Pirelli & C. S.p.a. · MIL:PIRC
Pirelli & C — FY2010 Earnings Presentation
47 slides from Pirelli & C's earnings presentation, Mar 8, 2011
Slide 1: Pirelli FY'10 Results
TREC PIRELLI FY’10 RESULTS March 8, 2011
Slide 2: 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
Slide 3: Agenda
AGENDA KEY MESSAGES PIRELLI & C 2010 FINANCIAL REVIEW PIRELLI TYRE 2010 RESULTS 2011 OUTLOOK AND TARGETS UPDATE APPENDIX 2
Slide 4: Key Industry Trends: Pirelli the Trailblazer
KEY INDUSTRY TRENDS: PIRELLI THE TRAILBLAZER Key trends Current Pirelli in 2010 2010 Top profitability despite high raw Maximum profitability material t i l costt iinflation fl ti ever Different dynamics Solid pricing discipline: value is the Best performer for vs. automotive common indust
Slide 5: Agenda
AGENDA KEY MESSAGES PIRELLI & C 2010 FINANCIAL REVIEW PIRELLI TYRE 2010 RESULTS 2011 OUTLOOK AND TARGETS UPDATE APPENDIX 4
Slide 6: 2010 FY Results vs Targets
PIRELLI 2010FY RESULTS VS TARGETS* €/bln FY’10 revised Targets (Nov.’10)** FY’10 Results ∆ YoY Revenues ~4.8 4.85 +19.2% Tyre >4.7 4.77 +19.5% EBIT ~0.38 0.41 +63.3% margin >7.5% 7.5% 8.4% pp +2.3p.p. Tyre ~0.42 0.45 +46.8% margin g >8.5% 9.5% +1.8p.p. pp Capex >0.35 0.4 +95% NFP <0.7 0.45 -14% (*)
Slide 7: Key Financial Results
PIRELLI KEY FINANCIAL RESULTS €/mln FY’10 FY’09 ∆ YoY 4Q’10 4Q’09 ∆ YoY 4Q results key drivers Revenues 4,848.4 4,067.5 +19.2% 1,229.7 1,055.1 +16.5% Effective pricing policy and g tyre winter sales driving y EBITDA before Restruct. Costs 653.7 507.8 +28.7% 173.6 150.2 +15.6% revenues growth Margin
Slide 8: Net Income
PIRELLI NET INCOME €/mln FY’10 Tax T rate:38% t 38% due d tto Pirelli Pi lli TTyre fiscal structure improvement (35% Tyre tax rate, -3pp yoy) 35 0 35.0 43 4.3 (47.0) 158.1 (123.6) FY’10 Oclaro capital gain 18 4 18.4 Dividends from fin. part. & others 5.0 FY’09 Devaluation/sale TI stake sales (17.5)
Slide 9: 2010 Net Financial Position
PIRELLI 2010 NET FINANCIAL POSITION €/mln EBIT before restr. costs 432.5 Investments*: ((438.6)) Depreciation: 221.2 ∆ NWC & others: 95.2 528.8 52.3 85.1 455.6 203.2 (31) (5.6) (67.2) (310) FY’09 Operating Fin.Income/ Dividends Restructuring Net Fin. Net Cash Others FY’10 Cash Flow Expenses Cash Out
Slide 10: Debt: Extend Maturity and Diversify Sources
DEBT: EXTEND MATURITY AND DIVERSIFY SOURCES Gross Debt Maturity post refinancing €/mln FUNDING STRATEGY 1,147 123.3 DEVELOPMENT 104 Committed Line 49 1st step November 30, 2010: new 5-year 380 92 Drawdown 146.7 380 1.2 € bln committed revolving facilities replacing the 2 existing ones for 1.475 1
Slide 11: Dividend Proposal
DIVIDEND PROPOSAL Parent Company Net Income: 87.4 €/mln (191.0 €/mln before disc. operations) Dividend Proposal to be filed with Pirelli & C. AGM (21 April 2011) DPS (€) N° of Shares** Dividends (€/mln) 2010 2009* mln 2010 ∆ % yoy Ordinary shares 0.1650 0.1595 475 78.4 Savings shares 0 2290 0.2290
Slide 12: Agenda
AGENDA KEY MESSAGES PIRELLI & C 2010 FINANCIAL REVIEW PIRELLI TYRE 2010 RESULTS 2011 OUTLOOK AND TARGETS UPDATE APPENDIX 11
Slide 13: 4Q Results Highlights
4Q RESULTS HIGHLIGHTS Double digit top line growth (+17.3% yoy) driven by solid price discipline and continuous focus on premium. Strong winter tyre season in Europe, leadership position in South America America, increasing market share in North America America, highest sales growth in Asia. The
Slide 14: Tyre Performance
PIRELLI TYRE PERFORMANCE €/mln 1Q’10 YoY% 2Q’10 YoY% 3Q’10 YoY% 4Q’10 YoY% FY’10 YoY% Revenues 1,110.0 +19.8% 1,215.3 +22.9% 1,233.8 +18.3% 1,212.9 +17.3% 4,772.0 +19.5% EBITDA (before (b f Strong sales restruct. costs) 146.4 +35.8% 177.5 +33.5% 173.0 +21.8% 187.4 +20.7% 684.3 +27.2% growth in all
Slide 15: Tyre by Region
PIRELLI TYRE BY REGION Sales by region FY’10 Actions and Results % on sales 100% 100% Yoy growth Europe Premium and Prestige OEMs sales Increase Rising market share in winter tyres Europe 40% 42% Mature Markets NAFTA +16% Enhanced market share in North America through premium strategy and high
Slide 16: Tyre FY'10 Operating Performance
PIRELLI TYRE FY’10 OPERATING PERFORMANCE €/mln Raw materials: (125.1) 131.9 19.8 Labour / energy / other: (12.6) 22 8 22.8 35 3.5 129 6 129.6 104.7 4Q 2010 (15.4) (137.7) EBIT 4Q’09 Price Volume Cost of Efficiencies Exchange Depreciation/ EBIT 4Q’10 (before restr. mix inputs rate other costs (befo
Slide 17: Tyre NFP Evolution
PIRELLI TYRE NFP EVOLUTION €/mln EBIT (before restr. costs): 129.6 EBIT (before restr. costs): 346.7 Investments*: (184.8) Investments*: (220.2) Depreciation: 57.8 p Depreciation: 150.2 ∆ NWC & others: 194.3 ∆ NWC & others: (105.1) 156.0 1,205.0 (2.3) 1,109.9 2.0 70.6 37.5 42.7 1,027.3 158.1
Slide 18: Consumer Business: Key Market Trends
CONSUMER BUSINESS: KEY MARKET TRENDS Car tyre shipments, shipments % (yoy) 4Q‘09 1Q’10 2Q’10 3Q’10 4Q’10 FY’10 +37% pe* +12% +11% +5% +13% Europ OE -2% +12% +10% +11% +6% +7% +8% Replacement +73% +74% America +26% +39% +2% +6% OE North A +8% +8% +8% +1% +4% +0% Replacement +44% +25% +12% +11% +13% +
Slide 19: Consumer Business: Pirelli Performance
CONSUMER BUSINESS: PIRELLI PERFORMANCE €/mln 1Q’10 YoY% 2Q’10 YoY% 3Q’10 YoY% 4Q’10 YoY% FY’10 YoY% Revenues 780.9 +16.5% 835.8 +19.1% 847.1 +15.1% 836.5 +16.2% 3,300.3 +16.7% EBITDA (before (b f restruct. costs) 106.0 +37.0% 122.4 +35.4% 118.9 +18.5% 141.1 +26.4% 488.4 +28.6% margin 13.6% +2.1 p.p.
Slide 20: New Consumer Products
NEW CONSUMER PRODUCTS Summerr Cinturato P1 Diablo Rosso II Green Performance nter S Snowcontrol t l Serie S i III Wi t ICEControl Winter ICEC t l Win 19
Slide 21: Industrial Business: Key Market Trends
INDUSTRIAL BUSINESS: KEY MARKET TRENDS Car tyre shipments, shipments 4Q‘09 1Q‘10 2Q‘09 3Q’10 4Q’10 FY’10 +84% +90% +67% +57% +1% Europe** OE -50% +38% +19% +15% +18% +12% +9% R l Replacement t +65% +61% +49% 49% +47% +3% +22% Mercosur OE +23% +26% +19% +23% +22% +23% M Replacement * Turkey and Russi
Slide 22: Industrial Business: Pirelli Performance
INDUSTRIAL BUSINESS: PIRELLI PERFORMANCE €/mln 1Q’10 YoY% 2Q’10 YoY% 3Q’10 YoY% 4Q’10 YoY% FY’10 YoY% Revenues 329.1 +28.4% 379.5 +32.0% 386.7 +26.1% 376.4 +19.7% 1,471.7 +26.3% EBITDA (before (b f restruct. costs) 40.4 +32.9% 55.1 +29.3% 54.1 +29.7% 46.3 +6.2% 195.9 +23.8% margin 12.3% +0.4 p.p. 14
Slide 23: Green Technology
PIRELLI GREEN TECHNOLOGY Technology Packages Green Performance SATT: Spiral Advanced Technology for Truck GREEN AREA 01 series DLTC: Dual Layer reference Tread Compound Hexa: Hexagonal Bead Wire Package High Penetration Steel Cords Green Materials and PERFORMANCE AREA Structures Retreadabi
Slide 24: Agenda
AGENDA KEY MESSAGES PIRELLI & C 2010 FINANCIAL REVIEW PIRELLI TYRE 2010 RESULTS 2011 OUTLOOK AND TARGETS UPDATE APPENDIX 23
Slide 25: 2011 Market Outlook
2011 MARKET OUTLOOK Volumes: a more positive outlook based on Low inventory levels Order O d books b k ffor b both th summer and d winter i t ttyres Higher market forecast for truck tyres Price discipline: confirmed and effective Consumer: C strong t demand d d makes k market k t receptive t
Slide 26: 2011 Outlook: Volumes
2011 OUTLOOK: VOLUMES Global Tyre Car Market Global Tyre Truck Market Mln pcs Update Ind. Plan Mln pcs Update Ind. Plan March ‘11 (nov. ’10) March ‘11 (nov. ’10) 1.290 +5% 5% 179 +8% 4% 1.230 166 +14% +8% 11% 12% 25% 25% +4% 75% +8% 75% 2010 2011 2010 2011 Non Premium Tyres Premium Tyres (*): T, H,
Slide 27: 2011 Outlook: Capex Plan
2011 OUTLOOK: CAPEX PLAN INVESTMENTS INVESTMENT ALLOCATION Capex C Y Year E d Capacity End C it Mature LATAM & RDE* Mature LATAM & RDE* (€/bln) (mln pcs) 2010 2011 2010 2011 2010 2011 CONSUMER 0.3 0.4 56 62 36% 42% 78% 18% 55% 73% yoy +10% +11% INDUSTRIAL 01 0.1 >0 1 >0.1 58 5.8 63 6.3 4% 18% 22% 3%
Slide 28: 2011 Outlook: Raw Material
2011 OUTLOOK: RAW MATERIAL Raw material impact on Ebit: 580 €/mln assuming Natural rubber @ 4,900$/ton (yearly average as a cost of goods sold) Oil @ 110$/barrel 110$/b l (yearly average as a cost of goods sold) Cost headwind will be fully compensated by price/mix improvement 80% already cov
Slide 29: 2011 Efficiency Plan Confirmed
2011 EFFICIENCY PLAN CONFIRMED 80 € mln 13% 16% 46% 25% Target T t Cost C t Productivity P d ti it Scale S l Allocation All ti tot Total T t l savings i Management low cost plants 2011 vs 2010 28
Slide 30: 2011 Targets Update
PIRELLI 2011 TARGETS* UPDATE €/bln 2011 Target 2011 Target (Nov. 4 2010) Update Revenues >5.15 >5.55 Tyre >5.1 >5.5 Volumes +4% ≥+6% Price/mix +4% ~+12% EBIT % 8 5% ÷ 9.5% 8.5% 9 5% confirmed Tyre 9% ÷ 10% confirmed T rate Tax 39%/38% ≤38% 38% (-1pp/-2pp vs. 2010E tax rate) Capex 1.2 in 3 y >0.5 NFP
Slide 31: Agenda
AGENDA KEY MESSAGES PIRELLI & C 2010 FINANCIAL REVIEW PIRELLI TYRE 2010 RESULTS 2011 OUTLOOK AND TARGETS UPDATE APPENDIX 30
Slide 32: Group – FY'10 Results
PIRELLI GROUP – FY’10 RESULTS* €/mln Profit & Loss and Net Financial Position by Business Unit Pirelli Tyre Other Pirelli & C. Cons. FY’10 FY’09 FY’10 FY’09 FY’10 FY’09 Sales 4,772.0 3,992.9 76.4 74.6 4,848.4 4067.5 ∆% 19.5% 19.2% EBITDA before Restruct Costs 684.3 538.0 (30.6) (30.2) 653.7 507.8 %o
Slide 33: Group – 4Q'10 Results
PIRELLI GROUP – 4Q’10 RESULTS* €/mln Profit & Loss and Net Financial Position by Business Unit Pirelli Tyre Other Pirelli & C. Cons. 4Q’10 4Q’09 4Q’10 4Q’09 4Q’10 4Q’09 Sales 1,212.9 1,034.3 16.8 20.8 1,229.7 1,055.1 ∆% 17.3% 16.5% EBITDA before Restruct Costs 187.4 155.2 (13.8) (5.0) 173.6 150.2 %o
Slide 34: Group – 3Q'10 Results
PIRELLI GROUP – 3Q’10 RESULTS* €/mln Profit & Loss and Net Financial Position by Business Unit Pirelli Tyre Other Pirelli & C. Cons. 3Q’10 3Q’09 3Q’10 3Q’09 3Q’10 3Q’09 Sales 1,233.8 1,042.7 15.9 15.8 1,249.7 1,058.5 ∆% 18.3% 18.1% EBITDA before Restruct Costs 173.0 142.0 1.9 (9.9) 174.9 132.1 %o on
Slide 35: Group – 2Q'10 Results
PIRELLI GROUP – 2Q’10 RESULTS* €/mln Profit & Loss and Net Financial Position by Business Unit Pirelli Tyre Other Pirelli & C. Cons. 2Q’10 2Q’09 2Q’10 2Q’09 2Q’10 2Q’09 Sales 1,215.3 989.0 19.3 17.4 1,234.6 1,006.4 ∆% 22.9% 10.9% 22.7% EBITDA before Restruct Costs 177.5 133.0 (14.2) (7.0) 163.3 126.
Slide 36: Group – 1Q'10 Results
PIRELLI GROUP – 1Q’10 RESULTS* €/mln Profit & Loss and Net Financial Position by Business Unit Pirelli Tyre Other Pirelli & C. Cons. 1Q’10 1Q’09 1Q’10 1Q’09 1Q’10 1Q’09 Sales 1,110.0 926.9 24.4 20.6 1,134.4 947.5 ∆% 19.8% 19.7% EBITDA before Restruct Costs 146.4 107.8 (4.5) (8.3) 141.9 99.5 %o on sa
Slide 37: Balance Sheet
PIRELLI BALANCE SHEET €/mln FY’10 FY’09 Fixed Assets 3,164.1 2,936.0 Net Working Capital 116.7 115.1 Net Invested Capital continuing operations 3,280.8 3,051.1 % Net Invested Capital p Net Invested Capital assets disposed p 766.9 Overall Net Invested Capital 3,280.8 3,818.0 FY‘10 FY‘09 Total Net Equ
Slide 38: Group Cash Flow
PIRELLI GROUP CASH FLOW €/mln 1Q’10 2Q’10 3Q’10 4Q’10 FY’10 EBIT before restructuring costs 90 2 90.2 109 6 109.6 119 9 119.9 112 8 112.8 432 5 432.5 Depreciation 51.7 53.7 55.0 60.8 221.1 Net investments (49.9) (85.2) (91.5) (212.0) (438.6) g capital/other Working p variations ((143.5)) 42.2 ((18.0
Slide 39: Group: Net Financial Position
PIRELLI GROUP: NET FINANCIAL POSITION €/mln FY’10 BY BUSINESS Tyre Other business Corporate Pirelli Group Dec. Jun. Dec. Dec. Jun. Dec. Dec. Jun. Dec. Dec. Jun. Dec. 10 10 09 10 10 09 10 10 09 10 10 09 Gross Debt 1,613.6 1,778.2 1,553.6 83.3 98.8 99.1 123.0 277.3 276.5 1,147.0 1,323.1 1,444.5 to Cor
Slide 40: FY'10 Pirelli Tyre Mix
FY’10 PIRELLI TYRE MIX SALES BY BUSINESS SALES BY SEGMENT Car Consumer 62% 70% Motorbike 8% Steelcord Truck & others Industrial 30% 28% 2% SALES BY CHANNEL SALES BY REGION Nafta Replacement Latin 10% Asia Pacific 75% America 6% 34% MEA 10% OE Europe 25% 40% 39
Slide 41: FY'10 Pirelli Tyre People
FY ‘10 PIRELLI TYRE PEOPLE HEADCOUNT PEOPLE BY REGION 28,865 Nafta 27 481 27,481 1% Europe 37% Latin America (w/o Mexico) 43% Asia Pacific MEA 2009 2010 9% 10% PEOPLE BY CONTRACT PEOPLE BY CLUSTER Permanents P t Workers 92% 81% Employees 18% Temps & Agency 8% Management 1% 40
Slide 42: Tyre: Industrial Plants in Countries
PIRELLI TYRE: 19 INDUSTRIAL PLANTS IN 11 COUNTRIES (AS OF DEC. 2010) Italy Germany U.K. Bollate (MI) Car Breuberg Car/Moto Settimo Torinese Car/Truck Merzig g Steelcord Burton Car Figline Valdamo Steelcord Carlisle Car Turkey Izmit Car/Truck Steelcord U.S.A Rome Car Romania Slatina Car/Steelcord Ven
Slide 43: Raw Materials
RAW MATERIALS RAW MATERIALS PRICE TREND 1Q/08 = 100 Brent Oil (in usd/bbl) 4,254 Natural Rubber ((in usd/tons)) 123 117 3,380 99 96 2,973 2,513 3,148 2,943 2,531 3,096 3,022 87 69 76 80 2 653 2,653 57 60 63 1,330 77 80 77 1,837 1,801 1,553 1,523 45 Natural Rubber: Sicom Brent: www.oilnergy.com In It
Slide 44: Tyre Selective Positioning in the Consumer Segment
PIRELLI TYRE SELECTIVE POSITIONING IN THE CONSUMER SEGMENT Sales Breakdown By Area Pirelli Focus Production By Area % of sales % of p production 100% 100% Segment 100% 100% Share #1 High 39% 29% Emea 37% Cost Prestige 54% Strong, NAFTA 27% 2-digit Latin 13% Premium 71% 6% Low 61% America Cost Low, A
Slide 45: Industrial Segment: A Unique Competitive Position
INDUSTRIAL SEGMENT: A UNIQUE COMPETITIVE POSITION Sales Breakdown By Area Pirelli Focus Production By Area % of sales % of p production 100% 100% 100% 100% Southern EU High 7% Emea 13% 24% and Near-East Cost 40% #2 P Premium i NAFTA 15% Latin 11% #1 China America Latin America Northern #1 Africa Low
Slide 46: New Projects: Settimo Torinese, Yanzhou
NEW PROJECTS ITALY - SETTIMO TORINESE Product: Car Tyres First tyre: 4Q 2010 CHINA – YANZHOU “2” Product: car and motorbike tyres First tyre: 2Q 2011 45
Slide 47: New Projects: Slatina, Guanajuato
NEW PROJECTS ROMANIA – SLATINA “2” 2 Product: Car Tyres First tyre: 4Q 2010 MEXICO - GUANAJUATO Product: Car Tyres First tyre: 2Q 2012 46