Pirelli & C. S.p.a. · MIL:PIRC
Pirelli & C — Investor Day (February 2020)
131 slides from Pirelli & C's investor day presentation, Feb 19, 2020
Slide 1: 2020-2022 Industrial Plan Vision 2025
Eis 2020 - 2022 INDUSTRIAL PLAN VISION 2025
Slide 2: Disclaimer (1/2)
DISCLAIMER (1/2) 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 “C
Slide 3: Disclaimer (2/2)
DISCLAIMER (2/2) Rounding. Due to rounding, numbers presented throughout this Presentation may not add up precisely to the totals provided and percentages may not precisely reflect the absolute figures. The data contained in this presentation are preliminary in nature and refer to the date hereof an
Slide 4: Agenda
AGENDA PIRELLI EVOLUTION TO DATE & STRATEGIC DIRECTION PIRELLI STRATEGY DEPLOYMENT: PILLAR 1 – COST COMPETITIVENESS 2020-2022 SCENARIO PIRELLI STRATEGY DEPLOYMENT: PILLAR 2 - COMMERCIAL DEVELOPMENT PIRELLI STRATEGY DEPLOYMENT: PILLAR 3 – TECHNOLOGY-BASED INNOVATION 2019 FINANCIAL REVIEW AND 2020-202
Slide 5: Pirelli Evolution to Date & Strategic Direction
PIRELLI EVOLUTION TO DATE & STRATEGIC DIRECTION 1 EVOLUTION TO DATE 2 IMPLICATIONS FROM 2020-2022 SCENARIO 3 STRATEGIC GUIDELINES & KEY 2020-2022 PROGRAMS 4 2020-2022 TARGETS AND ENABLERS 5 2025 VISION 1
Slide 6: Unique consumer positioning and business model focused on high value
PIRELLI HAS SUCCESSFULLY PURSUED A UNIQUE CONSUMER POSITIONING AND BUSINESS MODEL FOCUSED ON HIGH VALUE HIGH VALUE (H.V.) STANDARD (STD) • Premium and Prestige Car drivers fitting ≥18” • Standard presence reduction • Focus on 3 H.V. Regions: Europe, USA and APac • Trimming low profitability range CO
Slide 7: Pirelli forecasts and volume performances in ≥18" proved correct
PIRELLI FORECASTS AND VOLUME PERFORMANCES 1. Evolution to Date IN ≥18” PROVED CORRECT HIGH VALUE 2019 IPO1 2019A PREMIUM & PRESTIGE (million cars) UNFORESEEN EVENT CAR PROD. 13 12 Challenging pricing environment CAR PARC ~ 150 > 150 > on ≥18” non-specialties due to O.E. crisis ≥18” CAR TYRE MARKET (
Slide 8: Rapid decrease on ≤17" was not fully foreseen
…WHILE RAPID DECREASE ON ≤17" WAS NOT FULLY FORESEEN 1. Evolution to Date STANDARD UNFORESEEN EVENTS 2018 2019 IPO1 2019A South America economic crisis resulting in severe > Standard Tyre demand contraction since 2H (-12% Repl. STANDARD CAR PRODUCTION (million cars) Car ≤17” market in 2H2018; -5.8%
Slide 9: Gap in standard volumes explaining key variance with IPO plan
MORE GENERALLY, GAP IN STANDARD VOLUMES 1. Evolution to Date EXPLAINING KEY VARIANCE WITH IPO PLAN IPO1 VS ACTUAL € billion Δ IPO 6.4 -0.7 bln mainly Standard vol. cut (-9 million pcs) & lower Spec. ≤17” (-1 million pcs) Revenues -1.1 Price/mix (+6% CAGR vs +8% IPO, due to lower prices, driven by lo
Slide 10: Pirelli ESG leadership acknowledged by the market
PIRELLI ESG LEADERSHIP ACKNOWLEDGED BY THE MARKET 1. Evolution to Date TOP-OF-THE-INDUSTRY ESG RATINGS PIRELLI DISTINCTIVE FACTORS Comprehensive corporate positioning on key global Global Sector Leader in the S&P > sustainability challenges, beyond materiality Dow Jones Sustainability Indexes Awarde
Slide 11: Evolution to date sum up
EVOLUTION TO DATE SUM UP 1. Evolution to Date PURSUE HIGH VALUE APPROACH… …WITH A HIGHER O.E. / HOMOLOGATION SELECTIVITY KEEP PRUNING LOW RIM STANDARD ACCELERATE STRUCTURAL COST COMPETITIVENESS PROGRAM LOWER CAPEX INTENSITY IN NEW PLAN AS H.V. CAPACITY ALREADY IN PLACE LEVERAGE ON SUSTAINABLE APPROA
Slide 12: Pirelli Evolution to Date & Strategic Direction
PIRELLI EVOLUTION TO DATE & STRATEGIC DIRECTION 1 EVOLUTION TO DATE 2 IMPLICATIONS FROM 2020-2022 SCENARIO 3 STRATEGIC GUIDELINES & KEY 2020-2022 PROGRAMS 4 2020-2022 TARGETS AND ENABLERS 5 2025 VISION 8
Slide 13: No major discontinuity in high-end mobility in the next 36 months
NO MAJOR DISCONTINUITY IN «HIGH-END» MOBILITY 2. Implications from 2020-2022 scenario IN THE NEXT 36 MONTHS MILES DRIVEN GROWING CONSTANTLY PRIVATE CAR STILL DOMINANT Car Global Miles Driven (billion) Car Global Miles Driven (billion) by ownership model 12.2 +3% 11.5 12.2 10.7 15% +4% 11% 11.5 9.6 9
Slide 14: Resilient growth of high value tyre demand
RESILIENT GROWTH OF HIGH VALUE TYRE DEMAND 2. Implications from 2020-2022 scenario +5% +5% ~180 CAGR CAGR 148 156 164 16A-19A 19A-22E PRESTIGE & Other regions 5.7% ~5% PREMIUM CAR PARC 87% 87% 87% 87% (million vehicles) EU, N. America, APac 87% 5.8% ~5% 2018A 2019A 2020E 2021E 2022E +2% CAGR CAGR -2
Slide 15: High value overcapacity in 2019 will persist
HIGH VALUE OVERCAPACITY IN 2019 WILL PERSIST, 2. Implications from 2020-2022 scenario UNLESS PLAYERS POSTPONE PROGRAMS ≥18" NOMINAL CAPACITY VS. MARKET DEMAND (2018-2019-2022) - ESTIMATES ≥18” demand vs. Tier 1 + Tier 2 estimated Capacity <80% sat. <80% sat. ~90% sat. ~400 ~325 ~305 ~100 242 ~265 25
Slide 16: Technology & brand can limit price pressure in high value
TECHNOLOGY & BRAND CAN LIMIT PRICE PRESSURE 2. Implications from 2020-2022 scenario IN HIGH VALUE TECHNOLOGIES (E.G. RUNFLAT, PNCS, PREMIUM CONSUMERS MAINLY LOOK SEAL INSIDE) WITH HIGHER ADDED VALUE FOR PRODUCT PERFORMANCE, BRAND AND SAFETY € Sell-out price for tyre, same Product Line, Specialty vs.
Slide 17: 17" the only segment growing in standard
17" THE ONLY SEGMENT GROWING IN STANDARD 2. Implications from 2020-2022 scenario +3% +3% 1.235 1.269 1.305 ~1,370 CAGR CAGR 16A-19E 19A-22E Other regions SYNERGIC CAR 3.4% ~3% EU, N. America, APac 76% 76% 76% 76% 76% PARC (million vehicles) 3.5% ~2.5% 2018A 2019A 2020E 2021E 2022E -6% -2% CAGR CAGR
Slide 18: Market demand repositioning towards high end segments
MARKET DEMAND CONTINUOUSLY REPOSITIONING TOWARDS 2. Implications from 2020-2022 scenario HIGH END SEGMENTS CAGR CAGR 1,326 1,320 1,354 16A-19A 19A-22E 1,299 0.7% >0.5% ≥18” 14% 18% 19% 21% 9.3% >6% H.V. REGIONS 17” 17% 18% 18% 18% (EU, NA, APAC) 3.1% >1% (million tyres) 69% 64% 62% ≤16” -1.9% <-1% 6
Slide 19: Evolution to date and 2020-2022 scenario implications
1. Evolution 2. Implications from to Date 2020-2022 scenario EVOLUTION TO DATE 2020-2022 SCENARIO IMPLICATIONS Pursue High value approach… > RESILIENT HIGH VALUE DEMAND …With a higher O.E. / homologation selectivity > OVERCAPACITY/PRICE PRESSURE Keep pruning low-rim Standard Accelerate structural Co
Slide 20: Pirelli Evolution to Date & Strategic Direction
PIRELLI EVOLUTION TO DATE & STRATEGIC DIRECTION 1 EVOLUTION TO DATE 2 IMPLICATIONS FROM 2020-2022 SCENARIO 3 STRATEGIC GUIDELINES & KEY 2020-2022 PROGRAMS 4 2020-2022 TARGETS AND ENABLERS 5 2025 VISION 16
Slide 21: Strategic guidelines 2020-2022: high value is true north
STRATEGIC GUIDELINES 2020-2022 3. Strategic guidelines & key 2020-2022 programs HIGH VALUE IS PIRELLI’S “TRUE NORTH” RAISE COMPETITIVE BARRIERS FASTER: ─ Sustainability-driven innovation ─ Brand ─ Structural cost competitiveness ─ Speedy capture of opportunities through data-rich insights REPOSITION
Slide 22: Business model strengthened through 3 key major programs
BUSINESS MODEL STRENGTHENED THROUGH 3 KEY MAJOR 3. Strategic guidelines & key 2020-2022 programs PROGRAMS, BACKED BY A MORE CONTAINED INVESTMENT COST COMMERCIAL TECHNOLOGY-BASED COMPETITIVENESS DEVELOPMENT INNOVATION Contained Investment Program HIGHER FREE CASH FLOW GENERATION 18
Slide 23: Cost competitiveness: 2 waves, ~510M€ efficiency improvement
01. COST COMPETITIVENESS: 2 WAVES, REACHING 3. Strategic guidelines & key 2020-2022 programs ~510M€ EFFICIENCY IMPROVEMENT GROSS OF INFLATION WAVE 1 - 2020 WAVE 2 – 2021-2022 Gross impact Weight on Gross impact Weight on Wave 1 Wave 2 Product Cost ~ 28% ~ 33% Manufacturing ~ 22% ~ 36% SG&A ~ 22% ~ 1
Slide 24: Commercial development
02. COMMERCIAL DEVELOPMENT 3. Strategic guidelines & key 2020-2022 programs VOLUME VARIANCE (CAR) KEY PROGRAMS PRICE POLICY COST IMPROVEMENTS 2019 A ~64M Product & Replacement Pull-Through > Manufacturing 78% Specialties and Cost Reduction ≥19" Non-Specialty ~+9M Replacement Push-Through Time-to-Mar
Slide 25: Technology-based innovation: accelerating product innovation
03. TECHNOLOGY-BASED INNOVATION: 3. Strategic guidelines & key 2020-2022 programs ACCELERATING PRODUCT INNOVATION Fast-pace product renewal PRODUCT • H.V. homologated product families renewed, with Specialties available ~+40% New Product Lines in most of the new Product Lines in ’20-’22 vs. ’17-’19
Slide 26: High tech and eco-efficient manufacturing footprint
HIGH TECH AND ECO-EFFICIENT MANUFACTURING FOOTPRINT 3. Strategic guidelines & key 2020-2022 programs PIRELLI MANUFACTURING FOOTPRINT: HIGH-TECH & ECO-EFFICIENT IN 2022 18 PLANTS (~82% LOW COST COUNTRY) > 9 Car Fully High Value, of which 6 new / robotized > Bollate Plant converted to Premium Velo 2 P
Slide 27: Optimal capacity in high value, contained investment plan
ALREADY REACHED OPTIMAL CAPACITY IN HIGH VALUE, 3. Strategic guidelines & key 2020-2022 programs LEADING TO A CONTAINED INVESTMENT PLAN CAR CAPACITY million pcs 77 75 HIGH VALUE CAPACITY CONSISTENT WITH DEMAND 71 12 6 3 5 38 50 • H.V. Capacity already increased strongly in 2017-2019 53 (Europe, Chin
Slide 28: Reinforcing our iconic brand for premium consumers
REINFORCING OUR ICONIC BRAND FOR PREMIUM CONSUMERS 3. Strategic guidelines & key 2020-2022 programs ALWAYS IN TOP 3 POSITIONS MOVING EFFORTS DOWN BRAND INITIATIVES RELEVANT IN KEY MARKETS THE CONSUMER JOURNEY FOR PREMIUM CONSUMERS 2019 Pirelli Brand Tracking Premium Consumers1 Pirelli Global Brand I
Slide 29: Pirelli Evolution to Date & Strategic Direction
PIRELLI EVOLUTION TO DATE & STRATEGIC DIRECTION 1 EVOLUTION TO DATE 2 IMPLICATIONS FROM 2020-2022 SCENARIO 3 STRATEGIC GUIDELINES & KEY 2020-2022 PROGRAMS 4 2020-2022 TARGETS AND ENABLERS 5 2025 VISION 25
Slide 30: 2020-2022 targets
2020-2022 TARGETS 4. 2020-2022 Targets and Enablers € billion 2019 A 2020 E 2022 E Net Sales 5.3 ~5.4 ~5.8 adj. EBIT 0.9 ~ flat YoY margin 17.2% 18% ÷ 19% cum. ’20-’22 vs. cum CapEx 0.39 ~0.3 ~0.9 ‘17-’19 ~1.3 o/w cum. ’20-’22 Net Cash Flow bef. Dividends 0.33 ~0.4 ~0.5 in ’21 ~1.5 ~0.6 in ’22 Net F
Slide 31: Pirelli remuneration system aligned with industrial plan
PIRELLI REMUNERATION SYSTEM ALLIGNED WITH 4. 2020-2022 Targets and Enablers INDUSTRIAL PLAN REMUNERATION STRUCTURE to be approved by the Shareholders’ Meeting (June 18, 2020) COMPENSATION MIX FOR KEY MANAGEMENT FIXED COMPONENT • No more than 50% of Total Annual Direct Compensation on reaching all ob
Slide 32: Governance confirmed by renewed shareholders' agreement
GOVERNANCE CONFIRMED BY RENEWED 4. 2020-2022 Targets and Enablers SHAREHOLDERS’ AGREEMENT BY-LAWS BOARD OF DIRECTORS SHAREHOLDERS AGREEMENT Board made of highly qualified The partnership acknowledges: (i) Pirelli is a company Pirelli By-Laws shall be Members with a suitable mix of specialised in hig
Slide 33: Pirelli Evolution to Date & Strategic Direction
PIRELLI EVOLUTION TO DATE & STRATEGIC DIRECTION 1 EVOLUTION TO DATE 2 IMPLICATIONS FROM 2020-2022 SCENARIO 3 STRATEGIC GUIDELINES & KEY 2020-2022 PROGRAMS 4 2020-2022 TARGETS AND ENABLERS 5 2025 VISION 29
Slide 34: Key dynamics in 2025
KEY DYNAMICS IN 2025 5. 2025 Vision MILES DRIVEN KEEP GROWING CONSTANTLY SHARED & SERVICES GETTING RELEVANT Car Global Miles Driven (billion) Car Global Miles Driven (billion) by ownership model 13.3 12.2 +3% 11.5 +3% 13.3 10.7 15% >20% +4% Shared & 9.6 11% 12.2 9% +4% 11.5 Services1 7% 10.7 Private
Slide 35: Car trends 2020-2025: solutions for electric & connected
CAR TRENDS ‘2020-’2025: SOLUTIONS FOR ELECTRIC & CONNECTED 5. 2025 Vision MARKET PENETRATION (%) IN PRESTIGE & PREMIUM PIRELLI SOLUTIONS PRODUCTION PARC ELECTRIC • O.E. Partnership with top-end OEMs and start-up 2020E ~11% ~2% innovators over 1/3 of O.E. Homologations pipeline 2025E ~30% ~9% • ELECT
Slide 36: Coronavirus disease (COVID-19) – prevention and readiness
CORONAVIRUS DISEASE (COVID-19) – PREVENTION AND READINESS 5. 2025 Vision GROUP MEASURES FOCUS CHINA • Travels to and from China are blocked and all travels to APAC are • Body temperature checks applied to all people entering Pirelli facilities. discouraged. • In addition, employees are checked twice
Slide 37: Coronavirus disease (COVID-19) – preliminary sensitivity analysis
CORONAVIRUS DISEASE (COVID-19) 5. 2025 Vision – PRELIMINARY SENSITIVITY ANALYSIS PIRELLI IN CHINA CURRENT SITUATION • Temporary closure of 2 plants; Yanzhou Car / Moto – Shandong province Yanzhou is running at low capacity utilization • Shanghai office (APAC HQ) closed. Region managed by Tokyo and S
Slide 38: Agenda
AGENDA PIRELLI EVOLUTION TO DATE & STRATEGIC DIRECTION PIRELLI STRATEGY DEPLOYMENT: PILLAR 1 – COST COMPETITIVENESS 2020-2022 SCENARIO PIRELLI STRATEGY DEPLOYMENT: PILLAR 2 - COMMERCIAL DEVELOPMENT PIRELLI STRATEGY DEPLOYMENT: PILLAR 3 – TECHNOLOGY-BASED INNOVATION 2019 FINANCIAL REVIEW AND 2020-202
Slide 39: Business model strengthened through 3 key programs
BUSINESS MODEL STRENGTHENED THROUGH 3 KEY PROGRAMS, BACKED BY A MORE CONTAINED INVESTMENT COST COMMERCIAL TECHNOLOGY BASED COMPETITIVENESS DEVELOPMENT INNOVATION Contained Investment Program HIGHER FREE CASH FLOW GENERATION 34
Slide 40: Cost competitiveness: 2 waves, ~510 M€ efficiency improvement
01. COST COMPETITIVENESS: 2 WAVES, REACHING ~510 M€ EFFICIENCY IMPROVEMENT GROSS OF INFLATION WAVE 1 - 2020 WAVE 2 – 2021-2022 Gross impact focusing on: Gross impact focusing also on: Gross impact • Product range management Product Cost • Modularity ~ 160 M€ > • Specification optimization ~ 50 M€ ~
Slide 41: Product cost pillars – Plan 2020-2022
PRODUCT COST PILLARS – PLAN 2020-2022 PRODUCT COST BENEFITS BY WAVE PRODUCT € million ▬ Value based product portfolio RANGE MANAGEMENT ▬ Push lines design to value ~160 ▬ Activities on the existing and future product range SPECIFICATION to maximize performance and reduce product cost: OPTIMIZATION •
Slide 42: Manufacturing pillars – Plan 2020-2022
MANUFACTURING PILLARS – PLAN 2020-2022 ▬ Reorganization (Brazil), Italy plant conversion (to H.V.) MANUFACTURING BENEFITS BY WAVE € million FOOTPRINT creating Velo Hub OPTIMIZATION ▬ Local-for-local production through regional source ~160 mix in low cost country ▬ New production processes oriented t
Slide 43: SG&A pillars – Plan 2020-2022
SG&A PILLARS – PLAN 2020-2022 SG&A BENEFITS BY WAVE € million ▬ Reduce effort in awareness initiatives in the consumer ~100 MARKETING journey, favoring conversion actions & SALES ▬ Advanced digital marketing tools reducing customer acquisition cost Wave 2 ~60 21/22 ▬ Structural belt-tightening on pr
Slide 44: Organization pillars – Plan 2020-2022
ORGANIZATION PILLARS – PLAN 2020-2022 ORGANIZATION BENEFITS BY WAVE € million ORGANIZATION ▬ Business processes reengineering supported by new ~90 STREAMLINING ways of working enabled by the digital transformation Wave 2 ~40 21/22 ▬ Changing the mix of the available capabilities through NEW SKILLS D
Slide 45: Industrial Plan 2020-2022 Vision 2025
40 2020 2022 INDUSTRIAL PLAN | VISION 2025 19" FEBRUARY 2020
Slide 46: Agenda
AGENDA PIRELLI EVOLUTION TO DATE & STRATEGIC DIRECTION PIRELLI STRATEGY DEPLOYMENT: PILLAR 1 – COST COMPETITIVENESS 2020-2022 SCENARIO PIRELLI STRATEGY DEPLOYMENT: PILLAR 2 - COMMERCIAL DEVELOPMENT PIRELLI STRATEGY DEPLOYMENT: PILLAR 3 – TECHNOLOGY-BASED INNOVATION 2019 FINANCIAL REVIEW AND 2020-202
Slide 47: Car sales in downturn cycle, cars fitting ≥18" growing faster
CAR SALES IN DOWNTURN CYCLE, HOWEVER CARS FITTING ≥18” TYRES GROWING AT HIGHER RATE WORLD CAR PRODUCTION WORLD O.E. TYRE MARKET million vehicles million tyres -1.6% 0.7% -1.7% 0.3% CAGR CAGR CAGR CAGR 93.1 88.7 87.2 90.7 16A-19A 19A-22A 16A-19A 19A-22A 453 430 434 420 11.5 11.9 12.1 12.6 +1.2% ~+2%
Slide 48: High value replacement tyre market resilient
HIGH VALUE REPLACEMENT TYRE MARKET: RESILIENT ALSO IN A MORE DIFFICULT SCENARIO WORLD CAR PARC WORLD REPLACEMENT TYRE MARKET million vehicles million tyres CAGR CAGR CAGR CAGR 2.9% 1.0% 16A-19A 19A-22A 16A-19A 19A-22A 3.6% 1.8% 1,555 1,175 1,469 4 1,141 1,146 1,426 4 4 176 +5.7% ~+4.9% 1,082 +11.7%
Slide 49: Key drivers of global high value market growth
KEY DRIVERS OF GLOBAL HIGH VALUE MARKET GROWTH 1 2 3 4 5 Penetration of Increase in number Growing demand Rising penetration New Car Confirmed Premium & of homologations for specialties of SUVs technologies Prestige cars Electric and Connected Synergic Car Platform Adding new SUV further NEW “Premiu
Slide 50: Driver 1: penetration of premium & prestige cars
DRIVER 1: PENETRATION OF PREMIUM & PRESTIGE CARS AND PREMIUMIZATION OF SYNERGIC PREMIUM/PRESTIGE PENETRATION ON TOTAL CAR PARC million vehicles CAGR CAGR 1,426 16A-19A 19A-22A 1,281 1,555 10% 10.7% 11.3% Premium +5.7% ~+5% Prestige +3.4% ~+2.5% Synergic 2016 2019 2022 NEW SYNERGIC CARS FITTING ≥18”
Slide 51: Driver 2: increasing number of car models per brand
DRIVER 2: INCREASING NUMBER OF CAR MODELS PER BRAND ADDING ELECTRIC PLATFORM …AT THE SAME TIME EXPLOITING PLATFORM MODULARITY AND TO EXISTING ONES… TYRE HOMOLOGATION SYNERGIES Number of Models by OEM 1 Range coverage SEASONALITY RIM SPECIALTY ROOT 30 31 30 27 29 29 Volkswagen Skoda MEB Audi PPE 27 M
Slide 52: Driver 3: growing demand for specialties
DRIVER 3: GROWING DEMAND FOR SPECIALTIES PRODUCTS CONSUMER FOCUS AND NEEDS SEGMENTATION RUNFLAT SEAL INSIDETM Specialties Leader NOISE CANCELLING SYSTEMTM RACING TYRES COLLECTION TYRES New frontier PIRELLI ELECT New Tech Development CYBER TYRE REINFORCING LEADERSHIP ON SPECIALTIES ADDRESSING SPECIFI
Slide 53: Driver 4: rising SUV and CUV penetration
DRIVER 4: RISING SUV AND CUV PENETRATION WORLD CAR REGISTRATIONS: SUVS AND EXAMPLE: 3-SERIES AND X3 WORLD CAR CUVS ARE REPLACING SEDANS REGISTRATIONS SUV D 24% X3 36% SUV C ~50% 3 Series CAR D CAR C CAGR 2012-2022 76% 64% -1.4% 7.4% ~50% -2.0% 11.9% 2012 2014 2016 2018 2020 2022 2014 2018 2022 Avg F
Slide 54: Driver 5: electric and connected cars the key trends
DRIVER 5: ELECTRIC AND CONNECTED CARS THE KEY TRENDS MARKET PENETRATION (%) IN PRESTIGE & PREMIUM TYRE MARKET NEEDS PIRELLI SOLUTIONS REGISTRATION PARC • O.E. Partnership with Top-end ELECTRIC OEMs and start-up innovators 2025E ~30% 9% • Distinctive Marking Strategy to Higher Lower Higher Lower ensu
Slide 55: Industrial Plan 2020-2022 Vision 2025
49 2020 2022 INDUSTRIAL PLAN | VISION 2025 19" FEBRUARY 2020
Slide 56: Agenda
AGENDA PIRELLI EVOLUTION TO DATE & STRATEGIC DIRECTION PIRELLI STRATEGY DEPLOYMENT: PILLAR 1 – COST COMPETITIVENESS 2020-2022 SCENARIO PIRELLI STRATEGY DEPLOYMENT: PILLAR 2 - COMMERCIAL DEVELOPMENT PIRELLI STRATEGY DEPLOYMENT: PILLAR 3 – TECHNOLOGY-BASED INNOVATION 2019 FINANCIAL REVIEW AND 2020-202
Slide 57: High-value scenario: Pirelli expected to outperform market growth
2020-2022 HIGH-VALUE SCENARIO: PIRELLI EXPECTED TO OUTPERFORM MARKET GROWTH BY ~3PP +5% +5% CAGR CAGR PRESTIGE & 164 ~180 16A-19E 19A-22E 149 156 PREMIUM CAR PARC Other regions 5.7% ~5% (million vehicles) 87% 87% 87% EU, APac, N. America 87% 87% 5.8% ~5% 2018A 2019A 2020E 2021E 2022E +6% +6% CAGR CA
Slide 58: Top line growth key drivers
TOP LINE GROWTH KEY DRIVERS Reinforce leadership in the H.V. Premium Replacement driven by our core business model 1 based on O.E. pull-through and enhanced with analytics and big-data Expand in the H.V. Synergic Replacement, covering emerging market and consumer needs 2 through new products Consoli
Slide 59: Pull-through is Pirelli's consolidated business model
PULLTHROUGH IS PIRELLI'S CONSOLIDATED BUSINESS MODEL 1 2 3 4 O.E. + Repl. volumes • Keep the leadership in the Premium segment focusing on technologically advanced products: O.E. volumes Marked tyres, Specialties, EV tyres • Leverage on geo-localized Pull-through rate analytical coverage to further
Slide 60: Past homologations generating growing potential in plan horizon
PAST HOMOLOGATIONS ARE GENERATING A GROWING POTENTIAL 1 2 IN THE PLAN HORIZON 3 4 ≥18” REPLACEMENT TYRE ≥18” REPLACEMENT ≥18” PIRELLI SALES @ O.E. MARKET FITTING PIRELLI TYRE MARKET CAGR 19A-22E >10% +7.5% ~10% 2014 2015 2016 2017 2018 2019 2020 2021 2022 2014 2015 2016 2017 2018 2019 2020 2021 2022
Slide 61: Undisputed leadership on premium and prestige marked tyres
PIRELLI HAS AN UNDISPUTED LEADERSHIP ON PREMIUM AND 1 2 PRESTIGE MARKED TYRES IN THE ≥18” ARENA 3 4 PRESTIGE 1,090 o/w ≥18” 600 # of O.E.-marked items OF WHICH SOLE SUPPLIER 476 355 266 233 PREMIUM ≥ 18" Δ vs. Pirelli +82% +128% +208% +310% +368% Number of marked IP codes vs. premium competitors 54
Slide 62: Strong OEM relationships enhance go-to-market through big data
STRONG RELATIONSHIP WITH OEMS ALLOWS TO ENHANCE 1 2 GO-TO-MARKET EFFECTIVENESS, THROUGH BIG DATA AND 3 4 ADVANCED ANALYTICS BIG DATA TO COMBINE COUNTLESS DATA SOURCES CUSTOMER CENTRIC PREDICTIVE CAPABILITIES Pirelli proprietary Car Registrations Early identification of O.E. project targets Car based
Slide 63: Take pull-through strategy to a new precision level
TAKE “PULL-THROUGH STRATEGY” TO A NEW “PRECISION LEVEL” 1 2 Premium car parc: 160 million cars 3 4 Mercedes-EU car parc: Mercedes > 15.9 million cars 32.4M US: 5.0M EU: 15.9M Mercedes E-Class GERMANY: E-Class > 713K cars CN: 4.6M 2.17M UK: 240 K Mercedes E-Class (MY 2016) GER: 713K > BERLIN: 7,080 c
Slide 64: Expanding high value boundaries using big data
EXPANDING HIGH VALUE BOUNDARIES USING BIG DATA TO IDENTIFY 1 2 HIGH-END SYNERGIC CONSUMER NEEDS 3 4 Premium Synergic Safety in every driving condition Original Spare parts Known and high just like the original quality brand equipment In particular in US Value for money High mileage tyre product In p
Slide 65: Dedicated products portfolio with double-digit profitability
THROUGH A DEDICATED PRODUCTS PORTFOLIO WITH EXPECTED 1 2 DOUBLE-DIGIT PROFITABILITY 3 4 DESIGNED TO ADDRESS SAFETY, HIGH TECHNOLOGICAL PERFORMANCE & MILEAGE CONTENT 15 ECO-FRIENDLY new lines EFFICIENT PRODUCTION APPROACH PROCESS FOCUS ON REGIONAL NEEDS 58
Slide 66: Distribution network supporting replacement regional strategy
THE DISTRIBUTION NETWORK WILL COHERENTLY SUPPORT THE 1 2 REPLACEMENT REGIONAL STRATEGY 3 4 Reinforce leadership in the 11% 12% 12% Car dealer 1 H.V. Premium Replacement 17% • Continuous focus on car dealers and 25% 25% Tier 1 high-end retails 29% Expand presence in the 29% 34% Pirelli retail 2 H.V.
Slide 67: Original equipment: following customers globally, expanding base
2020-22 ORIGINAL EQUIPMENT: FOLLOWING OUR CUSTOMERS 1 2 GLOBALLY, EXPANDING THE CUSTOMER BASE 3 4 109 6-7 Index: 100 2-3 2019 customer base Current customers New customers 2022 customer base • Consolidate the • Geographical expansion in relationships strengthening APAC and NA, also with our technolo
Slide 68: Pirelli's leadership position strengthens
AS A RESULT, PIRELLI'S LEADERSHIP POSITION STRENGTHENS 1 2 3 4 HOMOLOGATIONS ~1,000 ~900 NUMBER OF O.E. PROJECTS 2017-2019 2020-2022 ~5% ~45% >50% EV PENETRATION ICE 2017-2019 2020-2022 Vision 2025 BEV + PHEV ~70% >80% >90% HIGHER RIM FOCUS (>19”) <19” 2017-2019 2020-2022 Vision 2025 ≥19” 61
Slide 69: Standard: car tyre reduction plan continues at lower pace
STANDARD: CAR TYRE REDUCTION PLAN CONTINUES, 1 2 AT A LOWER PACE 3 4 TOTAL STANDARD Market Standard CAGR 16-19 CAGR 19-22 H.V. REGIONS STANDARD REGIONS -0.6% -0.3% % of Volume by Region Cluster % of Volume by Region Cluster Pirelli CAGR 16-19 CAGR 19-22 Market Market Market Market Market Market 14 5
Slide 70: Three key levers to maximize value
THREE KEY LEVERS TO MAXIMIZE VALUE ▬ Mix shift towards 17” (~+1.5 million, in line with market growth) PRODUCT MIX ▬ Exit from 13” and second brands (except in LatAm and Russia) IMPROVEMENT ▬ Focus on more profitable segments (SUV, All Season) EBIT MARGIN FROM INDUSTRIAL ▬ Competitive sourcing (Kiro
Slide 71: Industrial Plan 2020-2022 Vision 2025
64 2020 2022 INDUSTRIAL PLAN | VISION 2025 19" FEBRUARY 2020
Slide 72: Agenda
AGENDA PIRELLI EVOLUTION TO DATE & STRATEGIC DIRECTION PIRELLI STRATEGY DEPLOYMENT: PILLAR 1 – COST COMPETITIVENESS 2020-2022 SCENARIO PIRELLI STRATEGY DEPLOYMENT: PILLAR 2 - COMMERCIAL DEVELOPMENT PIRELLI STRATEGY DEPLOYMENT: PILLAR 3 – TECHNOLOGY-BASED INNOVATION 2019 FINANCIAL REVIEW AND 2020-202
Slide 73: Innovation and product development strategic pillars
INNOVATION AND PRODUCT DEVELOPMENT STRATEGIC PILLARS 1. Accelerated product innovation PLAN 2020-2022 VISION 2025 1. ACCELERATED PRODUCT INNOVATION 2020 2021 2022 2025 • Product roadmap 2020 – 2022 • Innovation for 360° sustainability 2. COST COMPETITIVENESS • Product cost • Product modularity • Des
Slide 74: Accelerated product roadmap in 2020-2022, with 20 new lines
ACCELERATED PRODUCT ROADMAP IN 2020-2022, 1. Accelerated product innovation WITH 20 NEW LINES INNOVATION SPEED PULL LINES • Strengthen O.E. leadership (~2x homologation vs. best competitor) 5 • Focus on High Mix for Selective O.E. • Wide and deep product range 2017 - 2019 2020 - 2022 >40% • Specialt
Slide 75: Products launched in plan will be sustainability-driven
PRODUCTS LAUNCHED IN PLAN WILL BE 1. Accelerated product innovation "SUSTAINABILITY-DRIVEN" SOCIAL SUSTAINABILITY CUSTOMER Safety performance Sustainable performance • Wet grip • Rolling resistance BUSINESS COMPANY • Driving stability • Noise emission Competitiveness Design Speed • Extended mobility
Slide 76: Product cost competitiveness based on new design principles
PRODUCT COST COMPETITIVENESS BASED ON NEW DESIGN 2. Cost Competitiveness PRINCIPLES Product range management • Value based product portfolio • Push lines design to value 2020 - 2022 Specification optimization PRODUCT -10% • Tyre structure simplification COMPETITIVENESS • Tyre weight reduction Produc
Slide 77: Product cost competitiveness based on new design principles
PRODUCT COST COMPETITIVENESS BASED ON NEW DESIGN 2. Cost Competitiveness PRINCIPLES Product range management • Value based product portfolio • Push lines design to value 2020 - 2022 Specification optimization PRODUCT -10% • Tyre structure simplification COMPETITIVENESS • Tyre weight reduction Produc
Slide 78: Modularity reduces plant-level complexity costs
MODULARITY WILL POSITIVELY REDUCE PLANT-LEVEL 2. Cost Competitiveness COMPLEXITY COSTS Tread Components Base Semi-finished Sidewall Complexity index components -30% 100 95 Belt 90 85 80 75 Modularity Concept: > 70 • Reduce variety of tyre components Complexity: 20 • To manage 500 SKUs in a factory a
Slide 79: Full virtual product development
FULL VIRTUAL PRODUCT DEVELOPMENT TO IMPROVE 2. Cost Competitiveness TIME-TO-MARKET AND REDUCE COSTS DEVELOPMENT PHASE DESCRIPTION Virtual modelling & Parametric design TIME TO MARKET • Material performance prediction TYRE MODELLING • New design guidelines for modularity • Performance linked with pro
Slide 80: Design for sustainability: new green ingredients
DESIGN FOR SUSTAINABILITY: ACCELERATING THE 3. Innovation focus on sustainable mobility INTRODUCTION OF NEW AND INNOVATIVE "GREEN INGREDIENTS" TARGET ON NEW PRODUCT LINES Product eco & safety-design • Recycled materials increase • Renewable materials increase 20% > 60% • Fossil-based materials reduc
Slide 81: Technology innovation: technologies developed for EV requirements
TECHNOLOGY INNOVATION: SPECIFIC TECHNOLOGIES DEVELOPED 3. Innovation focus on sustainable mobility TO MEET NEW “EV” REQUIREMENTS PLAN 2020-2022 • Ultra Low Rolling Resistance 10% reduced RR 2% Extended Battery Range • Battery Range Extension (WLTP Cycle = Only Straight Running) • High Load Capacit
Slide 82: Cyber entering new phase
CYBER ENTERING NEW PHASE 3. Innovation focus on sustainable mobility IN A CONNECTED FUTURE, TYRE INTELLIGENCE IS THE ONLY ONE SOURCED DIRECTLY FROM ROAD SURFACE 1ST PHASE: 2ND PHASE: TECHNOLOGICAL DEVELOPMENT INDUSTRIALISATION IN AN “OPEN” PARTNERSHIP • Technology stabilization • Scaling up with Glo
Slide 83: Design for competitiveness and sustainability
Modularity New product concepts Design for Sustainable Design for Design Speed competitiveness Product life-cycle sustainability Specialties Sustainable mobility 75
Slide 84: Agenda
AGENDA PIRELLI EVOLUTION TO DATE & STRATEGIC DIRECTION PIRELLI STRATEGY DEPLOYMENT: PILLAR 1 – COST COMPETITIVENESS 2020-2022 SCENARIO PIRELLI STRATEGY DEPLOYMENT: PILLAR 2 - COMMERCIAL DEVELOPMENT PIRELLI STRATEGY DEPLOYMENT: PILLAR 3 – TECHNOLOGY-BASED INNOVATION 2019 FINANCIAL REVIEW AND 2020-202
Slide 85: 2019 Financial Review and 2020-2022 Targets in Detail
2019 FINANCIAL REVIEW AND 2020-2022 TARGETS IN DETAIL 1 2019 FINANCIAL REVIEW 2 2020-22 TARGETS IN DETAILS 76
Slide 86: FY 2019 results in line with guidance
FY 2019 RESULTS IN LINE WITH GUIDANCE 1. 2019 financial review 2018 A 2019 E 2019 A (guid. Oct. 2019) Net Sales €5,195 mln ≥€5.3 bln €5,323 mln High Value weight ~ 64% ~ 67% 67% Adjusted EBIT €955 mln €917 mln Adjusted EBIT margin 18.4% >17% ÷ 17.5% 17.2% High Value weight on adj. EBIT1 ~ 83% ~ 85%
Slide 87: FY 2019 net sales bridge
FY 2019 NET SALES BRIDGE 1. 2019 financial review € million o/w Organic -2.0% +4.2% +0.3% +2.5% +2.2% 5,323 14 5,194 216 -101 O.E. +4.9% +6.4% Repl. +10.5% +8.0% -9.7% Net Sales Volumes Price/Mix FX Net Sales FY’18 FY’19 High Value Standard Car ≥18” mainly negative O.E. +15.3% +7.8% +1.5% -0.7% +0.5
Slide 88: Price/mix drivers and dynamics in 2019 and 2020
PRICE/MIX DRIVERS AND DYNAMICS IN 2019 AND 2020 1. 2019 financial review 6.4% 4.2% 3.0% 2.0% 1H’19 A 2H’19 A FY’19 A 1H’20 E 2H’20 E FY’20 E Channel Mix ++ stronger Repl. - + = + + stronger O.E. sales still impacted by O.E. channels sales (Car ≥18" Repl. +8% sales (rollover of rebalance (Car ≥18" Re
Slide 89: FY2019 adjusted EBIT performance
FY2019 ADJUSTED EBIT PERFORMANCE 1. 2019 financial review € million internal levers ∑ +104 6 (25) external levers ∑ -142 70 (26) (67) 955 123 ▬ cost-cutting +50 (77) (45) ▬ unabsorbed fixed costs -20 917 ▬ other3 -56 2 2018 Volume Price/mix Efficiencies Start-up D&A2 Other Raw Mat. Other FX 2019 cos
Slide 90: FY 2019 cash flow and net financial position
FY 2019 CASH FLOW AND NET FINANCIAL POSITION 1. 2019 financial review € million NCF bef. dividends: +333 (+978 in 4Q’19) 3,507 Op. CF: +773 (+383 in FY’18) -17 3,180 500 3,024 177 -1,221 440 57 391 Net Cash Flow: +156 (+978 in 4Q’19) NFP FY’18 EBITDA CapEx ∆ WC & other Other1 Dividends NFP FY’19 Lea
Slide 91: 2019 Financial Review and 2020-2022 Targets in Detail
2019 FINANCIAL REVIEW AND 2020-2022 TARGETS IN DETAIL 1 2019 FINANCIAL REVIEW 2 2020-22 TARGETS IN DETAILS 82
Slide 92: Our 2020-2022 targets
OUR 2020-2022 TARGETS … 1. 2019 financial review € billion 2019 A 2020 E 2022 E Net Sales 5.3 ~5.4 ~5.8 Adjusted EBIT 0.9 ~ flat YoY margin 17.2% 18% ÷ 19% cum. ’20-’22 vs. cum CapEx 0.39 ~0.3 ‘17-’19 ~1.3 ~0.9 cum. ’20-’22 Net Cash Flow bef. dividends 0.33 ~0.4 o/w ~1.5 ~0.5 in ’21 ~0.6 in ’22 Net
Slide 93: 2020-2022 revenues trend
2020-2022 REVENUES TREND 2. 2020-22 targets in details € billion 𝚫’19 -’20 CAGR ‘19-’22 ~5.4 ~ +2% ~5.8 ~ +3% High Value 5.3 ~ +6% 73% ~ +6% 67% 69% Standard ~ -6% ~ -4% 33% 31% 27% 2019 A 2020 E 2022 E CAGR 19-22 Volumes -2.0% ~ 0% ÷ +1% ~ +1.5% ÷ +2% High Value +6.4% ~ +8% ~ +8% Standard -9.7% ~…
Slide 94: 2020-2022 profitability trend
2020-2022 PROFITABILITY TREND 2. 2020-22 targets in details € million efficiencies vs. inflation price/mix vs. raw mat. 917 ~flat YoY 2019 Volume Price/mix Raw Mat. Efficiencies Inflation D&A Other FX 2020 EBIT 17.2% margin efficiencies vs. inflation price/mix vs. raw mat. ~flat vs. ‘19 2020 Volume
Slide 95: Financial and fiscal management
FINANCIAL AND FISCAL MANAGEMENT 2. 2020-22 targets in details € million FINANCIAL INCOME & EXPENSES1 ~217 > 100% new strategic funding will be Green ~185 on avg. or linked to our Sustainability targets per year > Option to extend the maturity of current credit lines > Reduction of the exposure to hi
Slide 96: 2020-22 net cash flow (before dividends) trend
2020-22 NET CASH FLOW (BEFORE DIVIDENDS) TREND 2. 2020-22 targets in details + Δ restr. / € billion non-rec. ~0.6 MAIN COMPONENTS + Positive + Δ int. / taxes ~0.5 - Negative ▬ Δ restr. / non-rec. ~0.4 + Δ adj. EBITDA 0.3 + Δ adj. 2020-22 N.C.F. EBITDA ~1.5 cum., o/w: + Δ CapEx ▬ Δ W.C. + Δ W.C. ~0.5
Slide 97: 2020E-2022E raw material guidance
2020E-2022E RAW MATERIAL GUIDANCE 2. 2020-22 targets in details € million 13% Natural Rubber 10% Steel Reinf. 17% Textiles Breakdown 27% Synthetic Rubber FY 2019 A based on purch costs 23% Chemicals 10% Carbon Black Raw Materials 33% on Sales Commodities – avg. Quotation Commodities – avg. cost of g
Slide 98: 2020E-2022E forex guidance
2020E-2022E FOREX GUIDANCE 2. 2020-22 targets in details 13% other 6% GBP 37% EUR Breakdown 3% RUB. FY 2019 A based on 11% BRL currency 12% CNY 18% USD Main average exchange rates 2019 A 2020 E ∆ YoY 2021 E ∆ YoY 2022 E ∆ YoY (vs. EUR) (vs. EUR) (vs. EUR) EUR / USD / 1.12 1.12 0% 1.14 +2% 1.18 +4% U
Slide 99: Industrial Plan 2020-2022 Vision 2025
90 2020 2022 INDUSTRIAL PLAN | VISION 2025 19" FEBRUARY 2020
Slide 100: Agenda
AGENDA PIRELLI EVOLUTION TO DATE & STRATEGIC DIRECTION PIRELLI STRATEGY DEPLOYMENT: PILLAR 1 – COST COMPETITIVENESS 2020-2022 SCENARIO PIRELLI STRATEGY DEPLOYMENT: PILLAR 2 - COMMERCIAL DEVELOPMENT PIRELLI STRATEGY DEPLOYMENT: PILLAR 3 – TECHNOLOGY-BASED INNOVATION 2019 FINANCIAL REVIEW AND 2020-202
Slide 101: Industrial Plan 2020-2022 Vision 2025
91 2020 2022 INDUSTRIAL PLAN | VISION 2025 19" FEBRUARY 2020
Slide 102: Appendix
APPENDIX 1 GOVERNANCE 2 SUSTAINABILITY STRATEGY & TARGETS 3 FINANCIALS 92
Slide 103: Governance confirmed by renewed shareholders' agreement
GOVERNANCE CONFIRMED BY RENEWED SHAREHOLDERS’ AGREEMENT BY-LAWS BOARD OF DIRECTORS SHAREHOLDERS AGREEMENT Board made of highly qualified The partnership acknowledges: (i) Pirelli is a company Pirelli By-Laws shall be Members with a suitable mix of specialised in high quality and technology products,
Slide 104: Pirelli shareholder structure
PIRELLI SHAREHOLDER STRUCTURE INSTITUTIONAL INVESTORS BREAKDOWN 3% Rest of World Camfin SpA1 LTI2 26% North America 10.10% 6.24% Free Float Institutional 34% U.K. 34.64% 38.14% Investors 45.52% Marco Polo International Italy Srl 3.50% 37% Rest of Europe Retail Investors Source: NASDAQ, Libro soci Pi
Slide 105: Pirelli remuneration system aligned with industrial plan
PIRELLI REMUNERATION SYSTEM ALLIGNED WITH INDUSTRIAL PLAN REMUNERATION STRUCTURE to be approved by the Shareholders’ Meeting (June 18, 2020) COMPENSATION MIX FOR KEY MANAGEMENT FIXED COMPONENT • No more than 50% of Total Annual Direct Compensation on reaching all objectives at target level ALL VARIA
Slide 106: Short term incentive plan objectives
SHORT TERM INCENTIVE PLAN OBJECTIVES > On/off condition: Group Net Cash Flow before dividends > OBJECTIVE WEIGHT Group Adjusted EBIT 40% Group Net Cash Flow1 30% Net Income 20% Green performance Revenues 10% Bonus at target level defined as percentage of base salary; pay-out cap is 2,5x bonus at tar
Slide 107: 2020-2022 long-term incentive plan highlights
2020-2022 LONG-TERM INCENTIVE PLAN HIGHLIGHTS > Cash, long-term incentive plan aligned with the 2020-2022 Industrial Plan > Rolling plan, with 3 objectives with different weights > OBJECTIVE WEIGHT VALUE AT TARGET Pirelli performance aligned to the average of the peers’ performance Relative TSR 40%
Slide 108: Appendix
APPENDIX 1 GOVERNANCE 2 SUSTAINABILITY STRATEGY & TARGETS 3 FINANCIALS 98
Slide 109: Pirelli integrated model
PIRELLI INTEGRATED MODEL 1 1 MULTI-STAKEHOLDER APPROACH Governance Management systems Planning Reporting2 Board of Directors Quality Return on capital Group integrated Annual Report Board Committee ISO 9001 IATF 16949 Governance Environmental ISO/IEC 17025 performance Labour and Social Growth Opport
Slide 110: Key figures & achievements 2019
KEY FIGURES & ACHIEVEMENTS 2019 KPIs1 2019 PIRELLI ESG LEADERSHIP ACKNOWLEDGED BY THE MARKET Eco-Safety Performance revenues2 55.8% 63.3% on H.V.3 Top-of-the-industry ESG ratings Pirelli distinctive factors Car tyres Avg. rolling resistance reduction -18% Global Sector Leader in Comprehensive corpor
Slide 111: Global scenarios @2025-2030
GLOBAL SCENARIOS @2025-2030 OPPORTUNITIES & CHALLENGES MUST MATCH THE GLOBAL JOURNEY TOWARDS UN SDGS Technological breakthroughs Demographic growth and urbanization Automation, • Population reaching 8.3 bln. in 2030 Robotics, Artificial (7.7 bln. in ‘19) Intelligence • @2030: Urban 5,1 bln., extra-u
Slide 112: Industrial plan sustainability levers
INDUSTRIAL PLAN SUSTAINABILITY LEVERS STRATEGY & TARGETS @2022-2025-2030: > Are embedded into Pirelli High Value & Pure Consumer strategy > Replace previous 2017-2020 Sustainability Plan with selected targets to 2025 > Impact on 11 UN Sustainable Development Goals 102
Slide 113: Product sustainability strategy 2022/2025/2030
PRODUCT SUSTAINABILITY STRATEGY 2022/2025/2030 CIRCULAR ECONOMY (closed loop) RAW MATERIALS MANUFACTURING USE END OF LIFE Raw mat. CO2 absolute emissions Towards Carbon Neutrality Rolling resistance reduction Chemical recycling based on reduction innovative process to ensure the Raw materials Weight
Slide 114: Materials innovation
MATERIALS INNOVATION STRATEGY ACTING ON TARGETS Focusing on: > By 2025, on new product lines: > 40% of renewable materials > 3% of recycled materials2 • Increase Renewable1 > Reinforcements < 40% of fossil based materials Materials > Bio-Chemicals > By 2030, on new product lines: • Increase Recycled
Slide 115: Eco-safety performance innovation
ECO-SAFETY PERFORMANCE INNOVATION CAR- AVG. TOTAL GAMMA (VS. 2015) MOTO- AVG. RADIAL TYRES (VS. 2015) @2022 @2025 @2022 @2025 Rolling Resistance -15% -20% Rolling Resistance -10% -14% Wet grip +21% +25% Mileage +4% +13% Weight -25% -30% VELO- AVG. TOTAL TYRES (VS. 2017) Wear rate -12% -18% @2022 @20
Slide 116: Eco-safety product innovation
ECO-SAFETY PRODUCT INNOVATION PIONEERING THE CONSUMER SPECIALTIES BUSINESS 2001 RUNFLAT SHORT TERM DEVELOPMENT ROADMAP TO ACCELERATE Safe & extended mobility CONSUMERS TRANSITION TO FUTURE MOBILITY NEW AND DISRUPTIVE FEATURES ON: SEAL INSIDE TM • Rolling resistance Safe & extended mobility • Noise •
Slide 117: Eco-safety performance revenues
ECO-SAFETY PERFORMANCE1 REVENUES +15pp +15pp +21pp 78% +23pp 71% 63% 56% Eco-safety Eco-safety performance performance revenues2 on revenues2 42% total Car Focus on tyres 33% High Value revenues products3 2015 2019 2022 2015 2019 2022 • Criteria to categorize the Eco-Safety Performance products: Rol
Slide 118: Eco-efficiency: towards group carbon neutrality
ECO-EFFICIENCY: TOWARDS GROUP CARBON NEUTRALITY Committed to the Science Based Target initiative (SBTi)1 - 25% absolute CO2 emissions by 2025 vs. 2015 100% renewable electricity by 2025 - 10% specific energy consumption by 2025 vs. 2019 Group CARBON NEUTRALITY by 2030 1. Targets adopted by companies
Slide 119: Eco-efficiency: water, waste
ECO-EFFICIENCY: WATER, WASTE - 43% SPECIFIC WATER WITHDRAWAL BY 98% OF WASTE SENT TO RECOVERY BY 2025 2025 VS 2015 +6pp -43% 97% 98% 100% 92% 65% 57% 2015 2019 2025 2015 2019 2025 Towards zero waste to landfill vision Excellence in water management: Reduce, Reuse, Recover, Recycle, Replenish (5R Pri
Slide 120: Human capital
HUMAN CAPITAL ORGANIZATION PREPAREDNESS TO EMBRACE FUTURE SCENARIOS ENSURING: A diverse and People safety & welfare engaged workplace Availability of digital Adaptiveness to respond & new competences to changes and capture value THROUGH > Accident frequency index reduction: ≤ 0.15 by 2022, ≤ 0.1 by
Slide 121: Supply chain sustainability
SUPPLY CHAIN SUSTAINABILITY Full compliance of Purchasing Model with ISO 20400 provisions attested1 SELECTION + QUALIFICATION ESG 2 CONTRACTUAL STAGE ONSITE THIRD-PARTY AUDIT ▬ ESG assessment questionnaire ▬ 100% coverage of high ESG risk suppliers ▬ Third party on-site audit (raw material and Susta
Slide 122: Sound cyber security program
SOUND CYBER SECURITY PROGRAM A BUSINESS ENABLER TO SECURE CORPORATE OPERATIONS AND DELIVERY OF WELL-PROTECTED BUSINESS SERVICES AND QUALITY PRODUCTS TO PIRELLI CUSTOMERS Enhanced Rights Management Program Supply Chain Security Cyber Threat Hunting Risk-Based Vulnerability Management Main pillars Ext
Slide 123: Advocacy and commitment for road safety
ADVOCACY AND COMMITMENT FOR ROAD SAFETY Pirelli is Donor and Member of the Advisory Board of the United Nations Road Safety Trust Fund Goal: provide aid to United Nations’ Member States to significantly: • reduce the number of deaths and injuries caused by traffic accidents • reduce the economic los
Slide 124: Appendix
APPENDIX 1 GOVERNANCE 2 SUSTAINABILITY STRATEGY & TARGETS 3 FINANCIALS 114
Slide 125: 2019 results highlights by quarter
2019 RESULTS HIGHLIGHTS BY QUARTER 1Q’18 1Q’19 Δ YoY 2Q’18 2Q’19 Δ YoY 3Q’18 3Q’19 Δ YoY 4Q’18 4Q’19 Δ YoY FY’18 FY’19 Δ YoY € million Revenues 1,310 1,314 +0.3% 1,320 1,341 +1.6% 1,295 1,382 +6.7% 1,269 1,287 +1.4% 5,195 5,323 +2.5% Organic Growth1 +1.2% +1.6% +4.1% +2.0% +2.2% High Value Revenues
Slide 126: Key car market trends: EMEA
KEY CAR MARKET TRENDS: EMEA Market trend 4Q’18 FY’18 1Q’19 2Q’19 3Q’19 4Q'19 FY’19 ∆% YoY O.E. -3 -3 -6 -7 -11 -9 -10 Total Car market 3 1 Replacement -2 -2 -1 -1 -1 0 Total (O.E.+Repl.) -1 -3 -4 -1 -2 -3 3 5 ≥18” O.E. New Premium & Standard ≤17" 0 0 -1 -5 -4 -6 -6 -7 -9 -13 -11 -12 17 12 11 11 12 1
Slide 127: Key car market trends: North America
KEY CAR MARKET TRENDS: NORTH AMERICA Market trend ∆% YoY 4Q’18 FY’18 1Q’19 2Q’19 3Q’19 4Q'19 FY’19 2 O.E. -1 -4 -3 -1 -4 -9 Total Car market 7 6 4 1 2 1 Replacement -2 6 4 3 1 0 Total (O.E.+Repl.) 0 -3 ≥18” 5 6 4 5 New Premium & Standard O.E. 2 ≤17" -1 0 -2 -5 -7 -9 -7 -9 -16 Replacement1 13 13 11 1
Slide 128: Key car market trends: Asia Pacific
KEY CAR MARKET TRENDS: ASIA PACIFIC Market trend ∆% YoY 4Q’18 FY’18 1Q’19 2Q’19 3Q’19 4Q'19 FY’19 -1 -6 -4 -7 O.E. -8 -6 -11 Total Car market 3 5 5 3 1 1 1 Replacement Total (O.E.+Repl.) 0 1 -3 -1 -2 -1 -1 14 17 New Premium & Standard ≥18” O.E. 3 3 1 ≤17" -5 -1 -4 -5 -11 -8 -7 -8 -12 Replacement 14
Slide 129: Key car market trends: Russia & Nordics / South America
KEY CAR MARKET TRENDS: RUSSIA & NORDICS / SOUTH AMERICA Market trend ∆% YoY 4Q’18 FY’18 1Q’19 2Q’19 3Q’19 4Q'19 FY’19 16 12 8 7 6 3 O.E. Russia & Nordics -9 8 7 1 Replacement -2 -5 -4 -10 9 8 1 Total (O.E.+Repl.) -1 -3 -8 -6 O.E. 6 South America -3 -4 -1 -4 -3 -3 Replacement 4 Total (O.E.+Repl.) -7
Slide 130: 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 64.2 ; -10% YoY 1.378 ; +1% YoY 1.651 ; +20% YoY 1.365 ; -17% YoY 1.406 ; +3% YoY $ / kg Brent Oil (in $ / barrel) $ / barrel 2.25 85 Natural Rubber (in $ / kg) 2.00 75 yearly avg. ; Δ YoY
Slide 131: 2020-2022 Industrial Plan Vision 2025
Eis 2020 - 2022 INDUSTRIAL PLAN VISION 2025