Pirelli & C. S.p.a. · MIL:PIRC
Pirelli & C — Q1 2014 Earnings Presentation
35 slides from Pirelli & C's earnings presentation, May 7, 2014
Slide 1: Pirelli 1Q 2014 Results
PIRELLI 1Q 2014 RESULTS MILANO – MAY 7, 2014
Slide 2: Agenda
AGENDA KEY MESSAGES 1Q 2014 RESULTS 2014 OUTLOOK & TARGETS 1Q 2014 TYRE OVERVIEW APPENDIX 1Q 2014 RESULTS 1
Slide 3: Key Messages
KEY MESSAGES Pirelli 1Q Snapshot > Europe: Top Premium segment (18” and above) market share increase > Russian Turnaround: progressing in line with plan > Emerging markets: resilient performance in a volatile economic environment 2014 Outlook > Industry - positive scenario confirmed: - Premium outgr
Slide 4: Agenda: 1Q 2014 Results
AGENDA KEY MESSAGES 1Q 2014 RESULTS 2014 OUTLOOK & TARGETS 1Q 14 TYRE OVERVIEW APPENDIX 1Q 2014 RESULTS 3
Slide 5: Pirelli Key Financial Results
PIRELLI KEY FINANCIAL RESULTS 1Q 13* 1Q 14 Δ yoy Highlights Revenues 1,514.6 1,473.2 -2.7% Organic growth** +8.0% • Solid organic growth: visible recovery in Europe, good trend in Nafta despite weather, sound EBITDA before Restr. Costs 253.0 277.3 +9.6% performance of Emerging Markets Margin 16.7% 1
Slide 6: 1Q 2014 Performance by Region
1Q 2014 PERFORMANCE BY REGION Riding the recovery in mature markets, solid organic growth in emerging markets Tyre Sales Consumer Sales Industrial Sales Tyre Ebit Margin** €/Mln Organic Organic Organic D YoY D YoY D YoY growth* growth* growth* 1,469.5 -2.4% +8.4% 1,128.7 +1.1% +10.3% 340.7 -12.2% +3
Slide 7: Premium: Our Growth Engine Across Regions
PREMIUM: OUR GROWTH ENGINE ACROSS REGIONS €/Mln D YoY Organic • OEM partnerships strengthened with new top growth* homologations and market share gains: 51% in Prestige 566.7* 639.9 12.9% +16.4% OEMs (+1 pp vs Ind. Plan Nov. ’13), 22% in Premium OEMs (+3pp vs Nov. ’13) • Tangible OE benefits on Repl
Slide 8: Region-Specific Product Innovation Supporting Premium Growth
REGION-SPECIFIC PRODUCT INNOVATION SUPPORTING PREMIUM GROWTH • Closer technological partnership with Premium European and extra-European OEMs • Extension of product offering meeting Region-specific market needs • De-complexity through component standardization and plant specialization LatAm Russia •
Slide 9: Efficiency Program: ~30% of 2014 Target Already Reached in Q1
EFFICIENCY PROGRAM: ~30% OF 2014 TARGET ALREADY REACHED IN Q1 2014-2017 Efficiency Plan Q1 2014 results ~30 ~350 27,6 ~320 1Q 2014 Highlights • Materials: scrap 48% efficiencies and spec Materials simplifications Materials 56% • Labour: productivity improvement • Allocation Mix: fully Labour 26% exp
Slide 10: Pirelli Net Income 1Q 2014 vs 1Q 2013
PIRELLI NET INCOME 1Q 2014 VS 1Q 2013 14.7 (11.3) 91.5 (7.2) 0.7 22.5 72.1 Of which: Prelios (13.6) Net Income ∆ EBIT ∆ Results Financial ∆ Taxes Discontinued Net income Q1 ‘13 from Income/ Operations Q1 ‘14 particip. charges 1Q 2014 RESULTS 9
Slide 11: Debt Structure - March 31, 2014
DEBT STRUCTURE - MARCH 31, 2013 Net Financial Position Gross Debt Maturity €/Mln 2,468 -502 136 Cash & Cash Committed Equivalent 126 108 Line 423 827 49 Drawdown 84 42 28 790 1,966 79 614 Debt Capital 1,110 213 Market 764 Fin. Receivables 790 Other Borrowings 914 220 320 Gross Fin. Net fin. 8.9% 45.
Slide 12: Pirelli Net Financial Position
PIRELLI FY 2013 NET FINANCIAL POSITION €/Mln EBIT before restr. costs 206.7 Depreciation / amortization: 70.6 Investments*: (65.3) D NWC & other: (686.6) 1,965.6 12.9 58.9 96.8 474.6 1,322.4 Main ∆ NWC dynamics • Receivables: higher sales in Europe and Russia (highly seasonal) • Payables: impacted b
Slide 13: Agenda: 2014 Outlook & Targets
AGENDA KEY MESSAGES 1Q 2014 RESULTS 2014 OUTLOOK & TARGETS 1Q 2014 TYRE OVERVIEW APPENDIX 1Q 2014 RESULTS 12
Slide 14: 2014 Pirelli Outlook by Region
2014 PIRELLI OUTLOOK BY REGION Car Tyre Market 2014 Target Tyre Business Highlights Highlights Revenues EBIT%* +4% yoy Positive development of Premium, Europe o/w Premium up double-digit Mid single-digit growth Mid-teens = efficiency and use of low-cost sources Premium growth above market, due to +3
Slide 15: FY 2014 Targets Confirmed
FY 2014 TARGETS CONFIRMED FY 2014 Targets Steelcord business FY 2014 At constant consolidation perimeter* Included in discontinued operations, formerly part of Industrial Business Revenues ~6.2 €/bln ~90 €/mln vs third parties • Volumes > +5% - o/w Premium > +14% • Price/mix ~ +4% / ~ +5% Organic re
Slide 16: 2014 Consumer & Industrial Targets Confirmed
2014 CONSUMER & INDUSTRIAL TARGETS CONFIRMED Consumer Business Industrial Business 2014 Targets at Steelcord business 2014 Targets constant perimeter* Discontinued operations Confirmed Confirmed Revenues ~4.6 Revenues ~ 1.6 ~90 €/mln vs third parties • Volumes > +6% • Volumes ~ +4% / ~ +4.5% - o/w P
Slide 17: Agenda: 1Q 2014 Tyre Overview
AGENDA KEY MESSAGES 1Q 2014 RESULTS 2014 OUTLOOK & TARGETS 1Q 2014 TYRE OVERVIEW APPENDIX 1Q 2014 RESULTS 16
Slide 18: Key Tyre Results
KEY TYRE RESULTS 1Q’13* Q1‘14 ∆% • Solid performance, in line with our FY 2014 targets Revenues 1,505.0 1,469.5 -2.4% • Strong volume growth in mature markets (+11.7% yoy), stable volumes in emerging markets (+0.2%): o/w premium 566.7 639.9 +12.9% - Consumer ~ +3% - Industrial ~ -4% discounting unfa
Slide 19: Pirelli Tyre Operating Performance
PIRELLI TYRE OPERATING PERFORMANCE Depreciation -5.8 Marketing costs -7.5 Other -13.9 7.9 (29.5) 27.6 (27.2) 39.3 (2.3) (19.2) 204.9 184.3 24.0 EBIT Volume Price/ Raw Other Efficiencies Depreciation Restr. FX EBIT 1Q ’13* Mix Materials Input & other costs 1Q ‘14 Costs (Labour Energy / other) * Resta
Slide 20: Consumer Business: Pirelli Performance
CONSUMER BUSINESS: PIRELLI PERFORMANCE 1Q’13 1Q‘14 ∆% Revenues 1,116.7 1,128.7 1.1% o/w premium 566.7 639.9 12.9% % revenues 50.8% 56.7% +5.9p.p. EBITDA before Restr. Costs 194.8 219.4 +12.6% Margin 17.4% 19.4% +2.0p.p. EBIT before Restr. costs 138.0 162.7 +17.9% Margin 12.4% 14.4% +2.0p.p. EBIT 136
Slide 21: Industrial Business: Pirelli Performance
INDUSTRIAL BUSINESS: PIRELLI PERFORMANCE 1Q’13* Q1‘14 ∆% Revenues 388.3 340.8 -12.2% EBITDA before Restr. Costs 63.0 60.9 -3.3% Margin 16.2% 17.9% +1.7% EBIT before Restr. costs 49.5 47.6 -3.8% Margin 12.7% 14.0% +1.3pp EBIT 48.3 46.1 -4.6% Margin 12.4% 13.5% +1.1pp Revenue drivers 1Q’13* 2Q’13* 3Q’
Slide 22: 2014 Raw Material Guidance Confirmed
2014 RAW MATERIAL GUIDANCE CONFIRMED Breakdown Q1 2014 Guidance 2014 (based on purchase cost) (March 2014) Average Cost of Goods Sold €/Mln 2013A 2014E Δ yoy Synthetic Rubber 27% Natural Rubber Natural Rubber ~2,700 ~ 2,250 +80 22% TSR20 ($/ton) Brent Oil 109 110 -5 ($/barrell) Carbon Black Textile
Slide 23: FY 2014 Main Profitability Drivers Confirmed
FY 2014 MAIN PROFITABILITY DRIVERS CONFIRMED Driver Impact Volumes >+5% on sales Price/Mix +4%/+5% on sales -9%/-10% on sales Forex -110€/mln on Ebit Efficiencies + ~90€/mln on Ebit 2014 Expected Ebit confirmed Raw Materials -75€/mln on Ebit ~850€/mln Other Input Costs ~ -125€/mln on Ebit D&A, Start
Slide 24: Appendix
AGENDA 1Q 2014 RESULTS 2014 OUTLOOK & TARGETS TYRE BUSINESS 1Q 2014 OVERVIEW APPENDIX 1Q 2014 RESULTS 23
Slide 25: Pirelli Group - Q1 Results
PIRELLI GROUP – Q1 14 RESULTS Profit & Loss and Net Financial Position by Business Unit Pirelli tyre Other Pirelli & C. Cons. Q1’13* Q1’14 Q1’13 Q1’14 Q1’13* Q1’14 SALES 1,505.0 1,469.5 9.6 3.7 1,514.6 1,473.2 EBITDA before Restr. Costs 257.8 280.3 (4.8) (3.0) 253.0 277.3 % on sales 17.1% 19.1% 16.7
Slide 26: Pirelli Group Cash Flow
PIRELLI GROUP CASH FLOW 1Q’13 2Q’13 3Q’13 4Q’13 1Q’14 €/Mln reported reported reported reported EBIT before restructuring costs 183.0 205.1 208.8 219.6 206.7 Depreciation / Amortization 72.3 73.1 71.1 72.4 70.6 Net investments (79.7) (84.3) (74.3) (174.8) (65.3) Working capital / other variations (4
Slide 27: Pirelli Balance Sheet
PIRELLI BALANCE SHEET €/Mln FY’13 1Q’14 FIXED ASSETS 4,043.0 3,862.6 Inventories 987.3 965.4 Trade receivables 666.4 1,048.0 Trade payables (1,244.5) (882.5) NET OPERATING WORKING CAPITAL 409.2 1,130.9 Other payables/receivables 3.0 5.9 Net Working Capital 412.2 1,136.8 Net Invested Capital of disco
Slide 28: Pirelli Group - 2013 Quarterly Results - Restated
PIRELLI GROUP – 2013 QUARTERLY RESULTS – RESTATED* Q1’13 Q2’13 Q3’13 Q4’13 FY’13 Tyre Group Tyre Group Tyre Group Tyre Group Tyre Group SALES 1,505.5 1,541.6 1,567.9 1,575.4 1,489.4 1,496.4 1,468.3 1,474.6 6,030.6 6,061.0 EBITDA before Restr. 257.8 253.0 280.8 276.3 282.3 277.5 299.0 288.2 1,119.9 1
Slide 29: Consumer Business: Key Market Trends
CONSUMER BUSINESS: KEY MARKET TRENDS 1Q’13 2Q’13 3Q’13 4Q’13 FY’13 1Q’14 % yoy 3 5 5 2 0 OE -9 9 Europe* 3 5 2 0 REPLACEMENT -11 6 5 5 5 4 1 America OE North 0 3 3 REPLACEMENT -7 -3 -1 22 8 4 6 Mercosur OE -10 -10 17 11 6 4 9 4 REPLACEMENT** 24 16 17 China 14 14 10 OE * Turkey included, Russia exclu
Slide 30: Industrial Business: Key Market Trends
INDUSTRIAL BUSINESS: KEY MARKET TRENDS 1Q’13 2Q’13 3Q’13 4Q’13 FY’13 1Q’14 % YoY 24 2 7 6 7 OE Europe * -6 12 9 6 7 14 1 REPLACEMENT 44 51 33 34 11 OE Mercosur -1 12 16 8 10 6 5 REPLACEMENT** 40 China 24 18 17 13 OE -6 * Turkey included and Russia excluded ** Non-pool members’ imports not included S
Slide 31: 1Q 2014 Pirelli Tyre Mix
1Q 2014 PIRELLI TYRE MIX Sales by Business Sales by Segment Consumer Car 77% 69% Agro 3% Truck Motorbike Industrial 8% 23% 20% Sales by Channel Sales by Region Replacement South America NAFTA 75% 32% 12% Asia Pacific 8% MEAI 8% Russia OE Europe 4% 25% 36% 1Q 2014 RESULTS 30
Slide 32: March 2014 Pirelli People
MARCH 2014 PIRELLI PEOPLE Headcount People by Region NAFTA +1.8% yoy, South America 38,529 mainly China 3% 37,846 37% Asia Pacific 11% MEAI 9% Russia Europe 9% Mar. 2013 Mar. 2014 32% People by Contract People by Cluster Management Temps & Agency 1% 7% Employees Workers 93% Staff 80% 19% 1Q 2014 RES
Slide 33: 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 Figline Valdarno Steelcord MEXICO ROMANIA Guanajuato Car Slatina Car / Steelcord VENEZUELA CHINA Guacara Car Yanzhou Car / Moto / T
Slide 34: 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 3,156 111.0 98.5 111.7 108.9 2,517 2,531 80.2 75.2 1,801 Q1/08 Q2/08 Q3/08 Q4/08 Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Q4/10 Q1/11 Q
Slide 35: 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