assumptions used to measure pension plan obligations are as follows:

North North
America Europe Other America Europe Other
Discount rate 3.65% 2.11% 9.85% 4.02% 2.30% 11.10%
Inflation rate 2.37% 2.69% 4.50% 2.37% 2.78% 5.00%
Rate of salary increases 2.86% 2.81% 4.84% 2.85% 2.69% 6.00%
Weighted average duration of the defined
benefit obligation 12.1 15.9 12.4 12.0 16.5 11.3
The discount rates, salary increase and inflation are the main For the sensitivity of the fair market value of plan assets due to the
financial assumptions used in the measurement of the defined interest rates movement it is considered that all the yield curve is
benefit obligation and changes in these rates may have a significant moving up or down by 0.5 point and only the value of the bonds
effect on the amounts reported. are impacted, all other assets keeping their value. The sensitivity
All actuaries provide, for each plan, sensitivities on the obligation indicated is the overall change of the value of the total portfolio
(DBO) and Current Service Cost to a change of the main assumptions. due to the change in the interest rates.
DBO and cost (meaning in that case the aggregate of the current
service cost and interest cost on the obligation) sensitivities are the
weighted average change of respectively the DBO and the Cost
when one of these assumptions changes.
A 0.5-point shift in these rates, while holding all other assumptions constant, compared to those used for 2017 would have the following
effect on:
0.5-point 0.5-point
upward shift downward shift
Discount rate on the defined benefit obligation (DBO) -6.63% 7.43%
Discount rate on the aggregate of current service cost and interest cost on the obligation 6.90% -8.19%
Inflation rate on the defined benefit obligation (DBO) 4.33% -4.13%
Inflation rate on the aggregate of current service cost and interest cost on the obligation 4.72% -4.46%
Salary increase rate on the defined benefit obligation (DBO) 1.63% -1.46%
Salary increase rate on the aggregate of current service cost and interest cost on the obligation 3.05% -2.68%
Interest rates on the fair market value of plan assets -6.02% 6.85%

Net income and expenses recognized in the income statement as well as the actual return on plan assets are as follows:
Year ended December 31, 2017 Year ended December 31, 2016
North North
Cost of services rendered during the year 12 44 2 58 23 44 1 68
Interest income on plan assets (143) (64) (4) (211) (147) (85) (3) (235)
Actuarial (gains) or losses recognized during the
year on other long term defined benefit plans - - - - - - - -
Due to the introduction of or modifications to
defined benefit plans 4 (24) - (20) 2 - - 2
Due to curtailments of defined benefit plans - - - - - - - -
Effect of defined benefit plans settlements - - - - - (20) - (20)
Other items - - - - - (1) - (1)
within reorganizations and adaptation of
activities costs - (88) - (88) - (5) - (5)
TOTAL DEFINED PENSION BENEFIT
EXPENSES 36 (27) 1 10 54 61 1 116
Actual return on plan assets 401 212 15 628 226 320 2 548
The asset allocation of fully and partly funded pension plans is as follows:
Canada USA UK Other Total Canada USA UK Other Total
Quoted securities
Local equities 3.2% 10.4% 2.4% 0.0% 5.7% 3.5% 11.0% 3.0% 0.0% 6.4%
Foreign and global equities 9.3% 9.4% 11.0% 0.0% 9.6% 8.9% 10.0% 18.7% 0.0% 12.5%
Alternative investments 3.9% 11.2% 18.3% 0.0% 12.1% 5.2% 10.3% 19.6% 0.0% 12.3%
Real estate 0.0% 0.0% 7.3% 0.0% 2.7% 0.0% 0.0% 7.2% 0.0% 2.5%
Indexed linked bonds 0.1% 0.1% 10.3% 13.8% 4.5% 0.1% 0.1% 10.8% 14.0% 4.4%
Fixed income government
and agencies 24.1% 9.4% 9.6% 0.0% 11.7% 21.3% 8.9% 6.3% 0.2% 9.9%
Corporate bonds 11.5% 27.2% 7.4% 0.0% 16.0% 11.6% 26.5% 6.6% 0.0% 15.8%
Other fixed income,
multi‑asset credit, emerging
market bonds 39.8% 19.4% 22.4% 0.0% 23.4% 35.9% 20.2% 18.8% 0.0% 21.8%
Cash & cash equivalent 1.9% 2.9% 4.2% 0.0% 3.1% 2.6% 2.7% 3.5% 0.8% 2.9%
Total quoted securities 93.8% 90.1% 93.0% 13.8% 88.7% 89.2% 89.7% 94.5% 15.0% 88.5%
Non-quoted securities
Funds managed by insurance
companies 0.0% 0.0% 0.0% 83.3% 3.4% 0.0% 0.0% 0.0% 85.0% 3.2%
Private placements(1) 3.2% 2.0% 7.0% 2.9% 4.1% 4.0% 2.9% 5.5% 0.0% 3.9%
Real estate 3.0% 7.9% 0.0% 0.0% 3.8% 6.8% 7.4% 0.0% 0.0% 4.4%
Total non-quoted
securities 6.2% 9.9% 7.0% 86.2% 11.3% 10.8% 10.3% 5.5% 85.0% 11.5%
TOTAL 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Duration in years of the
bond portfolio, excluding
cash & cash equivalents
and funds managed
by insurance companies 16.9 16.4 33.6 9.5 22.1 17.6 16.4 30.2 9.0 20.6
(1) Private equity and private debt.
In the above allocation, assets reported under “Quoted securities” are assets which have a regular market value at which such assets can
be sold and the ones under “Non-quoted securities” are assets managed by insurance companies and less liquid assets which could be
sold on short notice or in case of difficult markets at a discounted price.

An internal group of experts, composed by the chairmen or Chief independent advisors (actuaries, consultants, investment management
Investment Officers of the main investment committees and Group firms). The asset allocation takes into account the structure of
specialists, has issued investment guidelines for the use of the employee-related liabilities and their terms. In case of a large rise
local investment committees giving the investment best practices. in funding ratio, an asset allocation study should be performed to
Among other issues, these guidelines state not to invest directly ensure the target allocation is still appropriate.
in any Michelin securities or in any properties used by the Group. The largest pension plans have implemented a dynamic asset
Fund managers do not have such restrictions. The Group has no allocation, where the target asset allocations are based on plan funded
significant amount invested in its own securities. Michelin does not status. An improvement in funding status results in the de-risking
occupy or use any of the real estate assets included in the various of the portfolios, allocating more funds to liability hedging assets
portfolios. Detailed information is not available about the underlying (LHA) and less to return seeking assets (RSA). In case of a decrease
assets held in general insurance funds or alternative investments. of the funding ratio the target allocation remains unchanged, as
Alternative investments are composed of hedge funds and multi asset re-risking of the portfolios is not permitted. These pension plans
products such as diversified growth funds in the United Kingdom. have also implemented an interest rate hedging policy as well as
These kinds of investment are expected to deliver absolute returns an Inflation hedge policy for the UK. The hedging ratio increases
with a lower volatility than equities. as the funding level improves.
Other fixed income are composed of emerging market bonds, The RSA are diversified with the objective to target efficient portfolios
commingled funds, liability hedging portfolios for which the managers where the level of volatility is minimized for the targeted return.
invest in government and corporate bonds or in derivatives, as well These portfolios combine domestic and global equities with real
as, in the UK, in multi asset credit for which the managers can switch estate and alternative assets such as hedge funds and private
between main credit products depending on market conditions. placements. Special attention is given to less liquid asset classes
This kind of investment is expected to have a return similar to that may complicate the de-risking process by creating concentrated
corporate bonds with a lower volatility due to its diversification positions or requiring transactions at discounted prices.
to asset backed securities, loans, high yield bonds as well as cash, The LHA are hedging the duration risk as well as in some cases the
government and corporate bonds. credit spread and inflation risk. The LHA portfolios are primarily
For the UK portfolio the real estate investment is an investment into composed of government and corporate bonds. The larger plans
a Limited Price Index Property Fund with long term leases which is also use completion managers to implement custom solutions in
expected to hedge inflation risk. order to hedge key rate duration according to the policy set by
In most countries assets are managed by local independent boards each pension fund.
which are required under local pension laws. The boards are required Foreign exchange risks might be hedged when the exposure to
by their articles of association as well as by law to act in the best foreign currency is considered as non-negligible. For instance the
interest of the fund and of all relevant stakeholders in the plan, i.e. UK fund has numerous currencies and has a policy to hedge 75% of
current and future beneficiaries as well as employers. its exposure. Also in Canada 50% of the American dollar exposure
Asset allocation studies are performed periodically, generally every is hedged. In other cases, investment managers are given discretion
three to five years, by an independent fiduciary body (Investment to hedge currency exposure as they deem necessary.
Board, Board of Trustees) based on recommendations made by
Group contributions to pension plans and benefit payments made by these plans in 2017 and to be made during the 10 following years
are as follows:
(in € million) North America Europe Other Total
Contributions paid and benefits paid directly by the Group
2017 45 176 2 223
Estimates of contributions to be paid and benefits to be paid directly by
the Group
2018 1 108 - 109
2019 2 101 - 103
2020 3 118 - 121
2021 3 119 - 122
2022 3 126 - 129
2023-2027 245 640 - 885

The Group makes contributions to fully and partly funded plans Eligible retirees are mainly those who were active prior to January 1,
in order to meet its future benefit payment obligations to the 2004 and will have at least reached age 55 with 10 years of service
beneficiaries. The level of contributions is periodically determined at the date of retirement.
by the Group based on factors such as current funding levels, legal For Medicare eligible retirees, the health care coverage comes as
and tax considerations and local practice, in consultation, as the an addition to Medicare.
case may be, with local boards and actuaries.
Medical and prescription drug expenses are covered by the plan. The
In the US the following year contribution is determined annually retirees contribute to the cost of the pre-Medicare post-retirement
using IRS rules including temporary funding relief provided by BBA15 medical plan.
(Bipartisan Budget Act of 2015) In Canada the contributions are
In 2016, the plan was amended to move non-union Medicare eligible
determined on a tri-annual base and the funding plan is spread
retirees from a company-sponsored retirement offering to private
over 15 years as required under local regulations.
Medicare exchanges. For this population, the plan will provide the
In the UK the contributions are determined based on tri-annual following benefit improvements:
actuarial valuations as required by the Pension Act. In case of deficit
Retiree Reimbursement Account (RRA) will be funded in a fixed
the employer must agree a recovery plan with the Trustees. The
annual amount per retiree and eligible dependents through a
current Recovery Plan matures in 2027.
Retiree Health Exchange program to either reimburse Medicare,
In 2017, in addition to the ordinary contributions, it was decided Medicare supplement and/or prescription drug premiums;
to make contributions in advance due in the UK for an amount of
Catastrophic Retiree Reimbursement Account: if the retiree or
€80 million and in the United States for an amount of €44 million.
dependent reaches the eligibility threshold for catastrophic drug
In the case of unfunded plans, the payments are made on the coverage, he or she can receive reimbursement for the 5% of
due dates, either directly to the beneficiaries or indirectly via the out-of-pocket cost not covered by Medicare Part D.
relevant administrators.
The Group pays a premium for the administrative services. This
The estimates of future payments for unfunded plans are based on
plan is not funded.
data included in the calculation of the projected defined benefit
obligation based on expected leaving dates each year. The same
Canada
method is used for the constitutive funds for partially funded plans
paid to insurance companies. The Group offers retiree medical benefits that provide healthcare
coverage for certain retirees and their dependents. Medical and
prescription drug expenses are covered by the plan.
// 27.1.2 Other Defined Benefit Plans
This plan was closed to new entrants as from January 1, 2005.
In many countries, Group employees receive other post-employment
benefits and long-term benefits throughout their term of employment. The Group pays a premium for the administrative services. This
The “other post-employment benefits” mainly include health plan is not pre-funded.
insurance and end of service benefit. The “Other defined benefit
plans” are mainly found in the United States, Canada and France. France
“Other long-term benefits” include mainly long service awards plans The main plan is a mandatory rubber branch end-of-service benefit
provided under local company-specific agreements. Such defined plan.
benefit plans generally concern the Group European companies. The plan provides that a lump sum payment is made upon retirement
As in the case of the above-described defined benefit plans, “other for employees being present at the retirement date. The normal age
defined benefit plans” are valued with the assistance of independent of retirement is 65. The calculation of the lump sum corresponds
actuaries using actuarial techniques. The obligations under these to a number of months of salary based on years of service at the
plans are not covered by assets and are recognized as liabilities. time of retirement.
The main plans provided within the Group are: This plan is not pre-funded.
USA
The Group offers retiree medical benefits that provide healthcare
coverage for Pre-Medicare and Medicare eligible retirees and their
dependents.

Changes in the financial position of “other defined benefit plans” are as follows:
North North
Present value of the obligations at the beginning of
the year 958 1,025 38 2,021 1,184 1,055 32 2,271
Translation adjustments (98) 1 (4) (101) 45 - 3 48
Changes in scope of consolidation - - - - - (9) - (9)
Current service cost 10 48 4 62 12 44 4 60
Administration costs - - - - - - - -
Plan reorganization costs generated during the
year:
Past service cost due to the introduction of or
modifications to defined benefit plans (39) 3 - (36) (271) 7 - (264)
Past service cost due to curtailments of defined
benefit plans - (95) - (95) - (14) - (14)
(Gains) or losses on settlements of defined
benefit plans - - - - - 1 - 1
Benefits paid (51) (69) (2) (122) (59) (63) (2) (124)
Other items - - - - - (55) - (55)
Actuarial (gains) or losses generated during the year (24) 58 2 36 1 39 - 40
Present value of the obligations at the end of
the year 790 990 40 1,820 958 1,025 38 2,021
Fair value of plan assets at the beginning of the year - - - - - - - -
Translation adjustments - - - - - - - -
Changes in scope of consolidation - - - - - - - -
Interest income on plan assets - - - - - - - -
Contributions paid to the plans - - - - - - - -
Benefits paid by the plans - - - - - - - -
Other items - - - - - - - -
Actual return on plan assets excluding interest
income - - - - - - - -
Fair value of plan assets at the end of the year - - - - - - - -
Deficit/(Surplus) at the end of the year 790 990 40 1,820 958 1,025 38 2,021
NET LIABILITY/(ASSET) RECOGNIZED IN
THE BALANCE SHEET AT THE END OF THE
YEAR 790 990 40 1,820 958 1,025 38 2,021
USA France
In the United States of America, the Group has remeasured the As at June 22, 2017, the Group has announced a global reorganization
impact of Postretirement Welfare plan amendment in the light project aimed to better serve the customers. A voluntary pre-retirement
of the actual data. The initial measurement carried out in 2016 plan has been offered to the salaried employees and managers who
resulted in a negative past service cost amounting to €271 million. are based at the Clermont-Ferrand site and for which an agreement
The remeasurement of the impact made in 2017 led the Group to with the personnel’s representative bodies has been issued.
recognize an additional negative past service cost for an amount The other post-employment plan obligation has been reduced for
of €22 million. an amount of €95 million. A provision for reorganizations and
In 2017, the Postretirement Welfare plan has been amended for a adaptation of activities has been recognized for an amount slightly
specific category of retiree members introducing a new structure of lower to the extent that end-career allowances of the voluntary
the annual subsidy provided by the Company for medical coverage. pre-retirement plan are partly exempted from social security charges.
This change in the plan regulation has generated a negative past
service cost resulting in a reduction of the obligation amounting
to €17 million.

In 2017 the present value of “other defined benefit plans” decreased by €201 million, due to:
2017 2016
Effect of changes in exchange rates for the US dollar, British pound and Canadian dollar against the euro 101 (48)
Actuarial gains or (losses) from changes in actuarial assumptions and difference between assumptions and
actual experience (36) (40)
Difference between the costs (service cost and interest cost) and the benefits paid during the year 5 (3)
Changes in plan regulations 131 277
Changes in the scope of consolidation - 9
Other items - 55
The present value of the defined benefit obligation and experience adjustments are as follows for 2017 and the previous four periods:
(in € million) 2017 2016 2015 2014 2013
Defined benefit obligation (1,820) (2,021) (2,271) (2,286) (1,993)
Experience adjustments to plan liabilities 46 16 25 65 86
Experience adjustments to plan liabilities (in % of present value of the
obligation (DBO)) -2.53% -0.79% -1.10% -2.84% -4.32%
The main actuarial weighted average assumptions used to measure obligations for “other defined benefit plans” are as follows:
North America Europe Other North America Europe Other
Discount rate 3.57% 1.61% 5.47% 4.02% 1.70% 6.47%
Weighted average duration of the defined
benefit obligation 11.3 13.6 9.6 10.7 12.1 10.2
Assumptions concerning healthcare cost trends are as follows:

USA Canada USA Canada
Expected growth in healthcare costs in the first year 7.85% 6.30% 7.96% 5.64%
Minimum long-term rate of annual growth in healthcare costs 5.00% 4.25% 5.00% 4.25%
Year in which the minimum growth rate will be achieved 2026 2028 2026 2028
The discount rate is one of the main assumptions used in the DBO and Cost (meaning in that case the aggregate of the current
measurement of the defined benefit obligation and changes in service cost and interest cost on the obligation) sensitivities are the
this rate may have a significant effect on the amounts reported. All weighted average change of respectively the DBO and the Cost
actuaries provide for each plan sensitivities on the obligation (DBO) when one of these assumptions changes.
and Current Service Cost to a change of the main assumptions.
A 0.5-point shift in these rates, all else otherwise being equal, compared to those used for 2017 would have the following effect:
0.5-point 0.5-point
upward shift downward shift
Discount rate on the defined benefit obligation (DBO) -6.27% 6.39%
Discount rate on the aggregate of current service cost and interest cost on the obligation 0.47% -0.82%
Healthcare cost trend on the healthcare defined benefit obligation 1.84% -1.73%
Healthcare cost trend on the aggregate of current service cost and interest cost
of healthcare plan obligation 1.78% -1.63%

Net income and expenses recognized in the income statement are as follows:
Year ended December 31, 2017 Year ended December 31, 2016
North North
Cost of services rendered during the year 10 48 4 62 12 43 4 59
Interest income on plan assets - - - - - - - -
Actuarial (gains) or losses recognized during the
year on other long term defined benefit plans - - - - - 1 (1) -
Due to the introduction of or modifications
to defined benefit plans (39) 3 - (36) (271) 7 - (264)
Due to curtailments of defined benefit plans - - - - - - - -
Effect of defined benefit plans settlements - - - - - 1 - 1
within reorganizations and adaptation of
activities costs - (95) - (95) - (14) - (14)
TOTAL OTHER DEFINED BENEFIT
EXPENSES 5 (25) 6 (14) (213) 58 4 (151)
Group payments made under “other defined benefit plans” in 2017 and to be made during the 10 following years are as follows:
(in € million) North America Europe Other Total
Benefit payments made
2017 51 69 2 122
Estimates of benefit payments to be made
2018 47 21 1 69
2019 48 21 2 71
2020 49 34 2 85
2021 49 46 2 97
2022 50 92 2 144
2023-2027 240 336 9 585
For unfunded plans, such payments are made on the due dates, either directly to the beneficiaries or indirectly to the relevant administrators.
27.2 Defined contribution plans plans, asset allocation decisions are made by the employees. The
asset allocation choices are determined and monitored by the
In some Group companies, employees are covered by defined
North American Investment committee under the authority of the
contribution plans. Such plans mainly provide benefits in addition
US Pension Board.
to those of mandatory post-employment plans.
In 2017, the contributions paid to defined contribution plans and Canada
expensed amounted to €220 million (2016: €213 million). The defined contribution plans in Canada consist of the Defined
These plans are mainly found in the United States of America, Contribution Plan for the Employees of Michelin North America
Canada, the United Kingdom and France. (Canada) Inc. as well as a registered retirement savings plan (RRSP).
The defined contribution plan is funded by core employer contributions
USA and optional employee contributions with employer matching. The
The defined contribution plans in the United States consist of the core contribution levels, modified at January 1, 2016, are based on
Michelin Retirement Account Plan (MRAP) and various 401(k) plans. years of service and age. The RRSP plan is voluntary and is funded
The MRAP plan is fully funded by employer contributions. The by employee contributions with employer matching contributions.
contribution levels are based on age and years of service. The 401(k) In both the DC and RRSP plans, asset allocation decisions are made
plans are voluntary and are funded by employee contributions with by the employees. The asset allocation choices are determined and
employer matching contributions. In both the MRAP and 401(k) monitored by the North American Investment Committee under
the authority of the US Pension Board.

United Kingdom France
The main defined contribution pension plan in UK is the Michelin There are two defined contribution pension schemes in France:
Pension and Life Assurance plan DC section (for Michelin and ATS the “Article 83” scheme and the “PERCO”.
employees). It has been implemented as from December 1, 2004 The defined-contributions “Article 83” retirement savings plan has
for the new entrants and for January 1, 2009 for all employees been implemented as from January 1, 2012 in order to replace
who did not opt out. the defined benefit plan which will be progressively terminated.
For Michelin employees, there are employee and employer contributions It is a mandatory retirement plan for all employees of the French
to this Plan which are based on a percentage of the eligible pay companies concerned by the applicable agreement. Contributions
and age of the employee. Employees may also make optional are paid by the employee and the employer on the gross annual
contributions to the plan and the Group will match some of these salary capped. An individual account is opened on the name of
optional contributions. each employee. The employee can claim his additional retirement
For ATS employees, there are employee and employer contributions. benefit at the date he is entitled to his pension in a compulsory
The range of contribution is chosen by the employee and matched retirement scheme.
by the employer. Contributions are a flat rate whatever the age of The PERCO has been implemented on June 1, 2007 and revised as
the employee. from January 1, 2012. It is a voluntary pension saving plan. Each
All contributions to the plan are held in a Pension Account in a Trust. employee can contribute to this plan and the Group will match
The employees choose how to invest these contributions among the the voluntary contributions made by the employee up to a cap.
different options made available for the Plan. The asset allocation
choices are determined and monitored by the Board of Trustees.
NOTE 28 SHARE-BASED PAYMENTS
28.1 Stock option plans

Changes in the number of options granted under stock option plans and their weighted average exercise price are as follows:
2017 2016
Weighted average Weighted average
exercise price exercise price
(in € per option) Number of options (in € per option) Number of options
At January 1 54.35 672,028 65.87 1,733,471
Granted - - - -
Forfeited 51.16 (2,098) 85.79 (338,023)
Exercised 55.00 (308,979) 67.27 (723,420)
AT DECEMBER 31 53.81 360,951 54.35 672,028
360,951 of the 360,951 options outstanding as at December 31, 2017 are exercisable (2016: 672,028 exercisable out of a total of 672,028).
Stock option plans have the following exercise prices and expiry dates:
Number Number
Exercise prices of options Exercise prices of options
Grant dates Vesting dates Expiry dates (in € per option) outstanding (in € per option) outstanding
May 2008 May 2012 May 2017 59.85 - 59.85 75,662
November 2009 November 2013 November 2018 51.16 177,748 51.16 317,554
May 2010 May 2014 May 2019 52.13 79,963 52.13 102,910
May 2011 May 2015 May 2020 66.00 59,127 66.00 93,288
June 2012 June 2016 June 2021 51.16 44,113 51.16 82,614
NUMBER OF STOCK OPTIONS OUTSTANDING 360,951 672,028

28.2 Performance share plans

Changes in the number of performance share rights are as follows:
2017 2016
Number of outstanding Number of outstanding
performance share rights performance share rights
At January 1 668,936 732,406
Granted 296,440 120,520
Forfeited (42,780) (61,027)
Shares delivered (39,084) (122,963)
AT DECEMBER 31 883,512 668,936
In November 2017, 296,440 rights to performance shares have been is estimated at €66.84. This fair value is based on the share price
granted to Group employees. Grantees are subject to a vesting period at the grant date, less the present value of expected dividends that
of four years ending in November 2021 and are not subject to any will not be received by grantees during the vesting period. The
lock-up period. The shares will vest providing that the performance market performance has reduced the fair value of the performance
conditions (share price on the market, industrial environmental share at grant date, according to the estimated probability that
performance, employee engagement level, increase in operating the condition is met. The total cost for the plans issued in 2017 is
income) are met. The fair value of a right to a performance share estimated at €13 million.
The performance share plans have the following characteristics:

Number of Number of
outstanding outstanding
Fair value at grant performance share performance share
Grant dates Vesting dates Lock-up period date rights rights
Other Other Other
France countries France countries France countries
2013 2017 2017 None None 69.43 69.43 - 78,168
2014 2018 2018 None None 63.05 63.05 276,168 279,864
2014 2018 2018 None None 63.05 63.05 106,244 106,244
2015 2019 2019 None None 82.24 82.24 84,140 84,140
2016 2020 2020 None None 66.41 66.41 120,520 120,520
2017 2021 2021 None None 66.84 66.84 296,440 -
NUMBER OF OUTSTANDING PERFORMANCE SHARE RIGHTS 883,512 668,936
The expense recognized in 2017 for the performance share plans amounts to €7 million (2016: €7 million) and is included in
“Other operating income and expenses from recurring activities”.

28.3 Employee share purchase plans The share subscription price was set at €76.38, after a 20% discount
on the reference price of €95.47, the latter being the average of
In 2017, there was no new employee share purchase plan.
the Michelin share’s opening trading price of the last twenty trading
In 2016, the Group launched a share offer for all its employees located days preceding the price fixing day. The employees were granted
in countries where the legal and fiscal requirements were met. This one free share for each share purchased capped to the first five.
share purchase plan (Bib’Action), carried out under the Company 657,366 shares were purchased during this share offer.
savings plan (Plan d’Épargne Groupe), is a standard plan allowing
The global expense recognized in the income statement by the
employees to invest in Michelin shares at a discounted price. The
Group in 2016 in relation to this plan amounted to €16 million
shares acquired by the employees participating in the plan cannot
after deduction of the effect of the five-year restriction.
be sold or transferred during a five-year period.
The main features of the plan and the assumptions used for the valuation of the cost linked to the shares acquired by Group employees
were as follows:
Maturity of the plan 5 years
Number of shares subscribed 657,366
Reference price (in €) 95.47
Subscription price (in €) 76.38
Five-year risk-free rate(1) -0.28%
Five-year market participant rate (2)
5.30%
Dividend yield 2.99%
Cost of the lock-up period (in % of the reference price) 23.82%
Cost recognized (in € per share) 23.95
(1) The risk-free interest rate is based on the yield of French government bonds with the equivalent maturity.
(2) The five-year market participant rate is an average of non-dedicated 5-year individual loan rates.
NOTE 29 PROVISIONS AND OTHER NON-CURRENT LIABILITIES
Provisions and other long-term liabilities amount to €1,676 million (2016: €1,604 million) and include provisions for reorganizations and
adaptation of activities, provisions for litigation, for warranties as well as other provisions and long-term liabilities.
Movements in provisions during the year:
Reorganizations and Litigation, warranties
(in € million) adaptation of activities and other provisions Total
At January 1, 2017 274 363 637
Additional provisions 253 137 390
Provisions utilized during the year (97) (101) (198)
Unused provisions reversed during the year (18) (10) (28)
Translation adjustments (3) (21) (24)
Other effects 1 86 87
AT DECEMBER 31, 2017 410 454 864
The €454 million balance for Litigation, warranties and other provisions includes mainly amounts arising from social security disputes (URSSAF
in France), as well as risks and warranty relating to products marketed mainly in North America.

29.1 Reorganizations and adaptation of activities

At December 31, 2017, the remaining provisions for reorganizations and adaptation of activities relate to following countries:
France 269(1) 109
United Kingdom 62 76
Italy 40 42
Germany 26 21
Other countries 13 26
TOTAL 410 274
(1) The balance includes mainly the provision made in relation to the implementation of the new worldwide organisation of the Group.
NOTE 30 OTHER CURRENT LIABILITIES
The carrying amount of other current liabilities is presented in the table below:
Customers – Deferred rebates 847 969
Employee benefits 573 500
Social security liabilities 221 231
Reorganizations and adaptation of activities liabilities 3 3
Current income tax payable 186 188
Other taxes 279 195
Other 276 310
OTHER CURRENT LIABILITIES 2,385 2,396

NOTE 31 DETAILS OF THE CASH FLOW STATEMENT
Details of the cash flows are presented in the table below:

Investment grants (13) (12)
Change in employee benefit obligations (235) (94)
Change in litigation and other provisions (5) (20)
Costs related to reorganizations and adaptation of activities (100) (99)
Other 7 19
Operating income and expenses from non-recurring activities (cash)
and change in provisions (346) (206)
Interest and other financial expenses paid (422) (2)
(210)
Interest and other financial income received 23 44
Dividends received 26 20
Cost of net debt and other financial income and expenses paid (373) (146)
Change in inventories (311) (83)
Change in trade receivables and advances (317) (319)
Change in trade payables and advances 205 72
Change in trade payables under factoring contracts 199 217
Change in other receivables and payables 160 (89)
Change in working capital, net of impairments (64) (202)
Purchases of intangible assets (note 13) (186) (158)
Purchases of PP&E (note 14) (1,585) (1,653)
Government grants received 25 21
Change in capital expenditure payables 78 (25)
Purchases of intangible assets and PP&E (1,668) (1,815)
Increase in other non-current financial assets (21) (6)
Decrease in other non-current financial assets 10 13
Net cash flows from cash management financial assets (18) (162)(1)
Net cash flows from borrowing collaterals 36 2
Net cash flows from other current financial assets (10) (6)
Cash flows from other financial assets (3) (159)
Increase in non-current financial liabilities 494 115
Decrease in non-current financial liabilities (28) (92)
Repayment of finance lease liabilities (24) (13)
Net cash flows from current financial liabilities (424) (141)
Derivatives (86) 112
Cash flows from financial liabilities (68) (19)
Details of non cash transactions:
New finance leases (note 14) 135 42
Increase/(Decrease) of liabilities to minority shareholders - -
New emission rights 4 4
(1) See note 21.
(2) See note 26.1.

NOTE 32 COMMITMENTS AND CONTINGENCIES
32.1 Commitments
// 32.1.1 Operating lease commitments

Future minimum payments under non-cancellable operating leases by maturity are as follows (not discounted):
Within one year 234 220
Between one and five years 415 402
More than five years 134 101
TOTAL FUTURE MINIMUM PAYMENTS 783 723
Total operating lease rents recognized in the income statement in 2017 amounted to €379 million (2016: €381 million).
// 32.1.2 Capital commitments The Group does not accept any of the positions taken by the German
tax authorities and considers that:
PP&E capital expenditure on the main extension projects, which
were contracted but not delivered before December 31, 2017, it is more unlikely than likely that the subsidiary will have to face
amounts to €326 million (of which €90 million is likely to be a financial loss in connexion with these tax adjustments;
delivered from 2019). furthermore, it is not possible at this stage of the proceedings
to reliably evaluate the potential financial risk related to these
// 32.1.3 Other commitments tax litigations.
The Group has various purchase commitments for goods and services. In 2016 a new tax audit covering the periods 2010 to 2014 was
These commitments are in line with the level of activity expected instigated; no specific elements have been raised as at the date of
in the first half of 2018. They are established under normal market the closing of the consolidated accounts.
conditions and arise in the course of the Group ordinary activities.
// 32.2.3 Legal claims in Brazil
32.2 Contingencies In relation to an investment project at its Resende plant (State of
Rio de Janeiro), a Brazilian subsidiary of the Group benefitted in
2010, by means of a decree issued by the State governor, from
// 32.2.1 Michelin Pension Trust Ltd UK tax advantages taking the form of deferred tax payments on the
Following the introduction of the “Pension Act 2004” in the United importation of machines and raw materials, as well as access to a
Kingdom, a multi-annual plan of contributions to the UK pension BRL 1, 029 million (around €260 million at 2017 closing exchange
funds, “Recovery Plan”, was established between Michelin Pension rate) credit line.
Trust Ltd U.K. and Michelin U.K. In order to limit the amount of In 2013, a lawsuit was instigated against the subsidiary, the plaintiff
the contributions and to stagger them over more than ten years, pleading the unconstitutional nature of the decree by which the
the Group has given a guarantee to the pension fund to cover the advantages had been given.
stream of contributions which its subsidiary will have to make.
After having received a favorable ruling in 2015, the subsidiary
The calculation of the Recovery Plan is done every three years. was condemned on appeal in October 2016. The judgment only
The last one was carried out as of March 31, 2017. The actuarial concerned the deferred tax payments relating to the importation
assumptions used to evaluate the liability for the Recovery Plan of industrial machines for the Resende plant. The Group estimates
are globally more conservative than the ones used to evaluate the that the amount of financial risk related to this litigation to be in
defined benefit obligations under IAS 19. the region of BRL 32 million.
The amount of the guarantee given is equal to the difference, In November 2016, the Prosecutor of the State of Rio de Janeiro,
if positive, between the present value of future contributions based on the appeal ruling, started a new lawsuit against the
and the amount of the provision booked in the accounts. As of subsidiary and demanded that it restitutes all of the advantages
December 31, 2017, the present value of the future contributions received following the decree.
exceeding the provision booked in the Group accounts amounts
to €133 million. The subsidiary opened legal proceedings to suspend the lawsuit, but
its request was rejected by the judge who ordered the sequestration
of the subsidiary’s assets for an amount up to the level of the credit
// 32.2.2 Tax audit in Germany line granted.
Following a tax audit covering the periods 2005 to 2009, a German The subsidiary, which has never made use of the credit line, entered
subsidiary received during the year 2015 notifications of intended an appeal for an immediate suspension and annulation of the
tax adjustments on a €305 million tax base. The tax authorities are decision. The request for a suspension was rejected.
contesting in the main (€286 million) the effects on the subsidiary
of the transfer price policy applied by the Group. No significant new At the date of the closing of the consolidated accounts, the
elements with regards to this claim have been identified in 2017. preliminary decision concerning the sequestration of the company’s
assets, pronounced following the lawsuit initiated in November
2016, has not been put into effect.

The Group contests all of the positions expressed by the Brazilian // 32.3.2 Financial assets
legal authorities in the different lawsuits and considers that it is Loans and deposits amounting to €42 million (2016: €77 million) are
more likely than unlikely that it will make its points of view prevail. pledged as collateral for financial borrowings (note 16 “Derivative
Financial Instruments”).
// 32.2.4 Other contingencies
In the course of their ordinary activities, the Group companies may be // 32.3.3 Trade receivables
involved in administrative proceedings, litigation and claims. Although The Group runs two separate programs whereby certain European
provisions have been recognized when the risks are established and and North American subsidiaries have transferred ownership interests
the cash outflows probable, there exist uncertainties concerning in their eligible trade receivable portfolios. The maximum financing
some of these administrative proceedings, litigation and claims. that can be raised from these programs amounts to €468 million
In the opinion of the Group management, there is no other (2016: €476 million). Since the Group has substantially retained
governmental, judicial or arbitration proceedings likely to have all the risks and rewards of ownership, the ownership interests
significant impacts on its net assets or cash flows. in the trade receivable portfolios sold by the European and North
American subsidiaries have not been derecognized and the financing
received from the financial institutions, amounting to €15 million as
32.3 Assets pledged as collateral at December 31, 2017 (2016: €15 million), has been accounted for
as collateralized loans (note 26.2 “Loans from financial institutions
// 32.3.1 PP&E and other”).
PP&E pledged as collateral amounted to €33 million (2016: €34 million).
NOTE 33 CHANGE IN THE SCOPE OF CONSOLIDATION AND IN THE PERCENTAGE

OF INTEREST
33.1 Change in the scope of consolidation
// 33.1.1 Nextraq
On July 17, 2017, the Group took control of NexTraq Inc., a US provider of telematics solutions for commercial fleets. Nextraq provides
solutions that improve drivers’ safety, fuel consumption management and fleet productivity. Its services are mainly based on geolocation
management of small commercial vehicles for fleets between 2 and 50 vehicles.
The measurement at their fair value of assets acquired and liabilities assumed are detailed in the following table:
Intangible assets(1) 113
Property, plant and equipment (PP&E) -
Non-current financial assets and other assets -
Non-current assets 113
Inventories 1
Trade receivables and other current assets 14
Cash and cash equivalents 2
Current assets 17
Non-current financial liabilities -
Provisions and other non-current liabilities -
Deferred tax liabilities 42
Non-current liabilities 42
Current financial liabilities -
Trade payables and other current liabilities 7
Current liabilities 7
TOTAL FAIR VALUE OF NET ASSETS ACQUIRED 81
(1) The fair value of intangible asset has been measured, with the assistance of an external consultant, using the royalty relief method for the trademark and using an income
approach for the customer relationships and the technology. The Nextraq trademark has been valued at €9 million. Its remaining useful life is 15 years. The fair value of
the customer relationships has been measured at €87 million. It will be amortized over its remaining useful life of 15 years. The fair value of the technology is €17 million
and will be amortized over its remaining useful life of five years.

The allocation of the purchase price, after the measurement of identifiable assets acquired and liabilities assumed, led to the recognition
of goodwill for €224 million, calculated as follows:
Fair value of consideration transferred (1) 305
Fair value of net assets acquired (2) 81
GOODWILL (1) - (2) 224
This acquisition will enable the Group to increase its expertise 33.2 Change in the percentage of interest
and visibility in the field of fleets telematics services, to expand its
On June 6, 2017, the Group, through its subsidiary Compagnie
customer base in the United States and the geographical coverage
Financière Michelin SCmA, has filed a draft simplified cash public
of its offerings, as well as accelerate its market’s penetration within
tender offer with the French securities regulator (Autorité des
the trailer segment, where the potential growth of telematics services
marchés financiers – AMF), acting in concert with the Ivory Coast
such as those provided by Nextraq is expected to be important.
company SIFCA, the majority shareholder of SIPH, to acquire
These analyses led to the allocation of the goodwill to the group
the 1,042,324 shares (i.e., 20.60% of the capital) in Société
of CGUs comprising Truck tire, fleet services and digital activities
Internationale de Plantations d’Hévéas (SIPH) not currently held by
in North America (note 13.2).
the concert parties, at a price of €85 per share. The amount of the
In the five months to December 31, 2017, NexTraq contributed operation, corresponding to the expected total repurchase of the
€19 million to the Group’s net sales, €1 million to its operating shares, is €89 million and was deposited with the financial broker
income and €13 million to its net income as a consequence of a on a blocked account until the closing of the tender offer. Before
deferred tax income recognized following the United States’ tax launching this offer, the Group owned 23.81% of the capital of
reform adopted in December. SIPH, recognized as “Investments in associates” in the consolidated
// 33.1.2 Other acquisitions The shareholders’ agreement entered into by the Group and SIPH
In October 2017, the Group acquired the truck tire distributor at the date of the launch of this operation states that the Group
and service provider Tructyre, in the United Kingdom and Lehigh undertakes to sell forward to SIFCA, in the five coming years, 25%
Technologies in the United States. The latter is specialized in the of the shares acquired by the Group under the public tender or the
development and production of innovative raw materials based on squeeze out of any remaining minority shareholders of SIPH, in order
the recycling of worn non-reusable tires and other rubber-based to reach the targeted ownership structure as follows:
industrial products. Michelin 40% of the share capital;
In December, the acquisition of PTG (Germany) and Teleflow (France), SIFCA 60% of the share capital.
two leaders in tire pressure control systems, was completed.
The simplified public tender initiated by the Group was closed on
Given the acquisition dates of these entities, it has not been possible July 12, 2017. The Group acquired through this tender 493,452 shares,
to integrate them according to the acquisition method before of which 248,732 were taken up and paid as at June 30, 2017,
the consolidated financial statements’ finalisation and they are for a total amount of €41 million. The targeted number of shares
provisionally presented under the section “Non-current financial was 1,042,234.
assets and other assets” of both the Consolidated Statement of
The percentage of share capital held by the Group in SIPH after this
Financial Position and the Consolidated Cashflow Statement, as at
operation is 33.56%, compared to the 23.81% previously held.
December 31, 2017 for €55 million. Consolidation and purchase
price allocation will be carried out during the accounting period
beginning on January 1, 2018.
NOTE 34 RELATED PARTY TRANSACTIONS
34.1 Subsidiaries, joint ventures and associates

The list of the major Group subsidiaries is included in note 36 “List of main Group companies”. Transactions between the parent company
and its subsidiaries and between subsidiaries are eliminated in consolidation.
Transactions and balances between the Group and its associates and joint ventures are presented in the table below:
(in € million) 2017 2016
Income statement
Income for the sale of goods or supply of services 78 111
Expenses for the purchase of products or supply of services (224) (142)
Balance sheet
Financial liabilities (7) (9)
Accounts payable (5) (5)
Financial assets 20 4
Accounts receivable 11 31

34.2 Senior Management and Supervisory The present value of the benefits attributed during the period in
a post-employment defined benefit plan amounts to €0.6 million
Board (2016: €0.6 million). He was entitled to a gross amount (social
In 2017, Jean-Dominique Senard, Managing Chairman and General charges and tax included) of €1.2 million according to the terms
Partner of Compagnie Générale des Établissements Michelin, received of a long term incentive bonus program reducing the provision,
a statutory distribution based on 2016 net income and amounting based on the present value of the vested rights in that program,
to €2.2 million (2015: €1.3 million). recognized as at December 31, 2017 to an amount of €1.1 million
He was entitled to a global compensation of €1.5 million (social (2016: €2.2 million) including the related tax and social charges.
charges included) as non-general Managing Partner of Manufacture
Française des Pneumatiques Michelin (2016: €1.5 million).
The global compensation granted in 2017 to the 11(*) members of the Group Executive Committee (2016: 13(*) members) was €24 million
(2016: €20 million). This amount breaks down as follows:
Short term benefits 17.1 14.0
Post-employment benefits 3.8 3.1
Other long term benefits - -
Termination benefits - -
Share-based payments 3.4 2.5
COMPENSATION GRANTED TO MEMBERS OF THE GROUP EXECUTIVE
COMMITTEE 24.3 19.6
(*) Members of the Group Executive Committee as at December 31.
The attendance fees paid in 2017 to the Supervisory Board members for 2016 meetings were €0.5 million (2016: €0.4 million).
NOTE 35 EVENTS AFTER THE REPORTING DATE
The reported amounts of assets and liabilities at the date of the 35.2 Non-dilutive cash-settled convertible
consolidated statement of financial position were adjusted, if needed,
up to the date when the Managing Chairman authorized for issue bonds issue
the 2017 consolidated financial statements. In January 2018, the Group issued exclusively cash-settled five year
convertible bonds with a total face value of 600 million USD.
These bonds, which were issued at 95.5% of their face value, are
35.1 Joint venture with Sumitomo Corporation redeemable at par on November 10, 2023 (if they are not converted)
of Americas and their coupon’s interest rate is 0%.
Michelin North America Inc. and Sumitomo Corporation of Americas In addition to that bond issuance, the Group subscribed to call
announced on January 3, 2018 an agreement to combine their options settled in cash only, enabling it to fully cover its exposure
respective North American replacement tire distribution and related to the exercise of the conversion rights embedded in the bonds.
service operations in a joint venture owned on a 50-50 basis by This set of transactions, which were hedged by euro-denominated
the parties. The transaction will form the second-largest player in swaps, provides the Group with the equivalent of classic euro-
the wholesale tire market in the United States which will operate denominated bond financing at an advantageous cost.
under a new brand, NTW.
The Group will bring to the joint venture the wholesale tire activity
of its TCI network in the United States, valued at 160 million USD
completed by a contribution in cash for 630 million USD.
The transaction might be completed by the end of the first quarter
of 2018, subject to customary approvals.

NOTE 36 LIST OF MAIN GROUP COMPANIES
Countries are presented based on the Michelin geographical regions and within each regions are listed according to the alphabetical order
of the French names.
% of
Companies Registered office Nature interest
EUROPE
Germany
Laurent Reifen GmbH Oranienburg Manufacturing & commercial 100.00
Michelin Reifenwerke AG & Co. KgaA Karlsruhe Manufacturing & commercial 100.00
Euromaster GmbH Mannheim Commercial 100.00
Michelin Finanz Gesellschaft für Beteiligungen AG & Co.OHG Karlsruhe Financial 100.00
Ihle tires GmbH Muggensturm Miscellaneous 100.00
Tirecorp GmbH Muggensturm Miscellaneous 100.00
Ihle International GmbH Muggensturm Miscellaneous 100.00
Belgium
Michelin Belux S.A. Zellik Commercial 100.00
Denmark
Euromaster Danmark A/S Skanderborg Commercial 100.00
Spain
Michelin España Portugal, S.A. Tres Cantos Manufacturing & commercial 99.81
Reservas de Restaurantes, S.L. Madrid Miscellaneous 99.81
Euromaster Automoción y Servicios, S.A. Madrid Commercial 100.00
Nex Tyres, S.L. Lleida Miscellaneous 50.00
Finland
Suomen Euromaster Oy Pori Commercial 100.00
France
Compagnie Générale des Établissements Michelin Clermont-Ferrand Parent -
Manufacture Française des Pneumatiques Michelin Clermont-Ferrand Manufacturing & commercial 100.00
Pneu Laurent Avallon Manufacturing & commercial 100.00
Simorep et Cie – Société du Caoutchouc Synthétique Michelin Bassens Manufacturing 100.00
Montbonnot-Saint-
Euromaster France Martin Commercial 98.41
Michelin Aircraft Tyre Clermont-Ferrand Commercial 100.00
Transityre France Clermont-Ferrand Commercial 100.00
Michelin Travel Partner Boulogne-Billancourt Commercial 100.00
Spika Clermont-Ferrand Financial 100.00
Michelin Air Services Clermont-Ferrand Miscellaneous 100.00
Montbonnot-Saint-
Société Nationale des Établissements Piot Pneu Martin Commercial 96.81
Tyredating Lyon Commercial 100.00
Ihle France Schiltigheim Miscellaneous 100.00
Euromaster Services et Management Clermont-Ferrand Commercial 100.00
GIE MICHELIN PLACEMENTS Clermont-Ferrand Financial 100.00
Greece
Elastika Michelin A.E. Halandri Commercial 100.00
Hungary
Michelin Hungaria Tyre Manufacture Ltd. Nyíregyháza Manufacturing & commercial 100.00
Ireland
Miripro Insurance Company Designated Activity Company / Miripro
Insurance Company DAC Dublin Miscellaneous 100.00
Italy
Società per Azioni Michelin Italiana Turin Manufacturing & commercial 100.00
Luxembourg
Michelin Luxembourg SCS Luxembourg Financial 100.00
Michelin Finance (Luxembourg) S.à r.l. Luxembourg Financial 100.00

% of
The Netherlands
Euromaster Bandenservice B.V. Deventer Commercial 100.00
Michelin Nederland N.V. Drunen Commercial 100.00
Transityre B.V. Breda Commercial 100.00
Poland
Michelin Polska S.A. Olsztyn Manufacturing & commercial 100.00
Serbia
Tigar Tyres d.o.o. Pirot Manufacturing & commercial 100.00
Romania
Michelin Romania S.A. Voluntari Manufacturing & commercial 99.86
Euromaster Tyre & Services Romania S.A. Voluntari Commercial 100.00
United Kingdom
Michelin Tyre Public Limited Company Stoke-on-Trent Manufacturing & commercial 100.00
ATS Euromaster Limited Birmingham Commercial 100.00
Blackcircles.com Limited Edinburgh Commercial 100.00
Livebooking Holdings Limited London Commercial 99.94
LB Central Limited London Commercial 99.94
Sweden
Euromaster AB Varberg Commercial 100.00
Michelin Nordic AB Stockholm Commercial 100.00
Switzerland
Euromaster (Suisse) S.A. Givisiez Commercial 100.00
Nitor S.A. Granges-Paccot Financial 100.00
Michelin Suisse S.A. Givisiez Commercial 100.00
Compagnie Financière Michelin SCmA Granges-Paccot Financial 100.00
Michelin Recherche et Technique S.A. Granges-Paccot Miscellaneous 100.00
Michelin Mexico Properties Sàrl Granges-Paccot Miscellaneous 100.00
Turkey
Michelin Lastikleri Ticaret A.S. Istanbul Commercial 100.00
AFRICA/INDIA/MIDDLE EAST
South Africa
Michelin Tyre Company South Africa Proprietary Limited Boksburg Commercial 100.00
Algeria
Michelin Algérie SPA Algiers Commercial 100.00
Nigeria
Michelin Tyre Services Company Ltd. Lagos Commercial 95.48
India
Michelin India Private Limited Chennai Manufacturing 100.00
NORTH AMERICA
Canada
Michelin North America (Canada) Inc. Laval Manufacturing & commercial 100.00
Michelin Retread Technologies (Canada) Inc. New Glasgow Commercial 100.00
United States of America
Michelin North America, Inc. New York Manufacturing & commercial 100.00
Michelin Retread Technologies, Inc. Wilmington Commercial 100.00
Tire Centers, LLC Wilmington Commercial 100.00
CR Funding Corporation Wilmington Financial 100.00
Michelin Corporation New York Financial 100.00
Oliver Rubber Company, LLC Wilmington Manufacturing 100.00
NexTraq LLC Wilmington Commercial 100.00
Mexico
Michelin Mexico Holding, S.A. de C.V. Queretaro Financial 100.00
Industrias Michelin, S.A. de C.V. Queretaro Manufacturing & commercial 100.00

% of
SOUTH AMERICA
Argentina
Michelin Argentina Sociedad Anónima, Industrial, Comercial y Financiera Buenos Aires Commercial 100.00
Brazil
Sociedade Michelin de Participações, Indústria e Comércio Ltda. Rio de Janeiro Manufacturing & commercial 100.00
Michelin Espírito Santo – Comércio, Importações e Exportações Ltda. Vila Velha Commercial 100.00
Plantações E. Michelin Ltda. Rio de Janeiro Miscellaneous 100.00
Sascar Tecnologia E Segurança Automotiva S.A. Barueri Miscellaneous 100.00
Industrial Levorin S.A. Guarulhos Manufacturing & commercial 100.00
Neotec Indústria e Comércio de Pneus Ltda. Manaus Manufacturing & commercial 100.00
LevNeo Participações Ltda. Guarulhos Miscellaneous 100.00
Chile
Michelin Chile Ltda. Santiago Commercial 100.00
Colombia
Industria Colombiana de Llantas S.A. Bogotá Commercial 99.96
Peru
Michelin del Perú S.A. Lima Commercial 100.00
SOUTHEAST ASIA/AUSTRALIA
Australia
Michelin Australia Pty Ltd Melbourne Commercial 100.00
Indonesia
PT Michelin Indonesia Jakarta Commercial 100.00
PT Synthetic Rubber Indonesia Jakarta Manufacturing 55.00
Malaysia
Michelin Malaysia Sdn. Bhd. Petaling Jaya Commercial 100.00
Singapore
Michelin Asia (Singapore) Co. Pte. Ltd. Singapore Commercial 100.00
Michelin Asia-Pacific Pte Ltd Singapore Miscellaneous 100.00
Société des Matières Premières Tropicales Pte. Ltd. Singapore Miscellaneous 100.00
Thailand
Michelin Siam Company Limited Bangkok Manufacturing & commercial 100.00
Michelin Thai Holding Co., Ltd. Bangkok Financial 100.00
Vietnam
Michelin Vietnam Company Limited Ho Chi Minh City Commercial 100.00
CHINA
China
Michelin Shenyang Tire Co., Ltd. Shenyang Manufacturing 100.00
Shanghai Michelin Tire Co., Ltd. Shanghai Manufacturing 100.00
Michelin Asia (Hong Kong) Limited Hong Kong Commercial 100.00
Michelin (China) Investment Co., Ltd. Shanghai Commercial 100.00
Taiwan
Michelin Tire Taiwan Co., Ltd. Taipei Commercial 100.00
EASTERN EUROPE
Russia
Michelin Russian Tyre Manufacturing Company LLC Davydovo Manufacturing & commercial 100.00
Ukraine
Michelin Ukraine LLC Kiev Commercial 100.00
JAPAN/KOREA
Japan
Nihon Michelin Tire Co., Ltd. Tokyo Commercial 100.00
South Korea
Michelin Korea Co., Ltd. Seoul Commercial 100.00

NOTE 37 STATUTORY AUDITORS’ FEES
Deloitte PricewaterhouseCoopers
Statutory auditor Statutory auditor
(Deloitte & Associés) Network (PricewaterhouseCoopers Audit) Network
(in € thousand) Amount % Amount % Amount % Amount %
Statutory audit (including
consolidated financial
statements and half year review)
Public Interest Entity 517 43% - - 605 43% - -
Controlled entities 685 57% 1,640 100% 815 57% 3,564 100%
Sub-total 1,202 100% 1,640 100% 1,420 100% 3,564 100%
Non Audit Services
Public Interest Entity(1) 20 83% - - 36 29% - -
Controlled entities 4 17% 821 100% 87 71% 2,704 100%
Sub-total 24 100% 821 100% 123 100% 2,704 100%
TOTAL 1,226 2,461 1,543 6,268
(1) These services are relating mainly to a certificate from the Statutory Auditors on agreed-upon procedures.

Design and production:
Tel.: +33 (0)1 55 32 29 74
compagnie générale
des établissements MICHELIN
+ 33 (0) 4 73 32 20 00 – 12, cours Sablon
63000 Clermont-Ferrand – France
www.michelin.com
INVESTOR RELATIONS
Valérie Magloire, Edouard de Peufeilhoux,
Matthieu Dewavrin, Humbert de Feydeau
+ 33 (0) 1 78 76 45 36 – 27, cours de l’Île Seguin
92100 Boulogne-Billancourt – France
investor-relations@michelin.com
INDIVIDUAL SHAREHOLDER RELATIONS
Jacques Engasser
+ 33 (0) 4 73 98 59 08 – 12, cours Sablon
63040 Clermont-Ferrand Cedex 9 – France
Toll-free calls in France: 0 800 000 222
actionnaires-individuels@michelin.com
COMMUNICATION
AND BRANDS DEPARTMENT
MEDIA RELATIONS: Corinne Meutey
+ 33 (0) 1 45 66 22 22 – 27, cours de l’Île Seguin
92100 Boulogne-Billancourt – France

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2017

3 REPORT OF THE MANAGING PARTNERS 70

4 FINANCIAL HIGHLIGHTS 105

5 CONSOLIDATED FINANCIAL STATEMENTS

MICHELIN – 2017 RESULTS 1

2017 NET SALES AND RESULTS 7

COMPAGNIE GÉNÉRALE DES ÉTABLISSEMENTS MICHELIN 9

MICHELIN – 2017 RESULTS 3

4 MICHELIN – 2017 RESULTS

PASSENGER CAR AND LIGHT TRUCK TIRES

MICHELIN – 2017 RESULTS 5

Original equipment Replacement

TRUCK TIRES (RADIAL AND BIAS)

6 MICHELIN – 2017 RESULTS

2017 NET SALES AND RESULTS

adjustments following application of raw materials indexation

MICHELIN – 2017 RESULTS 7

RESULTS NET FINANCIAL POSITION

Operating income from Operating margin on

8 MICHELIN – 2017 RESULTS

MICHELIN – 2017 RESULTS 9

PRESENTATION AND CONFERENCE CALL

Investor Relations Media Relations

10 MICHELIN – 2017 RESULTS

2017: GROWTH IN OPERATING INCOME FROM RECURRING

2018 GUIDANCE IN LINE WITH 2020 OBJECTIVES 38

MICHELIN – 2017 RESULTS 11

12 MICHELIN – 2017 RESULTS

H1 2017 H2 2017 2017 actual 2016

Volumes +3.6% +1.6% +2.6% +2.1%

Structural FCF N/A N/A €1,509m €961m

2 2017 ANNUAL RESULTS – February 12, 2018

MICHELIN – 2017 RESULTS

Strong €1.5bn in structural FCF and €145m increase

MICHELIN – 2017 RESULTS

*from recurring activities

3 2017 ANNUAL RESULTS – February 12, 2018

2015 2016 2017

Acquisitions(2) (312) (16) (476)

WCR impact of raw materials costs(3) 132 79 (178)

4 2017 ANNUAL RESULTS – February 12, 2018

MICHELIN – 2017 RESULTS

Still strong price effect in Q4, as announced, led by RT

MICHELIN – 2017 RESULTS

2013 2014 2015 2016 Q1 17 Q2 17 Q3 17 Q4 17

5 2017 ANNUAL RESULTS – February 12, 2018

2015 2016 2017

Worldwide market MICHELIN

6 2017 ANNUAL RESULTS – February 12, 2018

MICHELIN – 2017 RESULTS

Partnerships and acquisitions to support our growth

MICHELIN – 2017 RESULTS

objectives +20% x2 x3 leadership

7 2017 ANNUAL RESULTS – February 12, 2018

Per share data (in €)

2010 2011 2012 2013 2014 2015 2016 2017

2013-2020 payout ratio: ≥ 35 % of consolidated net income

*subject to shareholder approval at the Annual Meeting on May 18, 2018

8 2017 ANNUAL RESULTS – February 12, 2018

3 REPORT OF THE MANAGING PARTNERS 70

4 FINANCIAL HIGHLIGHTS 105

2017 NET SALES AND RESULTS 7

COMPAGNIE GÉNÉRALE DES ÉTABLISSEMENTS MICHELIN 9

2018 GUIDANCE IN LINE WITH 2020 OBJECTIVES 38