Slide 1: Pirelli, Global High Value – 9M 2018 Results
PIRELLI, GLOBA L HIGH VA LUE 9 M 2 0 18 R E S U L T S – 14 N O V E M B E R , 2 0 18 9M 2018 RESULTS PIRELLI, GLOBAL HIGH VALUE 14 November 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: Agenda
AGENDA_ OUR STRATEGY, 9M’18 DELIVERY AND FY’18 OUTLOOK 9M’18 RESULTS IN DETAIL APPENDIX 9M 2018 RESULTS PIRELLI, GLOBAL HIGH VALUE 2 14 November 2018
Slide 4: We are delivering good results because
We are delivering good results because: >• Our High Value strategy is proving resilient and on track >• We are cutting costs, with a short term crash program to deal with the LatAm crisis, and with additional actions in 2019 to continue to support the double digit reduction in Standard and the High
Slide 5: Why our strategy is unique (I/II): choice of positioning in High Value
WHY OUR STRATEGY IS UNIQUE (I/II): choice of positioning in High Value PRESTIGE & PREMIUM +5% +5% CAR PARC 141 129 135 Other regions EU, APac, NAFTA 93% +5% 93% +5% 93% (million vehicles) 2016A 2017A 2018E ~10x ≤17” growth (flat) O.E. + REPLACEMENT ~5x ≤17” growth (+1.9%) ≥18” TYRE MARKET +10% ≥+10%
Slide 6: Why our strategy is unique (II/II): distinctive business model
WHY OUR STRATEGY IS UNIQUE (II/II): distinctive business model I Widest marked II III homologated portfolio Long-term demand visibility Robust pull-through demand # of ≥18’’ OE-marked items, German product list Car Registrations OE volumes Repl Volume OE + Repl Volumes >850 Tier 1 panel O.E. Sales ≥
Slide 7: 9M 2018 Results Summary
9M 2018 RESULTS SUMMARY_ Fully on track vs. guidance ▬ ≥18” Global market +10.5%, Pirelli +16.5% ▬ Strengthening our strategic levers at a rapid pace: High ~+260 new H.V. Homologations, 45% Specialties; fitments on EVs growing 2x YoY Value Increase in H.V. capacity by +2.6M / pcs, now accounting
Slide 8: 9M 2018 Results Highlights
9M 2018 RESULTS HIGHLIGHTS_ € million REVENUES EBIT ADJ.1 w/o start-up costs2 ∆ YoY -2.8% organic +7.5% 4,038 3,925 +4.4% 681 732 Standard -5.5% High Value 58.1% +7.9% 64.5% +11.5% 9M 2017 9M 2018 9M 2017 9M 2018 Margin 16.9% 18.7% NET INCOME before discontinued operations NET FINANCIAL POSITION +90
Slide 9: 9M 2018 Performance by High Value Regions
9M 2018 PERFORMANCE BY HIGH VALUE REGIONS_ € million SALES Δ org. EBIT KEY HIGHLIGHTS 9M’17 9M’18 YoY % growth adj. margin1 1,698 1,715 +1.0% +2.8% ▬ Successful High Value -8.7% strategy implementation: gaining shares in both OE HIGH VALUE REGIONS High-teens and Replacement SALES EUROPE +8.8% (impro
Slide 10: 9M 2018 Performance by Standard Regions
9M 2018 PERFORMANCE BY STANDARD REGIONS_ € million SALES Δ org. EBIT KEY HIGHLIGHTS 9M’17 9M’18 YoY % growth adj. margin1 682 In a context of weak demand -26.8% -3.6% and a challenging market 499 environment: Mid-single ▬ Continued mix improvement STANDARD REGIONS -5.7% LATAM Digit ▬ Increased expor
Slide 11: FY 2018 Outlook Update
FY 2018 OUTLOOK UPDATE_ 2017A 2018E (14 Nov. 2018) August 7th guidance € 5.35 billion excl. LatAm Revenues € 5,352 mln ~ € 5.2 bln slowdown vs August guidance ~€ 5.4 billion High Value weight 58% ~ 64% from >60% flat excl. LatAm slowdown vs Volumes ~ -2.0% August guidance flat ≥13% excl. LatAm slowd
Slide 12: Agenda
AGENDA_ OUR STRATEGY, 9M’18 DELIVERY AND FY’18 OUTLOOK 9M’18 RESULTS IN DETAIL APPENDIX 9M 2018 RESULTS PIRELLI, GLOBAL HIGH VALUE 11 14 November 2018
Slide 13: 9M 2018 Net Sales Bridge
9M 2018 NET SALES BRIDGE_ o/w Organic € million -1.8% +6.2% -6.6% -0.6% -2.8% +4.4% 283 (356) 4,038 253 (268) (26) 3,925 (73) +12.1% -11.2% +16.5% Net Sales Volume Price/Mix FX IFRS 15 impact1 Net Sales 9M’17 9M’18 High Value Standard +6.2% if Brazil price increase successfully Car ≥18’’ implemented
Slide 14: 9M / 3Q 2018 Operating Performance
9M / 3Q 2018 OPERATING PERFORMANCE_ € million internal levers ∑ +148 external levers ∑ -90 7 (33) 43 (24) (37) (28) 700 160 ▬ Costs cutting +21 EBIT adj. 642 ▬ D&A / other -53 9M (29) 17.8% margin 15.9% 2017 Volume Price/mix Efficiencies Start-up D&A / Other Raw Mat. Other FX 2018 EBIT adj. costs1 i
Slide 15: 9M 2018 Net Income Bridge
9M 2018 NET INCOME BRIDGE_ € million (33) 378 151 11 199 50 Net Income Δ EBIT Δ Net income / Δ Financial Δ Taxes Net Income bef. disc. oper. loss from equity income / charges bef. disc. oper. 9M’17 participations 9M’18 % on Sales 4.9% 9.6% 9M’17 9M’18 Net Income related to cont. oper. 199 378 PPA am
Slide 16: 9M 2018 Cash Flow and Net Financial Position
9M 2018 CASH FLOW AND NET FINANCIAL POSITION_ € million Op. Cash Flow: -634 101 (155) 4,038 139 101 3,219 1,245 ▬ Non rec. / restr. 55 ▬ FX / other 46 (908) 297 NFP FY’17 EBITDA CapEx ∆ WC Taxes Interests Other Financial NFP 9M’18 adjusted asset sale NFP / 2.7 x 3.2 x1 adj. EBITDA Working Capital dy
Slide 17: Current Capital Structure (September 2018)
CURRENT CAPITAL STRUCTURE (SEPTEMBER 2018)_ € million NET FINANCIAL POSITION GROSS DEBT MATURITY Cash & Cash equivalents 4,805 (767) 1,694 (570) 4,038 (198) Loan 1,143 2,821 1,037 Bond Fin. receivables & other 1,685 505 935 Other 1,316 343 1,034 200 305 84 669 200 8 2 82 9 3 Gross Fin. Net Fin. 2018
Slide 18: Agenda
AGENDA_ OUR STRATEGY, 9M’18 DELIVERY AND FY’18 OUTLOOK 9M’18 RESULTS IN DETAIL APPENDIX 9M 2018 RESULTS PIRELLI, GLOBAL HIGH VALUE 17 14 November 2018
Slide 19: 9M / 3Q 2018 Results Highlights
9M / 3Q 2018 RESULTS HIGHLIGHTS_ € million 3Q’17 3Q’18 Δ YoY 9M’17 9M’18 Δ YoY Revenues 1,353 1,295 -4.3% 4,038 3,925 -2.8% Organic Growth1 +2.5% +4.4% High Value Revenues 782.5 846 +8.1% 2,345 2,530 +7.9% Organic Growth1 +9.6% +11.5% % on total Revenues 57.8% 65.3% +7.5 pp 58.1% 64.5% +6.4 pp EBITD
Slide 20: 9M Pirelli Balance Sheet
9M PIRELLI BALANCE SHEET_ € million 30/09/2017 31/12/2017 30/09/2018 Fixed assets related to continuing operations 9,147 9,121 8,881 Inventories 969 941 1,049 Trade receivables 1,037 653 968 Trade payables (1,067) (1,674) (1,005) Operating net working capital related to continuing operations 940 (80
Slide 21: 9M Pirelli Group Cash Flow
9M PIRELLI GROUP CASH FLOW_ € million 9M’17 1Q‘18 2Q‘18 3Q‘18 9M‘18 EBIT adjusted1 642 218 232 250 700 Depreciation & Amortization (excl. PPA amortization) 194 70 68 70 208 Capital expenditures (328) (85) (94) (118) (297) Change in working capital / other (900) (929) (69) (247) (1,245) Operating Cas
Slide 22: 2018E Raw Material Guidance
2018E RAW MATERIAL GUIDANCE_ € million 13% Natural Rubber 10% Steel Reinf. 17% Textiles breakdown 9M 2018 A 27% Synthetic Rubber raw mat. based on 35% on Sales purch. costs 23% Chemicals 10% Carbon Black AVERAGE QUOTATION OF COMMODITIES AVERAGE COST OF GOODS SOLD OF COMMODITIES 2018E 2017 A 2018 E ∆
Slide 23: 2018E Forex Guidance
2018E FOREX GUIDANCE_ € million 13% other 6% GBP 37% EUR 3% RUB breakdown 9M 2018 A 11% BRL based on currency 12% CNY 18% USD ∆ YoY MAIN AVERAGE EXCHANGE RATES 2017 A 2018 E ∆ YoY 2018E Nov. guidance vs. EUR Aug. guidance EUR / USD / 1.130 1.185 -5% -5% 1.188 USD / CNY / 6.752 6.610 +2% -3% 6.494 US
Slide 24: Key Car Market Trends: Europe
KEY CAR MARKET TRENDS: EUROPE_ Market trend 3Q’17 4Q’17 FY’17 1Q’18 2Q’18 3Q'18 9M’18 ∆% YoY 5 5 O.E. 1 1 0 Total Car market -1 -4 6 4 3 2 1 Replacement 0 -5 4 6 1 3 1 Total (O.E.+Repl.) 0 -4 14 ≥18” 10 10 10 8 New Premium & Standard ≤17" 3 5 2 O.E. -2 -2 -3 -4 -2 -4 20 19 12 13 11 13 2 3 5 3 Replac
Slide 25: Key Car Market Trends: NAFTA
KEY CAR MARKET TRENDS: NAFTA_ Market trend 3Q’17 4Q’17 FY’17 1Q’18 2Q’18 3Q'18 9M’18 ∆% YoY 3 O.E. Total Car market -3 -2 -1 -6 -4 -10 4 5 1 3 Replacement -2 0 -2 3 5 Total (O.E.+Repl.) 2 -1 -1 -2 -4 ≥18” 11 New Premium & Standard ≤17" 4 6 7 O.E. 0 -1 -3 -8 -9 -7 -9 -8 -7 -12 14 16 11 13 13 9 10 2 2
Slide 26: Key Car Market Trends: APAC
KEY CAR MARKET TRENDS: APAC_ Market trend 3Q’17 4Q’17 FY’17 1Q’18 2Q’18 3Q'18 9M’18 ∆% YoY O.E. 5 6 2 0 Total Car market -1 -2 -3 6 3 5 2 Replacement 1 1 -1 6 1 4 3 Total (O.E.+Repl.) 1 0 -2 ≥18” New Premium & Standard 23 20 ≤17" 14 16 13 O.E. 10 8 2 4 -3 -1 -5 -5 -2 19 18 19 11 11 11 11 Replacement
Slide 27: Key Market Trends: Russia & CIS and South America
KEY MARKET TRENDS: RUSSIA & CIS AND SOUTH AMERICA_ Market trend 3Q’17 4Q’17 FY’17 1Q’18 2Q’18 3Q'18 9M’18 ∆% YoY 24 22 22 18 15 13 16 O.E. Russia & CIS 20 17 16 15 11 2 1 Replacement 21 17 17 15 11 5 3 Total (O.E.+Repl.) 27 16 20 11 10 8 10 O.E. South America 13 10 7 0 Replacement1 -6 -11 -6 15 12 8
Slide 28: 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 $ / barrel 06 140 05 120 05 04 100 04 03 80 03 53.6 54.8 60 02 45.0 02 1.65 1.37 40 1.38 01 01 20 4Q 1Q 2Q 3Q 4Q 1
Slide 29: Pirelli Manufacturing Footprint as of September 30th 2018
PIRELLI MANUFACTURING FOOTPRINT AS OF SEPTEMBER 30TH 2018 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 ▬ Yanzhou
Slide 30: Pirelli, Global High Value 9M 2018 Results
9M 2018 RESULTS PIRELLI, GLOBAL HIGH VALUE 14 November 2018