Pirelli & C. S.p.a. · MIL:PIRC
Pirelli & C — H1 2009 Earnings Presentation
58 slides from Pirelli & C's earnings presentation, Jul 29, 2009
Slide 1: Pirelli Group 1H'09 Financial Results
Rew MILAN —- JULY 29, 2009 PIRELLI GROUP 1H’09 FINANCIAL RESULTS
Slide 2: Disclaimer
Disclaimer This presentation contains statements that constitute forward-looking statements and does not constitute an offer or solicitation for the sale, purchase or acquisition of securities of any of the companies mentioned and is directed to professionals of the financial community. These statem
Slide 3: Agenda
Agenda Pirelli Group 1H’09 Key Messages Pirelli Group Financial Review Pirelli Tyre Results Eco Technology Results Pirelli Real Estate Results Appendix 2
Slide 4: Group 1H'09 Key Messages
Pirelli Group 1H’09 Key Messages Our target markets are still “difficult”, there are modest signs of recovery, while the drivers Pirelli formulated in its ’09-‘11 Industrial Plan are realistic The Group is more competitive also thanks to the powerful restructuring program started in 2008. Approximat
Slide 5: Group results 1H'09 vs 2009 targets
Pirelli Group results 1H’09 vs 2009 targets €/bln 2Q09 1H09 2009 Targets 2009 revised (Feb.’09) Target (July ’09) Group revenues 2.1 ~4.3 - EBIT % 4.7% 4.5-5.0% - After continuous restructuring NFP 1.1 1.0 ~ 0.8 (*) Green revenues and Capex information will be completed at year end 4
Slide 6: Agenda
Agenda Pirelli Group 1H’09 Key Messages Pirelli Group Financial Review Pirelli Tyre Results Pirelli Eco Technology Results Pirelli Real Estate Results Appendix 5
Slide 7: Group Key Financial Results
Pirelli Group Key Financial Results €/mln 1H’09 YoY % 2Q‘09 YoY % 2Q‘09 Results Drivers Revenues (organic*) 2,137.6 -11.1% 1,094.6 -11.7% Market conditions still bearish for both EBITDA before Restructuring Costs 226.1 -26.1% 124.4 -6.9% Tyre and Real Estate Businesses Margin 10.6% -1.9pp 11.4% +0.8
Slide 8: Group: EBIT trend
Pirelli Group: EBIT trend (post restructuring costs and results from equity participations) €/mln 49.6 24.9 Δ Organic EBIT: -10.2 2Q trend Listed company participations change in value 98.0 (13.2) Results from PRE Equity part (26.2) Dividends (13.0) Others (9.2) (2.7) (0.9) (1.3) (1.9) (3.4) (1.3) E
Slide 9: Group: attributable net income 1H'09 vs 1H'08
Pirelli Group: attributable net income 1H’09 vs 1H’08 45.4 6.3 Δ organic EBIT: (79.8) Δ rest. costs: 0 Δ Results from equity participations: 66.9 7.7 19.2 (36.2) (12.9) (16.9) 1H08 ΔEBIT post Δ financial Δ tax charges Δ discontinued Δ minorities 1H09 restruct. & results charges operations from equit
Slide 10: Group: 1H'09 net financial position
Pirelli Group: 1H’09 net financial position €/mln EBIT: 46.8 EBIT: 54.3 Dep/Am: 51.4 Dep/Am: 52.4 Capex: (42.9) Capex: (37.4) Δ NWC & others: (258.7) Δ NWC & others: 96.0 46.5 45.8 (6.6) 1,278.9 203.4 (37.9) (165.3) 38.4 (56.6) 1107.6 1,027.7 25.1 (12.9) 2008 Operating Fin. Inc./Expen. Fin. Invest.
Slide 11: Group: Debt Structure as of June 30, 2009
Pirelli Group: Debt Structure as of June 30, 2009 Net Financial Position Gross Debt Maturity €/mln 1,005 2,050 942 756 Committed Line 1,155 Drawdown 1,108 167 249 69 325 98 210 895 553 115 Other Borrowing 120 433 Gross Fin. Net Fin. Debt Assets * Position Gross Debt maturity as of June 30, 2009 27%
Slide 12: Strong improvement in Group NFP after Pirelli Re Capital Increase
Strong improvement in Group NFP after the complete success of Pirelli Re Capital Increase The complete success of Pirelli RE Capital Increase Shares (mln) €/mln Newly issued shares 798.6 399.3 (gross of closing costs) o/w Pirelli subscription 463.8 231.9 Retail & Institutional investors 334.8 167.4
Slide 13: 2012 Group Gross Debt maturity will improve after Pirelli RE Club deal
2012 Group Gross Debt maturity will improve after Pirelli RE 320€/mln “Club deal” An agreement was reached with a pool of 8 leading financial institutions to set up a 320 €/mln credit line maturing in July 2012 With this deal, Pirelli RE will have 470 €/mln committed bank lines with a residual avera
Slide 14: Agenda
Agenda Pirelli Group 1H’09 Key Messages Pirelli Group Financial Review Pirelli Tyre Results Pirelli Eco Technology Results Pirelli Real Estate Results Appendix 13
Slide 15: 2Q'09 Pirelli Tyre performance: Key Messages
2Q’09 Pirelli Tyre performance: Key Messages Top line QoQ improvement in a still recessive market environment: +6.7% 2Q revenues vs. 1Q09 Price/mix holding well in both Industrial and Commercial Segments Market share increase in all major markets Profitability trend rebound in 2Q09 in both Consumer
Slide 16: Tyre quarterly performance
Pirelli Tyre quarterly performance €/mln, Percent Profit & Loss 1Q’09 YoY% 2Q ‘09 YoY% 1H ‘09 YoY% Revenues 926.9 -13.9% 989.0 -9.2% 1,915.9 -11.6% EBITDA (before 107.8 -28.6% 133.0 -1.8% 240.8 restructuring costs) -16.0% margin 11.6% -2.4 p.p. 13.4% +1.0 p.p. 12.6% -0.6 p.p. EBIT (before 61.0 -40.7
Slide 17: Tyre operating performance
Pirelli Tyre operating performance €/mln +35.6 +13.8 +4.8 +1.4 88.2 85.5 Nothwistanding raw 2Q trend materials cost reduction (12.2) in 2Q’09, the positive (46.1) Price/mix variation is Raw materials: +18.0 maintained year over Labour / energy / other: (4.2) year EBIT 2Q08 Price Volume Cost of Effic
Slide 18: Tyre 2009 Cost reduction program update
Pirelli Tyre 2009 Cost reduction program update 1H’09 COST REDUCTION PROGRAMS ACHIEVEMENTS 15% rightsizing in high-cost 82% of the target Labour countries; bonus and pay freeze for (over 1,200 headcount) management and staff in 2009 360° purchasing contracts renegotiation -10% Q0Q Raw 45% of 200 € m
Slide 19: Tyre NFP evolution
Pirelli Tyre NFP evolution €/mln EBIT (beforet restr. costs): 86 Invest. & Depreciation: 21 2Q’09 Δ NWC: 90 Financial / fiscal charges: (40) EBIT (before restr. costs): 61 Other variations: (4) Invest. & Depreciation: 9 Exchange rate (23) Δ NWC: (249) Financial / fiscal charges: (46) 8 Other variati
Slide 20: Consumer Business: market trends in 1H'09
Consumer Business: market trends in 1H‘09 Car tyre shipments, % (yoy) Market trends Q1’09 * Q2‘09 1H‘09 OE Europe -34% -19% -27% Replacement -5% -6% -8% North America OE -49% -50% -49% Replacement -13% -10% -11% OE Mercosur -18% -10% -14% +2% Replacement -4% -1% *Updated figures Sources: main extern
Slide 21: Consumer Business: Pirelli economics in 1H'09
Consumer Business: Pirelli economics in 1H‘09 €/mln, % Profit & Loss 1Q’09 Δ% 2Q ‘09 Δ% 1H ‘09 Δ% Price/mix still holding well Revenues 670.5 -10.4% 701.5 -6.0% 1,372.0 -8.2% Pirelli volumes better than EBITDA (before 77.4 -28.8% market trends in all regions restructuring costs) 90.4 +1.1% 167.8 -15
Slide 22: Industrial Business: market trends in 1H'09
Industrial Business: market trends in 1H‘09 Car tyre shipments, % (yoy) Market trends Q1’09 * Q2‘09 1H‘09 OE Europe -62% -72% -67% Replacement -33% -25% -29% OE Mercosur -26% -29% -27% Replacement -22% -17% -19% *Updated figures Sources: main external data provider for each country and Pirelli estim
Slide 23: Industrial Business: Pirelli economics in 1H'09
Industrial Business: Pirelli economics in 1H‘09 €/mln, Percent Profit & Loss 1Q’09 Δ% 2Q‘09 Δ% 1H‘09 Δ% Price/Mix holding well Revenues 256.4 -22.0% 287.5 -16.3% 543.9 -19.1% Increasing market share in all regions EBITDA (before 30.4 -28.1% restructuring costs) 42.6 -7.6% 73.0 -17.4% Double digit ma
Slide 24: Recent Pirelli Tyre Highlights
Recent Pirelli Tyre Highlights: Pirelli Tyre introduces Cinturato P7, the first green-performance tyre for medium and April 6, 2009 high-powered cars Pirelli Tyre introduces the R:01 Series. The new regional tyre for medium heavy trucks May 20, 2009 offers higher mileage, reduced consumption, better
Slide 25: Agenda
Agenda Pirelli Group 1H’09 Key Messages Pirelli Group Financial Review Pirelli Tyre Results Pirelli Eco Technology Results Pirelli Real Estate Results Appendix 24
Slide 26: Eco Technology: Key market factors and accomplishments
Pirelli Eco Technology: Key market factors and accomplishments Key Market Factors Pirelli Eco Technology accomplishments Demand slow down in existing Diesel Particulate Pirelli technology “proof of principle” achieved in Filter markets due to economical downturn all Diesel Particulate Filters market
Slide 27: Eco Technology: Expected scenario 2H'09
Pirelli Eco Technology: Expected scenario 2H’09 Market Evolution Pirelli Eco Technology Plan New government programmes aiming at improving Italy: opportunity to exploit as “first mover” the air quality to be rolled out in Autumn 2009: relevant demand growth expected for 4Q’09 Italy: stricter traffic
Slide 28: Eco Technology: 1H'09 Key Financial Results
Pirelli Eco Technology: 1H’09 Key Financial Results €/mln 1H‘09 1H‘08 YoY Volumes Filters 1,948 396 +391.9% Gecam (l/mln) 37.4 43.8 -14.6% Revenues 28.3 33.4 -15.3% Negative effect from: Filters 8,2 1.7 -Oil price: -6.2 €/mln; Gecam 20,1 31,7 - EU Transport Business contraction: -6.5 l/mln Ebitda (4
Slide 29: Agenda
Agenda Pirelli Group 1H’09 Key Messages Pirelli Group Financial Review Pirelli Tyre Results Pirelli Eco Technology Results Pirelli Real Estate Results Appendix 28
Slide 30: RE Key Messages
Pirelli RE Key Messages The complete success of the capital increase as well as the extension of the average corporate debt maturity have significantly strenghtened the company and its financial structure allowing it to implement the Business Plan The Real Estate market is still critical and access
Slide 31: Consolidated Profit and Loss
Consolidated Profit and Loss €/mln 1H’09 1Q’09 1H’08 Revenues 115.8 53.8 192.8 of whch services 94.7 47.7 115.0 of which other revenues 21.1 6.1 77.8 EBIT before restructuring costs (2.0) (2.2) 20.3 Income from Equity Participations (20.9) (12.5) 17.4 A EBIT inl. Inc. From Equity Part. Before Restru
Slide 32: Writedowns and Revaluations
Writedowns and Revaluations €/mln Total Italy Pirelli RE 20.5 1.8 45.5 (18.7) (4.8) Germany & Poland 25.0 (50.3) (6.6) (31.6) Writedowns Of which Highstreet (28.1) Rivaluations Based on independent appraisals, on a like for like basis, market value of real estate participated assets were written dow
Slide 33: Update on Headcount and on Cost savings
Update on Headcount and on Cost savings (€/mln) 1,110 Headcount Reduction from 2,956 in 220 NPL reduction 1,473 2007 to 1,267 as of June. 1,267 New targets confirmed 890(*) 2008 A 1H’09 2009 E (*) Not Including possible outsourcing for 160 FTE 29 € mln savings as of 2009 (of which approx. 50% relate
Slide 34: Details on Service Platform & on Vehicles/Funds
Details on Service Platform & on Vehicles /Funds (€/mln) Service Platform & Holding 1H’09 1Q’09 1H’08 Net of one-off Consolidated Revenues 94.7 47.7 115.0 1.6 Other Revenues (*) 2.0 0.0 17.6 -17.0 Berenice Fee Total Revenues 96.7 47.7 132.6 -15.4 EBIT (**) (3.2) (1.3) 1.6 Vehicles & Funds 1H’09 1Q’0
Slide 35: Economic Results – Italy
Economic Results – Italy (€/mln) Service Platform 1H’09 1Q’09 1H’08 Net of one-off Consolidated Revenues 50.1 26.2 59.5 16.9 Other Revenues (*) 0.0 0.0 17.0 -17.0 Berenice Fee Total Revenues 50.1 26.2 76.5 -0.1 EBIT (**) 6.7 4.9 16.9 Vehicles & Funds 1H’09 1Q’09 1H’08 Vehicles & funds (14.6) (10.7)
Slide 36: Economic Results – Germany
Economic Results – Germany (€/mln) Service Platform 1H’09 1Q’09 1H’08 Consolidated Revenues 28.5 13.5 30.2 Other Revenues (*) 0.0 0.0 0.4 Total Revenues 28.5 13.5 30.6 EBIT (**) 2.7 1.4 (2.3) Vehicles & Funds 1H’09 1Q’09 1H’08 Vehicles & funds (8.8) (6.1) 2.0 Interests Income from Participations 7.9
Slide 37: Economic Results – Poland
Economic Results – Poland (€/mln) Service Platform 1H’09 1Q’09 1H’08 Consolidated Revenues 3.1 2.1 4.5 Total Revenues 3.1 2.1 4.5 EBIT (**) (0.1) 0.4 0.6 Vehicles & Funds 1H’09 1Q’09 1H’08 Vehicles & funds 0.6 0.2 18.2 Interests Income from Participations 1.1 0.5 0.5 EBIT(**) 1.7 0.7 18.7 (***) TOTA
Slide 38: Economic Results – NPLs
Economic Results – NPLs (€/mln) Service Platform 1H’09 1Q’09 1H’08 Consolidated Revenues 8.7 3.6 18.0 Other Revenues (*) 2.0 0.0 0.0 Total Revenues 10.7 3.6 18.0 EBIT (**) (2.4) (2.9) 2.3 Vehicles & Funds 1H’09 1Q’09 1H’08 Vehicles & funds 3.0 3.2 11.8 Interests Income from Participations 0.4 1.7 4.
Slide 39: Evolution of Real Estate sales and NPL recoveries
Evolution of Real Estate sales and NPL recoveries €/mln REAL ESTATE SALES NPL RECOVERIES 100% Pro quota 100% Pro quota 207.7 207.7 527.6 527.6 527.6 235.0 351.9 207.7 116.6 175.8 67.4 54.3 1H’09 1H’08 1H’09 1H’08 1H’09 1H’08 1H’09 1H’08 Margin on sales is approx. 15% as of June 2009 Confirmed 1 €/bl
Slide 40: Net Asset Value as of June 2009
Net Asset Value as of June 2009 Real Estate NAV at 100% (€/bn) Real Estate NAV Pro quota (€/bn) Partecipated AUM RE Unrealized Capital Gain 0.2 14.7 3.9 13.9 3.7 10.3 2.7 4.4 1.2 1.2 1.1 0.4 SHL SHL 11.4 3.3 3.1 0.8 0.8 Book Value Mkt Value Net Debt NAV Book Value Mkt Value Net Debt NAV NAV 06/2009
Slide 41: Agenda
Agenda Pirelli Group 1H’09 Key Messages Pirelli Group Financial Review Pirelli Tyre Results Pirelli Eco Technology Results Pirelli Real Estate Results Appendix 40
Slide 42: Group – 1H'09 Results
Pirelli Group – 1H’09 Results Profit & Loss and Net Financial Position by Business Unit Pirelli Pirelli Tyre Eco Technology Pirelli Real Estate Broadband Access Others Pirelli & C. Cons. €/mln 1H’09 1H’08 1H’09 1H’08 1H’09 1H’08 1H’09 1H’08 1H’09 1H’08 1H’09 1H’08 Sales 1,915.9 2,166.3 28.3 33.4 115
Slide 43: Group – 2Q'09 Results
Pirelli Group – 2Q’09 Results Profit & Loss and Net Financial Position by Business Unit Pirelli Pirelli Tyre Eco Technology Pirelli Real Estate Broadband Access Others Pirelli & C. Cons. €/mln 2Q’09 2Q’08 2Q’09 2Q’08 2Q’09 2Q’08 2Q’09 2Q’08 2Q’09 2Q’08 2Q’09 2Q’08 Sales 989.0 1,089.4 14.0 16.8 62.0
Slide 44: Group Balance Sheet
Pirelli Group Balance Sheet €/mln % Net Invested Capital 1H’09 2008 Actual 30.06.2009 31.12.2008 P.Tyre 66.4% 62.7% Fixed Assets 3,581.9 3,665.4 P.Eco Tech. 1.0% 0.8% Net Working Capital 627.3 418.4 P.Real Est. 18.3% 18.9% Net Invested Capital 4,209.2 4,083.8 PBS 0.0% 0.4% Altro 14.3% 17.2% Equity 2
Slide 45: Group Cash Flow
Pirelli Group Cash Flow €/mln 1Q’09 2Q’09 1H’09 1H’08 Operating profit (EBIT) 46.8 54.3 101.1 180.9 Depreciation 51.4 52.4 103.8 103.7 Net investments (42.9) (37.4) (80.3) (128.1) Working capital/other variations (258.7) 96.0 (162.7) (263.2) FREE CASH FLOW (203.4) 165.3 (38.1) (106.7) Financial inco
Slide 46: Group: Net financial position 1H'09 by Business
Pirelli Group: Net financial position 1H’09 by Business €/mln TYRE PRE Other Corporate Pirelli Group Business Gross Debt 1,726 899 50 394 2,050 to Corporate 502 434 48 Financial receivables (86) (503) (37) (991) (597) Cash and cash equivalents (173) (59) (4) (109) (345) Net Financial Position 1,467
Slide 47: 1H'09 Pirelli Tyre Mix
1H’09 Pirelli Tyre Mix Sales by segment Sales by region Europe Car Latin 44% Moto 10% America 62% 32% Steelcord & others Truck 2% MEA 10% Asia North Pacific 26% America 6% 8% Raw materials mix Sales by channel Synt. Rubber 24% Carbon Replacement Natural 81% black Rubber 12% 23% Chemicals 17% Steelco
Slide 48: 1H'09 Pirelli Tyre People
1H’09 Pirelli Tyre People Headcount Headcount by region 28.601 North America Europe 27.241 1% 39% Latin Asia America Pacific MEA 42% Dec ‘08 Jun ‘09 7% 11% Headcount by contract Headcount by cluster Blue Collar workers Permanent 81% 92% Staff Temps & 18% Agency Management 8% 1% 47
Slide 49: 1H'09 Pirelli Tyre factories
1H’09 Pirelli Tyre factories Italy U.K. Germany Bollate (Mi) Car Burton-on-trent Car Carlisle Settimo Torinese Car Car Breuberg Car/Motorcycle Carlisle Car Settimo Torinese Truck Merzig Steelcord Figline Valdarno Steelcord Spain Turkey Manresa Car Izmit Car/Truck Izmit Steelcord U.S.A. Romania Rome
Slide 50: Asset allocation by Products / Countries (Market Value)
Asset allocation by Products / Countries (Market Value) (€/mln) Market Value June 2009: 16.8 € bln Market Value Dic. 2008: 17.3 € bln NPL 1.7 NPL 1.9 Real Estate 15.1 Real Estate 15.4 Of which partecipated 15.0 Of which partecipated 14.7 o/w Real Estate o/w Real Estate Poland 1% Poland 1% Germany 49
Slide 51: AUM participated Real Estate – 100%
AUM participated Real Estate – 100% (€/000) Jun-09 PRE Quota Passing Rent Passing Yield Vacancy Book Value Market Value Net Financial Position Of which Net Debt Commercial Core Italy 90,758 5.7% 9.7% 1,592,340 1,722,030 1,132,574 1,098,676 Tecla Fondo Uffici 45.0% 40,499 5.6% 8.6% 725,280 725,280 50
Slide 52: AUM participated Real Estate – pro-quota
AUM participated Real Estate – pro-quota (€/000) Jun-09 Passing Rent pro-quota Passing Yield Vacancy Book Value pro-quota Market Value pro-quota Net Financial Position Of which Net Debt Proquota Commercial Core Italy 30,602 5.6% 9.4% 549,638 576,245 410,169 389,407 Tecla Fondo Uffici 18,225 5.6% 8.6
Slide 53: Net invested Capital
Net invested Capital €/bln 1.2 Italy 1.1 1.1 0.8 Market Value Participated Real Estate Asset Investment under Management Italy Real Estate 0.6 Germany Investment & Poland 7.6 Italy 7.1 0.8 Investment Germany Germany 0.2 0.3 Services Ita 0.2 Services NPL 0.3 0.1 Services Ger 0.1 Total NIC NIC excludi
Slide 54: Consolidated Balance Sheet
Consolidated Balance Sheet €/mln 2009 Post 2008 actual 1H’09 1H’08 cap. increase Fixed Assets 583.0 589.1 795.3 - of which participations 406.7 405.7 608.5 - of which goodwill 137.0 137.8 141.7 Net Working Capital 122.4 133.1 183.1 Net Invested Capital 705.3 722.2 978.4 Net Equity 308.2 707.5 366.4
Slide 55: Consolidated Net Cash Flow
Consolidated Net Cash Flow €/mln 1H’09 1H’08 Ebit before restructuring costs (2.0) 20.3 Depreciation 3.6 4.3 Change in investments (37.5) 9.3 Change in other fixed assets (0.7) (15.0) Change in NWC, Funds and other 15.7 (22.7) Free Chas Flow (20.8) (3.8) Impact from Facility Mgm disposal 0.0 102.4 R
Slide 56: Maturity
Financial situation Vehicles and partecipated Funds 100% 13.0 3.7 Euro / bn 0.5 0.5 2.7 SPVs DEBT Pro-Quota Shareholders’ NPL RE Assets PRE Loans Ero B o M?? 2.685 133 248 MATURITY Euro / mln 771 High Street 1,533 415 RE Assets 2009 2010 2011 Ahed Banks Debt characteristics: Average maturities close
Slide 57: NFP evolution excluding shareholders' loans
NFP evolution excluding shareholders’ loans (€/mln) 23.6 898.4 27.5 (89.2) 16.0 861.8 (11.2) 828.5 429.2 NPL ( 20% NFP NFP Equity PFN Dicembre 2008 sales of C.S Working PFN NFP June 2009 December injections Investments Layoff and Capital & Mach June 2009 (Post Cap. 2008 to veichles refinincing.to Ot
Slide 58: Broadband Solutions
Pirelli Broadband Solutions €/mln 2Q‘09 YoY 1H’09 YoY Volumes 563 -61.5% 1,301 29.6% Set Top Boxes 57 -19.7% 162 26.6% Revenues 28.8 -17.9% 72.8 14.8% Ebit 0.2 2.7 % on sales 0.7% 3.7% Net income 1.3 4.1 Net Financial Position (32.3) (31.9) 57