Slide 1: Pirelli Group 9M 2008 Financial Results
Milan, November 7th,2008 PIRELLI GROUP 9M 2008 FINANCIAL RESULTS Marco Tronchetti Provera Pirelli Group Chairman
Slide 2: Agenda
Agenda 9M'08 highlights Marco Tronchetti Provera, Chairman Financial Review Claudio De Conto, COO and CFO Pirelli Tyre Results Francesco Gori, Tyre CEO Pirelli Real Estate Carlo Puri Negri, Real Estate CEO Outlook 2008 Marco Tronchetti Provera,Chairman Q&A Chairman and Top Management Appendix Pirell
Slide 3: 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 4: 2008 global economic scenario & Pirelli positioning (1/2)
2008 global economic scenario & Pirelli positioning (1/2) Russia (*) USA (*) GDP growth YoY 7,0% GDP growth YoY 1,4% Inflation 13,7% Inflation 4,4% Europe China (*) GDP growth YoY 1,2% GDP growth YoY 9,8% Inflation 3,4% Inflation 6,4% The world has evolved from a single engine economy to a multi - e
Slide 5: 2008 global economic scenario & Pirelli Tyre positioning (2/2)
2008 global economic scenario & Pirelli Tyre positioning (2/2) Pirelli, as a global company, has to face this scenario leveraging on flexibility and innovative capabilities Pirelli strengths As of Sept. '08 As of Sept. '08 29,151 Employees Tyre Revenues: €/mln 3.229 Approx. 1000 dedicated to R&D of
Slide 6: Pirelli's immediate reaction to a deep change in 3Q '08 macro scenario
Pirelli’s immediate reaction to a deep change in 3Q ’08 macro scenario In TYRE, a quick short term plan 3 macro actions: Management and staff right sizing in HQ and main European Companies (from now to 1Q 2009) Output reduction in all Western European factories, both tactical (4Q) and structural (20
Slide 7: Real Estate scenario evolution and Pirelli Re repositioning
Real Estate scenario evolution and Pirelli Re repositioning Real Estate Market Scenario - 44% decline YoY in total RE Further deterioration of “credit Increase in number of forced sellers investment in Europe crunch” and liquidity “frozen” First sign of market recovery not before late 2009 Collapse
Slide 8: An updated mission… deployed in the following priorities
An updated mission… Continue to play the role of leading Real Estate Fund & Asset Manager in Italy, Germany and Poland Shift focus from strong growth to consolidation in order to face the new market condition and get ready to capture recovery Maintain the unparalleled innovation capabilities ... dep
Slide 9: Agenda
Agenda 9M'08 highlights Marco Tronchetti Provera, Chairman Financial Review Claudio De Conto, COO and CFO Pirelli Tyre Results Francesco Gori, Tyre CEO Pirelli Real Estate Carlo Puri Negri, Real Estate CEO Outlook 2008 Marco Tronchetti Provera,Chairman Q&A Chairman and Top Management Appendix Pirell
Slide 10: Pirelli Group: 9M '08 Key Financial Results
Pirelli Group: 9M ’08 Key Financial Results €/mln 9M 08 9M 07 YoY 3Q 08 3Q 07 YoY Net sales (as reported) 3898,6 5229,2 -25,4% 1213,3 2036,6 -40,4% (*) Net sales (organic) 3898,6 3886,1 +0,3% 1213,3 1271,2 -4,6% EBITDA before restructuring costs 402,0 456,1 -11,9% 85,2 129,6 -34,3% Ebitda Margin 10,
Slide 11: Pirelli Group: Ebit 9M '08 vs 9M '07
Pirelli Group: Ebit 9M ’08 vs 9M ’07 (post restructuring costs and Results from equity participations) €/mln +3,9 +1,2 462,1 (6,4) 31,7 Tyre 17,6 RE (54,4) (49,3) ∆ organic Ebit: -55,7 (155,3) 109,6 (92,2) 9M ‘07 Tyre Real Broadband Other Restructuring TI Shares Results 9M ‘08 Group Estate Access Bu
Slide 12: Pirelli Group: Attributable Net Income 9M '08 vs 9M '07
Pirelli Group: Attributable Net Income 9M ’08 vs 9M ‘07 ∆ Ebit org: (55,7) Rest. Costs: (49,3) TI Share dev: (155,3) Results from equity part. (92,2) 129,8 +94,3 +14,8 +98,5 (36,2) (352,5) (51,3) 9M ‘07 ∆ Ebit ∆ Financial ∆ Tax ∆ discontinued ∆ minorities 9M ‘08 Group Post restr. & charges/income Ch
Slide 13: Pirelli Group: Net Financial position 9M '08 vs YE '07
Pirelli Group: Net Financial position 9M ’08 vs YE ‘07 140,1 1055,7 3Q ‘08 835,5 119,1 P. & C. Re Invest. In High street: 59,8 Turkish minority stakes purchase 43,3 CyOptics Invest. 12,7 P.& C. Real Estate shares purchase 3,3 168,0 133,8 80,4 38,5 75,1 (302,1) NFP Net Cash Flow ord Financial & fisca
Slide 14: Agenda
Agenda 9M'08 highlights Marco Tronchetti Provera, Chairman Financial Review Claudio De Conto, COO and CFO Pirelli Tyre Results Francesco Gori, Tyre CEO Pirelli Real Estate Carlo Puri Negri, Real Estate CEO Outlook 2008 Marco Tronchetti Provera,Chairman Q&A Chairman and Top Management Appendix Pirell
Slide 15: Quarterly trends for Pirelli major markets
Quarterly trends for Pirelli major markets North America Car Repl. North America Car OE Source: RMA, Pirelli YoY Q1 Q2 Q3 Q1 Q2 Q3 -5% -5% -10% -11% -15% -19% Mercosur Car OE + Repl. Mercosur Truck OE + Repl. YoY Source: ANIP, Pirelli +12% +9% +8% +7% +7% +6% Q1 Q2 Q3 Q1 Q2 Q3 Europe Car Repl. Europ
Slide 16: Trends for key tyre raw materials
Trends for key tyre raw materials Drivers Share Spending (Pirelli 2007) 100=2007 225% 200% Steel Cord 175% Natural 14% Rubber Textile 26% 150% 13% Brent USD / barrel 125% STEEL SCRAP Chemicals Synthetic TSR 20 USD/t 15% Rubber 100% US BUTADIENE USD/t Carbon 21% Black 75% 12% 50% 2008 Jan Feb Mar Apr
Slide 17: Pirelli raw material extra cost trend vs 2007
Pirelli raw material extra cost trend vs 2007 €/mln, net of exchange rates 121 45 14 1Q '08 1H '08 9 months '08 Pirelli Group 9M 2008 Financial Results 16
Slide 18: 3Q 08 Pirelli Tyre Results (before restructuring costs)
3Q 08 Pirelli Tyre Results (before restructuring costs) €/mln 3Q 08 3Q 07 Variation ∆ Price/mix: +7.6% ∆ Volumes: - 4.2% Net Sales 1,062.9 1,040.4 +2,2% ∆ Actual Variation: +3.4% ∆ Exch. Rates: - 1.2% ∆ Total: +2.2% EBITDA 91.8 128.9 -28,8% EBITDA margin 8,6% 12,4% ∆ Commercial Variations: +53.2 EBI
Slide 19: Pirelli Tyre 9M Results (before and after restruct. costs)
Pirelli Tyre 9M Results (before and after restruct. costs) €/mln 9M 08 9M 07 Variation ∆ Price/mix: +5,3% ∆ Volumes: - 2,2% Net Sales 3,229.2 3,191.8 +1,2% ∆ Actual Variation: +3,1% ∆ Exch. Rates: - 1,9% EBITDA 378.3 430.6 -12,1% Before restructuring costs ∆ Total: +1,2% EBITDA margin 11.7% 13.5% Be
Slide 20: 9M Pirelli Tyre Results for Consumer Business
9M Pirelli Tyre Results for Consumer Business (before restructuring costs) €/mln 9M 08 9M 07 Variation Sales 2,207.9 2,212.1 -0,2% EBITDA 249.1 307.3 -18,9% EBITDA margin 11,3% 13,9% EBIT 139.0 201.8 -31,1% EBIT margin 6,3% 9,1% Top line organic growth +2.2%, driven by higher sales to OEMs Volumes d
Slide 21: 9M Pirelli Tyre Results for Industrial Business
9M Pirelli Tyre Results for Industrial Business (before restructuring costs) €/mln 9M 08 9M 07 Variation Sales 1,021.3 979.6 +4.3% EBITDA 129.2 123.3 +4.8% EBITDA margin 12,7% 12,6% EBIT 92.8 84.4 +10.0% EBIT margin 9,1% 8,6% Top line organic growth 5.2%, driven by higher sales in Latin America Volu
Slide 22: Pirelli Tyre sales by Region
Pirelli Tyre sales by Region Europe North America 51 49 47 46 47 42 8 7 8 7 8 7 % on total sales 2007 Q1 Q2 Q3 2008 Q1 Q2 Q3 Latin America Africa, Asia and Pacific 32 35 30 30 26 27 16 15 16 15 15 16 Q1 Q2 Q3 Q1 Q2 Q3 Pirelli Group 9M 2008 Financial Results 21
Slide 23: 3Q Pirelli Tyre highlights
3Q 08 Pirelli Tyre highlights: (draft) Pirelli scored above the industry average in the Tire Satisfaction Index 2008 and ranked second among the 14 major brands included in this year’s Original Equipment Tire Customer Satisfaction Study For the seventh year in a row, Pirelli once again confirmed as
Slide 24: Pirelli Tyre short term action plan
Pirelli Tyre short term action plan Management and staff right sizing in HQ and main European Companies (from now to 1Q 2009) Output reduction in all Western European factories, both tactical (4Q) and structural (2009) Focus on inventory reductions by year end Sales of minor non-core assets Re-negot
Slide 25: Agenda
Agenda 9M'08 highlights Marco Tronchetti Provera, Chairman Financial Review Claudio De Conto, COO and CFO Pirelli Tyre Results Francesco Gori, Tyre CEO Pirelli Real Estate Carlo Puri Negri, Real Estate CEO Outlook 2008 Marco Tronchetti Provera,Chairman Q&A Chairman and Top Management Appendix Pirell
Slide 26: Consolidated Income Statement
Consolidated Income Statement (Values in €/ml) 9 Months 2008 2007 net of temporary Consolidation of DGAG 9M ‘07 1. Aggregated Pro-quota Revenues (*) 938,3 982,8 1071,9 2. Consolidated Revenues (*) 527,1 523,5 612,5 3. EBIT before lay off 30,1 3,3 26,1 4. Income from Equity Participations 3,0 138,0 1
Slide 27: Net Debt
Net Debt (Values in €/ml) 9M ‘08 9M ‘07 2007 FY Total Net Debt 323,8 337,4 289,7 Total Shareholders' Loans 610,7 589,5 526,4 Net Debt gross of Sh. Loans 934,5 926,9 816,1 Net Equity 616,7 687,8 720,1 Gearing 1,52 1,35 1,13 Pirelli Group 9M 2008 Financial Results 26
Slide 28: Acquisitions and Sales - Real Estate
Acquisitions and Sales - Real Estate Acquisitions Sales (Values in €/ml) Pro quota 100% 4.956,4 2.106,0 1.186,6 783,9 714,5 658,7 299,9 365,7 Sept-08 Sept-07 Sept-08 Sept-07 Pirelli RE Equity investments €129.5mln. in n 2008 vs € 127.8 mln. in 2007 Pirelli Group 9M 2008 Financial Results 27
Slide 29: Agenda
Agenda 9M'08 highlights Marco Tronchetti Provera, Chairman Financial Review Claudio De Conto, COO and CFO Pirelli Tyre Results Francesco Gori, Tyre CEO Pirelli Real Estate Carlo Puri Negri, Real Estate CEO Outlook 2008 Marco Tronchetti Provera,Chairman Q&A Chairman and Top Management Appendix Pirell
Slide 30: Outlook 2008
Outlook 2008 Pirelli Group For the full year 2008, taking also into account statements made on the occasion of publication of financial statements as of 30 June, the Company confirms its expectations of consolidated EBIT before restructuring charges lower overall than in 2007. The size of the declin
Slide 31: Statement
Statement The Manager mandated to draft corporate accounting documents of Pirelli & C. SpA, Claudio De Conto, attests – as per art.154-bis, comma 2 of the Testo Unico della Finanza (D.Lgs. 58/1998) – that all the accounting information contained in this presentation correspond to the documented resu
Slide 32: Appendix
Appendix Pirelli Group 9M 2008 Financial Results 31
Slide 33: Pirelli & C. Group – Results at September 2008
Pirelli & C. Group – Results at 30 September 2008 Profit & Loss and Net Financial Position – Per Business Unit €/mln Pirelli Tyre Pirelli Real Estate Broadband Access Others Business Others Pirelli & C. Cons. 30.09.08 30.09.07 30.09.08 30.09.07 30.09.08 30.09.07 30.09.08 30.09.07 30.09.08 30.09.07 3
Slide 34: Pirelli Broadband Access 9M '08 Key Financial Results
Pirelli Broadband Access 9M ’08 Key Financial Results €/mln 9M 08 9M 07 YoY Net sales 92,3 86,7 6,5% EBITDA 3,8 2,7 40,7% Ebitda Margin 4,1% 3,1% EBIT 3,2 2,0 60,0% Ebit Margin 3,5% 2,3% Financial/Income charges (1,3) (2,5) -48% Tax charges 0,4 - n.s. Net Income 2,3 (0,5) n.s. NFP 32,0 37,6 Pirelli
Slide 35: Investment - Assets under Management as at Sept 2008
Investment - Assets under Management as at 30 Sept 2008 (Book Value) 100% Pro - Quota % Book Value Net Debt Book Value Net Debt Av. PRE Share TOTAL ASSETS UNDER MANAGEMENT 17,4 13,1 4,3 3,6 25% AUM not partecipated 0,5 0,0 0,0 0,0 0% of which Total AUM partecipated 16,9 13,1 4,3 3,6 banks: 3,0 26% s
Slide 36: Financial Situation SPVs/Funds participated by PRE
Financial Situation SPVs/Funds participated by PRE Net Debt 100% Funds/SPV: 13,1 € bn (including Shareholders' loans for €1,7 bn) Pro Quota Net Debt Funds/SPV: € 3.6 bn (including Shareholders' loans for €0,6 bn) Pro-quota recourse guarantees for approx. €44 mln (Need for refinancing until 2010: €35