Pirelli & C. S.p.a. · MIL:PIRC
Pirelli & C — H1 2013 Earnings Presentation
35 slides from Pirelli & C's earnings presentation, Aug 5, 2013
Slide 1: Pirelli H1 2013 Results
PIRELLI H1 2013 RESULTS AUGUST 5, 2013 H1 2013 RESULTS
Slide 2: 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
Slide 3: Agenda
AGENDA KEY MESSAGES H1 2013 RESULTS TYRE BUSINESS H1 2013 OVERVIEW 2013 OUTLOOK & TARGETS APPENDIX H1 2013 RESULTS 2
Slide 4: Key Messages
KEY MESSAGES The Tyre Industry confirms its “value strategy”. Profitability and FCF remain its top priorities. In this context, Pirelli is the best performer in volume growth and price/mix, given its exposure to Premium segment and Emerging Markets. Faced with a downturn of the economic cycle,
Slide 5: Agenda
AGENDA KEY MESSAGES H1 2013 RESULTS TYRE BUSINESS H1 2013 OVERVIEW 2013 OUTLOOK & TARGETS APPENDIX H1 2013 RESULTS 4
Slide 6: Key Financial Results
PIRELLI KEY FINANCIAL RESULTS 1H13 1H12* D YoY 2Q13 2Q12* D YoY 2Q Highlights €/mln Revenues 3,131.1 3,021.8 +3.6% 1,594.8 1,465.3 +8.8% On going volume momentum in Organic growth** +8.6% +13.8% Emerging Markets and Premium rebound in Europe - sustaining mix EBITDA before Restr. Costs 533.5 550.3
Slide 7: H1 2013 Performance by Region
H1 2013 PERFORMANCE BY REGION Tyre Sales Consumer Sales Industrial Sales Tyre Ebit Margin o/w Premium €/mln 3,114.0 +3.8% yoy 2,255.4 +1.1% yoy 1,104.7 +1.6% yoy 858.6 +11.5% yoy 12.6% (-1.3 pp) High single-digit Europe 32% -8% 39% -8% Europe (decreasing yoy) 52% -7% 14% -12% Mid-teen NAFTA 11% -6 %
Slide 8: Russian JV
RUSSIAN JV MARKET UPDATE New car registrations Tyre replacement market Mln cars -4/5% Mln pcs -3/4% 2.94 2.81 37.4 36.1 Imported A brand 24% -10% Brands 34% -2% 34% 22% Foreign Local B brand 32% +3% -4% 34% Production 43% 43% Russian C brand 44% -4% 44% Brands 23% -10% 22% 2012A 2013E 2012A 2013E NE
Slide 9: Net Income H1 2013 vs H1 2012
PIRELLI NET INCOME H1 2013 VS H1 2012 Financial charges (21) €/mln One-off FX impact (19) Prelios fin. Income (7) 218.5 (24.6) (21.6) 24.7 150.1 (46.9) Of which: RCS (12.6) Mediobanca (10.4) Net Income DEBIT D Results D Financial D Taxes Net Income H1 12 from particip. income/ H1 13 charges * Before
Slide 10: Debt Structure as of June 30, 2013
PIRELLI DEBT STRUCTURE AS OF JUNE 30, 2013 Net Financial Position Gross Debt Maturity 186.8 €/mln 2,562.5 829.9 113.2 214.4 73.6 Committed Line 605 515.6 Cash & Cash 42.5 Drawdown Equivalent 847.9 171.9 769.7 Fin. Receivables 614 Debt Capital 314.3 Market 1,732.6 759 575 233.9 605 Other 1,187.8 154
Slide 11: 1H 2013 Net Financial Position
PIRELLI 1H 2013 NET FINANCIAL POSITION €/mln EBIT before restr. costs 205.1 Dep/Am: 73.1 EBIT before restr. costs 183.0 Investments*: (84.3) Dep/Am: 72.3 D NWC & other: (5.6) Investments*: (79.7) D NWC & other: (492.4) 159.8 1,732.6 7.5 49.6 1,680.2 101.1 105.2 5.2 316.8 (29.5) 1,205.2 (188.3) 107 €
Slide 12: Agenda
AGENDA KEY MESSAGES H1 2013 RESULTS TYRE BUSINESS H1 2013 OVERVIEW 2013 OUTLOOK & TARGETS APPENDIX H1 2013 RESULTS 11
Slide 13: Key Tyre Results
KEY TYRE RESULTS 1Q’13 YoY% 2Q’13 YoY% 1H’13 YoY% Q2QHighlights €/mln Revenues 1,526.7 -1.0% 1,587.3 +8.9% 3,114.0 +3.8% Distinctive geographic exposure (Emerging Markets EBITDA (before 260.1 -8.3% 282.7 +2.0% 542.8 -3.2% 57% of sales) allowed the capture restruct. costs) of volume growth across m
Slide 14: Tyre Operating Performance
PIRELLI TYRE OPERATING PERFORMANCE 31.2 20.2 12.8 28.0 199.7 9.0 207.2 (37.2) (7.5) (7.9) (12.3) (19.6) (9.2) Depreciation -9.2 Others -10.4 EBIT 2Q ‘12* Volume Price/Mix Raw Other Input Efficiencies Slowdown Other Marketing Depreciation Restr. FX EBIT 2Q ’13 Materials Costs (Labour/ Industrial Comm
Slide 15: Investments to Foster Premium Growth
INVESTMENTS TO FOSTER PREMIUM GROWTH +19 € MLN Marketing & Commercial expenditure in 1H 2013 100% New store openings and network improvement in China, Russia, Retail Network Brazil and Europe enhancement Strengthening bonds with partner stores Strengthen technological bond with OEMs 50% New ad
Slide 16: Innovation Capability
PIRELLI INNOVATION CAPABILITY CAR Most complete range of Preferred partner to Premium Leading technological Premium products OEM’s innovation (# of ≥18’’ items available) Index 100 >400 homologated items 67 with Prestige and Premium clients ≥18’’ 58 on total 54% 51 H12013 key homologations Pirelli N
Slide 17: Consumer Business: Pirelli Performance
CONSUMER BUSINESS: PIRELLI PERFORMANCE 1Q’13 YoY% 2Q’13 YoY% 1H’13 YoY% Q2 result key drivers €/mln Revenues 1,116.7 -3.0% 1,138.7 +5.6% 2,255.4 +1.1% Revenues up 10.3% before the impact of foreign exchange EBITDA (before 194.8 -17.2% 203.5 -5.2% 398.3 -11.5% restruct. costs) margin 17.4% -3.0p.p.
Slide 18: Industrial Business: Pirelli Performance
INDUSTRIAL BUSINESS: PIRELLI PERFORMANCE 1Q’13 YoY% 2Q’13 YoY% 1H’13 YoY% Q2 result key drivers €/mln Revenues 410.0 +4.9% 448.6 +18.2% 858.6 +11.5% Sales growth acceleration thanks to leadership position in buoyant EBITDA (before 65.3 +35.5% end-markets, especially Latin restruct. costs) 79.2 +26
Slide 19: Agenda
AGENDA KEY MESSAGES H1 2013 RESULTS TYRE BUSINESS H1 2013 OVERVIEW 2013 OUTLOOK & TARGETS APPENDIX H1 2013 RESULTS 18
Slide 20: 2013 Outlook by Region
2013 OUTLOOK BY REGION Old Guidance New Guidance Region Car Tyre market Revenue trend EBIT% Revenue trend EBIT% (Total Tyre Car Market in Mln pcs) Europe Mid single-digit decline. Slight reduction High single-digit Total: 314 Confirmed Confirmed Premium % weight: Premium resilient, flat yoy (l
Slide 21: 2013 Targets Update
PIRELLI 2013 TARGETS UPDATE €/bln 2013 Targets Δ YoY 2013 Targets Δ YoY May ‘13 update Revenues ~ 6.3 / <6.4 +4% / +5% 6.3 / 6.35 > +4% Volumes ~ +3% / ~ +4%; high-end more likely ~ +5.5% / ~ +6.5% higher focus on Premium OE Emerging markets High single-digit, upside more likely High single-digit gr
Slide 22: 2013 Consumer & Industrial Targets
2013 CONSUMER & INDUSTRIAL TARGETS Consumer business Industrial business 2013Targets 2013 Targets 2013Targets 2013 Targets May ‘13 update May‘13 update €/bln Revenues ~ 4.6 Confirmed Revenues ~ 1.7 Confirmed Volumes +3% / +4% +4.5% / +5.5% Volumes +3.5% / +4.5% +9% High end more likely o/w Premium ~
Slide 23: 2013 Main Profitability Drivers – H1 Update
2013 MAIN PROFITABILITY DRIVERS – H1 UPDATE Driver Impact Changes vs previous guidance Volumes +5.5% / +6.5% revenue growth Upside from LatAm, APAC more than Zero net (previous guidance +3% / +4%) compensate downside from Russia impact on Ebit Price/Mix +3.5% / +4% revenue growth Higher impact o
Slide 24: 2013 Raw Materials Guidance
2013 RAW MATERIALS GUIDANCE BREAKDOWN FY 2012 Update Guidance (based on purchase cost) May 2013 Aug 2013 Synthetic Rubber Average Cost of 2012A 2013 Δ yoy 2013 Δ yoy Goods Sold (2013 vs 2012) (2013 vs 2012) €/mln Natural 31% Rubber 26% Natural Rubber 3,450 ~2,800 +132 ~2,700 +150 TSR20 ($/ton) Carbo
Slide 25: Agenda
AGENDA KEY MESSAGES H1 2013 RESULTS TYRE BUSINESS H1 2013 OVERVIEW 2013 OUTLOOK & TARGETS APPENDIX H1 2013 RESULTS 24
Slide 26: Group – H1 Results
PIRELLI GROUP – H1 13 RESULTS Profit & Loss and Net Financial Position by Business Unit Pirelli Tyre Other Pirelli & C. Cons. H1 13 H1 12 H1 13 H1 12 H1 13 H1 12 €/mln Sales 3,114.0 3,000.3 17.1 21.5 3,131.1 3,021.8 EBITDA before Restruct. Costs 542.8 560.8 (9.3) (10.5) 533.5 550.3 % on sales 17.4%
Slide 27: Group – Q2 Results
PIRELLI GROUP – Q2 13 RESULTS Profit & Loss and Net Financial Position by Business Unit Pirelli Tyre Other Pirelli & C. Cons. Q2 13 Q2 12 Q2 13 Q2 12 Q2 13 Q2 12 €/mln Sales 1,587.3 1,457.7 7.5 7.6 1,594.8 1,465.3 EBITDA before Restruct. Costs 282.7 277.2 (4.5) (6.0) 278.2 271.2 % on sales 17.8% 19.
Slide 28: Balance Sheet
PIRELLI BALANCE SHEET H1 13 FY12 €/mln Fixed Assets 3,800.0 3,877.2 Inventories 1,096.7 1,102.6 Trade receivables 935.5 704.6 Trade payables (1,101.2) (1,268.7) Net Operating Working Capital 931.0 538.5 Other payables/receivables 94.2 11.0 Net Working Capital 1,025.2 549.5 Net Invested Capital 4,825
Slide 29: Group Cash Flow
PIRELLI GROUP CASH FLOW €/mln 2Q’12 3Q’12 4Q’12 1Q’13 2Q’13 EBIT before restructuring costs 205.1 199.2 212.6 183.0 205.1 Depreciation 66.1 68.4 72.4 72.3 73.1 Net investments (114.8) (132.5) (143.5) (79.7) (84.3) Working capital/other variations (237.3) (197.2) 594.7 (492.4) (5.6) OPERATING CASH FL
Slide 30: Consumer Business: Key Market Trends
CONSUMER BUSINESS: KEY MARKET TRENDS % YoY 2Q12 3Q12 4Q12 1Q13 2Q13 1H13 OE* 0% Europe -8% -11% -10% -5% -9% +3% Replacement** -5% -13% -11% -13% -11% +27% +16% America +10% North +6% +4% OE +1% Replacement -1% -7% -3% -7% -3% -4% +22% +14% +15% Mercosur +3% +8% OE -9% +15% +5% +7% +11% Replacement*
Slide 31: Industrial Business: Key Market Trends
INDUSTRIAL BUSINESS: KEY MARKET TRENDS % YoY 2Q12 3Q12 4Q12 1Q13 2Q13 1H13 +2% OE -2% Europe* -7% -8% -10% -6% +12% +1% +7% Replacement -1% -10% -26% +51% +48% +44% OE Mercosur -27% -28% -31% +16% +14% +12% 0% +3% Replacement** -7% +40% +14% China OE -6% -7% -19% -24% (*)Turkey included and Russia e
Slide 32: 1H 2013 Pirelli Tyre Mix
1H 2013 PIRELLI TYRE MIX SALES BY BUSINESS SALES BY SEGMENT Car Consumer 65% 72% Motorbike 7% Steelcord Truck & other Industrial 28% 26% 2% SALES BY CHANNEL SALES BY REGION Nafta Replacement South 11% 75% America Asia Pacific 36% 8% MEA 9% Russia 4% OE Europe 25% 32% H1 2013 RESULTS 31
Slide 33: June 2013 Pirelli People
JUNE 2013 PIRELLI PEOPLE HEADCOUNT PEOPLE BY REGION Nafta 38,138 Europe 3% 37,338 41% South America 37% Asia Pacific MEA Dec. 2012 Jun. 2013 9% 10% PEOPLE BY CONTRACT PEOPLE BY CLUSTER Permanents Workers 92% 80% Staff 19% Temps & Agency Management 8% 1% H1 2013 RESULTS 32
Slide 34: Plants in the World
PIRELLI PLANTS IN THE WORLD MEXICO Italy Germany Russia U.K. Bollate (MI) Car Breuberg Car/Moto Settimo Torinese Car Merzig Steelcord Kirov Car Burton Car Figline Valdamo Steelcord Voronezh Car Carlisle Car Turkey U.S.A Car/Truck Izmit Rome Car Steelcord Mexico Romania Guanajuato Car Slatina Car/Ste
Slide 35: Raw Materials
RAW MATERIALS RAW MATERIAL PRICE TREND 5,251 5,251 Brent Oil (in usd/bbl) 4,671 Natural Rubber (in usd/tons) 4,565 4,254 3,587 3,687 3,380 123 3,301 117 3,096 118 11 3,022 110 110 113 111 8 3,148 112 103 99 112 2,513 109 3.156 109 96 2,943 2,973 2,531 105 2,962 2,750 2,884 2,653 80 2,447 69 87 63 80