Slide 1: FY'14 Preliminary Results
FY’14 PRELIMINARY RESULTS MILANO – FEB 12, 2015
Slide 2: Agenda
AGENDA FY 2014 PRELIMINARY RESULTS 2015 OUTLOOK & TARGETS FY 2014 TYRE OVERVIEW APPENDIX FY 2014 PRELIMINARY RESULTS 1
Slide 3: Key Messages - 2014
KEY MESSAGES - 2014 > Sound 2014: targets delivered in spite of a macro and market slowdown in Brazil and the deterioration in Venezuela and Argentina. > Premium Strategy accelerating vs. London Plan: • Global Premium Market grew 10% year-on-year, non-Premium slightly positive (Nov. 2013 London Plan
Slide 4: FY 2014 Results vs Guidance
FY 2014 RESULTS VS GUIDANCE 2014 targets 2014 targets FY 2014 Preliminary November 2014 restated * Results unaudited (including Steelcord) (with Steelcord as (with Steelcord as discontinued operations) discontinued operations) Revenues >6.1 / <6.2 €/bln >6.0 / <6.1 €/bln 6.0 €/bln • Volumes > +2.5%
Slide 5: Pirelli Key Financial Results
PIRELLI KEY FINANCIAL RESULTS FY 13* FY 14 Δ YOY Q4 13* Q4 14 Δ YOY Revenues 6,061 6,018 -0.7% 1,475 1,489 +1.0% Organic Growth** +5.9% +4.1% EBITDA before Restr. Costs 1,095 1,168 +6.7% 288 300 +4.2% Margin 18.1% 19.4% +1.3p.p. 19.5% 20.2% +0.8p.p. EBIT before Restr. Costs 810 869 +7.3% 217 221 +2.
Slide 6: FY 2014 Performance by Region
FY 2014 PERFORMANCE BY REGION Tyre Sales Consumer Sales Industrial Sales Tyre EBIT Margin** €/Mln D YOY Organic D YOY Organic D YOY Organic growth* growth* growth* Total 6,008 -0.4% +6.2% 4,611 +2.9% +8.9% 1,397 -10.0% -1.5% 14.7% (+0.8 pp) Europe Mid-teens Europe 34% +4.6% +4.2% 40% +5.1% +4.7% (im
Slide 7: Premium Outperformance in Every Market: Volume Growth 2x the Market
PREMIUM OUTPERFORMANCE IN EVERY MARKET: VOLUME GROWTH 2x THE MARKET €/Mln D YOY Organic growth* Total 2,274 2,536 +12% +13% • Consolidated leadership in Super Premium: 22% total mkt share in ≥ 18" segment, >+1pp vs. 2013 YE Europe 51% 49% +8% +7% • Strong customer appreciation of marked items suppor
Slide 8: 2015 Outlook & Targets
AGENDA FY 2014 PRELIMINARY RESULTS 2015 OUTLOOK & TARGETS FY 2014 TYRE OVERVIEW APPENDIX FY 2014 PRELIMINARY RESULTS 7
Slide 9: Outlook 2015
OUTLOOK 2015 > Macroeconomic scenario: growth continues in China and Mature Markets, volatility expected in South America and Russia > Car market: growing prevalence of Premium car (>10% on new registrations), leading to a faster growth of Premium tyre market at a global level (>5x vs Non- Premium y
Slide 10: 2015 Macroeconomic Scenario
2015 MACROECONOMIC SCENARIO: CHINA AND MATURE MARKETS STILL DRIVING GROWTH, VOLATILITY AFFECTING LATAM AND RUSSIA GDP $/Trillion Δ %YOY Mature Economies RDEs Europe* (EU) LATAM China +1.3% +1.7% +0.6% +0.9% +7.3% +6.5% 18.3 18.5 18.8 4.7 4.7 4.8 9.1 9.7 8.5 13A 14E 15E 13A 14E 15E 13A 14E 15E London
Slide 11: Car Market: Upside from China Premium Growth
CAR MARKET: UPSIDE FROM CHINA PREMIUM GROWTH 2013-2015 – London Plan 2013-2015 – Last estimates CAGR ‘13-’15 CAGR London Plan ‘13-’15 Mln Vehicles Mln Vehicles +3.6% +3.6% 1,014 1,050 1,088 1,019 1,056 1,094 CAR PARC 8.6% 8.8% 9.1% 8.6% 8.9% 9.3% +6.8% +8.0% +3.3% +3.2% 13A 14E 15E 13A 14E 15E Premi
Slide 12: Car Tyre: Premium Outgrowing Our Expectations
CAR TYRE: PREMIUM OUTGROWING OUR EXPECTATIONS London Plan (Nov. 2013) CAGR ‘13-’15 CAGR ‘13-’15 Mln pcs +3.8% +2.9% 1,359 1,410 1,466 1,381 1,426 1,462 GLOBAL 22% 23% 24% +7.7% 23% 24% 25% +8.7% +2.7% +1.1% 77% 76% 75% 2013E 2014E 2015E 2013A 2014A 2015E (Europe + NAFTA) MATURE 683 700 +2.4% 708 727
Slide 13: Truck Production Lower than Expectations, Recovery in 2015
TRUCK PRODUCTION LOWER THAN EXPECTATIONS, RECOVERY IN 2015 Truck Production* – Last estimates Production trend by Region – Last estimates (2013=100) Mln Vehicles CAGR ’13-’15 Europe, Nafta (Europe, NAFTA) 130 +0.5% 2.7 2.8 118 MATURE 100 113 105 0.8 0.9 2013 2014 2015 0.5 0.5 London Plan Last Estima
Slide 14: Truck Tyre: Europe and NAFTA Offsetting Emerging Markets Slowdown
TRUCK TYRE*: EUROPE AND NAFTA OFFSETTING EMERGING MARKETS SLOWDOWN London Plan (Nov. 2013) CAGR ‘13-’15 CAGR ‘13-’15 Mln pcs +2.9% +1.8% +2.3% +2.3% 141 144 147 148 151 GLOBAL 144 20% 20% +2.5% +0.1% 20% 20% OE -0.2% 20% OE +0,5% 19% +2.3% +2,9% 80% 80% 80% 80% Repl. +2.9% 80% Repl. +2.1% 81% 2013E
Slide 15: Competitive Scenario in 2015
COMPETITIVE SCENARIO IN 2015 Competitive dynamics Pirelli positioning Focus on Premium Premium arena attracting Industry’s attention: however, a Pirelli focus on Prestige & Premium paying off: & Product technological and complexity challenge strong partnership with Car Makers; unique specialty produ
Slide 16: Pirelli Priorities in 2015
PIRELLI PRIORITIES IN 2015 > Maintain Prestige and Premium leadership through OE business via: - Technological innovation CAR - Leading homologation portfolio - Growing product specialties > Grow replacement market share working on: - Car dealer pull-through - Geolocalized Premium vehicle park cover
Slide 17: 2015 Regional Targets
2015 REGIONAL TARGETS Tyre Market 2015 Pirelli Tyre Business Target Highlights Revenues EBIT Margin* Car >+4% YOY, Mid teen organic Twenties • Outperforming Premium market leveraging APAC o/w Premium >+10% growth (>20% in €) increasing on OE pull-through, new product launch and Truck* >+1% YOY retai
Slide 18: Venezuela & Argentina: The Scenario in 2015
VENEZUELA & ARGENTINA: THE SCENARIO IN 2015 Macro Scenario Pirelli 2014 Exposure 2015 Targets Underlying Assumptions Challenging economic • 1 plant: Capacity already • Action plan to face the current crisis: scenario: reduced to ~1.0 mln pcs – Temporary reduction of production output (50% capacity C
Slide 19: FY 2015 Guidance
FY 2015 GUIDANCE FY 2014 Preliminary 2015 Guidance unaudited Revenues 6.0 € bln ~ 6.4 € bln Forex Guidance • Volumes +2.0% ≥ +3% (yearly avg) 2014 2015 - o/w Premium +17.8% ≥+10% EUR/USD 1.33 1.22 EUR/RUB 51 65.0 • Price/mix +4.2% ≥ +4% USD/BRL 2.35 2.65 USD/VEF* 12 20 • Foreign Exchange -6.6% ~ -1%
Slide 20: 2015 Consumer & Industrial Guidance
2015 CONSUMER & INDUSTRIAL GUIDANCE Consumer Business Industrial Industrial Business Business 2014 2015 2014 2015 Preliminary Guidance Preliminary Guidance unaudited unaudited Revenues 4.6 € bln ~ 4.9 € bln Revenues 1.4 € bln ~1.5 € bln • Volumes +5% ~+3% • Volumes -6.5% +4.5%/5% - o/w Premium +17.8
Slide 21: Efficiency Program: Results and Targets
EFFICIENCY PROGRAM: RESULTS AND TARGETS €/mln 2014-2017 Efficiency Plan 2014 results and 2015 targets ~350 92 ~90 ~320 ~30 Materials 64% 49% Materials 56% Labour prod Labour & scale 23% 47% 30% Expenses Allocation mix Allocation mix 8% & other 13% 6% 4% Industrial SG&A Total 2014 Actual 2015 Targets
Slide 22: 2015 Raw Material Guidance
2015 RAW MATERIAL GUIDANCE Raw material breakdown FY 2014 2014 Actual 2015 Guidance Textile Average cost of goods sold Natural Rubber (€/Mln) 12% 2014A Δ YOY 2015E Δ YOY Steel 20% 7% Natural Rubber ~1.950 +144 ~1.700 +55 TSR20 ($/ton) Brent Oil 109 -2 78 +117 ($/barrell) Chemicals 19% 28% Butadiene
Slide 23: 2015 Capex and Capacity
2015 CAPEX AND CAPACITY: PREMIUM EXPANSION IN LOW-COST COUNTRIES, MIX AND QUALITY IMPROVEMENT IN MATURE MARKETS Capex Capex by destination % of Sales 7% 6.3% < 6% 2013A 2014A 2015E €/Mln 413 <400 378 Capacity 34% 36% 37% o/w Premium 29% 29% 36% Mix & 40% 32% 35% Quality Others 26% 32% 28% 2013A 2014
Slide 24: 2015 Profitability Guidance
2015 PROFITABILITY GUIDANCE Driver 2014 Preliminary unaudited 2015 Guidance Impact Impact Volumes +2.0% of sales ≥3% of sales Price/Mix +4.2% of sales ≥+4% of sales Forex -6.6% of sales -1% of sales D YoY on Ebit D YoY on Ebit Efficiencies +92 €/mln ~+90 €/mln Raw Materials +4.5 €/mln +6 €/mln Other
Slide 25: FY 2014 Tyre Overview
AGENDA FY 2014 PRELIMINARY RESULTS 2015 OUTLOOK & TARGETS FY 2014 TYRE OVERVIEW APPENDIX FY 2014 PRELIMINARY RESULTS 24
Slide 26: Key Tyre Results
KEY TYRE RESULTS €/Mln Q1‘14 ∆% Q2‘14 ∆% Q3‘14 ∆% Q4‘14 ∆% FY‘14 ∆% Revenues 1,470 -2.4% 1,511 -3.6% 1,539 +3.3% 1,488 +1.3% 6,008 -0.4% o/w Premium 640 +12.9% 645 +12.6% 649 +11.1% 602 +9.4% 2,536 +11.5% EBITDA before restr. costs 280 +8.7% 309 +9.9% 287 +1.7% 301 +0.6% 1,177 +5.1% Margin 19.1% +2.
Slide 27: Pirelli Tyre Operating Performance
PIRELLI TYRE OPERATING PERFORMANCE €/Mln 30 (13) (17) 18 (38) 219 21 (6) (1) 213 EBIT Volumes Price / Raw FX Other Input Efficiencies Depreciation Restructuring EBIT 4Q ’13 Mix Materials Costs (Labour & other costs 4Q ‘14 Energy / other) 157 5 (81) (127) 92 (62) 58 (5) 853 816 +81 D&A (28) Marketing
Slide 28: Consumer Business: Pirelli Performance
CONSUMER BUSINESS: PIRELLI PERFORMANCE €/Mln Q1‘14 ∆% Q2‘14 ∆% Q3‘14 ∆% Q4‘14 ∆% FY‘14 ∆% Revenues 1,129 +1.1% 1,160 +1.8% 1,178 +4.9% 1,144 +4.0% 4,611 +2.9% o/w Premium 640 +12.9% 645 +12.6% 649 +11.1% 602 +9.4% 2,536 +11.5% % revenues 57% +6p.p. 56% +5p.p. 55% +4p.p. 53% +3p.p. 55% +4p.p. EBITDA
Slide 29: Industrial Business: Pirelli Performance
INDUSTRIAL BUSINESS: PIRELLI PERFORMANCE €/Mln Q1‘14 ∆% Q2‘14 ∆% Q3‘14 ∆% Q4‘14 ∆% FY‘14 ∆% Revenues 341 -12.2% 352 -18.1% 361 -1.4% 344 -6.7% 1,397 -10.0% EBITDA before restr. costs 61 -3.3% 64 -17.7% 59 -15.9% 59 -15.9% 242 -13.6% Margin 17.9% +1.7p.p. 18.1% +0.1p.p. 16.4% -2.8p.p. 17.0% -1.9pp 17
Slide 30: Appendix
AGENDA FY 2014 PRELIMINARY RESULTS 2015 OUTLOOK & TARGETS FY 2014 TYRE OVERVIEW APPENDIX FY 2014 PRELIMINARY RESULTS 29
Slide 31: Pirelli Group - 2014 Quarterly Results
PIRELLI GROUP – 2014 QUARTERLY RESULTS Q1’14 Q2’14 Q3’14 Q4’14 preliminary FY’14 preliminary Tyre Group Tyre Group Tyre Group Tyre Group Tyre Group SALES 1,469.5 1,473.2 1,511.3 1,513.7 1,539.2 1,541.8 1,488 1,489 6,008 6,018 EBITDA before 280.3 277.3 308.7 305.5 287.2 284.9 301 300 1,177 1,168 Rest
Slide 32: Consumer Business: Key Market Trends
CONSUMER BUSINESS: KEY MARKET TRENDS Market trend 4Q’13 1Q’14 2Q’14 3Q’14 4Q’14 FY'14 % YOY 9 2 3 2 2 4 OE Europe* 9 6 2 1 2 REPLACEMENT -8 5 4 7 4 5 3 OE Nafta 3 2 5 3 2 3 REPLACEMENT South America OE -10 -11 -9 -19 -17 -25 4 4 3 4 7 5 REPLACEMENT** 24 China 10 12 9 10 6 OE * Turkey included, Russi
Slide 33: Industrial Business: Key Market Trends
INDUSTRIAL BUSINESS: KEY MARKET TRENDS Market trend 4Q’13 1Q’14 2Q’14 3Q’14 4Q’14 FY'14 % YOY 24 7 OE Europe * -4 -5 -12 -4 6 14 2 2 REPLACEMENT -3 -1 11 South America OE -1 -28 -29 -23 -33 6 3 REPLACEMENT** -4 -3 -10 -3 China 18 13 OE -7 -11 -5 -16 * Turkey included and Russia excluded ** Non-pool
Slide 34: FY 2014 Pirelli Tyre Mix
FY 2014 PIRELLI TYRE MIX Sales by Business Sales by Segment Consumer Car 77% 70% Agro 3% Truck Motorbike Industrial 7% 23% 20% Sales by Channel Sales by Region Replacement South America NAFTA 76% 33% 12% Asia Pacific 9% MEAI 8% Russia OE Europe 4% 24% 34% FY 2014 PRELIMINARY RESULTS 33
Slide 35: December 2014 Pirelli People
DECEMBER 2014 PIRELLI PEOPLE Headcount People by Region NAFTA South America 4% 37,561 37% Asia Pacific 36,597* 11% MEAI 9% Russia Europe 9% Dec. 2013 Dec. 2014 30% * Net of Steelcord headcount (Italy, Romania and Brazil) People by Contract People by Cluster Management Temps & Agency 1% 8% Employees
Slide 36: Pirelli Plants in the World
PIRELLI PLANTS IN THE WORLD U.S.A. U.K. ITALIA GERMANY RUSSIA Rome Car Burton Car Bollate Car Breuberg Car/Moto Kirov Car Carlisle Car Settimo Torinese Car Voronezh Car MEXICO ROMANIA Guanajuato Car Slatina Car VENEZUELA CHINA Guacara Car Yanzhou Car / Moto / Truck Steel cord (JV) BRAZIL ARGENTINA E
Slide 37: Raw Materials
RAW MATERIALS Raw Material Price Trend Brent Oil (in USD/bbl) Natural Rubber: Sicom Natural Rubber (in USD/tons) Brent: www.oilnergy.com Yearly Average 4,519 3,380 108.9 3,156 111.0 98.5 111.7 99.5 2,517 2,531 80.2 75.2 1,711 1,801 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q1
Slide 38: Disclaimer
DISCLAIMER This presentation contains statements that constitute forward-looking statements based on Pirelli & C SpA’s current expectations and projections about future events and does not constitute an offer or solicitation for the sale, purchase or acquisition of securities of any of the companies