Pirelli & C. S.p.a. · MIL:PIRC
Pirelli & C — H1 2012 Earnings Presentation
38 slides from Pirelli & C's earnings presentation, Jul 26, 2012
Slide 1: Pirelli 1H 2012 Results
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 FINANCIAL REVIEW TYRE BUSINESS APPENDIX 2
Slide 4: Key Messages
KEY MESSAGES 1H ’12 Results Halfway through our yearly targets Fast conversion to high-margin products 2H ’12 Outlook Well-placed for a fast-changing scenario 2012 profitability & cash flow targets confirmed Premium acceleration: what makes us different OEM Premium Car distinctive positioning and st
Slide 5: 2H 2012 Pirelli Outlook
2H 2012 PIRELLI OUTLOOK Light & shade of a fast-changing scenario Premium outpacing markets: robust growth expected to continue in EM & NAFTA; moderate Demand growth in North West & Central Europe Truck & Consumer non-Premium dealing with economic turmoil Easing up: 30€/mln tailwind expected in
Slide 6: 2H 2012 Pirelli Regional Car Market Overview
2H 2012 PIRELLI REGIONAL CAR MARKET OVERVIEW Pirelli MARKET HIGHLIGHTS POSITIONING VOLUME OUTLOOK North West: downside market North West: market share Double-digit reduction in the wake of European gains through Premium Premium single-digit growth precariousness strategy Central: among Europe
Slide 7: Change vs November '11 Industrial Plan
CHANGE VS NOVEMBER ‘11 INDUSTRIAL PLAN: Out of low-end Tyres and full-fledged into Premium ∆ 2012Revenues ∆ 2012 Ebit vs Ind.Plan (Nov ’11) vs Ind. Plan (Nov ’11) CONSUMER INDUSTRIAL CONSUMER INDUSTRIAL Car -3.8 mln pcs (from 36 mln pcs) ~-370 ~-120 ∆ non-Premium Moto/Scooter -2.4 mln pcs Changes
Slide 8: 2012 Enhanced Efficiency Plan
2012 ENHANCED EFFICIENCY PLAN ~150€/Mln ~+30€/mln 120€/Mln 20% flat Use of alternative Raw Materials Raw Weight reduction Materials 25% Waste improvement 12% +7 Optimization of production process Labour Productivity & Scale Automation of mature plants 9% New plants designed more efficien
Slide 9: Pirelli 2012 Targets Update
PIRELLI 2012 TARGETS UPDATE €/bln 2012 Targets 2012 Targets Update 2011A (May 10, 2012) (July 26, 2012) Δ YoY Δ YoY Total Revenues 5.65 ~6.45 +14% ~ 6.4 +13% Russia JV - ~ 0.25 confirmed Dackia - - ~ 50€/mln Organic Revenues ~6.2 +10% ~ 6.1 +8% Volumes +1.4% -1% / -2% -3% / -4% o/w Premium +18.2% ~+
Slide 10: 2012 Consumer Targets Update
2012 CONSUMER TARGETS UPDATE €/bln 2012 Targets 2012 Targets Update 2011A (May 10, 2012) (July 26, 2012) Δ % YoY Δ % YoY Revenues 3.9 ~4.7 +20% ~ 4.65 +18% Russia JV - ~0.25 confirmed Dackia - - ~ 50€/mln Organic ~4.45 +13% ~ 4.35 +11% Revenues Volumes +3% -0.5% / -1.5% -2.5% / -3.5% o/w Premium 18.
Slide 11: 2012 Industrial Targets Update
2012 INDUSTRIAL TARGETS UPDATE €/bln 2012 Targets 2012 Targets Update 2011A (May 10, 2012) (July 26, 2012) Δ % YoY Δ % YoY Revenues 1.68 ~1.7 +3% / +2% ~ 1.7 0% / +1% Volumes -1.7% -2% / -4% -5% / -6% o/w Radial +2% / 0% -3% o/w Conventional -20% confirmed Price/mix +17.8% +5% / +6% confirmed EBIT %
Slide 12: Russia: Premium on the upsurge
RUSSIA Premium on the upsurge, trend confirmed Car Market New Registrations Car Park mln pcs mln pcs Confirmed the growth trend (+5-6%) 42.8 +6% yoy in new registrations, in particular for +6% yoy 40.4 2.65 2.8 foreign local production (+26% YoY, Foreign Brands 47% 48% positive impact on mix) Impo
Slide 13: Russia: Work in progress on marketing levers
RUSSIA Work in progress on marketing levers Building strong brand awareness... ...and distribution pervasiveness In 2012 Pirelli top spender in Tyre Industry for Media & advertising 2012 Targets Achievements 1H (traditional media, digital media, football sponsorship) Pirelli Retail presence: ~800 PO
Slide 14: Russia: Pirelli approach to value
RUSSIA Pirelli approach to value Product Production Pirelli as Premium player Factory improvement In winter KIROV VORONEZH Enhanced product range and improved performance (hexagonal studs, new compound) Execution Dec. 14, 2011 Mar. 1, 2012 Range extension from 40 to 63 sizes focused on Premium (
Slide 15: Agenda
AGENDA KEY MESSAGES PIRELLI & C FINANCIAL REVIEW TYRE BUSINESS APPENDIX 14
Slide 16: Pirelli Key Financial Results
PIRELLI KEY FINANCIAL RESULTS 1H12 1H11 D YoY 2Q12 2Q11 D YoY 2Q Highlights €/mln Revenues 3,021.8 2,789.3 8.3% 1,465.3 1,388.4 5.5% Premium segment outperforming Organic growth* 8.8% 6.6% overall market across Regions (revenues +22%, volumes +12.3%) EBITDA before Restr. Costs 545.7 410.9 269.9 20
Slide 17: Performance by Region in 1H 2012
PERFORMANCE BY REGION IN 1H 2012 Tyre Sales Ebit % Highlights YoY YoY Total growth Premium growth 1H’2012 Profitability improving in all Regions, €/mln with NAFTA, APAC and Europe the 3,000.3 +8,7% 1,086.9 +26% 13.8% (+2.5pp yoy) highest contributors (Ebit + 30% YoY) South* 10% -23% -11% S. Euro
Slide 18: Pirelli Net Income 1H12 vs 1H11
PIRELLI NET INCOME 1H12 VS 1H11 €/mln 110.6 (3.6) (4.1) 221.7 (40.0) 158.8 Net Income DEBIT D Results D Financial D Taxes Net Income 1H11 from particip. income/ 1H12 charges 17
Slide 19: Pirelli 1H12 Net Financial Position
PIRELLI 1H12 NET FINANCIAL POSITION €/mln EBIT before restr. costs 203.8 Dep/Am: 66.1 Investments*: (114.8) Dackia -70.8 DNWC/Others: (238.8) Campneus -35.4 Focus on NWC dynamics 132.3 1,702.7 106.2 -19.5 D Operating WC: 50€/mln (30€/mln impact of 91.7 3.3 new retail acquisition) 83.7 D Others: 190€
Slide 20: Pirelli Debt Structure as of June 30, 2012
PIRELLI DEBT STRUCTURE AS OF JUNE 30, 2012 Net Financial Position Gross Debt Maturity €/mln 2,436.5 733.8 83.2 671.8 171.8 Committed Line Drawdown 815 1,702.7 500 943.3 Bond 500 815 128.3 Other 137 1121.5 Borrowings 335.6 265.6 10.9% 13.8% 5.6% 38.7% 27.6% 3.4% Gross Fin. Net Fin. Debt Assets* posit
Slide 21: Agenda
AGENDA KEY MESSAGES PIRELLI & C FINANCIAL REVIEW TYRE BUSINESS APPENDIX 20
Slide 22: Key Tyre Results
KEY TYRE RESULTS €/mln 1Q’12 YoY% 2Q’12 YoY% 1H’12 YoY% Revenues 1,542.6 +11.4% 1,457.7 5.9% 3,000.3 8.7% Results of our value strategy o/w Premium 584.4 +29 % 502.5 22% 1.086.9 26% in the current scenario: EBITDA (before 280.3 +33.8% 275.9 26.3% 556.2 30.0% Following growth across restruct. costs
Slide 23: Pirelli Tyre Operating Performance
PIRELLI TYRE OPERATING PERFORMANCE €/mln 101.7 (34.7) 32.1 198.4 160.1 (7.4) (8.0) (5.8) (1.7) 2Q 2012 (37.9) Raw materials: (5.0) Labour / energy / other: (32.9) EBIT 2Q11 Price mix Volume Cost of inputs Efficiencies Slowdown Restructuring Depreciation/ Exchange EBIT 2Q12 (a) (b) (c) Costs other
Slide 24: Consumer Business: Key Market Trends
CONSUMER BUSINESS: KEY MARKET TRENDS % YoY 2Q11 3Q11 4Q11 1Q12 2Q12 1H12 Europe +0% +3% +1% OE* +6% -6% -8% -7% +1% Replacement** -4% -12% -13% -13% +27% +22% +16% America +14% North +8% +2% OE Replacement -5% -2% -4% -8% -1% -4% +7% +3% Mercosur OE -8% -7% -9% -8% +6% +4% +4% +4% 0% +2% Replacement
Slide 25: Consumer Business: Pirelli Performance
CONSUMER BUSINESS: PIRELLI PERFORMANCE €/mln 1Q’12 YoY% 2Q’12 YoY% 1H’12 YoY% Revenues 1.151.8 +17.1% 1,078.3 +12.5% 2,230.1 +14.8% 2Q Highlights o/w Premium +29% +22% +26% EBITDA (before Strong Premium revenue restruct. costs) 232.1 +44.5% 213.4 +25.8% 445.5 +34.9% growth (+22%) across margin 20.
Slide 26: Industrial Business: Key Market Trends
INDUSTRIAL BUSINESS: KEY MARKET TRENDS % YoY 2Q11 3Q11 4Q11 1Q12 2Q12 1H12 +42% +24% Europe* OE +2% +11% -6% -7% -6% Replacement -9% -18% -26% -28% -30% +21% +16% OE +4% Mercosur +6% -27% -29% Replacement** -30% -6% -7% -13% -7% -10% OE China -22% -15% -24% Replacement -27% +4% (*)Turkey included an
Slide 27: Industrial Business: Pirelli Performance
INDUSTRIAL BUSINESS: PIRELLI PERFORMANCE €/mln 1Q’12 YoY% 2Q’12 YoY% 1H’12 YoY% Revenues 390.8 -2.6% 379.4 -9.1% 770.2 -5.9% Weak demand across Regions, especially in the EBITDA (before Replacement market, restruct. costs) 48.2 -1.4% 62.5 +28.3% 110.7 +13.4% continues to weigh on topline margin 12
Slide 28: Raw Materials
RAW MATERIALS Guidance Guidance Update Industrial Plan Nov’11 May 2012 July 2012 BREAKDOWN FY 2011 Average Cost of (based on purchasing cost) Goods Sold 2011 2012 Headwind 2012 Headwind 2012 Headwind €/mln (2012 vs 2011) (2012 vs 2011) (2012 vs 2011) Synthetic Rubber 27% Natural Rubber 4,600 +50 +12
Slide 29: A Walk Through 2H 2012
A WALK THROUGH 2H 2012 1H’ 12 A 2H’12 E FY’12 E EBIT 400 €/mln >400 AT LEAST 800 €/MLN Volumes - 7.5% flat yoy -3.5% strong Premium in Emerging Markets and Nafta; flat in Europe; Winter confirmed down 10% yoy (upside in case of early snow) favourable comparison base (flat in 2H’11) Price Mix +
Slide 30: Agenda
AGENDA KEY MESSAGES PIRELLI & C FINANCIAL REVIEW TYRE BUSINESS APPENDIX 29
Slide 31: Pirelli Group – 1H12 Results
PIRELLI GROUP – 1H12 RESULTS Profit & Loss and Net Financial Position by Business Unit €/mln Pirelli Tyre Other Pirelli & C. Cons. 1H12 1H11 1H12 1H11 1H12 1H11 Sales 3,000.3 2,760.9 21.5 28.4 3,021.8 2.789.3 EBITDA before Restruct Costs 556.2 427.9 (10.5) (17.0) 545.7 410.9 % on sales 18.5% 15.5% 1
Slide 32: Pirelli Group – 2Q12 Results
PIRELLI GROUP – 2Q12 RESULTS Profit & Loss and Net Financial Position by Business Unit €/mln Pirelli Tyre Other Pirelli & C. Cons. 2Q12 2Q11 2Q12 2Q11 2Q12 2Q11 Sales 1,457.7 1,376.4 7.6 12.0 1,465.3 1.388.4 EBITDA before Restruct Costs 275.9 218.4 (6.0) (10.9) 269.9 207.5 % on sales 18.9% 15.9% 18.
Slide 33: Pirelli Balance Sheet
PIRELLI BALANCE SHEET €/mln 1H 12 1Q 12 FY 11 Fixed Assets 3,813.4 3,679.1 3,577.5 Inventories 1,200.4 1,115.3 1,036.7 Commercial receivables 964.3 1,059.9 745.2 Commercial payables (1,149.0) (1,207.8) (1,382.8) Net Operating Working Capital 1,015.7 967.4 399.1 % Net Invested Capital Oth receivables
Slide 34: Pirelli Group Cash Flow
PIRELLI GROUP CASH FLOW €/mln 1Q’11 2Q’11 1Q’12 2Q’12 1H’12 EBIT before restructuring costs 146.5 151.3 211.4 203.8 415.2 Depreciation 56.9 56.2 64.4 66.1 130.5 Net investments (96.9) (137.2) (80.1) (114.8) (194.9) Working capital/other variations (313.5) 18.1 (512.8) (238.8) (751.6) OPERATING CASH
Slide 35: 1H12 Pirelli Tyre Mix
1H12 PIRELLI TYRE MIX SALES BY BUSINESS SALES BY SEGMENT Car Consumer 66% 74% Motorbike 8% Steelcord & others Truck Industrial 26% 2% 24% SALES BY CHANNEL SALES BY REGION Nafta Replacement South 13% Asia Pacific 75% America 7% MEA 32% 8% Russia 4% OE Europe 25% 36% 34
Slide 36: June 2012 Pirelli People
JUNE 2012 PIRELLI PEOPLE HEADCOUNT PEOPLE BY REGION Russia Nafta 36,349 Europe 11% 2% 34,259 32% South America 37% Asia Pacific MEA Dec. 2011 Jun. 2012 9% 9% PEOPLE BY CONTRACT PEOPLE BY CLUSTER Permanents Workers 92% 80% Staff 19% Temps & Agency Management 8% 1% 35
Slide 37: Pirelli Plants in the World
PIRELLI PLANTS IN THE WORLD MEXICO Italy Germany NEW Russia U.K. Bollate (MI) Car Breuberg Car/Moto Settimo Torinese Car/Truck Merzig Steelcord Kirov Car Burton Car Figline Valdamo Steelcord Voronezh Car Carlisle Car (Production starts in 2012) Turkey U.S.A Car/Truck Izmit Rome Car Steelcord NEW Mex
Slide 38: Raw Materials
RAW MATERIALS RAW MATERIAL PRICE TREND 5,251 4.671 4.565 Brent Oil (in usd/bbl) 4.254 Natural Rubber (in usd/tons) 3.587 3.687 123 3.301 117 3.380 96 2.513 3.148 118 118 99 3.096 3.022 112 2.943 2.973 87 105 109 109 2.653 2.531 80 1.837 77 57 1.330 1.523 76 80 77 69 63 1.553 60 1.801 45 QI/08 QII/0