Pirelli & C. S.p.a. · MIL:PIRC
Pirelli & C — H1 2020 Earnings Presentation
35 slides from Pirelli & C's earnings presentation, Aug 5, 2020
Slide 1: 1H 2020 Results
1H 2020 RESULTS Milan, August 5th, 2020 1H 2020 RESULTS Milan, August 5th, 2020
Slide 2: Disclaimer
DISCLAIMER In General. This document, is referred to herein as the “Presentation”. This document has been prepared by Pirelli & C. S.p.A. (“Pirelli” or the “Company” and, together with its subsidiaries the “Group”). The Presentation is being furnished to you for information purposes only and for use
Slide 3: Key Messages
KEY MESSAGES > FY 2020 outlook confirmed, with High Value proving again its resilience > Competitiveness Program and “Covid Actions” in line with Plan, mitigating 2Q slowdown impact > CO-CEO appointment to further accelerate our Transformation Program towards a leaner, faster and more profitable com
Slide 4: Agenda
AGENDA 1 2020 OUTLOOK 2 MARKET AND PIRELLI PERFORMANCE 3 1H 2020 FINANCIAL REVIEW 4 APPENDIX 1H 2020 RESULTS 3 Milan, August 5th, 2020
Slide 5: 2020 Outlook Confirmed, with H.V. Proving Its Resilience
2020 OUTLOOK CONFIRMED, WITH H.V. PROVING ITS RESILIENCE First Outlook Outlook @1Q Outlook @2Q 2020E 2020E 2020E (Apr) Δ YoY % (May) Δ YoY % (Aug) Δ YoY % CAR PRODUCTION (million cars) TOTAL 69.3 -22% 69.5 -22% confirmed PRESTIGE 9.9 -17% 10.3 -14% & PREMIUM SYNERGIC 59.4 -23% 59.2 -23% CAR TYRE M
Slide 6: In ≥18” Planning to Reach Almost 2019 Levels in 2H
IN ≥18” PLANNING TO REACH ALMOST 2019 LEVELS IN 2H DESPITE THE TOUGH EXTERNAL SCENARIO TOTAL ≥18” ≤17” -3% CAR TYRE -10% -13% -11% MARKET -19% -20% (Δ YoY) -24% -28% -29% -1% -7% -13% -13% -19% -25% -25% -31% -36% CAR TYRE > 1H: Repl. Destocking in EU and > 1H: Pirelli LATAM Standard VOLUMES (Δ YoY)
Slide 7: Pirelli Competitiveness Program and Covid Actions Progressing as Planned
PIRELLI COMPETITIVENESS PROGRAM AND «COVID ACTIONS» PROGRESSING AS PLANNED € million FY 2020 1H 2020 COMPETITIVENESS PLAN COVID ACTIONS COMPETITIVENESS PLAN COVID ACTIONS (19-Feb) (5-Aug) (5-Aug) Product Cost Manufacturing ~€ 20M freeze due to slowdown (as indicated in may) Organization SG&A T
Slide 8: A Further Reaching Transformation Is Underway
A FURTHER REACHING TRANSFORMATION IS UNDERWAY PIRELLI TRANSFORMATION: SUMMARY SELECTED EXAMPLES OF KEY HIGHLIGHTS OBJECTIVES PROGRESS UNDER WAY • >85% adoption of Smart Working technologies •> Each working Group is multidisciplinary: • New CRM adopted by >90% of the Business + People & Organization
Slide 9: New Organizational Structure to Maximize Operational Effectiveness
NEW ORGANIZATIONAL STRUCTURE TO MAXIMIZE OPERATIONAL EFFECTIVENESS KEY MISSION > Strategic Planning & Control M. Tronchetti Provera EXECUTIVE VICE- > Approval of Corporate Policies, Initiatives and Projects CHAIRMAN AND CEO > Representation of Management and Board to General Public, Institutions, Sh
Slide 10: 2020 Targets Update
2020 TARGETS UPDATE 2020 KEY TARGETS € billion @ 13-May @ 5-Aug @ 13-May @ 5-Aug 2020 E 2020 E 2019 A 2020 E 2020 E Volumes ~ -18% ÷ -20% confirmed Net Sales 5.3 ~4.3 ÷ ~4.4 ~4.15 ÷ ~4.25 • o/w High Value ~ -14% • o/w Standard ~ -26% adj. EBIT 0.9 Price/mix ~ +2% confirmed margin 17.2% ~14% ÷ ~1
Slide 11: Agenda
AGENDA 1 2020 OUTLOOK 2 MARKET AND PIRELLI PERFORMANCE 3 1H 2020 FINANCIAL REVIEW 4 APPENDIX 1H 2020 RESULTS 10 Milan, August 5th, 2020
Slide 12: Full Impact of Lockdown Measures in 2Q 2020
FULL IMPACT OF LOCKDOWN MEASURES IN 2Q 2020 1Q-2Q MARKET SCENARIO AND PIRELLI VOLUMES 2Q KEY TRENDS PIRELLI PERFORMANCE TOTAL HIGH VALUE STANDARD High Value 1Q’20 2Q’20 1Q’20 2Q’20 1Q’20 2Q’20 •> O.E. over-performing market through ≥18” ≤17” portfolio diversification (Apac and NA) market -12% -21% -
Slide 13: Challenging Outlook in 2H Confirmed
CHALLENGING OUTLOOK IN 2H CONFIRMED GLOBAL TYRE Of which Of which MARKET (OE+REPL) O.E. REPL. KEY TRENDS IN 2H TYRE MARKET DEMAND Δ YoY % Δ YoY % Δ YoY % Assuming no 2nd wave of COVID -21% -22% -20% Channels •> O.E.: down double digit in line with car production -36% -47% -32% •> Repl.: down high si
Slide 14: Deep Dive on Competitiveness and Covid Actions
DEEP DIVE ON COMPETITIVENESS AND COVID ACTIONS COST COMPETITIVENESS AND COVID ACTIONS 2020 GROSS BENEFITS BY PILLAR € million Competitiveness Covid ▬ Product range management ▬ Specification optimization and virtual prototyping PRODUCT COST ~50 ~10 ~60 ▬ Material portfolio de-complexity ▬ Procuremen
Slide 15: Production Slowdown to Reduce Stocks While Strengthening Sales Channels
PRODUCTION SLOWDOWN TO REDUCE STOCKS WHILE STRENGHTENING SALES CHANNELS PRODUCTION SLOWDOWN • Careful Production scheduling reducing Stock levels (over -2M pcs Car finished products) • Accelerating integration with partners to optimize level of stock • Faster mix rotation to match clients’ service l
Slide 16: Innovation: Launched New Flagship Product Cinturato P7
INNOVATION: LAUNCHED NEW FLAGSHIP PRODUCT CINTURATO P7 PRODUCT DEVELOPMENT ACCELLERATION • Product development speed-up thanks to simulation tools shortening design and testing phases • New product features meeting evolving customer requirements towards sustainability and technology TECH- BASED INNO
Slide 17: 2020 Targets Update: Operational Drivers
2020 TARGETS UPDATE: OPERATIONAL DRIVERS 2020 MAIN OPERATIONAL DRIVERS € billion @ 13-May @ 5-Aug @ 13-May @ 5-Aug 2020 E 2020 E 2019 A 2020 E 2020 E Volumes ~ -18% ÷ -20% confirmed Net Sales 5.3 ~4.3 ÷ ~4.4 ~4.15 ÷ ~4.25 • o/w High Value ~ -14% • o/w Standard ~ -26% adj. EBIT 0.9 Price/mix ~ +2
Slide 18: Agenda
AGENDA 1 2020 OUTLOOK 2 MARKET AND PIRELLI PERFORMANCE 3 1H 2020 FINANCIAL REVIEW 4 APPENDIX 1H 2020 RESULTS 17 Milan, August 5th, 2020
Slide 19: 1H 2020 Net Sales Bridge
1H 2020 NET SALES BRIDGE o/w Organic € million -29.5% +1.0% -3.1% -31.6% -28.5% 2,655 -783 27 1,816 -82 -24.7% -35.4% o/w Car ≥18” O.E. -25.6% -24.5% Repl. -23.8% Net Sales Volumes Price/Mix FX Net Sales 1H’19 1H’20 High Value Standard 2Q‘20 -35.2% -41.6% -50.4% +3.3% -4.7% -43.0% -38.3% o/w Car ≥18
Slide 20: 1H / 2Q 2020 Adjusted EBIT Bridge
1H / 2Q 2020 ADJUSTED EBIT BRIDGE € million 221 (237) Net eff. +25 Net impact -25 ▬ D&A -5 2Q ▬ other -48 (8) 29 (54) 33 22 (53) (12) (15) (74) 2Q’19 Volume Price/mix Efficiencies Inflation Covid Cost Slowdown D&A and Raw Mat. FX 2Q’20 margin 16.5% cutting Other -9.7% 441 Net eff. +41 Net impact -9
Slide 21: 1H 2020 Cash Flow and Net Financial Position
1H 2020 CASH FLOW AND NET FINANCIAL POSITION € million Operating Cash Flow: -590 (-375 in 1H’19) 4,265 54 41 73 729 ▬ non-recurring / restr. -37 3,507 ▬ Covid-19 costs -12 ▬ FX / other +8 -268 47 81 Net Cash Flow: -758 (-817 in 1H’19) NFP FY’19 EBITDA CapEx Increase in ∆ W.C. Interests Taxes Other N
Slide 22: Current Capital Structure (June 2020)
CURRENT CAPITAL STRUCTURE (JUNE 2020) € million Net Financial Position Gross Debt maturity 6,160 (1,895) Liquidity 1,747 can be exercized the option: position1 extended to 2024 1,818 Loan 253 now due in 2021, (1,474) further extendable to 2022 Bond 4,265 3,717 (421) IFRS 16 1,144 125 1,001 Fin. rece
Slide 23: Agenda
AGENDA 1 2020 OUTLOOK 2 MARKET AND PIRELLI PERFORMANCE 3 1H 2020 FINANCIAL REVIEW 4 APPENDIX 1H 2020 RESULTS 22 Milan, August 5th, 2020
Slide 24: 2Q / 1H 2020 Results Highlights
2Q / 1H 2020 RESULTS HIGHLIGHTS € million 2Q’19 2Q’20 Δ YoY 1H’19 1H’20 Δ YoY Revenues 1,341 765 -43.0% 2,655 1,816 -31.6% Organic Growth1 -38.3% -28.5% High Value Revenues 893 553 -38.0% 1,788 1,286 -28.1% % on total Revenues 66.6% 72.4% +5.8pp 67.3% 70.8% +3.5pp EBITDA adjusted2 321 24 -92.6% 636
Slide 25: 1H 2020 Pirelli Balance Sheet
1H 2020 PIRELLI BALANCE SHEET € million 30-June-2019 31-Dec-2019 30-June-2020 Fixed assets related to continuing operations (before IFRS 16) 9,016 9,007 8,619 Right of use IFRS 16 459 463 449 Fixed assets related to continuing operations (incl. IFRS 16) 9,475 9,470 9,068 Inventories 1,165 1,094 962
Slide 26: 2Q / 1H 2020 Pirelli Group Cash Flow
2Q / 1H 2020 PIRELLI GROUP CASH FLOW € million 2Q’19 2Q’20 1H’19 1H ‘20 Adjusted EBIT1 221 (74) 441 67 Depreciation & Amortization (excl. PPA amortization) 99 98 196 201 Capital expenditure (90) (25) (168) (81) Rights of use (IFRS 16) (14) (24) (17) (47) Change in working capital / other 10 132 (826
Slide 27: 2020 E Raw Material Guidance
2020 E RAW MATERIAL GUIDANCE € million 13% Natural Rubber 10% Steel Reinf. 17% Textiles Breakdown FY 2019 A 26% Synthetic Rubber Raw Materials based on 33% on Sales purch. costs 22% Chemicals 12% Carbon Black COMMODITIES: AVERAGE COST OF GOODS SOLD OLD NEW 2019 A 2020 E 2020 E 2020 E 2020 E May-20 g
Slide 28: 2020 E Forex Guidance
2020 E FOREX GUIDANCE € million 13% other 6% GBP 37% EUR 3% RUB Breakdown FY 2019 A 11% BRL based on currency 12% CNY 18% USD + devaluation - revaluation OLD NEW MAIN AVERAGE EXCHANGE RATES 2019 A 2020 E ∆ YoY 2020 E ∆ YoY May-20 guid. vs. EUR Aug-20 guid. vs. EUR EUR / USD / 1.12 1.10 -2% 1.12 -0.4
Slide 29: Key Car Market Trends: Europe
KEY CAR MARKET TRENDS: EUROPE Market trend 2Q’19 3Q’19 4Q’19 FY’19 1Q’20 2Q‘20 1H’20 ∆% YoY O.E. -8 -1 -3 -5 -16 Total Car market -40 -65 0 0 Replacement -2 -1 -13 -24 -35 0 Total (O.E.+Repl.) -4 -1 -2 -14 -28 -42 ≤17" 4 2 ≥18” -9 -5 -2 -5 -6 0 O.E. -16 -14 of which ≥18” & ≤17” -41 -39 -65 -64 11 13
Slide 30: Key Car Market Trends: North America
KEY CAR MARKET TRENDS: NORTH AMERICA Market trend 2Q’19 3Q’19 4Q’19 FY’19 1Q’20 2Q‘20 1H’20 ∆% YoY O.E. -3 -1 -10 -4 -11 Total Car market -40 -69 1 3 2 Replacement -1 -9 -21 -32 2 1 Total (O.E.+Repl.) 0 -2 -10 -25 -40 ≤17" 4 5 2 ≥18” O.E. -2 -8 -7 -17 -4 of which ≥18” & ≤17” -16 -10 -44 -37 13 15 12
Slide 31: Key Car Market Trends: Asia Pacific
KEY CAR MARKET TRENDS: ASIA PACIFIC Market trend 2Q’19 3Q’19 4Q’19 FY’19 1Q’20 2Q‘20 1H’20 ∆% YoY O.E. -4 -3 -6 Total Car market -11 -17 -32 -25 5 3 3 Replacement 0 -16 -29 -43 1 Total (O.E.+Repl.) -1 -1 -1 -17 -27 -38 ≤17" ≥18” 7 9 3 O.E. of which ≥18” & ≤17” -2 -7 -6 -8 -6 -13 -33 -28 -20 -27 -17
Slide 32: Key Market Trends: Russia & Nordics / South America
KEY MARKET TRENDS: RUSSIA & NORDICS / SOUTH AMERICA Market trend 2Q’19 3Q’19 4Q’19 FY’19 1Q’20 2Q‘20 1H’20 ∆% YoY 3 3 0 O.E. -9 -11 Russia & Nordics -31 -52 Replacement -2 0 -8 -5 -19 -28 -38 0 Total (O.E.+Repl.) -2 -8 -4 -18 -29 -41 O.E. -1 -5 -3 -3 -17 -51 South America -82 4 Replacement1 -3 -6 -3
Slide 33: Raw Material Costs Trend and Mix
RAW MATERIAL COSTS TREND AND MIX Main raw materials price trend 54.8 ; +22% YoY 71.5 ; +31% YoY 64.2 ; -10% YoY 1.651 ; +20% YoY 1.365 ; -17% YoY 1.406 ; +3% YoY $ / kg Brent Oil (in $ / barrel) Natural Rubber (in $ / kg) yearly avg. ; Δ YoY $ / barrel 2.25 85 2.00 75 1.75 65 1.50 55 1.25 45 1.00 35
Slide 34: Manufacturing Footprint as of June 30th, 2020
MANUFACTURING FOOTPRINT AS OF JUNE 30TH, 2020 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 – Car ▬
Slide 35: 1H 2020 Results
1H 2020 RESULTS Milan, August 5th, 2020