Slide 1: Pirelli, Global High Value - FY 2017 Results
F Y 2 0 1 7 R E S U LT S - 2 6 F E B R U A R Y 2 0 1 8 FY 2017 RESULTS PIRELLI, GLOBAL HIGH VALUE 26 February 2018
Slide 2: Disclaimer
DISCLAIMER_ 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 “Compan
Slide 3: Key Messages
KEY MESSAGES_ > 2017 RESULTS: SOUND HIGH VALUE STRATEGY DELIVERY ▬ Strengthened foothold in High Value (~58% on revenues, ~83% on adjusted EBIT before start-up costs) ▬ Top Price/Mix improvement in the industry: +6.9% in FY, +7.8% in 4Q ▬ Solid profitability increase driven by internal levers : EBIT
Slide 4: Agenda
AGENDA_ PLAN DELIVERY IN 2017 AND 2018 OUTLOOK SUSTAINABILITY PLAN UPDATE REVIEW OF 2017 RESULTS APPENDIX FY 2017 RESULTS PIRELLI, GLOBAL HIGH VALUE 33 26 February 2018
Slide 5: 2017 Results Highlights
2017 RESULTS HIGHLIGHTS_ € million 2016A 2017E 2017A ∆ vs. guidance ~-0.7pp on FX ~-0.8pp on faster target @ 6-Nov-18 YoY Standard reduction Revenues 4,976 ~+9% YoY 5,352 +7.6% ~ HV Revenues 2,754 3,078 +11.8% HV weight on tot. revenues 55% >57% 57.5% Adjusted EBIT w/o start-up1 844 ~930 927 +9.7% M
Slide 6: 2017 Performance by High Value Region
2017 PERFORMANCE BY HIGH VALUE REGION_ € million SALES Δ Org. EBIT KEY HIGHLIGHTS FY16A FY17A YoY % growth adj. margin1 2,093 2,238 +6.9% +7.5% ▬ Consolidated leadership on High Value HIGH VALUE REGIONS ▬ Standard exposure SALES EUROPE +11.6% Mid-teens decreasing 42% 42% +7.7% 4,028 3,740 935 984 +5
Slide 7: 2017 Performance by Standard Region
2017 PERFORMANCE BY STANDARD REGION_ € million SALES Δ Org. EBIT KEY HIGHLIGHTS FY16A FY17A YoY % growth adj. margin1 916 +11.1% +7.4% 824 ▬ Continuous mix improvement among STANDARD REGIONS Standard products High-single SALES LATAM ▬ Export to NAFTA to support digit H.V. growth +29.4% ▬ Increasing
Slide 8: Pillar 1: High Value 2017 Achievements and 2018 Priorities
PILLAR 1: HIGH VALUE 2017 ACHIEVEMENTS AND 2018 PRIORITIES_ 1 2018 PRIORITIES A # new homologations +28% ~x2 ~800 ACCELERATING homologation 402 projects already ▬ High Value (mainly ≥19” Homologations) HOMOLOGATION 315 165 in the pipeline ▬ New materials and technologies PIPELINE for 2018-2020 2014A
Slide 9: Pillar 2: Transformation Programs 2017 Achievements and 2018 Priorities
PILLAR 2: TRANSFORMATION PROGRAMS 2 2017 ACHIEVEMENTS AND 2018 PRIORITIES New O. E. Homologation D Registrations Tyres Market E S S M 1 Integrated Forecasting A A F U E E P N C N L N A P G O G 2 Smart Manufacturing and Flexible Factory E D C L T A N A S T R Pull through Y G S G P O A Demand E U E P
Slide 10: Pillar 3: Standard Capacity Reduction, 2017 Achievements and 2018 Priorities
PILLAR 3: STANDARD CAPACITY REDUCTION, 3 2017 ACHIEVEMENTS AND 2018 PRIORITIES STANDARD CAPACITY EVOLUTION 2016-2020 2017 ACHIEVEMENTS million pcs others LATAM ▬ Mix improvement ▬ Phasing out of legacy brands in Russia (e.g. Amtel) -7 million pcs in 2016-2020 ▬ Pruning of lower rim sizes in Europe a
Slide 11: 2018 High Value Market Outlook in Line with Our Plan
2018 HIGH VALUE MARKET OUTLOOK IN LINE WITH OUR PLAN_ CAGR ‘16A-’20E +5% +5% PRESTIGE & PREMIUM 141 154 CAR PARC 129 135 Tot. +4.6% Other regions EU, APac, NAFTA 93% +5% 93% +5% 93% 93% +4.5% (million vehicles) 2016A 2017A 2018E 2020E ~5x ≤17” CAGR (+1.9%) ~8x ≤17” CAGR (+1.2%) CAGR ‘16A-’20E O.E. +
Slide 12: FY 2018 Outlook
FY 2018 OUTLOOK_ 2017A 2018E € million Revenues 5,352 ≥+6% YoY ~+10% Net of FX High Value weight 58% ~60% Adjusted EBIT w/o start-up1 927 >€ 1,0 bln High Value weight ~83% ≥83% Start-up costs 50 ~40 Adjusted EBIT2 876 ~€1,0 bln Net financial position / Adjusted 2.7X ~2.3X EBITDA w/o start-up costs3
Slide 13: Agenda
AGENDA_ PLAN DELIVERY IN 2017 AND 2018 OUTLOOK SUSTAINABILITY PLAN UPDATE REVIEW OF 2017 RESULTS APPENDIX FY 2017 RESULTS PIRELLI, GLOBAL HIGH VALUE 12 26 February 2018
Slide 14: The Sustainability Plan
THE SUSTAINABILITY PLAN_ The Plan 2020 with selected 2025 target > Was drafted according to Pirelli Value Driver Model, with a Return on Capital approach > Integrates Group Industrial Plan and its High Value development strategy > Replaces previous Sustainability Plan 2013-2017 with selected targets
Slide 15: Sustainability Plan Update: Achievements and Key Targets
SUSTAINABILITY PLAN UPDATE: ACHIEVEMENTS AND KEY TARGETS_ ’17 ’17 Targets FURTHER 2017/18 KPIs vs ‘09 vs ‘16 ‘20 vs ‘09 ACHIEVEMENTS Green Performance Tyres revenues +2pp >50% > Issuance of Pirelli «Sustainable accounted for 42% of total tyre sales in >65% on HV Natural Rubber Policy» 20171 Accident
Slide 16: Agenda
AGENDA_ PLAN DELIVERY IN 2017 AND 2018 OUTLOOK SUSTAINABILITY PLAN UPDATE REVIEW OF 2017 RESULTS APPENDIX FY 2017 RESULTS PIRELLI, GLOBAL HIGH VALUE 15 26 February 2018
Slide 17: FY 2017 Results: Highlights
FY 2017 RESULTS: HIGHLIGHTS_ € million REVENUES EBIT ADJ.1 w/o start-up costs2 ∆ YoY +7.6% organic +9.7% 4,976 5,352 +7.9% 844 927 Standard Standard High Value 81% ~83% High Value 55.3% +11.8% 57.5% +13.4% FY 2016 FY 2017 FY 2016 FY 2017 Margin 17.0% 17.3% NET INCOME CONSUMER NET FINANCIAL POSITION
Slide 18: FY 2017 Net Sales Bridge
FY 2017 NET SALES BRIDGE_ o/w organic € million High Value +7.9% Standard +7.6 % +0.4% +6.9% 5,352 (34) 22 +12.5% -0.7% 338 +1.0% -5.3% 4,976 50 Net Sales FY Volume Price/Mix FX Perimeter1 Net Sales FY ’17 ’16 restated o/w organic +11.5% 4th Quarter +0.5% +7.8% -4.5% -0.3% +3.5% +8.3% -5.8% +12.2% 3
Slide 19: FY / 4Q 2017 Operating Performance
FY / 4Q 2017 OPERATING PERFORMANCE_ € million Internal levers ∑ +308 External levers ∑ -226 (40) 47 (165) FY 278 (54) 927 (7) 876 844 (50) 23 EBIT adj. Volume Price/mix D&A / Other2 Efficiencies Raw Mat. Other FX EBIT adj. start-up EBIT adj. FY16A input costs FY17A costs 1 FY17A w/o start-up margin
Slide 20: FY 2017 Net Income Bridge
FY 2017 NET INCOME BRIDGE_ 263 € million 34 65 164 (13) 13 Net Income Δ EBIT Δ Net income / Δ Financial Δ Taxes Net Income Consumer loss from equity income / charges Consumer FY16A participations FY17A % on Sales 3.3% 4.9% FY ’16 FY ’17 Net Income 164 263 PPA amortization + 105 + 110 Non recurring /
Slide 21: FY 2017 Cash Flow and Net Financial Position
FY 2017 CASH FLOW AND NET FINANCIAL POSITION_ € million 4,913 Net Cash Flow before extraordinary operations : +200 74 (305) 363 (1,138) (124) 136 489 (1,189) 3,219 NFP ’16 EBITDA CapEx ∆ WC Taxes Interests Other Industrial Capital NFP ’17 adjusted reorg. increase NFP / 4.6 x5 2.7 x EBITDA adj. 1 rep
Slide 22: Current Capital Structure (December 2017)
CURRENT CAPITAL STRUCTURE (DECEMBER 2017)_ € million NET FINANCIAL POSITION GROSS DEBT MATURITY Cash & Cash equivalents 4,523 1,637 1,678 1,151 3,219 Loan 153 3,278 Bond Fin receivables 1,628 1,650 & Other 570 635 Other 596 596 649 2 39 9 28 Gross Fin. Net Fin. Debt Assets Position 2018 2019 2020 20
Slide 23: Agenda
AGENDA_ PLAN DELIVERY IN 2017 AND 2018 OUTLOOK SUSTAINABILITY PLAN UPDATE REVIEW OF 2017 RESULTS APPENDIX FY 2017 RESULTS PIRELLI, GLOBAL HIGH VALUE 22 26 February 2018
Slide 24: FY / 4Q 2017 Results Highlights
FY / 4Q 2017 RESULTS HIGHLIGHTS_ € million FY ’16 4Q ’16 restated FY ‘17 Δ YoY restated 4Q ‘17 Δ YoY 4Q Highlights Revenues 4,976.4 5,352.3 +7.6% 1,269.9 1,313.8 +3.5% Organic Growth1 +7.9% +8.3% Strong organic growth on the back of: High Value Revenues 2,753.8 3,078.1 +11.8% 677.2 734.2 +8.4% ▬ Str
Slide 25: 2017 Results Highlights by Quarter
2017 RESULTS HIGHLIGHTS BY QUARTER_ € million 1Q ’16 2Q ’16 3Q ’16 4Q ’16 restated 1Q ‘17 Δ YoY restated 2Q ‘17 Δ YoY restated 3Q ‘17 Δ YoY restated 4Q ‘17 Δ YoY Revenues 1,180.9 1,339.3 +13.4% 1,246.0 1,346.0 +8.0% 1,279.6 1,353.2 +5.8% 1,269.9 1,313.8 +3.5% Organic Growth1 +8.4% +6.2% +8.3% +8.3%
Slide 26: FY Pirelli Balance Sheet
FY PIRELLI BALANCE SHEET_ € million 31/12/2016 31/12/2016 31/12/2017 Carve-out Reported Fixed assets related to continuing operations 9,168 10,299 9,121 Inventories 874 1,056 941 Trade receivables 680 679 653 Trade payables (1,281) (1,499) (1,674) Operating net working capital related to continuing
Slide 27: FY Pirelli Group Cash Flow
FY PIRELLI GROUP CASH FLOW_ FY ‘16 restated FY ‘17 € million EBIT adjusted1 844 876 Depreciation & Amortization (excl. PPA amortization) 238 261 Capital expenditures (342) (489) Change in working capital / other 32 124 Operating Cash Flow 772 772 Financial income / (expenses) (427) (363) Taxes paid
Slide 28: 2018E Forex Guidance
2018E FOREX GUIDANCE € million 14% other 6% GBP 36% EUR 3% RUB breakdown FY 2017 A 13% BRL based on currency 11% CNY 17% USD ∆ YoY 2018E MAIN AVERAGE EXCHANGE RATES 2017 A 2018 E ∆ YoY vs EUR IPO plan EUR / USD / 1.130 ~1.17 -4% -4% ~1,05 USD / CNY / 6.752 ~6.85 -1% -5% ~7.3 USD / BRL / 3.193 ~3.4 -
Slide 29: 2018E Raw Material Guidance
2018E RAW MATERIAL GUIDANCE € million 15% Natural Rubber 10% Steel Reinf. 16% Textiles breakdown raw mat. FY 2017 A 29% Synthetic Rubber 35% on Sales based on purch. costs 21% Chemicals 9% Carbon Black AVERAGE QUOTATION 2018E 2018E 2017 A 2018 E ∆ YoY OF COMMODITIES EBIT impact IPO plan Natural Rubb
Slide 30: Attractive Tyre Market: ≥18" Outgrowing Standard ~4x
ATTRACTIVE TYRE MARKET: ≥18” OUTGROWING STANDARD ~4x SUSTAINED BY PREMIUM & PRESTIGE CAR PARC EXPANSION_ CAGR 16A-20E CAR PARC 1,372 +3.4% Total (million vehicles) 0.3% +3.4% 1,286 1,244 0.2% 11.0% 1,200 +3.6% +7.7% +7.8% Prestige 0.2% 0.2% +8.3% 10.7% 10.6% +4.5% 10.5% +4.6% +4.5% Premium +3.5% +3.
Slide 31: Key Car Market Trends: Europe
KEY CAR MARKET TRENDS: EUROPE1_ Market trend 4Q’16 FY’16 1Q’17 2Q’17 3Q’17 4Q'17 FY’17 ∆% YoY 3 4 6 O.E. 1 2 1 Total Car market (6) 7 7 4 3 2 Replacement 0 (3) 5 4 6 4 0 1 Total (O.E.+Repl.) (4) ≥18” 15 12 New Premium & Standard 10 10 10 ≤17" 6 1 1 3 2 O.E. 0 (1) (2) 18 19 (9) 16 13 12 11 6 4 5 2 2
Slide 32: Key Car Market Trends: NAFTA
KEY CAR MARKET TRENDS: NAFTA_ Market trend 4Q’16 FY’16 1Q’17 2Q’17 3Q’17 4Q'17 FY’17 ∆% YoY O.E. 1 2 2 Total Car market (3) (4) (4) (10) 5 2 2 1 Replacement (2) (2) 0 4 2 2 Total (O.E.+Repl.) 0 (2) (4) (1) ≥18” New Premium & Standard ≤17" 2 4 5 O.E. (1) 0 (1) 0 (1) 0 (5) (7) (7) (6) 15 14 13 (12) 14
Slide 33: Key Car Market Trends: APAC
KEY CAR MARKET TRENDS: APAC_ Market trend 4Q’16 FY’16 1Q’17 2Q’17 3Q’17 4Q'17 FY’17 ∆% YoY O.E. 10 7 5 5 1 2 Total Car market (2) 5 5 7 4 6 3 5 Replacement 7 6 6 3 6 4 Total (O.E.+Repl.) 1 ≥18” 31 27 26 New Premium & Standard 22 22 19 ≤17" O.E. 8 5 9 2 2 (2) (4) (1) 11 11 13 14 15 13 14 Replacement
Slide 34: Key Market Trends: Russia & CIS and South America
KEY MARKET TRENDS: RUSSIA & CIS AND SOUTH AMERICA_ Market trend 4Q’16 FY’16 1Q’17 2Q’17 3Q’17 4Q'17 FY’17 ∆% YoY 24 23 24 21 15 6 O.E. Russia & CIS (11) 25 21 20 17 11 0 2 Replacement 21 24 21 17 10 4 Total (O.E.+Repl.) (2) 27 21 17 15 20 8 O.E. South America (11) 15 13 10 6 8 7 Replacement1 0 16 15
Slide 35: Raw Material Costs Trend and Mix
RAW MATERIAL COSTS TREND AND MIX_ MAIN RAW MATERIALS PRICE TREND Natural Rubber: Sicom Brent Oil (in $ / barrel) Natural Rubber (in $ / kg) Yearly Average Brent: www.oilnergy.com $ / kg $ / bbl 5.75 150 5.25 130 4.75 4.25 110 3.75 3.25 90 2.75 70 2.25 54.8 1.75 53.6 45.0 1.65 50 1.38 1.25 1.37 0.75
Slide 36: Pirelli Manufacturing Footprint as of December 31st 2017
PIRELLI MANUFACTURING FOOTPRINT AS OF DECEMBER 31ST 2017 U.K. Germany Romania Russia ▬ Burton – Car ▬ Breuberg – ▬ Slatina – Car ▬ Kirov – Car U.S. ▬ Carlisle – Car Car / Moto ▬ Voronezh – Low-cost countries Car ▬ Rome – Car Mexico ▬ Silao – Car Italy ▬ Bollate – Car China ▬ Settimo – Car Venezuela1
Slide 37: Pirelli, Global High Value FY 2017 Results
FY 2017 RESULTS PIRELLI, GLOBAL HIGH VALUE 26 February 2018