Pirelli & C. S.p.a. · MIL:PIRC
Pirelli & C — H1 2019 Earnings Presentation
29 slides from Pirelli & C's earnings presentation, Aug 1, 2019
Slide 1: Pirelli, Global High Value – 1H 2019 Results
PIRELLI, GLOBAL HIGH VALUE 1 H 2 0 1 9 R E S U L T S – A U G U S T 1st , 2 0 1 9 1H 2019 RESULTS PIRELLI, GLOBAL HIGH VALUE 1 August 2019
Slide 2: Disclaimer
DISCLAIMER In General. This disclaimer applies to this document and any oral comments of any person presenting it. This document, taken together with any such oral comments, is referred to herein as the “Presentation”. This document has been prepared by Pirelli & C. S.p.A. (“Pirelli” or the “Company
Slide 3: Agenda
AGENDA 1H 2019 RESULTS HIGHLIGHTS AND FY 2019 GUIDANCE REVIEW OF 1H 2019 RESULTS AND OPERATIONAL TARGETS APPENDIX 1H 2019 RESULTS PIRELLI, GLOBAL HIGH VALUE 2 1 August 2019
Slide 4: Key Messages
KEY MESSAGES > Market environment deteriorating in 2Q with the Car industry experiencing a more prolonged production weakness and new technological and regulatory challenges. > Pirelli’s exposure to High Value and increased cost-cutting measures partially offset the impact of the current challenging
Slide 5: 1H 2019 Results Highlights
1H 2019 RESULTS HIGHLIGHTS € million NET SALES EBIT ADJUSTED.1 ∆ YoY +0.9% organic -2.1% 2,630 2,655 +1.4% 450 441 Standard -4.2% High Value 64.0% +6.2% 67.3% +4.5% 1H 2018 1H 2019 1H 2018 1H 2019 Margin 17.1% 16.6% NET INCOME before discontinued operations NET FINANCIAL POSITION IFRS 162 impact +69
Slide 6: FY 2019 Outlook Update (Aug '19)
FY 2019 OUTLOOK UPDATE (AUG ’19) 2019 TARGETS 2019 OPERATIONAL DRIVERS 2018A 2019E 2019E 2019E 2019E (guid. May 2019) (guid. Aug 2019) (guid. May 2019) (guid. Aug 2019) Net Sales €5.2 b +3% ÷ +4% +1.5% ÷ +2.5% Volumes ~ -1.0% -2.5% ÷ -2% High Value weight ~ 64% ~ 67% confirmed ▬ o/w High Value >+9%
Slide 7: Agenda
AGENDA 1H 2019 RESULTS HIGHLIGHTS AND FY 2019 GUIDANCE REVIEW OF 1H 2019 RESULTS AND OPERATIONAL TARGETS APPENDIX 1H 2019 RESULTS PIRELLI, GLOBAL HIGH VALUE 6 1 August 2019
Slide 8: 1H 2019 Net Sales Bridge
1H 2019 NET SALES BRIDGE o/w Organic € million -5.0% +6.4% -0.5% +0.9% +1.4% Group Volumes 66 2,655 2,630 -12 -198 168 -132 +3.9% -13.9% O.E. -3.4% Repl. +13.1% +5.5% Net Sales H.V. Volumes Std. Volumes Price/Mix FX Net Sales 1H’18 1H’19 High Value Standard o/w Organic Car ≥18” +3.4% 0.0% 2Q ‘19 O.E
Slide 9: 1H / 2Q 2019 Adjusted EBIT Performance
1H / 2Q 2019 ADJUSTED EBIT PERFORMANCE € million internal levers ∑ +89 external levers ∑ -98 1 7 36 (59) 450 (35) 441 101 ▬ Costs cutting +30 (5) (57) 1H ▬ D&A / other2 -23 2018 Volume Price/mix Efficiencies Start-up D&A / Other2 Raw Mat. Other FX 2019 costs1 input costs margin 17.1% 16.6% internal
Slide 10: 1H 2019 Performance by High Value Regions
1H 2019 PERFORMANCE BY HIGH VALUE REGIONS € million SALES Δ org. adj. EBIT 1H’18 1H’19 YoY % growth margin1 1,213 1,167 -3.8% -3.2% -12.7% Mid-teens HIGH VALUE REGIONS EMEA SALES +0.6% (decreasing YoY) 1.6% 46% 44% 2,138 2,172 Standard2 487 544 +11.7% +4.6% NORTH Twenties -8.4% AMERICA High +7.2% (i
Slide 11: 1H 2019 Performance by Standard Regions
1H 2019 PERFORMANCE BY STANDARD REGIONS € million SALES Δ org. adj. EBIT 1H’18 1H’19 YoY % growth margin1 138 137 STANDARD REGIONS -0.2% +2.5% SALES Mid-teens RUSSIA -6.5% & NORDICS +34.1% (improving YoY) -2.0% 5% 5% 493 482 Standard2 355 -2.7% +8.6% 345 High High-single Value SOUTH +5.2% digit +30.
Slide 12: 2019 ≥18” Market Outlook
2019 ≥18” MARKET OUTLOOK O.E. + REPL. ≥18” CAR TYRE MARKET 2019E million tyres ~+8 p.p. vs. ≤17” (2019E at ~-2%) ~+6% from +7% prev. ~256 Replacement 241 ▬ Maintains double digit growth, backed by recent years’ high rim additions to car parc ▬ Homogenous growth in all High Value Regions, ~+10% Repla
Slide 13: Cost Cutting Further Enhanced to Limit External Headwind
COST CUTTING FUTHER ENHANCED TO LIMIT EXTERNAL HEADWIND € million ACTIONS 70 Outsourcing rationalization ▬ Consultancies and external services (e.g. logistics and freight costs) across regions 50 ▬ Standard Regions: reducing Marketing Budget Marketing & Adv. ▬ High Value Regions: higher use of digit
Slide 14: FY 2019 Outlook Update (Aug '19)
FY 2019 OUTLOOK UPDATE (AUG ’19) 2019 TARGETS 2019 OPERATIONAL DRIVERS 2018A 2019E 2019E 2019E 2019E (guid. May 2019) (guid. Aug 2019) (guid. May 2019) (guid. Aug 2019) Net Sales €5.2 b +3% ÷ +4% +1.5% ÷ +2.5% Volumes ~ -1.0% -2.5% ÷ -2% High Value weight ~ 64% ~ 67% confirmed ▬ o/w High Value >+9%
Slide 15: 1H 2019 Net Income Bridge
1H 2019 NET INCOME BRIDGE € million (37) 307 307 0 108 7 182 47 of which: ▬ -12 of IFRS 16 impact ▬ +100 of Brazil tax credit Net Income Δ EBIT Δ Net income / Δ Financial Δ Taxes Net Income Disc. oper. Net Income bef. disc. loss from equity income / charges bef. disc. reported oper. participations o
Slide 16: 1H 2019 Cash Flow and Net Financial Position
1H 2019 CASH FLOW AND NET FINANCIAL POSITION € million NCF bef. dividends & extr. oper.: -623 (-830 in 1H’18) 4,492 (25) 4,022 494 Op. CF: -375 (-589 in 1H’18) 17 177 110 87 76 3,180 826 ▬ Non-rec. / restr. 34 (636) ▬ IFRS 16 adj.2 25 185 ▬ FX / other 29 998 in 1H 2018 Net Cash Flow: -842 (-698 in 1
Slide 17: Current Capital Structure (June 2019)
CURRENT CAPITAL STRUCTURE (JUNE 2019) € million NET FINANCIAL POSITION GROSS DEBT MATURITY 1,802 Cash & Cash equivalents 5,469 (977) (742) can be 4,492 397 can be extended1 to 2024 (235) Loan extended1 to 2022 1,017 2,912 953 Bond Fin. receivables 757 1,718 797 & other 77 597 IFRS 16 1,270 970 598 4
Slide 18: Agenda
AGENDA 1H 2019 RESULTS HIGHLIGHTS AND FY 2019 GUIDANCE REVIEW OF 1H 2019 RESULTS AND OPERATIONAL TARGETS APPENDIX 1H 2019 RESULTS PIRELLI, GLOBAL HIGH VALUE 17 1 August 2019
Slide 19: 2Q / 1H 2019 Results Highlights
2Q / 1H 2019 RESULTS HIGHLIGHTS € million 2Q’18 2Q’19 Δ YoY 1H’18 1H’19 Δ YoY Revenues 1,320 1,341 +1.6% 2,630 2,655 +0.9% Organic Growth1 +1.6% +1.4% High Value Revenues 850 893 +5.0% 1,684 1,788 +6.2% Organic Growth1 +3.7% +4.5% % on total Revenues 64.4% 66.6% +2.2 pp 64.0% 67.3% +3.3pp Adjusted E
Slide 20: 1H 2019 Balance Sheet
1H 2019 BALANCE SHEET € million 30-Jun-2018 31-Dec-2018 30-Jun-2019 Fixed assets related to continuing operations 8,881 9,018 9,016 Rights of use (IFRS 16) n.a. n.a. 459 Inventories 983 1,129 1,165 Trade receivables 864 628 862 Trade payables (1,052) (1,605) (1,200) Operating net working capital rel
Slide 21: 1H 2019 Cash Flow
1H 2019 CASH FLOW € million 2Q ‘18 2Q ‘19 1H ‘18 1H ‘19 Adjusted EBIT1 232 221 450 441 Depreciation & Amortization (excl. PPA amortization) 68 99 138 196 Capital expenditures (94) (104) (179) (185) Change in working capital / other (69) 10 (998) (826) Operating Cash Flow 137 227 (589) (375) Financia
Slide 22: 2019E Raw Material Guidance
2019E RAW MATERIAL GUIDANCE € million 13% Natural Rubber 10% Steel Reinf. 17% Textiles Breakdown FY 2018 A 27% Synthetic Rubber Raw Materials based on 35% on Sales purch. costs 23% Chemicals 10% Carbon Black COMMODITIES - AVERAGE QUOTATION COMMODITIES: AVERAGE COST OF GOODS SOLD 2019E 2018 A 2019 E
Slide 23: 2019E Forex Guidance
2019E FOREX GUIDANCE € million 13% other 6% GBP 37% EUR 3% RUB breakdown FY 2018 A 11% BRL based on currency 12% CNY 18% USD ∆ YoY MAIN AVERAGE EXCHANGE RATES 2018 A 2019 E ∆ YoY 2019 E Aug-19 guidance vs. EUR May-19 guidance EUR / USD / 1.145 1.15 +0.4% +0.4% 1.15 USD / CNY / 6.863 6.9 +0.5% +1.0%
Slide 24: Key Car Market Trends: EMEA
KEY CAR MARKET TRENDS: EMEA Market trend 2Q’18 3Q’18 4Q’18 FY’18 1Q’19 2Q'19 1H’19 ∆% YoY 5 O.E. Total Car market -7 -3 -11 -9 -11 -10 Replacement 3 1 3 1 -2 -2 -2 4 Total (O.E.+Repl.) -1 -1 0 -4 -4 -4 ≥18” 9 4 2 New Premium & Standard ≤17" O.E. 0 -3 -4 -8 -5 -4 -5 -13 -12 -12 -12 16 15 17 12 11 10
Slide 25: Key Car Market Trends: North America
KEY CAR MARKET TRENDS: NORTH AMERICA Market trend 2Q’18 3Q’18 4Q’18 FY’18 1Q’19 2Q'19 1H’19 ∆% YoY O.E. 2 2 Total Car market -2 -1 -3 -3 -3 5 7 6 Replacement 4 4 3 1 5 6 4 Total (O.E.+Repl.) 2 3 2 0 ≥18” 9 New Premium & Standard ≤17" O.E. 5 5 6 -1 -3 -4 0 -2 16 -4 -5 -4 -4 13 -8 15 13 12 10 9 2 5 4
Slide 26: Key Car Market Trends: Asia Pacific
KEY CAR MARKET TRENDS: ASIA PACIFIC Market trend 2Q’18 3Q’18 4Q’18 FY’18 1Q’19 2Q'19 1H’19 ∆% YoY 7 O.E. Total Car market -3 -8 -1 -6 -9 -11 Replacement 2 0 1 1 2 4 3 Total (O.E.+Repl.) 4 0 -1 -3 -2 -2 -2 ≥18” 22 17 14 New Premium & Standard ≤17" 4 12 O.E. -6 -5 -1 -8 -4 -2 -11 -12 -10 12 12 10 12 9
Slide 27: Key Market Trends: Russia & Nordics / South America
KEY MARKET TRENDS: RUSSIA & NORDICS / SOUTH AMERICA Market trend 2Q’18 3Q’18 4Q’18 FY’18 1Q’19 2Q'19 1H’19 ∆% YoY 23 18 14 11 10 4 7 O.E. Russia & Nordics 13 8 7 Replacement -1 -5 -6 -8 13 10 8 Total (O.E.+Repl.) 0 -6 -3 -5 12 6 4 O.E. -1 South America -3 -5 -3 Replacement1 -4 -7 -2 -5 -10 -8 -14 To
Slide 28: Raw Material Costs Trend and Mix
RAW MATERIAL COSTS TREND AND MIX MAIN RAW MATERIALS PRICE TREND 45.0 ; -16% YoY 54.8 ; +22% YoY 71.5 ; +31% YoY 1.378 ; +1% YoY 1.651 ; +20% YoY 1.365 ; -17% YoY $ / kg Brent Oil (in $ / barrel) $ / barrel 2.50 85 2.25 Natural Rubber (in $ / kg) 75 2.00 yearly avg. ; Δ YoY 65 1.75 55 1.50 45 1.25 35
Slide 29: Manufacturing Footprint as of June 30th, 2019
MANUFACTURING FOOTPRINT AS OF JUNE 30TH, 2019 U.K. Germany Romania Russia ▬ Burton – Car ▬ Breuberg – ▬ Slatina – Car ▬ Kirov – Car U.S. ▬ Carlisle – Car Car / Moto ▬ Voronezh – Low-cost countries Car ▬ Rome – Car Mexico ▬ Silao – Car Italy ▬ Bollate – Car China ▬ Settimo – Car ▬ Yanzhou – Car / Mot