Pirelli & C. S.p.a. · MIL:PIRC
Pirelli & C — 9M 2022 Earnings Presentation
35 slides from Pirelli & C's earnings presentation, Nov 3, 2022
Slide 1: 9M 2022 Financial Results
9M 2022 Financial Results November 3rd, 2022 9M 2022 Financial Results
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: Agenda
Agenda 1 KEY MESSAGES 2 PIRELLI & C. – 9M’22 RESULTS 3 FY 2022 OUTLOOK AND TARGETS 4 APPENDIX 2 9M 2022 Financial Results
Slide 4: Key Messages
Key Messages > Solid 9M 2022 result driven by a resilient business model: • Strengthened positioning in Car ≥18’’, with market share gain in Replacement • Robust Price/Mix (+20%) more than offsetting raw mat. & inflation headwinds • Sound cash flow supported by efficient working capital management >
Slide 5: 9M 2022 Results highlights (1/2)
9M 2022 Results highlights (1/2) Solid performance despite a challenging environment … € million Net Sales adjusted EBIT1 +26% +26% 5,033 754 3,979 599 Standard High Value 71% 71% 9M’21 9M’22 9M’21 9M’22 margin 15.0% 15.0% Net Income Net Financial Position +141 3Q Net Cash Flow before dividends +52%
Slide 6: 9M 2022 Results highlights (2/2)
9M 2022 Results highlights (2/2) … supported by a resilient business model and strategy implementation Repl. Car ≥18“ 9M’22 (vol D % yoy) 3Q’22 > Enhanced positioning in High Value, a more resilient Pirelli 10.1% 4.5% +4.8pp +3.8pp segment with lower demand elasticity Mkt 5.3% 0.7% > Fast response t
Slide 7: Update on Sustainability
Update on Sustainability Area KPIs 2021A 2025E 3Q’22 update SAFETY FIRST Accident Towards zero accidents 0.21 <0.10 2022 S&P Global Sustainability Assessment: frequency index at work Pirelli confirmed as Global Leader in the Auto Components sector with 85 points score (+8p vs 2021) PRODUCT ECO Rolli
Slide 8: Agenda
Agenda 1 KEY MESSAGES 2 PIRELLI & C. – 9M’22 RESULTS 3 FY 2022 OUTLOOK AND TARGETS 4 APPENDIX 7 9M 2022 Financial Results
Slide 9: Pirelli vs. market – outperformance in High Value confirmed in 3Q
Pirelli vs. market – outperformance in High Value confirmed in 3Q ► H.V.: share gain in Replacement while keeping a more selective approach to O.E. (focus on EV) ► Std. : lower exposure, in line with the Company Strategy Pirelli TOTAL ≥18” ≤17” Market 9M’22 3Q’22 9M’22 3Q’22 9M’22 3Q’22 4.0% 12.2% 3
Slide 10: 9M 2022 Strategy implementation: delivery in line with targets
9M 2022 Strategy implementation: delivery in line with targets Main programs 2022 targets 9M’22 main achievements • Focus on H.V. outperforming the market in ≥18” • Car ≥18”: +9.4% vs. +6.8% of the mkt achieved by capturing: Replacement • solid Repl. demand across regions • More selective approach t
Slide 11: Strong over-performance driven by ≥19” & Specialties
Commercial Program delivery in 9M 2022 Strong over-performance driven by ≥19” & Specialties 9M 2022A volume variance (Car) Key programs highlights Volume trend Market 9M’21 A 46% 54% Car ≥18" +6.8% +9.4% H.V. Repl. Massive weight of H.V. Regions (~92%), PULL first Elect volumes sales (~4% of Repl. o
Slide 12: Innovation program on Car
Innovation program on Car Broadening N.A. product range in 3Q Cinturato Winter 2 named best winter tyre Dedicated to Dedicated to Sedans SUVs & ligt trucks 1 3PMSF* certification for unexpected weather conditions 2 Mileage warranty to better match N.A. consumers needs “Convincing all-round talent wi
Slide 13: Innovation Program: update on EVs
Innovation Program: update on EVs Pirelli EV homologation portfolio further enhanced >300 EV homologations worldwide, with the following main partners1: Tesla Rivian Europe EV trade homologation portfolio vs. peers Pirelli EV: already achieved FY 2025 target # of EV O.E. marked items2: ~2.5x the pee
Slide 14: Strengthening our position in H.V. segment in 9M’22
Innovation on 2 wheels Strengthening our position in H.V. segment in 9M’22 MOTO CYCLING Dedicated to Completing all market segments with 10 new products Hypernakeds P ZERO Race 4S > Flagship of compound selection for sportier road Made in Bollate, top quality & riders performance > Patented ABC1 com
Slide 15: Competitiveness programs progress
Competitiveness programs progress 9M achievements in line with expectations and consistent with programs quarterly targets 2021 2022 E FY ACT Focusing on: FY GUI 9M’22 ACT Modularity Product Cost ~70% in 9M Design speed and virtualization Footprint optimization Manufacturing ~60% in 9M Indus
Slide 16: Operational programs: update on Energy
Operational programs: update on Energy Key issue Pirelli’s mitigation actions update > FY’22 Energy cost increase driven by Russian gas shortage > Energy Risk Containment Committee is continuously monitoring the situation and implementing actions: Pirelli energy costs on sales (%) ~3.7% ► Risk and r
Slide 17: 9M’22 Sales bridge
9M’22 Sales bridge: Record price/mix confirmed for the third quarter in a raw; solid High Value performance € million 5,033 257 3,979 797 (0) Standard 71% 71% High Value 9M’21 Δ Volumes Δ Price/mix Δ Forex 9M’22 High Value Standard o/w Organic 9M'22 6.6% 0.0% -7.6% +20.0% +6.5% +26.5% +20.0% 3Q'22 8
Slide 18: 9M/3Q 2022 adjusted EBIT bridge
9M/3Q 2022 adjusted EBIT bridge Profitability supported by price/mix & efficiency covering 1.3x Raw Mat & Inflation headwinds in 9M/ 3Q € million Net impact +199 Net impact +340 Net impact -141 (365) 677 28 86 (227) 754 (20) (25) 599 adj. EBIT 0 margin 15.0% 15.0% 9M’21 Volume Price/mix Raw Mat. FX
Slide 19: 9M 2022 Net Income bridge
9M 2022 Net Income bridge Earnings driven mainly by improving operating performance and lower non-rec. / rest. costs € million 51 2 (38) (46) 359 155 236 Net Income Δ adj. EBIT Δ non rec. / Δ Net income / Δ Financial Δ Taxes Net Income 9M’21 restr. costs loss from equity income / charges 9M’22 parti
Slide 20: 9M’22 Net Financial Position
9M’22 Net Financial Position Better yoy cash flow trend driven by the solid operating performance € million Net Cash Flow (before dividends): -323 (-377 in 9M’21) 3,391 160 Operating Cash Flow: 87 (-85 in 9M’21) 114 2,907 151 145 ▬ Non-rec. / restr. 46 753 ▬ FX 43 (1,079) ▬ Others 25 51 189 Δ Net Fi
Slide 21: Total Gross Debt structure as of September 30th 2022
Total Gross Debt structure as of September 30th 2022 €2 bln ESG financing in 2023 and strong cash-flow generation lead to sound liquidity position and early redemption of €553 mln bond originally due in Jan 2023 € million Net Financial Position Gross Debt maturity 5,375 (1,984) 1,462 Liquidity posit
Slide 22: Agenda
Agenda 1 KEY MESSAGES 2 PIRELLI & C. – 9M’22 RESULTS 3 FY 2022 OUTLOOK AND TARGETS 4 APPENDIX 21 9M 2022 Financial Results
Slide 23: 2022 Car Tyre market outlook update
2022 Car Tyre market outlook update: High Value outperforming Standard High Value: confirmed O.E. trend supported by China; slightly milder Repl. expectations (million pcs) WORLD Car tyre market China Car tyre market 1,540 255 247 1,425 1,426 1,419 237 ≥18" 265 35 232 279 299 297 43 44 45 1,275 1,14
Slide 24: Pirelli FY 2022 targets update
Pirelli FY 2022 targets update Price/Mix and FX are driving guidance upgrade € billion 2021 A 2022 E Target @ 4-Aug-22 Target @ 3-Nov-22 • Vol.: flat (~+5% H.V., ~-6% Std) (old: vol ~+0.5%÷~+1.5%) Net Sales 5.33 ~6.2 ÷ ~6.3 ~6.5 • Price/mix: ≥+17% (old: ~+13.5%/+14.5%) • Forex: ~+5% (old: ~+2.5%) ad
Slide 25: Agenda
Agenda 1 KEY MESSAGES 2 PIRELLI & C. – 9M’22 RESULTS 3 FY 2022 OUTLOOK AND TARGETS 4 APPENDIX 24 9M 2022 Financial Results
Slide 26: A Globally Acknowledged Sustainability Leadership
A GLOBALLY ACKNOWLEDGED SUSTAINABILITY LEADERSHIP Major ratings (November-22) last positioning in the reference sector score update & 2022 – GOLD CLASS; Top score ATX Auto Components 2022 2022 – score 85 2021 A Max score 2021 Inclusion Max score 2021 AA 6% of the Auto components in AA 2021 4.5 / 5 T
Slide 27: Key Car Market Trends: Europe
Key Car Market Trends: Europe Market trend (∆% YoY) 1Q’21 2Q’21 3Q’21 4Q’21 FY’21 1Q’22 2Q’22 3Q’22 Total 91 26 O.E. 2 -5 -7 -16 42 -31 -29 Replacement 8 6 10 8 5 -3 -5 49 Total (O.E.+Repl.) 5 7 3 4 -7 -2 -1 ≥18” & ≤17” 114 80 O.E. 5 27 26 ≥18” 1 3 2 ≤17” -10 -25 -34 -25 -31 -11 -15 -17 52 40 21 23
Slide 28: Key Car Market Trends: North America
Key Car Market Trends: North America Market trend (∆% YoY) 1Q’21 2Q’21 3Q’21 4Q’21 FY’21 1Q’22 2Q’22 3Q’22 Total 132 O.E. 0 12 19 -4 -16 -1 -25 64 Replacement1 11 13 6 0 -5 -5 -8 72 Total (O.E.+Repl.) 7 10 4 -5 -7 -3 -4 ≥18” & ≤17” 146 118 O.E. 15 19 19 ≥18” 2 7 5 8 ≤17” -11 -18 -34 -11 -22 -8 -9 62
Slide 29: Key Car Market Trends: Asia Pacific
Key Car Market Trends: Asia Pacific Market trend (∆% YoY) 1Q’21 2Q’21 3Q’21 4Q’21 FY’21 1Q’22 2Q’22 3Q’22 Total 36 24 12 O.E. 3 0 -7 -7 -17 27 4 3 4 Replacement -7 -1 -6 -14 31 7 11 Total (O.E.+Repl.) 3 -4 -3 -10 -11 ≥18” & ≤17” 53 31 22 30 22 O.E. 9 11 0 5 ≥18” -3 -1 -1 -9 ≤17” -9 -19 -9 68 24 12 R
Slide 30: Key Car Market Trends: Russia, Nordics, MEAI / South America
Key Car Market Trends: Russia, Nordics, MEAI / South America Market trend (∆% YoY) 1Q’21 2Q’21 3Q’21 4Q’21 FY’21 1Q’22 2Q’22 3Q’22 Russia, Nordics, MEAI 144 O.E. 16 17 14 0 -11 -1 -1 51 Replacement 15 12 3 0 -4 -1 -6 66 Total (O.E.+Repl.) 11 13 4 0 2 -4 -5 South America 290 O.E. 7 15 15 30 -13 -8 -1
Slide 31: Economic results summary
Economic results summary € million 3Q 2022 3Q 2021 ∆ YoY 9M 2022 9M 2021 ∆ YoY Net Sales 1,836.3 1,414.5 +29.8% 5,033.3 3,979.3 +26.5% Organic variation +21.2% +20.0% adjusted EBITDA1 383.9 320.1 +19.9% 1,079.2 894.0 +20.7% % of net sales 20.9% 22.6% -1.7 p.p. 21.4% 22.5% -1.1 p.p. reported EBITDA 3
Slide 32: Consolidated Balance Sheet
Consolidated Balance Sheet € million 30/09/2022 31/12/2021 30/09/2021 Fixed assets 9,006.6 8,912.4 8,822.5 Inventories 1,464.3 1,092.2 973.7 Trade receivables 1,169.0 659.2 939.4 Trade payables (1,625.3) (1,626.4) (1,092.1) Operating net working capital 1,008.0 125.0 821.0 % of net sales1 15.8% 2.3%
Slide 33: Net Cash Flow
Net Cash Flow € million 1Q 2022 2Q 2022 3Q 2022 9M 2022 9M 2021 Adjusted Operating income (EBIT) 228.5 253.1 271.9 753.5 598.8 Amortiz. & depreciations (excl. PPA amortiz.) 104.6 109.1 112.0 325.7 295.2 Investments in tangible and intangible assets (Capex) (48.6) (67.1) (73.0) (188.7) (213.3) Increa
Slide 34: Raw Material costs trend and mix
Raw Material costs trend and mix Main raw materials price trend 71.5 ; +31% YoY 64.2 ; -10% YoY 43.2 ; -33% YoY 70.8 ; +64% YoY 1.365 ; -17% YoY 1.406 ; +3% YoY 1.317 ; -6% YoY 1.677 ; +27% YoY $ / kg Brent Oil (in $ / barrel) Natural Rubber (in $ / kg) yearly avg.; Δ YoY $ / barrel 1.90 115 100 1.6
Slide 35: Pirelli manufacturing footprint
Pirelli manufacturing footprint U.K. Germany Romania ▬ Burton – ▬ Breuberg – ▬ Slatina – Car Semi-finished Car / Moto ▬ Carlisle – Car U.S. ▬ Rome – Car Russia ▬ Kirov – Car ▬ Voronezh – Car China Mexico ▬ Yanzhou – Italy ▬ Silao – Car Car / Moto ▬ Bollate – ▬ Jiaozuo – Car Cycling ▬ Shenzhou – ▬ Se