Pirelli & C. S.p.a. · MIL:PIRC
Pirelli & C — 9M 2017 Earnings Presentation
34 slides from Pirelli & C's earnings presentation, Nov 6, 2017
Slide 1: 9M 2017 Results
6 November, 2017 9M 2017 RESULTS PIRELLI, GLOBAL HIGH VALUE 6 November 2017
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_ > Pirelli back to the Financial Market as: › The only Consumer Player focused on High Value products at global level › Well placed in an attractive market, which should outgrow the Standard market 4X in the long term › With a different game than European full-liners in a healthy sector
Slide 4: Agenda
AGENDA_ RECAP OF PIRELLI STRATEGY 9M 2017 RESULTS FULL YEAR 2017 OUTLOOK APPENDIX 9M 2017 RESULTS PIRELLI, GLOBAL HIGH VALUE 3 6 November 2017
Slide 5: High Value: Our New Distinctive Focus
HIGH VALUE: OUR NEW DISTINCTIVE FOCUS_ FROM FOCUS ON PREMIUM… …TO A NARROWER FOCUS ON “HIGH VALUE” % on 2016A % on 100% total revenues1 CAR MOTO CYBER VELO Total Revenues 2017E 2020E Old Prestige Premium 55% >57% ~63% ≥18” (≥17’’) ~65% Start-up New Premium (≥18’’) Premium3 in 2017 65% HIGH VALUE (~1
Slide 6: Attractive Tyre Market: ≥18" Outgrowing Standard ~4x
ATTRACTIVE TYRE MARKET: ≥18” OUTGROWING STANDARD ~4x ON LONG-TERM SUSTAINED BY PREMIUM & PRESTIGE CAR PARC EXPANSION_ CAGR CAGR 14A-16A 16A-20E CAR PARC 1,372 +4.1% +3.4% Total (million vehicles) 0.3% 1,244 11.0% 1,200 +8.3% 0.2% +12.5% +7.8% Prestige 0.2% 10.6% 1,108 10.5% +4.6% 0.2% +8.2% +4.5% Pr
Slide 7: Pirelli Well Placed in High Value Markets
PIRELLI WELL PLACED IN HIGH VALUE MARKETS (EU, APAC & NAFTA) TO KEEP OUTPERFORMING_ CAGR ‘14A-’16A CAGR ‘16A-’20E +4.7% PRESTIGE & PREMIUM 154 CAR PARC 129 135 Tot. +8.3% +4.6% 110 Other regions 93% +5% 93% 93% +8.5% +4.5% EU, APac, NAFTA 93% (million vehicles) 2014A 2016A 2017E 2020E 9M 2017 YoY +1
Slide 8: Pirelli Strategy Based on 3 Pillars
PIRELLI STRATEGY BASED ON 3 PILLARS_ 1 2 3 HIGH VALUE TRANSFORMATION STANDARD FOCUS PROGRAM REDUCTION 9M 2017 RESULTS PIRELLI, GLOBAL HIGH VALUE 7 6 November 2017
Slide 9: Pillar 1: High Value Focus and Current Achievements
PILLAR 1: HIGH VALUE FOCUS AND CURRENT ACHIEVEMENTS_ 1 9M 2017 achievements ▬ ~230 new High Value Homologations (~150 in 3Q) A # new homologations ~x2 >1,150 ▬ 20% Prestige ACCELERATING homologation 315 ▬ 25% Winter HOMOLOGATION projects already 165 in pipeline for ▬ New EV homologations with Premiu
Slide 10: Pillar 2: Transformation Program with 4 Key Initiatives
PILLAR 2: TRANSFORMATION PROGRAM WITH 4 KEY INITIATIVES_ 2 New O. E. C Homologation Registrations Tyres Market O T D N R 1 E S Integrated Forecasting S A S M U U D A A F M P E L N A E 2 Smart Manufacturing and Flexible Factory E D C P R L E S T Pull through Y N P O E Demand G P L R N C A Replacement
Slide 11: Pillar 3: Standard Capacity Reduction and Profitability Improvement
PILLAR 3: STANDARD CAPACITY REDUCTION AND PROFITABILITY 3 IMPROVEMENT UNDERWAY_ REDUCING CAPACITY… …AND IMPROVING PROFITABILITY million pcs others LATAM ▬ Improving mix ▬ Phasing out of legacy brands Pruning of: ▬ Customers ▬ Pruning of lower rim sizes ▬ Standard Products 33 ▬ Strengthening price po
Slide 12: Agenda
AGENDA_ RECAP OF PIRELLI STRATEGY 9M 2017 RESULTS FULL YEAR 2017 OUTLOOK APPENDIX 9M 2017 RESULTS PIRELLI, GLOBAL HIGH VALUE 11 6 November 2017
Slide 13: 9M 2017 Results: Highlights
9M 2017 RESULTS: HIGHLIGHTS_ € million REVENUES EBIT ADJ.1 w/o start-up costs2 +9% +10% 3,706 4,038 621 681 Standard High Value 56% +13% 58% 9M 2016 9M 2017 9M 2016 9M 2017 Margin 16.7% 16.9% NET INCOME ADJ. NET FINANCIAL POSITION +94% -625 258 4,913 4,288 133 9M 2016 9M 2017 FY 2016 9M 2017 NFP / 4
Slide 14: 9M 2017 Performance by High Value Regions
9M 2017 PERFORMANCE BY HIGH VALUE REGIONS_ € million SALES Δ EBIT KEY HIGHLIGHTS 9M16A 9M17A YoY % Adj. margin1 1,698 1,591 ▬ Strengthen High Value +6.7% position, with market HIGH VALUE REGIONS share increase in ≥18“ SALES EUROPE Mid-teens and Specialties +10.8% ▬ Proactive reduction to +9.4% Stand
Slide 15: 9M 2017 Performance by Standard Regions
9M 2017 PERFORMANCE BY STANDARD REGIONS_ € million SALES Δ EBIT KEY HIGHLIGHTS 9M16A 9M17A YoY % Adj. margin1 ▬ Accelerated exit from low 682 +11.5% 612 profitable products within the Standard segment STANDARD REGIONS SALES Mid-single ▬ Increased exports to LATAM +33.4% digit North America ▬ Car mar
Slide 16: 9M 2017 Net Sales Bridge
9M 2017 NET SALES BRIDGE_ € million o/w organic +7.7% +9.0 % +0.7% +0.6% 4,039 +6.5% o/w HV 24 26 +1.2% +12.9% 239 3,707 43 Net Sales 9M Volume Price/Mix FX Perimeter1 Net Sales 9M ’17 ’16 restated o/w o/w HV organic 3rd Quarter +1.0% +12.2% +7.3% -3.1% +0.6% +5.8% +8.3% 2nd Quarter -0.3% +9.6% +6.5
Slide 17: 9M / 3Q 2017 Operating Performance
9M / 3Q 2017 OPERATING PERFORMANCE_ € million Internal levers ∑ +224 External levers ∑ -164 (31) 34 (132) 9M 201 681 (34) 2 (39) 642 621 20 EBIT adj Volume Price/mix D&A / Other2 Efficiencies Raw Mat. Other FX EBIT adj start-up EBIT adj 9M16A input costs 9M17A costs 1 9M17A w/o start-up margin 16.7%
Slide 18: 9M 2017 Net Income Bridge
9M 2017 NET INCOME BRIDGE_ 199 € million 40 62 34 36 27 Net Income Δ EBIT Δ Net income / Δ Financial Δ Taxes Net Income Consumer loss from equity income / charges2 Consumer 9M16A participations 9M17A1 9M ’16 9M ’17 Net Income 35.8 198.9 PPA amortization + 78.4 + 80.9 Non recurring / restr. costs + 2
Slide 19: 9M 2017 Cash Flow and Net Financial Position
9M 2017 CASH FLOW AND NET FINANCIAL POSITION_ € million Op. Cash Flow: -391 154 (305) 290 34 4,913 900 (1,189) (836) 4,288 328 NFP FY’161 EBITDA CapEx ∆ WC Taxes Interests Other Industrial Capital NFP 9M’17 adjusted2 reorg.3 increase4 NFP / 4.6 x5 3.7 x EBITDA adj. ∆ Working Capital impacted by the
Slide 20: Current Capital Structure (September 2017)
CURRENT CAPITAL STRUCTURE (SEPTEMBER 2017)_ € million NET FINANCIAL POSITION GROSS DEBT MATURITY Cash & Cash equivalents 4,841 1,730 1,815 405 4,288 147 3,543 Loan Fin receivables & Other 1,814 Bond 1,729 614 601 383 Other 5 300 596 697 378 18 0 1 Gross Fin. Net Fin. Debt Assets Position 2017 2018 2
Slide 21: Agenda
AGENDA_ RECAP OF PIRELLI STRATEGY 9M 2017 RESULTS FULL YEAR 2017 OUTLOOK APPENDIX 9M 2017 RESULTS PIRELLI, GLOBAL HIGH VALUE 20 6 November 2017
Slide 22: FY 2017 Outlook
FY 2017 OUTLOOK_ € million 2016A 2017E Revenues 4,976 ~+9% YoY High Value weight 55% >57% Adjusted EBIT w/o start-up1 844 ~930 High Value weight 81% ~83% Adjusted EBIT2 844 ~880 Net financial position / Adjusted 4.6X <3X EBITDA w/o start-up costs3 CapEx on Revenues 6.8% ~9% (~7% on average in ‘17-20
Slide 23: Agenda
AGENDA_ RECAP OF PIRELLI STRATEGY 9M 2017 RESULTS FULL YEAR 2017 OUTLOOK APPENDIX 9M 2017 RESULTS PIRELLI, GLOBAL HIGH VALUE 22 6 November 2017
Slide 24: 9M 2017 Results Highlights
9M 2017 RESULTS HIGHLIGHTS_ € million 9M ’16 3Q ’16 restated 9M ‘17 Δ YoY restated 3Q ‘17 Δ YoY 3Q Highlights Revenues 3,706.5 4,038.5 +9.0% 1,279.6 1,353.2 +5.8% Organic Growth1 +7.7% +8.3% Sound top-line growth sustained by: High Value Revenues 2,076.6 2,344.0 +12.9% 705.7 782.3 +10.8% ▬ Strengthe
Slide 25: 9M Pirelli Balance Sheet
9M PIRELLI BALANCE SHEET_ € million 31/12/2016 31/12/2016 30/09/2017 Carve-out Reported Fixed assets related to continuing operations 9,168 10,299 9,147 Inventories 874 1,056 969 Trade receivables 680 679 1,038 Trade payables (1,281) (1,499) (1,067) Operating net working capital related to continuin
Slide 26: 9M Pirelli Group Cash Flow
9M PIRELLI GROUP CASH FLOW_ € million 9M ‘16 restated 9M ‘17 EBIT adjusted1 620.7 642.2 Depreciation & Amortization (excl. amort. PPA) 180.7 194.1 Capital expenditures (221.9) (327.6) Change in working capital / other (777.5) (900.1) Operating Cash Flow (198.0) (391.4) Financial income / expenses (3
Slide 27: Net Invested Capital Seasonality: Pirelli Group Reported Data
2015-2016 NET INVESTED CAPITAL SEASONALITY: PIRELLI GROUP REPORTED DATA_ € million SEASONALITY OF NET OPERATING WORKING CAP1 THROUGH QUARTERS COMMENTARY =640 Example based on former perimeter (Consumer + Industrial) = 733 only for illustration purposes 1,134 1,129 1,057 ▬ 4Q lowest level of workin
Slide 28: Key Car Market Trends: Europe
KEY CAR MARKET TRENDS: EUROPE1_ Market trend 3Q’16 4Q’16 FY’16 1Q’17 2Q’17 3Q'17 9M’17 ∆% YoY 1 3 4 4 O.E. 0 Total Car market (2) (6) 7 7 2 4 Replacement 1 0 (3) 5 4 6 2 0 1 Total (O.E.+Repl.) (4) ≥18” 12 12 New Premium & Standard 10 9 ≤17" 7 6 1 1 3 O.E. 1 0 (3) 19 (5) 19 19 (9) 16 12 11 6 4 5 1 2
Slide 29: Key Car Market Trends: NAFTA
KEY CAR MARKET TRENDS: NAFTA_ Market trend 3Q’16 4Q’16 FY’16 1Q’17 2Q’17 3Q'17 9M’17 ∆% YoY O.E. 1 1 2 2 Total Car market (3) (3) (8) 5 0 2 2 Replacement (2) (2) (1) 4 2 2 Total (O.E.+Repl.) 1 (2) (3) (1) ≥18” New Premium & Standard ≤17" 3 2 4 5 O.E. 0 0 (1) (1) 0 0 (5) (6) (5) 15 14 13 (10) 12 9 10
Slide 30: Key Car Market Trends: APAC
KEY CAR MARKET TRENDS: APAC_ Market trend 3Q’16 4Q’16 FY’16 1Q’17 2Q’17 3Q'17 9M’17 ∆% YoY 14 10 O.E. 7 5 3 1 3 Total Car market 4 5 5 7 5 6 6 Replacement 8 7 6 6 3 5 5 Total (O.E.+Repl.) ≥18” 29 31 28 26 New Premium & Standard 21 20 23 ≤17" 12 O.E. 8 5 2 0 0 (2) 12 11 11 13 14 15 14 4 4 4 7 4 6 6 R
Slide 31: Key Market Trends: Russia & CIS and South America
KEY MARKET TRENDS: RUSSIA & CIS AND SOUTH AMERICA_ Market trend 3Q’16 4Q’16 FY’16 1Q’17 2Q’17 3Q'17 9M’17 ∆% YoY 24 23 18 22 2 6 O.E. Russia & CIS (11) 24 20 19 12 Replacement (1) (11) (9) 20 24 19 13 1 Total (O.E.+Repl.) (9) (10) 20 19 20 20 4 O.E. South America (7) (11) 15 12 12 3 6 8 Replacement1
Slide 32: 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 4.52 111.7 4.25 111.0 110 3.75 3.16 3.25 90 2.75 70 2.25 53.6 52.6 1.38 1.72 1.75 1
Slide 33: Pillar 1: Shifting Car Capacity Towards High Value
PILLAR 1: SHIFTING CAR CAPACITY TOWARDS HIGH VALUE_ PRODUCTION SPLIT CAR CAPACITY PRODUCTION SPLIT 2016A Mln pieces Capacity ≥18’’ Capacity ≤17’’ 2020E Other Car Other Car 79 (≤17” Marked, +11 -2 +2 (≤17” Marked, Homologated, Homologated, 71 technological and regional technological and New Premium l
Slide 34: Pirelli, Global High Value 9M 2017 Results
9M 2017 RESULTS PIRELLI, GLOBAL HIGH VALUE 6 November 2017