Pirelli & C. S.p.a. · MIL:PIRC
Pirelli & C — 9M 2019 Earnings Presentation
32 slides from Pirelli & C's earnings presentation, Oct 29, 2019
Slide 1: Pirelli, Global High Value – 9M 2019 Results
PIRELLI, GLOBAL HIGH VALUE 9 M 2 0 1 9 R E S U L T S – O C T O B E R 29th , 2 0 1 9 9M 2019 RESULTS PIRELLI, GLOBAL HIGH VALUE 29 October 2019
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 “Company
Slide 3: Key Messages
KEY MESSAGES > Prolonged weakness in car production impacted O.E. Tyre volumes and prices of both O.E. and Replacement, especially in Standard and High Value with lower technological content > Pirelli reacted by strengthening High Value leadership, lowering the exposure to Standard by reducing volum
Slide 4: Agenda
AGENDA CURRENT SCENARIO, 9M ‘19 RESULTS AND FY ‘19 GUIDANCE MEDIUM-TERM SCENARIO AND STRATEGIC GUIDELINES FOR ‘20-’22 PLAN REVIEW OF 9M ‘19 RESULTS AND OPERATIONAL TARGETS APPENDIX 9M 2019 RESULTS PIRELLI, GLOBAL HIGH VALUE 3 29 October 2019
Slide 5: Current Market Scenario: What Changed vs. Early August and How We Curbed the Headwinds
CURRENT MARKET SCENARIO: WHAT CHANGED VS. EARLY AUGUST AND HOW WE CURBED THE HEADWINDS O.E. deterioration leading to a weak pricing environment What we did to curb headwinds FY market expectations HIGH VALUE STANDARD High Value FY’19 FY’19 •> OEMs portfolio diversification (new N. America and Premiu
Slide 6: 9M 2019 Results Highlights
9M 2019 RESULTS HIGHLIGHTS € million NET SALES EBIT ADJUSTED.1 ∆ YoY lower Std saturation +2.8% -2.2% and challenging pricing organic environment 3,925 4,036 +2.3% 700 685 Standard -4.0% High Value 64.5% +7.5% 67.4% +5.7% 9M 2018 9M 2019 9M 2018 9M 2019 Margin 17.8% 17.0% NET INCOME before discontin
Slide 7: FY 2019 Outlook Update (Oct '19)
FY 2019 OUTLOOK UPDATE (OCT ’19) 2019 TARGETS 2019 OPERATIONAL DRIVERS 2018A 2019E 2019E 2019E 2019E (guid. Aug. 2019) (guid. Oct. 2019) (guid. Aug. 2019) (guid. Oct. 2019) Net Sales €5.2 bln ~ €5.3 bln ≥€5.3 bln Volumes -2.5% ÷ -2% ~ -2% ▬ o/w High Value +7.5% +8% ≥+7.5% High Value weight ~ 64% ~ 6
Slide 8: Agenda
AGENDA CURRENT SCENARIO, 9M ‘19 RESULTS HIGHLIGHTS AND FY ‘19 GUIDANCE MEDIUM-TERM SCENARIO AND STRATEGIC GUIDELINES FOR ‘20-’22 PLAN REVIEW OF 9M 2019 RESULTS AND OPERATIONAL TARGETS APPENDIX 9M 2019 RESULTS PIRELLI, GLOBAL HIGH VALUE 7 29 October 2019
Slide 9: Economic Momentum Is Weakening in a More Troubling Global Trade Outlook
ECONOMIC MOMENTUM IS WEAKENING IN A MORE TROUBLING GLOBAL TRADE OUTLOOK GDP GROWTH FORECASTS (%) Troubling outlook for Global Trade 4% -0.4 pp. • U.S. focused on closing trade deficit (~80% of world GDP on-the-table) > 3% ? • Brexit > • EU anti-globalization parties > 2% • US & EU Sanctions on Russi
Slide 10: Our View on the Medium Term Scenario: ≥18” Resilient Despite a More Difficult Scenario
OUR VIEW ON THE MEDIUM TERM SCENARIO: ≥18” RESILIENT DESPITE A MORE DIFFICULT SCENARIO WORLD CAR PARC WORLD ≥18" TYRE DEMAND (O.E.+Repl.) million vehicles million tyres CAGR CAGR CAGR CAGR 14A-18A 19E-22E 14A-18A 19E-22E +4% ~+3% +5% +3% High +12% single +6% ~+5% 255 digit 1,428 241 1,382 +5% +4% ~+
Slide 11: 2020-2022 Strategic Guidelines to Further Strengthen the Performance of Our Business Model
2020-2022 STRATEGIC GUIDELINES TO FURTHER STRENGTHEN THE PERFORMANCE OF OUR BUSINESS MODEL 01 Technology and Innovation Leadership 02 Major Cost & Breakeven point reduction 03 Selective profitable growth protection from downward scenario FY 2020 – 1H 2021 Contained Investment Program Higher Free Cas
Slide 12: Agenda
AGENDA CURRENT SCENARIO, 9M ‘19 RESULTS AND FY ‘19 GUIDANCE MEDIUM-TERM SCENARIO AND STRATEGIC GUIDELINES FOR ‘20-’22 PLAN REVIEW OF 9M ‘19 RESULTS AND OPERATIONAL TARGETS APPENDIX 9M 2019 RESULTS PIRELLI, GLOBAL HIGH VALUE 11 29 October 2019
Slide 13: 9M 2019 Net Sales Bridge
9M 2019 NET SALES BRIDGE o/w Organic € million -3.1% +5.4% +0.5% +2.8% +2.3% Group Volumes 4,036 21 151 3,925 -271 210 -120 +6.0% -12.2% O.E. +1.8% Repl. +12.7% +7.8% Net Sales H.V. Volumes Std. / Other Price/Mix FX Net Sales 9M’18 Volumes 9M’19 High Value Standard o/w Organic Car ≥18” +10.2% 3Q ‘19
Slide 14: 9M / 3Q 2019 Adjusted EBIT Performance
9M / 3Q 2019 ADJUSTED EBIT PERFORMANCE € million internal levers ∑ +106 external levers ∑ -121 3 (19) 56 (68) 700 (55) 685 121 ▬ cost-cutting +40 1 9M (54) ▬ unabsorbed fixed costs -10 ▬ D&A / other2 -49 2018 Volume Price/mix Efficiencies Start-up D&A / Other2 Raw Mat. Other FX 2019 costs1 input cos
Slide 15: 9M 2019 Performance by High Value Regions
9M 2019 PERFORMANCE BY HIGH VALUE REGIONS € million SALES Δ org. adj. EBIT 9M’18 9M’19 YoY % growth margin1 1,801 1,759 -2.4% -2.0% -12.3% Mid-teens HIGH VALUE REGIONS EMEA SALES +2.3% (decreasing YoY) 2.9% weight on 46% 44% Group Sales 3,237 3,331 Standard2 753 843 +11.9% +5.7% NORTH Twenties -8.3%
Slide 16: 9M 2019 Performance by Standard Regions
9M 2019 PERFORMANCE BY STANDARD REGIONS € million SALES Δ org. adj. EBIT 9M’18 9M’19 YoY % growth margin1 STANDARD REGIONS 189 197 +4.6% +5.4% Mid-teens SALES RUSSIA -2.9% & NORDICS (slightly +33.9% decreasing YoY) weight on 2.5% Group Sales 5% 5% 688 705 Standard2 499 508 +1.7% +7.2% High Value SOU
Slide 17: FY 2019 Outlook Update (Oct '19)
FY 2019 OUTLOOK UPDATE (OCT ’19) 2019 TARGETS 2019 OPERATIONAL DRIVERS 2018A 2019E 2019E 2019E 2019E (guid. Aug. 2019) (guid. Oct. 2019) (guid. Aug. 2019) (guid. Oct. 2019) Net Sales €5.2 bln ~ €5.3 bln ≥€5.3 bln Volumes -2.5% ÷ -2% ~ -2% ▬ o/w High Value +7.5% +8% ≥+7.5% High Value weight ~ 64% ~ 6
Slide 18: 9M 2019 Net Income Bridge
9M 2019 NET INCOME BRIDGE € million 64 (72) 378 386 386 7 9 0 of which: ▬ -18 of IFRS 16 impact ▬ +100 of Brazil tax credit Net Income Δ EBIT Δ Net income / Δ Financial Δ Taxes Net Income Disc. oper. Net Income bef. disc. loss from equity income / charges bef. disc. reported oper. participations ope
Slide 19: 9M 2019 Cash Flow and Net Financial Position
9M 2019 CASH FLOW AND NET FINANCIAL POSITION € million NCF bef. dividends & extr. oper.: -612 (-961 in 9M’18) 4,480 (16) 4,002 494 Op. CF: -252 (-634 in 9M’18) 17 177 176 87 3,180 113 963 (979) ▬ Non-rec. / restr. 41 268 ▬ IFRS 16 adj.2 16 1,245 in 9M’18 ▬ FX / other 29 Net Cash Flow: -822 (-820 in
Slide 20: Current Capital Structure (September 2019)
CURRENT CAPITAL STRUCTURE (SEPTEMBER 2019) € million NET FINANCIAL POSITION GROSS DEBT MATURITY 1,956 Cash & Cash equivalents 5,594 (1,114) (796) can be 4,480 260 can be extended1 to 2024 (318) Loan extended1 to 2022 1,136 3,073 917 125 Bond Fin. receivables 1,891 808 & other 636 1,271 460 IFRS 16 7
Slide 21: Agenda
AGENDA CURRENT SCENARIO, 9M ‘19 RESULTS AND FY ‘19 GUIDANCE MEDIUM-TERM SCENARIO AND STRATEGIC GUIDELINES FOR ‘20-’22 PLAN REVIEW OF 9M ‘19 RESULTS AND OPERATIONAL TARGETS APPENDIX 9M 2019 RESULTS PIRELLI, GLOBAL HIGH VALUE 20 29 October 2019
Slide 22: 3Q / 9M 2019 Results Highlights
3Q / 9M 2019 RESULTS HIGHLIGHTS € million 3Q’18 3Q’19 Δ YoY 9M’18 9M’19 Δ YoY Revenues 1,295 1,382 +6.7% 3,925 4,036 +2.8% Organic Growth1 +4.1% +2.3% High Value Revenues 846 932 +10.2% 2,530 2,720 +7.5% Organic Growth1 +8.3% +5.7% % on total Revenues 65.3% 67.5% +2.4 pp 64.5% 67.4% +2.8 pp Adjusted
Slide 23: 9M 2019 Balance Sheet
9M 2019 BALANCE SHEET € million 30-Sept-2018 31-Dec-2018 30-Sept-2019 Fixed assets related to continuing operations (before IFRS 16) 8,881 9,018 8,973 Right of use IFRS 16 n.a. n.a. 464 Fixed assets related to continuing operations (incl. IFRS 16) n.a. n.a. 9,437 Inventories 1,049 1,129 1,104 Trade
Slide 24: 9M 2019 Cash Flow
9M 2019 CASH FLOW € million 3Q ‘18 3Q ‘19 9M ‘18 9M ‘19 Adjusted EBIT1 250 245 700 685 Depreciation & Amortization (excl. PPA amortization) 70 98 208 294 Capital expenditures (118) (83) (297) (268) Change in working capital / other (247) (137) (1,245) (963) Operating Cash Flow (45) 123 (634) (252) F
Slide 25: 2019E Raw Material Guidance
2019E RAW MATERIAL GUIDANCE € million 13% Natural Rubber 10% Steel Reinf. 17% Textiles Breakdown FY 2018 A 27% Synthetic Rubber Raw Materials based on 35% on Sales purch. costs 23% Chemicals 10% Carbon Black COMMODITIES - AVERAGE QUOTATION COMMODITIES: AVERAGE COST OF GOODS SOLD 2019E 2018 A 2019 E
Slide 26: 2019E Forex Guidance
2019E FOREX GUIDANCE € million 13% other 6% GBP 37% EUR 3% RUB Breakdown FY 2018 A 11% BRL based on currency 12% CNY 18% USD ∆ YoY MAIN AVERAGE EXCHANGE RATES 2018 A 2019 E ∆ YoY 2019 E Oct-19 guidance vs. EUR Aug-19 guidance EUR / USD / 1.181 1.12 -5.5% -5.5% 1.15 USD / CNY / 6.617 6.95 +4.8% -0.4%
Slide 27: Key Car Market Trends: EMEA
KEY CAR MARKET TRENDS: EMEA Market trend 3Q’18 4Q’18 FY’18 1Q’19 2Q’19 3Q'19 9M’19 ∆% YoY O.E. Total Car market -7 -3 -4 -11 -9 -11 -8 Replacement 1 3 1 -2 -2 -1 -2 Total (O.E.+Repl.) -1 -1 0 -1 -3 -3 -4 ≥18” 4 2 New Premium & Standard ≤17" O.E. 0 -1 -4 -8 -5 -4 -5 -7 -13 -11 -12 -10 15 17 12 11 11
Slide 28: Key Car Market Trends: North America
KEY CAR MARKET TRENDS: NORTH AMERICA Market trend 3Q’18 4Q’18 FY’18 1Q’19 2Q’19 3Q'19 9M’19 ∆% YoY O.E. 2 2 Total Car market -1 -3 -1 -3 -4 5 7 6 Replacement 4 2 3 1 5 6 4 Total (O.E.+Repl.) 3 1 1 0 ≥18” 9 New Premium & Standard ≤17" O.E. 5 6 2 -1 -1 0 -3 0 16 -4 -5 -5 15 13 -5 12 -6 9 11 10 2 5 4 R
Slide 29: Key Car Market Trends: Asia Pacific
KEY CAR MARKET TRENDS: ASIA PACIFIC Market trend 3Q’18 4Q’18 FY’18 1Q’19 2Q’19 3Q'19 9M’19 ∆% YoY O.E. Total Car market -3 -8 -1 -6 -5 -7 -11 Replacement 1 1 3 4 4 4 0 Total (O.E.+Repl.) 0 0 -1 -3 -2 -2 -1 ≥18” 14 17 New Premium & Standard ≤17" 12 O.E. 3 -6 -5 -1 -4 -7 0 -11 -8 -12 -9 15 13 15 10 11
Slide 30: Key Market Trends: Russia & Nordics / South America
KEY MARKET TRENDS: RUSSIA & NORDICS / SOUTH AMERICA Market trend 3Q’18 4Q’18 FY’18 1Q’19 2Q’19 3Q'19 9M’19 ∆% YoY 23 18 11 10 5 6 7 O.E. Russia & Nordics 8 7 Replacement -1 -5 -1 -5 -8 10 8 Total (O.E.+Repl.) 0 -6 -3 0 -3 4 6 O.E. -1 South America -3 -5 -3 -3 Replacement1 -7 -8 -2 -5 -5 -10 -14 Tota
Slide 31: Raw Material Costs Trend and Mix
RAW MATERIAL COSTS TREND AND MIX MAIN RAW MATERIALS PRICE TREND 45.0 ; -16% YoY 54.8 ; +22% YoY 71.5 ; +31% YoY 1.378 ; +1% YoY 1.651 ; +20% YoY 1.365 ; -17% YoY $ / kg Brent Oil (in $ / barrel) $ / barrel 2.25 85 Natural Rubber (in $ / kg) 2.00 75 yearly avg. ; Δ YoY 1.75 65 1.50 55 1.25 45 1.00 35
Slide 32: Manufacturing Footprint as of September 30th, 2019
MANUFACTURING FOOTPRINT AS OF SEPTEMBER 30TH, 2019 U.K. Germany Romania Russia U.S. ▬ Burton – Car ▬ Breuberg – ▬ Slatina – Car ▬ Kirov – Car ▬ Carlisle – Car Car / Moto ▬ Rome – Car ▬ Voronezh – Car Mexico ▬ Silao – Car Italy ▬ Bollate – Car China ▬ Settimo – Car ▬ Yanzhou – Car / Moto ▬ Jiaozuo –