Pirelli & C. S.p.a. · MIL:PIRC
Pirelli & C — Investor Day (March 2021)
109 slides from Pirelli & C's investor day presentation, Mar 31, 2021
Slide 1: 2021-2022 | 2025 Industrial Plan
2 0 2 1 – 2022 I 2025 I NDUS TRI AL P L AN MILAN, 31 st MARCH 2021
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 STRATEGIC GUIDELINES & PLAN SUMMARY 2 MARKET OUTLOOK & STRATEGY IMPLEMENTATION PLAN 2.1 COMMERCIAL 2.2 INNOVATION 2.3 COMPETITIVENESS 2.4 OPERATIONS 2.5 DIGITIZATION 3 TARGETS 2 0 2 1 – 2022 I 2025 I NDUS TRI AL P L AN MILAN, 31 st MARCH 2021
Slide 4: Agenda
AGENDA STRATEGIC PLAN SCENARIO TARGETS GUIDELINES SUMMARY Macroeconomics STARTING POINT Demographics Miles Driven EVs LOOKING FORWARD World Car & Tyre market Pirelli Strengths Recap scenario 1 2 0 2 1 – 2022 I 2025 I NDUS TRI AL P L AN MILAN, 31 st MARCH 2021
Slide 5: Starting point: what the 2020 Covid crisis has taught us
STARTING POINT What the 2020 Covid crisis has taught us Strong reaction in terms Learning also from Pirelli Decision supported Resilient response of togetherness and China, we launched by insights, predictions to social, economic and participation countermeasures and early warning system environment
Slide 6: Macroeconomics
MACROECONOMICS Data indicates two distinctive phases Real GDP growth 2020 (YoY%) ‘21-'22 (avg. growth%) ‘23-'25 (avg. growth %) World China US Europe World China US Europe World China US Europe 6.6% 4.9% 5.3% 4.6% 3.9% 3.1% 2.5% 2.3% 1.6% Rebound phase Stable growth -3.7% -3.5% -6.8% GDP Rebound lin
Slide 7: Demographics scenario
DEMOGRAPHICS SCENARIO High-end consumers growing and far more digital High-end Consumer growth Covid has re-prioritized Online shopping booming confirmed some Core Values also in tyres Global # Households (Million) with Annual Income Total market B2C sales through online channels, % >$75 K vs. +8% i
Slide 8: Mobility scenario: miles driven
MOBILITY SCENARIO: MILES DRIVEN Car Global Miles Driven, Trillion More 2 wheels mobility Private Car Total Car >13.0 11.8 10.7 10.4 10.0 10.3 9.6 9.7 ~9.0 9.2 8.9 ~8.1 2015 2018 2020 2022 2025 2025 old plan 93% 91% 90% 88% ~85% <80% Private1 Car Share on Tot By 2025 ~2/3 of miles driven increase fro
Slide 9: Mobility scenario: EVs
MOBILITY SCENARIO: EVs Electric vehicles growth accelerated, pushing demand for technology tyres EV1 Penetration in Premium & Prestige production Tyre for EVs Technologically challenging Positively impacted by growing EVs Customers mostly “Motorheads” and “Tech enthusiast”, regulations and Governmen
Slide 10: World car & tyre market
WORLD CAR & TYRE MARKET Rich H.V. Demand particularly in ≥19” Car production Car parc Million CAGR% Million CAGR% vehicles -18% ‘20A-’22E ’22E-’25E vehicles ‘20A-’22E ’22E-’25E +2% 1,620 89 88 +7 +2 1,517 +2 +2 82 83 1,451 1,483 12% Premium 13% 15% +6 +3 1,423 +4 +4 & Prestige 73 14% 15% Prestige &
Slide 11: Pirelli well positioned in the H.V. competitive scenario
PIRELLI WELL POSITIONED IN THE H.V. COMPETITIVE SCENARIO In this scenario Pirelli has grown its array of competitive strengths Conventional 2 Wheels Emerging Leader in ≥19’’ marked tyres Share leader in China ≥18” Leader in Moto High Value First in O.E. with Cyber Tyre # of ≥19" O.E. marked items1 v
Slide 12: Summary: very favorable scenario for Pirelli
SUMMARY Very favorable scenario for Pirelli Two Phase Macro-Economic Growth: strong rebound till 2022, followed by steady state growth, both confirming High Value segment opportunity China Leading Macro-Economic Growth where Pirelli is leader in the ≥18” High-End Consumer Growth, with higher than ex
Slide 13: Strategic guidelines
STRATEGIC GUIDELINES In continuity with Febraury 2020 plan Additional & Accelerated Focus on H.V. Market, growing Growth in Specialties/EVs and and resilient ≥19” Rebalancing O.E. (-) and Replacement (+) Fully Capture 2021-2022 Capitalize on array of strengths rebound opportunities China acceleratio
Slide 14: Pirelli focus
PIRELLI FOCUS On the highest growing and most profitable segments ≥18” O.E. Tyre market ≥18” Replacement Tyre market CAGR% CAGR% Million ‘20A-’22E ’22E-’25E Million ‘20A-’22E ’22E-’25E tyres -13% tyres >125 +11 +3 -7% >210 +10 +8 110 112 118 95 152 157 171 49% 51% +14 +4 141 45% +11 +10 ≥19" 45% 48%
Slide 15: Strategy implementation plan: key programs' impact
STRATEGY IMPLEMENTATION PLAN: KEY PROGRAMS’ IMPACT 2021 - 2022 2023 - 2025 Fully capture rebound Accelerate cash generation as opportunities a remodelled specialties leader Revenue Increase: ~+€0.8B ÷ ~+€1B Revenue Increase: ~+€0.6B ÷ €0.9B Commercial Volume based Volume and mix based Product Launch
Slide 16: Capex
CAPEX Investing in H.V. Capacity and mix upgrade (≥19’’ & specialties) 7.5% 9% 7.5% CapEx on Sales 7% 7% 6% 3% € billion 0.39 ~0.71 ÷ ~0.73 ~1.2 ÷ ~1.3 0.14 2019 A 2020 A 2021 E 2022 E 2023 E 2025 E CAPEX breakdown 2021 - 22E 2023E - 25E H.V. Capacity High Value capacity (increase and conversion) ex
Slide 17: All key programs leverage on proactive people strategy
ALL KEY PROGRAMS WILL LEVERAGE ON PROACTIVE PEOPLE STRATEGY Our People Pirelli active in 4 pillar Programs ~30.500 people in 35 Countries International Social Inclusion and Diverse 92 Nationalities Organization ~30% Female* Caring Knowledge Average age ~39 yrs Experienced and Engaged Average tenure
Slide 18: People at the heart of our journey
PEOPLE AT THE HEART OF OUR JOURNEY Our Priorities Our Ambitions in 2025 Protect our employees, safe workplace and healthy lifestyle Protect Employees [Frequency Index] -62% Shift from traditional welfare programs to tailored Caring wellbeing initiatives New policies to increase flexibility and auton
Slide 19: 2021-22/25 targets
2021-22/25 TARGETS € billion 2020 A 2021 E 2022 E 2025 E Net Sales 4.3 ~4.7 ÷ ~4.8 ~5.1 ÷ ~5.3 ~5.7 ÷ ~6.2 Adjusted EBIT margin 11.6% >14% ÷ ~15% >16% ÷ ~17% ~19% ÷ ~20% o/w ~1.2 ÷ ~1.3 ~9% in ‘23 CapEx 0.14 ~0.33 ~0.38 ÷ ~0.4 ~7.5% in ‘24 cum ‘23-’25 ~6% in ‘25 (% on sales) (3.3%) (~7%) (~7.5%) (~7
Slide 20: Opportunity and flexibility vs targets 2021-25
OPPORTUNITY AND FLEXIBILITY VS TARGETS 2021-25 DIGITIZATION PLAN 21/25 IN CASE OF MARKET SLOWDOWN ≥18’’ Market current plan assumption CapEx ~7% of cumulated CapEx ’21-25 +8% ’20-’25 CAGR OpEx ~0.8% of yearly baseline ’21-25 2020A 2025E we continue to outperform with an added flexibility in reducing
Slide 21: Our sustainability strategy: key targets
OUR SUSTAINABILITY STRATEGY: KEY TARGETS Area Focus KPIs 2020A 2025E 2030E Towards zero accidents Accident SAFETY FIRST 0.22 <0.10 at work frequency index PRODUCT ECO Improve Rolling Target scope: RR1 = A/B 39% >70% & SAFETY Resistance with no new products (all new labelled PERFORMANCE compromise on
Slide 22: Agenda
AGENDA 1 STRATEGIC GUIDELINES & PLAN SUMMARY 2 MARKET OUTLOOK & STRATEGY IMPLEMENTATION PLAN 2.1 COMMERCIAL 2.2 INNOVATION 2.3 COMPETITIVENESS 2.4 OPERATIONS 2.5 DIGITIZATION 3 TARGETS 2 0 2 1 – 2022 I 2025 I NDUS TRI AL P L AN MILAN, 31 st MARCH 2021
Slide 23: High value car tyre demand
HIGH VALUE CAR TYRE DEMAND ≥19” growing double-digit, 3-5pp faster than ≥18”; demand from pure EVs booming, sizable in ’22-’25 ≥18” World O.E. Tyre Market million tyres ≥18” World Replacement Tyre Market million tyres +3% +8% -13% +11% CAGR % CAGR % CAGR % CAGR % -7% +10% >125 ‘20A-’22E ‘22E-’25E >2
Slide 24: Pure EV penetration in Premium & Prestige
PURE EV PENETRATION IN PREMIUM & PRESTIGE Higher than traditional ICE, leading to a rich tyre market Pure EV1 penetration driven by China Pure EV1 car production reshaped from 2020 12% China ~50% total Premium EV 6% 3% Prestige + Car Premium EU Production 2020 A 2022 E 2025 E Other Premium (mainly U
Slide 25: Pirelli's journey to EV Premium & Prestige leadership
PIRELLI’S JOURNEY TO EV PREMIUM & PRESTIGE LEADERSHIP Rich project pipeline, supporting mix improvement EV Contribution to High Value Pirelli positioning at 2025 Growth in rim Higher weight and torque call for high performance tyres Q3 Q4-tron 60% Homologations ELECT Range and main fitment Range and
Slide 26: China a long lasting opportunity
CHINA A LONG LASTING OPPORTUNITY Boosting High Value tyre market in the Region Pirelli consolidating leadership position in HV China ≥18” OE + Replacement tyre market OE growth based on electrification 30% CAGR% ’25 EV vol weight % on tot ~14% ~16% ~18% ‘20A-’22E ‘22A-’25E OE+Repl Replacement: growt
Slide 27: Prestige
PRESTIGE China and EV as key drivers of growth Prestige new trends Pirelli undisputed leadership 2020A 2025E 1 out 2 Prestige car fitting Pirelli tyres SUV +10% Attracts also luxury brands tyre market2 BEV 1 out of 3 new registrations in +37% Sole supplier Co-leader tyre market3 '25 will be BEV SUPE
Slide 28: Plan main programs
PLAN MAIN PROGRAMS 2021-22 2023-25 Capture H.V. market rebound, thanks to: Rebalancing OE / Repl in favour of Replacement Acceleration of new product launches High Value Specialties & ≥19” growth COMMERCIAL Rich homologation portfolio Consumer Value pricing & Journey Management China fast grow
Slide 29: Agenda
AGENDA 1 STRATEGIC GUIDELINES & PLAN SUMMARY 2 MARKET OUTLOOK & STRATEGY IMPLEMENTATION PLAN 2.1 COMMERCIAL 2.2 INNOVATION 2.3 COMPETITIVENESS 2.4 OPERATIONS 2.5 DIGITIZATION 3 TARGETS 2 0 2 1 – 2022 I 2025 I NDUS TRI AL P L AN MILAN, 31 st MARCH 2021
Slide 30: Pirelli vs. market
PIRELLI VS. MARKET Overperforming in High Value taking advantage of already achieved homologation Volume variance (Car) Key Programs Over-performance vs. market ≥18" ≤17" 2020 A ~54 Market HV Replacement OE Driven 15% 85% 85% Mirroring demand from past homologations mainly driven by Apac HV Replacem
Slide 31: High value replacement
HIGH VALUE REPLACEMENT Key initiatives to gain shares O.E. Driven Replacement Consumer driven Replacement Distribution channel strategy “Surf” Homologated Wide Market Growth Market potential Sales Process Transformation SFA1 SFA O.E. homologations Consumer - driven & Technologies Product range Digit
Slide 32: Wide range of specialties
REPL. H.V. WIDE RANGE OF SPECIALTIES O.E. Driven As a result of strong relationship with OEMs Focus on ≥19’’ Focus on Specialties4 # ≥19" O.E. marked items vs. peers1: Pirelli undisputed leadership. Specialties 923 RUNFLAT Leader in prestige Safety ~70% of ≥18” Repl. and high-end vehicles SEAL INSID
Slide 33: Deeper understanding of consumer needs
REPL. H.V. DEEPER UNDERSTANDING OF CONSUMER NEEDS Consumer Driver “Perfect fit” in designing regional product lines High technological content Safety 28 Performance new product & Milage lines Eco Friendly approach Efficient Production process Regional approach 28 2 0 2 1 – 2022 I 2025 I NDUS TRI AL
Slide 34: Deeper understanding of consumer needs
REPL. H.V. DEEPER UNDERSTANDING OF CONSUMER NEEDS Consumer Driver “Perfect fit” in designing regional product lines High technological content Safety 28 Performance new product & Milage lines Eco Friendly approach Efficient Production process Regional approach 29 2 0 2 1 – 2022 I 2025 I NDUS TRI AL
Slide 35: Deeper understanding of consumer needs
REPL. H.V. DEEPER UNDERSTANDING OF CONSUMER NEEDS Consumer Driver “Perfect fit” in designing regional product lines High technological content Safety 28 Performance new product & Milage lines Eco Friendly approach Efficient Production process Regional FORD F-150 approach 30 2 0 2 1 – 2022 I 2025 I N
Slide 36: Distribution network
REPL H.V. DISTRIBUTION NETWORK Channel strategy Will coherently support the Replacement regional strategy 11% 12% 13% Car dealer: high focus on pull, growing channel, especially for 1st/2nd tyre change 29% 30% 31% Pirelli retail: expansion of the network and 21% 23% focus on high end mix and service
Slide 37: The role of big data analytics
REPL H.V. THE ROLE OF BIG DATA ANALYTICS SFA O.E.- Replacement integrated sales process to maximize effectiveness Predictive Market Intelligence CRM B2B2C Implementation Data Science know-how and dedicated tools to B2B New sales force and customer relation approach accurately identify commercial opp
Slide 38: The role of big data analytics
REPL H.V. THE ROLE OF BIG DATA ANALYTICS SFA Premium & Prestige car parc analytics integrated in company process Car parc Car parc Car parc CAGR 20-22: +3% CAGR 20-22: +2% CAGR 20-22: +8% CAGR 25-22: +3% CAGR 25-22: +2% CAGR 25-22: +6% 2025 Premium & Prestige car parc >190M: Porsche 911 example Fore
Slide 39: Marketing spend
REPL H.V. MARKETING SPEND Reallocation towards conversion Pirelli Global Brand Investments in Consumer Journey funnel Pirelli «Click to Buy» Platform 16% Thanks to advanced digital solutions: Awareness 35% Funnel consumers on Pirelli digital 27% properties where they can have an immersive experience
Slide 40: High value O.E. key initiatives
HIGH VALUE O.E. KEY INITIATIVES O.E. SOLID PROJECT PIPELINE THANKS TO ALREADY ACHIEVED HOMOLOGATIONS 85% 21-22 volumes coming from business already running/sourced to Pirelli FOCUS ON ≥19" > 50% of total volumes from 2022 and ~90% new homologations in 2025 CUSTOMER – BASE DIVERSIFICATION Growing in
Slide 41: Standard
STANDARD STD Stabilization of standard volumes at double digit Ebit margin Pirelli Car Standard volumes M pcs 31 Landing Point ~25.5 ~25 Product mix improvement favoring =17” and 24 HV Regions 48% more profitable segments (SUV / CUV and All 44% 34% Season) 47% Price protection, focusing on segments
Slide 42: 2 wheel high value leadership
2 WHEEL HIGH VALUE LEADERSHIP Enhance moto positioning, projecting solid growth in the cycling, exploiting 2-wheel favourable market Moto Tyre Market Cycling ~+5% ~+6% CAGR 20-25 In the Moto Business: • Global leader in H.V. • 2 Distinctive Premium Brands SPORT/ • Segment Price Leadership SPORT/ RAC
Slide 43: Session agenda
SESSION AGENDA 1 STRATEGIC GUIDELINES & PLAN SUMMARY 2 MARKET OUTLOOK & STRATEGY IMPLEMENTATION PLAN 2.1 COMMERCIAL 2.2 INNOVATION 2.3 COMPETITIVENESS 2.4 OPERATIONS 2.5 DIGITIZATION 3 TARGETS 2 0 2 1 – 2022 I 2025 I NDUS TRI AL P L AN MILAN, 31 st MARCH 2021
Slide 44: Innovation model
INNOVATION MODEL Leveraging our strengths, further developing enablers to accellerate product solutions Vs. previous plan Empowerment Pirelli product solutions Enablers from outside 2020 2021 - 2022 2023 - 2025 Collaboration with Top Car makers People skills Confirming Feb ’20 Plan Design Innovation
Slide 45: Our innovation model strengths
OUR INNOVATION MODEL STRENGTHS How we constantly get inspiration to foster our cutting edge innovation Collaboration with top Car makers Constant feedbacks from consumers Leading research & innovation OE Leadership: Consumer Insights through O2O Journey, Open Innovation Model: Forefront Suppliers, 2
Slide 46: People skills: reshaping the future of R&D
PEOPLE SKILLS: RESHAPING THE FUTURE OF R&D Empowerment and spread of new competencies through acquisition and upskilling INVESTING IN NEW INTERNAL TALENT EXCELLENCE CAPABILITIES GROWTH MANAGEMENT PROGRAMS TALENT UPSKILLING & ADVANCED TYRE ACQUISITION COUNTINOUS LEARNING DEV’T PROGRAMS TECHNOLOGY GRA
Slide 47: Design innovation
DESIGN INNOVATION Virtualization and Simulation bringing tangible benefits in both product development and industrialization Development phase Milestones KPIs 2022 2025 Product Virtual Development Time Tyre Design ~60%1 OE ~30%1 -30% REPL ~80%1 ~100%1 Virtual Tyre Test Prototype Dynamic Costs Static
Slide 48: Material innovation
MATERIAL INNOVATION Virtualization and Eco & Safety design as a key driver for material (r)evolution Virtual material development Eco-materials End-of-life Renewable1 materials From recycle Material Development >40%by 2025, >60 by 2030 to regeneration time - 30% Fossil based materials: Recycled mate
Slide 49: Industrial process design
INDUSTRIAL PROCESS DESIGN Integrated roadmaps and Data driven process design to support industrial efficiencies Product Post processing Automated Handling Integrated Robotized Equipment Extension Technology Roadmap Materials Process Machine-to-Machine Data Driven Processes communication New Processe
Slide 50: Modularity
MODULARITY Extension of modularity concept to planning and processes to optimize variety management Development phase Milestones KPIs** 2019 Product Modularity Concept Technological applied in EU Factories COMMONALITY&MODULARITY Portfolio Modularity TO MEET INCREASING O.E. 2020 Product Modularity
Slide 51: Pirelli eco & safety leadership
PIRELLI ECO & SAFETY LEADERSHIP Sustainability pervasive innovation approach Product Lifecycle Renewable Assessment (LCA) materials By 20251: Renewable materials >40%2 A/B rolling resistance >70%3 A/B WET BRAKING >90% 3 100% renewable electricity Process 98% Waste to recovery End-of-life Innovation
Slide 52: Product solutions
PRODUCT SOLUTIONS Speeding up Product Pipeline with focus on Regional Consumer Driven Lines Product renewal Acceleration Old Plan New Plan New Plan Timeframe 2020 - 2022 2020 - 2022 2021 - 2025 Focus on Eco & Safety* Wet Grip Rolling Resistance New Lines 20 +20% 24 44 >90% >70% acceleration (3 in ’2
Slide 53: Product solutions: new homologation pipeline
PRODUCT SOLUTIONS New Homologation Pipeline focused on Top-end range (≥19) and Specialties New Homologations Focus on ≥19” New Homologations Focus on Specialties 2017 RUNFLAT ~70% 2019 Safety SEAL INSIDETM Total: >350/y NOISE CANCELLING SYSTEM 2020 Eco HIGHER RIM >80% PIRELLI ELECT SPECIALTIES FOCUS
Slide 54: Product solutions: EVs
PRODUCT SOLUTIONS EVs to represent more than half of homologations in 2025 Strong EV project pipeline Why “ELECT” is perfect fit for EVs 2020A 2025E Battery Range Extension Sustaining Higher Vehicle Mass BEVs/PHEVs 29% ~2x ~60% Handling Higher Torque homologations % Delivering Higher Comfort Extensi
Slide 55: Cyber Tyre
CYBERTYRE A road of features towards vehicle safety, Hits the ground as the first tyre system fleet & data solutions Tyre vehicle interaction Iot&related services AD Data Provider Telematics ADAS V2X & 5G Dynamic Forces WORLD FIRST Aqua 5G CONNECTED Planning TYRE Tyre Wear Mass Distribuition 2020-20
Slide 56: Agenda
AGENDA 1 STRATEGIC GUIDELINES & PLAN SUMMARY 2 MARKET OUTLOOK & STRATEGY IMPLEMENTATION PLAN 2.1 COMMERCIAL 2.2 INNOVATION 2.3 COMPETITIVENESS 2.4 OPERATIONS 2.5 DIGITIZATION 3 TARGETS 2 0 2 1 – 2022 I 2025 I NDUS TRI AL P L AN MILAN, 31 st MARCH 2021
Slide 57: Cost competitiveness
COST COMPETITIVENESS Wave 2 confirmed, Wave 3 worth ~€70M÷€100M cumulated ‘23-’25 Net impact Wave 1 -‘20 Wave 2 - ’21-22 Wave 3 - ’23-25 Gross impact Focusing on: Gross impact ‘21 impact ‘22 impact Modularity Product Cost Design speed and virtualization Footprint optimization Operational excellence
Slide 58: Agenda
AGENDA 1 STRATEGIC GUIDELINES & PLAN SUMMARY 2 MARKET OUTLOOK & STRATEGY IMPLEMENTATION PLAN 2.1 COMMERCIAL 2.2 INNOVATION 2.3 COMPETITIVENESS 2.4 OPERATIONS 2.5 DIGITIZATION 3 TARGETS 2 0 2 1 – 2022 I 2025 I NDUS TRI AL P L AN MILAN, 31 st MARCH 2021
Slide 59: Manufacturing capacity
MANUFACTURING CAPACITY Back to 90% saturation already in 2022, capacity increase in ’23-’25 to support volume growth Pirelli car capacity & saturation trend % Low-Cost Countries 81% ~82% ~83% ~83% H.V. Std. Other Other (≤17” Marked, Homologated, (≤17” Marked, Homologated, 77 75 +2 3 75 technological
Slide 60: Car manufacturing footprint evolution
CAR MANUFACTURING FOOTPRINT EVOLUTION Rationalization completed by 2022, 2023-2025 H.V. capacity growth in Low Cost Countries EU & RUSSIA 2019 2022 2025 APAC 2019 2022 2025 9 -2 7 7 3 3 3 Specialization in small lots & Prestige Yanzhou (CHN) Class – A Performance Bollate (ITA) conversion in Cycling
Slide 61: Industrial IoT
INDUSTRIAL IOT Platform enhancing plant efficiency and aiming at zero defect PLANT DIGITAL TWIN >300 data analysts (i.e. >30% manuf. White Collars) constant >100 industrial apps up & interaction running 100% H.V. capacity connected in ‘23 Higher efficiency, Zero Defect Manufacturing, immediate Best
Slide 62: Sustainable industrial footprint
SUSTAINABLE INDUSTRIAL FOOTPRINT 100% renewable Group Carbon Commitment to the Most efficient plants in electricity worldwide by Neutrality by 2030 Science Based Target terms of sustainability2 2025 initiative (e.g. excellence in water in alignment with our CO2 management, zero waste to emissions re
Slide 63: Customer centric supply chain
CUSTOMER CENTRIC SUPPLY CHAIN Enhancing service level through dedicated supply chains and digital customers integration 5 dedicated supply chains Customers digital integration OEMs Synchronized supply chain with car build Integrated sales and A.I. to improve schedule supply planning stock management
Slide 64: Agenda
AGENDA 1 STRATEGIC GUIDELINES & PLAN SUMMARY 2 MARKET OUTLOOK & STRATEGY IMPLEMENTATION PLAN 2.1 COMMERCIAL 2.2 INNOVATION 2.3 COMPETITIVENESS 2.4 OPERATIONS 2.5 DIGITIZATION 3 TARGETS 2 0 2 1 – 2022 I 2025 I NDUS TRI AL P L AN MILAN, 31 st MARCH 2021
Slide 65: By 2023 a totally remodeled, simultaneous company
BY 2023 A TOTALLY REMODELED, “SIMULTANEOUS” COMPANY Workflows integrating internal functions with external partners/ customers Integration is real time, 24/7, data intensive All data stored in shared “data lake” enabling better interpretation by AI models 5 leading-edge platforms supporting workflow
Slide 66: Strategy implementation plan: recap
STRATEGY IMPLEMENTATION PLAN: RECAP Brand High cost High Speed H.V. ≥19”, H.V. capacity heritage in low cost capacity China Technology Effectiveness Specialties, & Open Sky countries rationalization Sports Integration EVs innovation Activities Efficiency Commercial Innovation Com
Slide 67: Agenda
AGENDA 1 STRATEGIC GUIDELINES & PLAN SUMMARY 2 MARKET OUTLOOK & STRATEGY IMPLEMENTATION PLAN 2.1 COMMERCIAL 2.2 INNOVATION 2.3 COMPETITIVENESS 2.4 OPERATIONS 2.5 DIGITIZATION 3 TARGETS 2 0 2 1 – 2022 I 2025 I NDUS TRI AL P L AN MILAN, 31 st MARCH 2021
Slide 68: 2021-22/25 targets
2021-22/25 TARGETS € billion 2020 A 2021 E 2022 E 2025 E Net Sales 4.3 ~4.7 ÷ ~4.8 ~5.1 ÷ ~5.3 ~5.7 ÷ ~6.2 Adjusted EBIT margin 11.6% >14% ÷ ~15% >16% ÷ ~17% ~19% ÷ ~20% o/w ~1.2 ÷ ~1.3 ~9% in ‘23 CapEx 0.14 ~0.33 ~0.38 ÷ ~0.4 ~7.5% in ‘24 cum ‘23-’25 ~6% in ‘25 (% on sales) (3.3%) (~7%) (~7.5%) (~7
Slide 69: Our value roadmap
OUR VALUE ROADMAP 2021E-22E 2023E-25E ‘22 end: Next Normal ‘25 end > Fully deleveraged (back to pre-Covid level) Adjusted EBIT 501 (€ million) Volume: seizing market growth in H.V., 2020 A Δ ’20-’22 2022 E Δ ’22-’25 2025 E gaining share Price/Mix: reaping the benefits of our commercial actions while
Slide 70: 2021-2022 revenues trend
2021 2022 2025 2021-2022 REVENUES TREND YoY YoY € billion ~+10% ÷ ~+12% ~+7% ÷ ~+10% ~ 5.1 ÷ ~ 5.3 ~ 4.7 ÷ ~ 4.8 4.3 ~ 71% ~ 73% High Value 70% Standard 2020 A 2021 E 2022 E Volumes -15% ~ +11 ÷ ~ +13% Mid-single-digit ~ +15 ÷ ~ +17% High Value -9% Outperf. Car ≥18” market Outperf. Car ≥18” market ~
Slide 71: 2021-2022 price-mix trend
2021 2022 2025 2021-2022 PRICE-MIX TREND slightly higher vs. 2021 performance ~ +2.5 ÷ ~ +3% 1.2% 2020 A 2021 E 2022 E + ++ ++ Product Mix H.V. vs. Standard outperformance H.V. vs. Standard H.V. vs. Standard outperformance Mix improvem. within segments thanks outperformance Mix improvem. within segm
Slide 72: Efficiencies 2020-22
2021 2022 2025 EFFICIENCIES 2020-22 Competitiveness plan ’20-22 € million, YoY net efficiencies ~180 ~290 old plan @Feb20 old plan 20-22 Competitiveness Plan confirmed ~+170 @Feb20 2nd Wave almost in line with 2020 Feb plan ~ 50% ~ +280 despite a lower Standard production saturation ~ 50% vs. the
Slide 73: 2021-2022 profitability trend
2021 2022 2025 2021-2022 PROFITABILITY TREND Price/mix vs. Raw mat. Efficiencies vs. Inflation € million 2020 A Volume Price/mix Raw Mat. Efficiencies Inflation Covid D&A Cost for FX 2021 E Impact rev. growth & Adj EBIT Others1 margin 11.6% >14%÷~15% Efficiencies vs. Inflation Price/mix vs. Raw mat.
Slide 74: Below adjusted EBIT
2021 2022 2025 BELOW ADJUSTED EBIT Restructuring and non recurring costs € million Restructuring: 168 on-going plant restructuring (Brazil, Italy, Burton MIRS), rightsizing / Restructuring 42% ~120 organization streamlining and early retirement programs Non rec./One-off 22% ~50 benefits already visi
Slide 75: 2021-2022 net cash flow and net financial position trend
2021 2022 2025 2021-2022 NET CASH FLOW (BEF. DIV.) & NET FIN. POS. TREND MAIN COMPONENTS € billion + Positive - Δ interests + Δ adj. EBITDA - Negative - Δ taxes - Δ W.C. - Δ restr. / non-rec. - Δ CapEx 3.26 ~3.0 ~2.7 + Δ adj. EBITDA + Δ W.C. - Δ interests - Δ CapEx - Δ taxes - Δ restr. / non-rec. 20
Slide 76: 2023-2025 revenues trend
2021 2022 2025 2023-2025 REVENUES TREND € billion CAGR ’22-’25 ~+4% ÷ ~+5% ~5.7 ÷ ~6.2 ~5.1 ÷ ~5.3 Standard ~75% ~73% High Value 2022 E Volumes Price/Mix FX 2025 E YoY trend Mid single Low single Slightly negative digit growth digit growth o/w H.V. outperforming Car ≥18” market o/w Std. slightly dec
Slide 77: 2023-2025 adj. EBIT trend
2021 2022 2025 2023-2025 ADJ. EBIT TREND Efficiencies vs. Inflation Price/mix vs. Raw mat. 2022 E Volume Price/mix Raw Mat. Efficiencies Inflation D&A Cost for FX 2025 E growth & Other1 Adj. Ebit >16%÷~17% ~19%÷~20% margin 67 1. Costs of growth: R&D, Digital transformation, organization, marketing e
Slide 78: 2023-2025 net cash flow and net financial position trend
2021 2022 2025 2023-2025 NET CASH FLOW (BEF. DIV.) & NET FIN. POS. TREND MAIN COMPONENTS + Δ adj. EBITDA + Positive - Δ W.C. - Negative - Δ CapEx - Δ Interests € billion ~2.7 slightly below 2022 level YoY - Δ Taxes ~26% ÷ ~28% average yearly P&L tax rate - Δ Restr. / non-rec. ~1.6 ÷ ~1.4 2022 E Δ op
Slide 79: Appendix
APPENDIX A GOVERNANCE B SUSTAINABILITY STRATEGY & TARGETS 2 0 2 1 – 2022 I 2025 I NDUS TRI AL P L AN MILAN, 31 st MARCH 2021
Slide 80: Pirelli governance highlights
PIRELLI GOVERNANCE HIGHLIGHTS By-laws Board of Directors Shareholders agreement Pirelli By-Laws shall be The partnership acknowledges: (i) Pirelli is a Board made of highly qualified inspired by company specialised in high quality and technology Members with a suitable mix of skills. international b
Slide 81: Pirelli shareholder structure
PIRELLI SHAREHOLDER STRUCTURE INSTITUTIONAL INVESTORS Camfin SpA BREAKDOWN Tacticum Investment S.A.1 10.10% 13% Rest of World Marco Polo Int. Italy Srl 6.24% 21% North America 37.01% 20% U.K. 29.00% Institutional Investors2 9.02% 46% Rest of Europe PFQY (Silk Road Fund)4 8.63% Retail Investors & Oth
Slide 82: Pirelli remuneration system aligned with industrial plan
PIRELLI REMUNERATION SYSTEM ALIGNED WITH INDUSTRIAL PLAN Remuneration structure to be approved by the Shareholders’ Meeting (June 15, 2021) Compensation mix for key management Fixed component No more than 50% of Total Annual Direct Compensation on reaching all objectives at target level All variable
Slide 83: Short term incentive plan objectives
SHORT TERM INCENTIVE PLAN OBJECTIVES On / off condition: Group Net Cash Flow before Dividends Objective Weight Group adjusted EBIT 40% Bonus at target level defined as Group Net Cash Flow1 30% percentage of base salary; pay-out cap. is 2x bonus at target level Net Income 20% Eco & Safety 10% Perform
Slide 84: 2021-2023 long-term incentive plan highlights
2021-2023 LONG-TERM INCENTIVE PLAN HIGHLIGHTS Cash, long-term incentive plan aligned with the 2021-2023 Industrial Plan Rolling plan, with 3 objectives with different weights Objective Weight Value at target Pirelli performance aligned to the average of the peers’ Relative TSR 40% performance – Tier
Slide 85: Appendix
APPENDIX A GOVERNANCE B SUSTAINABILITY STRATEGY & TARGETS 2 0 2 1 – 2022 I 2025 I NDUS TRI AL P L AN MILAN, 31 st MARCH 2021
Slide 86: Our integrated model
OUR INTEGRATED MODEL 1 1 MULTI-STAKEHOLDER APPROACH Governance Management systems Planning Reporting2 Quality Return on capital Group integrated Annual Report ISO 9001 Environmental IATF 16949 Governance performance Board of Directors ISO/IEC 17025 Board Committee Labour and Social Growth Opportunit
Slide 87: Our sustainability leadership in numbers
OUR SUSTAINABILITY LEADERSHIP IN NUMBERS 2020 KPIs1 LEADING THE SECTOR IN MAJOR SUSTAINABILITY -54% Accident frequency index (vs. 2015) RANKINGS & INITIATIVES 58% Eco & Safety performance2 revenues -9% Avg. rolling resistance of car tyres (vs.2015) 52%3 Electricity from renewable sources -31%4 Plant
Slide 88: Our sustainability leadership in real life terms
OUR SUSTAINABILITY LEADERSHIP «IN REAL LIFE TERMS» 2020A Savings From 2015 to 2020 -9% FUEL SAVED EMISSIONS OF Avg. rolling resistance vs 2015 1.2 Bn liters = 600k Cars driven for 1 year FOSSIL BASED ELECTRICITY CONSUMED BY Like Electricity from ELECTRICITY SAVED4 = FLORENCE renewable sources 52%1 3
Slide 89: Global scenario @2025-2030
GLOBAL SCENARIO @2025-2030 Opportunities & challenges must match the global journey towards UN SDGs Demographic growth and urbanization Climate change Flooding, weather emergencies, Population reaching 8.5 Bn. in 20301 (7.8 Bn. in displaced people impacting businesses, ‘20) of which 60%2 will live i
Slide 90: Our group sustainability strategy and targets @2025-2030
OUR GROUP SUSTAINABILITY STRATEGY AND TARGETS @2025-2030 Eco & safety growth shaped around sustainable development goals is our must to tackle future scenarios in a resilient and competitive way 78 2 0 2 1 – 2022 I 2025 I NDUS TRI AL P L AN MILAN, 31 st MARCH 2021
Slide 91: The lever across to reach SDGs: human rights
THE LEVER ACROSS TO REACH SDGS: HUMAN RIGHTS Protect, Respect, Remedy, and ENGAGE 1 Risk and Impact Assessment • Recurring country materiality update • Analysis before entering new Reporting (Annual Report) countries/markets OUR BUSINESS • Conflict Minerals and Cobalt due diligence • N° of on-site 3
Slide 92: People at the heart of our journey
PEOPLE AT THE HEART OF OUR JOURNEY Our Priorities Our Ambitions in 2025 Protect Employees Protect our employees, safe workplace and healthy lifestyle [Frequency Index] -62% Caring Shift from traditional welfare programs to tailored wellbeing initiatives New policies to increase flexibility and auton
Slide 93: Our life-cycle strategy: eco & safety design
OUR LIFE-CYCLE STRATEGY: ECO & SAFETY DESIGN To minimize impacts on people and planet while maximizing performance Health & Safety CO2 absolute emissions reduction Renewable electricity increase MANUFACTURING on the road to Carbon Neutrality CO2 absolute emissions reduction Raw materials & natural r
Slide 94: Our consumer tyres raw materials targets
OUR CONSUMER TYRES RAW MATERIALS TARGETS Eco & Safety Design Our Eco & Safety strategy starts from raw materials We push innovation to increase bio-based and recycled materials while decreasing fossils Targets 2020A By 2025 By 2030 Renewable materials1 23% >40% >60% Recycled materials2 1%3 >3%3 >7%3
Slide 95: Our renewable and recycled materials innovation
OUR RENEWABLE AND RECYCLED MATERIALS INNOVATION Eco & Safety Design To achieve our targets, we are introducing new polymers, reinforcements, fillers and chemicals including What Why When Silica produced from rice husk, Avoid new raw material exploitation Introduction in 2021 in Pirelli one of the ma
Slide 96: Our manufacturing targets
OUR MANUFACTURING TARGETS Eco & Safety Design There is a urgent need for climate action to reduce greenhouse gas emissions in line with Paris Agreement goals CO2 abatement is only one among the key sustainability areas in operations Targets 2020A By 2025 Absolute emissions -31%1 -25% approved by the
Slide 97: Our decarbonization strategy in line with the Paris Agreement goals
OUR DECARBONIZATION STRATEGY IN LINE Transversal WITH THE PARIS AGREEMENT GOALS Scope 3 Scope 1 & 2 Scope 3 Scope 3 Scope 3 GWP1 <0.1% 5.8% 2.6% 0.2% 91.3% impact RAW MATERIALS MANUFACTURING LOGISTIC2 USE END OF LIFE -9% absolute scope 3 -25% absolute scope 1 & 2 CO2 emissions Rolling Resistance CO2
Slide 98: Our focus on water
OUR FOCUS ON WATER Transversal Excellence in Water Management, every drop counts WATER STEWARDSHIP Group water footprint Water use and quality Sustainable water management Return clean water Water risks Minimize water Ensure safe water back to assessment demand and its quality ecosystems Identificat
Slide 99: Our product performance targets
OUR PRODUCT PERFORMANCE TARGETS Eco & Safety Design Tyre rolling resistance plays a key role in reducing fuel and energy consumption and thus CO2 emissions. Our Eco and Safety approach consists on a continuous reduction of rolling resistance without any compromise on safety in all driving conditions
Slide 100: Our technology for electric vehicles
OUR TECHNOLOGY FOR ELECTRIC VEHICLES Electric vehicles are key to decarbonize mobility and have specific features that our tyres perfectly match ElectTM is the answer to the specific needs of Electric Vehicles: High load capacity for heavier vehicles Ultra low Rolling Resistance to improve battery r
Slide 101: Our tyres for autonomous vehicles
OUR TYRES FOR AUTONOMOUS VEHICLES Sensorized tyres can play a key role in road safety, enhancing ADAS and targeting Autonomous Vehicles Pirelli Cyber TyreTM can provide important safety related real-time data to the vehicle, the driver and the infrastructure: High-accuracy Pressure and Temperature m
Slide 102: Eco & safety performance revenues
ECO & SAFETY PERFORMANCE REVENUES1 Our targets +8pp +25pp 66% 58% ECO & SAFETY PERFORMANCE REVENUES2 33% TOTAL RANGE PRODUCTS 2015 2020 2025 +7pp +22pp 71% 64% ECO & SAFETY PERFORMANCE REVENUES 42% HIGH VALUE PRODUCTS3 2015 2020 2025 1. Eco-Safety Performance products, previously known as “Green Per
Slide 103: Pirelli Cycling
PIRELLI CYCLING USE Our history and outlook 1890: Pirelli produces its first tyre, a bicycle tyre 2017: Pirelli re-enters in the cycling business 2020: The turning point Bicycle market booming worldwide Pirelli in its best shape to take advantage of this scenario: new OE partnership, product range e
Slide 104: Our approach to ELT
OUR APPROACH TO ELT1 Eco & Safety Design End of life consumer tyres are a precious source of secondary raw materials for a number of industries, importantly valorized in circular economy Pirelli's Open Innovation Model Joint Development R&D to support innovation Agreements with key in industrial eco
Slide 105: Our focus on 5R circular economy
OUR FOCUS ON 5R1 CIRCULAR ECONOMY Transversal Re-think: Eco & Safety Design Design outstanding products, processes and services in terms of performance, environmental impact, health and safety Refuse Reduce Reuse Recycle Avoid processes, products, Reduce use of resources, Reuse resources and product
Slide 106: Some environmental benefits in real life terms
SOME ENVIRONMENTAL BENEFITS «IN REAL LIFE TERMS» Pirelli journey continues: by 2025 we are committed to almost double the environmental benefit delivered since 2015 Targets From 2015 to 2020 From 2020 to 2025 @2025 ELECTRICITY CONSUMED BY ELECTRICITY CONSUMED BY Electricity from FOSSIL BASED ELECTRI
Slide 107: Our supply chain: compliance, engagement and shared value creation
OUR SUPPLY CHAIN: COMPLIANCE, ENGAGEMENT AND SHARED VALUE CREATION Starting with common business values is a pre-requisite for a shared growth Management model: UN GLOBAL COMPACT – ISO 26000 – SA8000 - ISO 204001 Policies designed to embed Suppliers engagement Digital tools adopted to support and bo
Slide 108: Our focus on natural rubber sustainability
OUR FOCUS ON NATURAL RUBBER SUSTAINABILITY Pirelli Policy, Implementation Manual and Roadmap drafted in multi-stakeholder dialogue Implementation Roadmap 2019-2021 – focus areas TRAINING TRACEABILITY SHARING THE ENGAGE to improve towards more & COMMITTMENT with value-chain farmers’ more precise alon
Slide 109: Corporate citizenship: our key areas of engagement
CORPORATE CITIZENSHIP: OUR KEY AREAS OF ENGAGEMENT Culture Community projects OUR CULTURE STEMMING FROM OUR OUR ROOTS IN COMMUNITIES LONG HISTORY Supporting personal development and the improvement of living standards A 149-year story made up of people, technology and a pioneering spirit recognized