Slide 1: Pirelli FY 2014 Results
PIRELLI FY 2014 RESULTS MILANO – MARCH 31, 2015
Slide 2: Agenda
AGENDA FY 2014 RESULTS FY 2014 TYRE OVERVIEW 2015 TARGETS APPENDIX FY 2014 RESULTS 1
Slide 3: FY 2014 Results vs Guidance
FY 2014 RESULTS VS GUIDANCE 2014 targets 2014 targets FY 2014 Results November 2014 restated (with Steel Cord as (including Steel Cord) (with Steel Cord as discontinued operations) discontinued operations) Revenues >6.1 / <6.2 €/bln >6.0 / <6.1 €/bln 6.0 €/bln • Volumes > +2.5% > +2.5% +2.0% - o/w P
Slide 4: Pirelli Key Financial Results
PIRELLI KEY FINANCIAL RESULTS FY 13* FY 14 Δ YOY Q4 13* Q4 14 Δ YOY Revenues 6,061.0 6,018.1 -0.7% 1,474.6 1,489.4 +1.0% Organic Growth** +5.9% +4.1% EBITDA before Restr. Costs 1,095.0 1,168.0 +6.7% 288.2 300.3 +4.2% Margin 18.1% 19.4% +1.3p.p. 19.5% 20.2% +0.7p.p. EBIT before Restr. Costs 810.2 869
Slide 5: FY 2014 Performance by Region
FY 2014 PERFORMANCE BY REGION Tyre Sales Consumer Sales Industrial Sales Tyre EBIT Margin** €/Mln Δ YOY Organic Δ YOY Organic Δ YOY Organic growth* growth* growth* Total 6,007.5 -0.4% +6.2% 4,610.3 +2.9% +8.9% 1,397.2 -10.0% -1.5% 14.7% (+0.8 pp) Europe Mid-teens Europe 34% +4.6% +4.2% 40% +5.1% +4.
Slide 6: Premium Outperformance in Every Market: Volume Growth 2x the Market
PREMIUM OUTPERFORMANCE IN EVERY MARKET: VOLUME GROWTH 2x THE MARKET €/Mln Δ YOY Organic growth* Total 2,274.4 2,536.0 +12% +13% • Consolidated leadership in Super Premium: 22% total mkt share in ≥ 18" segment, >+1pp vs. 2013 YE Europe 51% 49% +8% +7% • Strong customer appreciation of marked items su
Slide 7: Pirelli Net Income FY 2014 vs FY 2013
PIRELLI NET INCOME FY 2014 VS FY 2013 Of which: €14.6m of capital gain on Steel Venezuela Fx devaluation (72.1) Cord activity disposal (Italy, Financial charges 2.6 Romania and Brazil) 53.2 15.6 332.8 306.5 (8.7) 35.7 (69.5) Lower tax rate of 35.5% compared to FY13 (40.7%) due to: • better geographi
Slide 8: Dividend Proposal
DIVIDEND PROPOSAL Dividend Proposal to be filed with Pirelli & C. AGM (May 14, 2015) DPS (€) # of Shares* Dividends (€/mln) 2014 2013 Δ % yoy mln 2014 Δ % yoy Ordinary shares 0.367 0.320 +14.7% 475.4 174.5 +14.7% Savings shares 0.431 0.390 +10.5% 11.8 5.1 +10.5% 179.6 +14.6% 40.5% of Group Net Incom
Slide 9: Pirelli Debt Structure as of December 31, 2014
PIRELLI DEBT STRUCTURE AS OF DECEMBER 31, 2014 Net Financial Position Gross Debt Maturity €/Mln 2,317.2 1,337.6 92 Committed Line 75.0 663 86 6 Drawdown 635 Cash & Cash 1,228.1 Equivalent 156 Debt Capital 52 29 1,378.6 818 Market Fin. 113 43 Receivables 979.6 614 5.8 103.7 RCF Maturity Nov. 2015 NFP
Slide 10: Pirelli FY 2014 Net Financial Position
PIRELLI FY 2014 NET FINANCIAL POSITION €/Mln EBIT before restr. costs 221.4 Depreciation / amortization: 78.9 Investments*: (133.4) NWC & other: 714.6 160.1 2,003.9 26.8 53.4 300.0 141.2 1,322.4 135.7 4.3 EBIT before restr. costs 647.8 (94.9) 979.6 Depreciation / amortization: 219.9 (881.5) Invest
Slide 11: FY 14 Tyre Overview
AGENDA FY 2014 RESULTS FY 14 TYRE OVERVIEW 2015 TARGETS APPENDIX FY 2014 RESULTS 10
Slide 12: Key Tyre Results
KEY TYRE RESULTS €/Mln Q1‘14 ∆% Q2‘14 ∆% Q3‘14 ∆% Q4‘14 ∆% FY‘14 ∆% Revenues 1,469.5 -2.4% 1,511.3 -3.6% 1,539.2 +3.3% 1,487.5 +1.3% 6,007.5 -0.4% o/w Premium 639.9 +12.9% 645.2 +12.6% 648.8 +11.1% 602.1 +9.4% 2,536.0 +11.5% EBITDA before restr. costs 280.3 +8.7% 308.7 +9.9% 287.2 +1.7% 300.7 +0.6%
Slide 13: Pirelli Tyre Operating Performance
PIRELLI TYRE OPERATING PERFORMANCE €/Mln 30.1 (13.4) (17.8) 17.6 (38.0) 219.4 21.4 (6.0) (1.0) 212.3 EBIT Volumes Price / Raw FX Other Input Efficiencies Depreciation Restructuring EBIT 4Q ’13 Mix Materials Costs (Labour & other costs 4Q ‘14 Energy / other) 157.2 4.5 (80.6) (126.7) 92.4 (63.4) 58.3
Slide 14: Consumer Business: Pirelli Performance
CONSUMER BUSINESS: PIRELLI PERFORMANCE €/Mln Q1‘14 ∆% Q2‘14 ∆% Q3‘14 ∆% Q4‘14 ∆% FY‘14 ∆% Revenues 1,128.7 +1.1% 1,159.6 +1.8% 1,178.0 +4.9% 1,144.0 +4.0% 4,610.3 +2.9% o/w Premium 639.9 +12.9% 645.2 +12.6% 648.8 +11.1% 602.1 +9.4% 2,536.0 +11.5% % revenues 56.7% +5.9p.p. 55.6% +5.3p.p. 55.0% +3.0p.
Slide 15: Industrial Business: Pirelli Performance
INDUSTRIAL BUSINESS: PIRELLI PERFORMANCE €/Mln Q1‘14 ∆% Q2‘14 ∆% Q3‘14 ∆% Q4‘14 ∆% FY‘14 ∆% Revenues 340.8 -12.2% 351.7 -18.1% 361.2 -1.4% 343.5 -6.7% 1,397.2 -10.0% EBITDA before restr. costs 60.9 -3.3% 63.6 -17.7% 59.2 -15.9% 58.5 -15.9% 242.2 -13.6% Margin 17.9% +1.7p.p. 18.1% +0.1p.p. 16.4% -2.8
Slide 16: 2015 Targets
AGENDA FY 2014 RESULTS FY 14 TYRE OVERVIEW 2015 TARGETS APPENDIX FY 2014 RESULTS 15
Slide 17: Pirelli Priorities in 2015
PIRELLI PRIORITIES IN 2015 > Maintain Prestige and Premium leadership through OE business via: - Technological innovation CAR - Leading homologation portfolio - Growing product specialties > Grow replacement market share working on: - Car dealer pull-through - Geolocalized Premium vehicle park cover
Slide 18: 2015 Regional Targets
2015 REGIONAL TARGETS Tyre Market 2015 Pirelli Tyre Business Target Highlights Revenues EBIT Margin* Car >+4% YOY, Mid teen organic Twenties • Outperforming Premium market leveraging on APAC o/w Premium >+10% growth (>20% in €) increasing YOY OE pull-through, new product launch and retail Truck* >+1
Slide 19: Venezuela & Argentina: The Scenario in 2015
VENEZUELA & ARGENTINA: THE SCENARIO IN 2015 Macro Scenario Pirelli 2014 Exposure 2015 Targets Underlying Assumptions Challenging economic • 1 plant: Capacity already • Action plan to face the current crisis: scenario: reduced to ~1.0 mln pcs Car – Temporary reduction of production output (50% capaci
Slide 20: FY 2015 Guidance
FY 2015 GUIDANCE FY 2014 Results 2015 Guidance Revenues 6.0 € bln ~ 6.4 € bln Forex Guidance • Volumes +2.0% ≥ +3% (yearly avg) 2014 2015 - o/w Premium +17.8% ≥+10% EUR/USD 1.33 1.22 EUR/RUB 51 65.0 • Price/mix +4.2% ≥ +4% USD/BRL 2.35 2.65 USD/VEF* 12 20 • Foreign Exchange -6.6% ~ -1% USD/ARS 8.12
Slide 21: 2015 Consumer & Industrial Guidance
2015 CONSUMER & INDUSTRIAL GUIDANCE Consumer Business Industrial Industrial Business Business FY 2014 2015 Guidance FY 2014 2015 Guidance Results Results Revenues 4.6 € bln ~ 4.9 € bln Revenues 1.4 € bln ~1.5 € bln • Volumes +5% ~+3% • Volumes -6.5% +4.5%/5% - o/w Premium +17.8% ≥+10% • Price/mix +3
Slide 22: Efficiency Program: Results and Targets
EFFICIENCY PROGRAM: RESULTS AND TARGETS €/mln 2014-2017 Efficiency Plan 2014 results and 2015 targets ~350 92 ~90 ~320 ~30 Materials 64% 49% Materials 56% Labour prod Labour & scale 23% 47% 30% Expenses Allocation mix Allocation mix 8% & other 13% 6% 4% Industrial SG&A Total 2014 Actual 2015 Targets
Slide 23: 2015 Raw Material Guidance
2015 RAW MATERIAL GUIDANCE Raw material breakdown FY 2014 2014 Actual 2015 Guidance Textile Average cost of goods sold Natural Rubber (€/Mln) 12% 2014A Δ YOY 2015E Δ YOY Steel 20% 7% Natural Rubber ~1.950 +144 ~1.700 +55 TSR20 ($/ton) Brent Oil 109 -2 78 +117 ($/barrell) Chemicals 19% 28% Butadiene
Slide 24: 2015 Capex and Capacity
2015 CAPEX AND CAPACITY: PREMIUM EXPANSION IN LOW-COST COUNTRIES, MIX AND QUALITY IMPROVEMENT IN MATURE MARKETS Capex Capex by destination % of Sales 7% 6.3% < 6% 2013A 2014A 2015E €/Mln 413 <400 378 Capacity 34% 36% 37% o/w Premium 29% 29% 36% Mix & 40% 32% 35% Quality Others 26% 32% 28% 2013A 2014
Slide 25: 2015 Profitability Guidance
2015 PROFITABILITY GUIDANCE Driver FY 2014 Results 2015 Guidance Impact Impact Volumes +2.0% of sales ≥3% of sales Price/Mix +4.2% of sales ≥+4% of sales Forex -6.6% of sales -1% of sales YoY on EBIT YoY on EBIT Efficiencies +92 €/mln ~+90 €/mln Raw Materials +4.5 €/mln +6 €/mln Other Input Cost
Slide 26: Appendix
AGENDA FY 2014 RESULTS FY 2014 TYRE OVERVIEW 2015 TARGETS APPENDIX FY 2014 RESULTS 25
Slide 27: Pirelli Group – 2014 Quarterly Results
PIRELLI GROUP – 2014 QUARTERLY RESULTS Q1’14 Q2’14 Q3’14 Q4’14 FY’14 Tyre Group Tyre Group Tyre Group Tyre Group Tyre Group SALES 1,469.5 1,473.2 1,511.3 1,513.7 1,539.2 1,541.8 1,487.5 1,489.4 6,007.5 6,018.1 EBITDA before Restr. Costs 280.3 277.3 308.7 305.5 287.2 284.9 300.7 300.3 1,176.9 1,168.0
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 1,514.6 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: Pirelli Group Cash Flow
PIRELLI GROUP CASH FLOW €/Mln 1Q’14 2Q’14 3Q’14 4Q’14 FY’14 EBIT before restructuring costs 206.7 232.2 208.9 221.4 869.2 Depreciation / Amortization 70.6 73.3 76.0 78.9 298.8 Net investments (65.3) (78.3) (101.1) (133.4) (378.1) Working capital / other variations (686.6) 77.4 (155.0) 714.6 (49.6) O
Slide 30: Pirelli Balance Sheet
PIRELLI BALANCE SHEET €/Mln FY’13* FY’14 FIXED ASSETS 4,043.0 3,874.0 Inventories 987.3 1,055.0 Trade receivables 666.4 673.8 Trade payables (1,244.5) (1,394.4) NET OPERATING WORKING CAPITAL 409.2 334.4 Other payables/receivables 3.0 33.9 Net Working Capital 412.2 368.3 Net Invested Capital held for
Slide 31: Consumer Business: Key Market Trends
CONSUMER BUSINESS: KEY MARKET TRENDS Market trend 4Q’13 1Q’14 2Q’14 3Q’14 4Q’14 FY'14 % YOY 9 2 3 2 2 4 OE Europe* 9 6 2 1 2 REPLACEMENT -8 5 4 7 4 5 3 OE Nafta 3 2 5 3 2 3 REPLACEMENT South America OE -10 -11 -9 -19 -17 -25 4 4 3 4 7 5 REPLACEMENT** 24 China 10 12 9 10 6 OE * Turkey included, Russi
Slide 32: Industrial Business: Key Market Trends
INDUSTRIAL BUSINESS: KEY MARKET TRENDS Market trend 4Q’13 1Q’14 2Q’14 3Q’14 4Q’14 FY'14 % YOY 24 7 OE Europe * -4 -5 -12 -4 6 14 2 2 REPLACEMENT -3 -1 11 South America OE -1 -28 -29 -23 -33 6 3 REPLACEMENT** -4 -3 -10 -3 China 18 13 OE -7 -11 -5 -16 * Turkey included and Russia excluded ** Non-pool
Slide 33: FY 2014 Pirelli Tyre Mix
FY 2014 PIRELLI TYRE MIX Sales by Business Sales by Segment Consumer Car 77% 70% Agro 3% Truck Motorbike Industrial 7% 23% 20% Sales by Channel Sales by Region Replacement South America NAFTA 76% 33% 12% Asia Pacific 9% MEAI 8% Russia OE Europe 4% 24% 34% FY 2014 RESULTS 32
Slide 34: December 2014 Pirelli People
DECEMBER 2014 PIRELLI PEOPLE Headcount People by Region NAFTA South America 4% 37,561 37% Asia Pacific 36,597* 11% MEAI 9% Russia Europe 9% Dec. 2013 Dec. 2014 30% * Net of Steel Cord headcount (Italy, Romania and Brazil) People by Contract People by Cluster Management Temps & Agency 1% 8% Employees
Slide 35: 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 MEXICO ROMANIA Guanajuato Car Slatina Car VENEZUELA CHINA Guacara Car Yanzhou Car / Moto / Truck Steel Cord (JV) BRAZIL ARGENTINA E
Slide 36: 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 3,380 108.9 3,156 111.0 98.5 111.7 99.5 2,517 2,531 80.2 75.2 1,711 1,801 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q1
Slide 37: 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