Pirelli & C. S.p.a. · MIL:PIRC
Pirelli & C — Q1 2020 Earnings Presentation
33 slides from Pirelli & C's earnings presentation, May 13, 2020
Slide 1: 1Q 2020 Results
1Q 2020 RESULTS Milan, May 13th, 2020 1Q 2020 RESULTS Milan, May 13th, 2020
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: Key Messages
KEY MESSAGES > April 3rd 2020 Outlook confirmed • global car tyre demand down 20% YoY • High Value resilience vs. Standard • Pirelli volume trend (-19% on total car, -12.5% on ≥18”) > Fully on track on “Competitiveness Program”. A second program launched to offset Covid impact and protect profitabil
Slide 4: Agenda
AGENDA 1 2020 OUTLOOK 2 MARKET AND PIRELLI PERFORMANCE 3 1Q 2020 FINANCIAL REVIEW 4 APPENDIX 1Q 2020 RESULTS 3 Milan, May 13th, 2020
Slide 5: April 3rd 2020 Outlook Confirmed: Weak Car Tyre Demand, H.V. Resilience, Pirelli Volumes Trend
APRIL 3RD 2020 OUTLOOK CONFIRMED: WEAK CAR TYRE DEMAND, H.V. RESILIENCE, PIRELLI VOLUMES TREND 2020E Iday 2020E (19-Feb) Δ YoY % (May) Δ YoY % 1Q 2020 Reporting takeaways CAR PRODUCTION (million cars) TOTAL PRESTIGE 87.4 -2% 69.3 -22% > Trend confirmed by latest IHS estimates Premium and Prestige
Slide 6: Pirelli Competitiveness Program Coupled with Covid Actions to Protect Margin
PIRELLI COMPETITIVENESS PROGRAM COUPLED WITH «COVID ACTIONS» TO PROTECT MARGIN, ALREADY DELIVERYING IN 1Q 2020 FY 2020 1Q 2020 COMPETITIVENESS PLAN COVID ACTIONS COMPETITIVENESS PLAN COVID ACTIONS € million (Feb.19) (13 May) (13 May) Product Cost ~€ 20M freeze Manufacturing due to slowdown Organiz
Slide 7: Transforming Pirelli into a Leaner and Faster Player
TRANSFORMING PIRELLI INTO A LEANER AND FASTER PLAYER Markets will take 2 years to go back to 2019 level. We are therefore working to transform Pirelli. A LEANER COMPANY THROUGH: • Product Range Streamlining • Organization Simplification • Digitalization of Processes • Adoption of new working methods
Slide 8: 2020 Targets Confirmed
2020 TARGETS CONFIRMED € billion @ 3-Apr @ 13-May 2019 A 2020 E 2020 E Tot. Vol.: ~-18%÷-20% Net Sales 5.3 ~4.3 ÷ ~4.4 • High Value: ~-14% confirmed • Standard: ~-26% adj. EBIT 0.9 margin 17.2% ~14% ÷ ~15% confirmed CapEx 0.39 ~0.13 Confirmed Net Cash Flow bef. Dividends 0.33 ~0.23 ÷ ~0.26 confirmed
Slide 9: Agenda
AGENDA 1 2020 OUTLOOK 2 MARKET AND PIRELLI PERFORMANCE 3 1Q 2020 FINANCIAL REVIEW 4 APPENDIX 1Q 2020 RESULTS 8 Milan, May 13th, 2020
Slide 10: 1Q 2020 Market Scenario Heavily Impacted by Covid-19
1Q 2020 MARKET SCENARIO HEAVILY IMPACTED BY COVID-19 VERY TOUGH 1Q MARKET SCENARIO KEY TRENDS PIRELLI PERFORMANCE TOTAL HIGH VALUE STANDARD 1Q’20 1Q’20 1Q’20 High Value Total Premium Synergic •> O.E.: over-performing market, thanks to portfolio Car diversification (N. America) Prod. -17.7% •> Replac
Slide 11: Very Challenging Outlook, Tyre Market Demand at ~-40% in 2Q
VERY CHALLENGING OUTLOOK, TYRE MARKET DEMAND AT ~-40% IN 2Q GLOBAL TYRE Of which Of which MARKET (OE+REPL) O.E. REPL. KEY TRENDS IN 2Q TYRE MARKET DEMAND Δ YoY % Δ YoY % Δ YoY % -20% -23% -19% Channels •> OE: <-40% globally (Car production <-45% YoY) •> Repl: slightly better than OE, heavily impacte
Slide 12: Deep Dive on Competitiveness and Covid Actions
DEEP DIVE ON COMPETITIVENESS AND COVID ACTIONS COST COMPETITIVENESS AND COVID ACTIONS 2020 GROSS BENEFITS BY PILLAR € million Competitiveness Covid ▬ Product range management ▬ Specification optimization and virtual prototyping PRODUCT COST ~50 ~10 ~60 ▬ Material portfolio de-complexity ▬ Procuremen
Slide 13: Containing Production Slowdown Costs
CONTAINING PRODUCTION SLOWDOWN COSTS COST COMPETITIVENESS AND COVID ACTIONS Actions to mitigate the costs of reduced level of Capacity Utilization > Adhesion to Social Safety Net > Reduction of complexity cost inside plants to maximize efficiency thanks to modularity and product range simplification
Slide 14: Accelerating Commercial Development and Innovation
ACCELLERATING COMMERCIAL DEVELOPMENT AND INNOVATION COMMERCIAL DEVELOPMENT DESTOCKING 1Q • Commercial policy aimed at maintaining low inventory levels with distribution partners (Mainly Europe & N. America) • Ready for the restart of activities CHINA EXPOSURE • Leverage experience gained in China, w
Slide 15: 2020 Targets: Operational Drivers
2020 TARGETS: OPERATIONAL DRIVERS € billion @ 3-Apr @ 13-May 2020 MAIN OPERATIONAL DRIVERS 2019 A 2020 E 2020 E 2020 E Net Sales 5.3 ~4.3 ÷ ~4.4 confirmed Volumes ~ -18% ÷ -20% • o/w High Value ~ -14% • o/w Standard ~ -26% adj. EBIT 0.9 margin 17.2% ~14% ÷ ~15% confirmed Price/mix ~ +2% Forex ~ -2%
Slide 16: Agenda
AGENDA 1 2020 OUTLOOK 2 MARKET AND PIRELLI PERFORMANCE 3 1Q 2020 FINANCIAL REVIEW 4 APPENDIX 1Q 2020 RESULTS 15 Milan, May 13th, 2020
Slide 17: 1Q 2020 Net Sales Bridge
1Q 2020 NET SALES BRIDGE € million 1,314 -226 -17 1,052 -19 1Q’19 Volumes Price/Mix FX 1Q’20 High Value Car ≥18” Standard o/w Organic -14.2% -17.2% -20.2% -1.3% -1.5% -20.0% -18.5% O.E. -9.5% -14.4% Repl. -18.1% >• 1Q Price/Mix performance: • Price in line with 4Q’19 trend (O.E. re-negotiation and c
Slide 18: 1Q 2020 Adjusted EBIT Bridge
1Q 2020 ADJUSTED EBIT BRIDGE € million 219 (95) Net eff. +16 Net impact +17 (16) 141 33 4 (3) (1) (15) 31 (15) ▬ D&A -9 ▬ other +13 1Q’19 Volume Price/mix Efficiencies Inflation Cost Slowdown D&A and Raw Mat. FX 1Q’20 Cutting Other Covid margin 16.7% 13.4% 1Q 2020 RESULTS 17 1. net of FX impact; 2.
Slide 19: 1Q 2020 Cash Flow and Net Financial Position
1Q 2020 CASH FLOW AND NET FINANCIAL POSITION € million Operating Cash Flow: -697 (-602 in 1Q’19) 4,261 33 31 -7 ▬ non-recurring / restr. -20 861 ▬ Covid-19 costs -1 3,507 ▬ FX / other 28 -244 23 57 Net Cash Flow: -754 (-713 in 1Q’19) NFP FY’19 EBITDA CapEx Increase in ∆ W.C. Interests Taxes Other NF
Slide 20: Current Capital Structure (March 2020)
CURRENT CAPITAL STRUCTURE (MARCH 2020) € million Net Financial Position Gross Debt maturity 5,610 (1,349) Cash & Cash 1,975 can be equivalents exercized the option: extended to 2024 2,043 Loan (810) 259 now due in 2021, Bond (540) 4,261 further extendable to 3,156 2022 IFRS 16 1,172 1,144 Fin. recei
Slide 21: Agenda
AGENDA 1 2020 OUTLOOK 2 MARKET AND PIRELLI PERFORMANCE 3 1Q 2020 FINANCIAL REVIEW 4 APPENDIX 1Q 2020 RESULTS 20 Milan, May 13th, 2020
Slide 22: 1Q 2020 Results Highlights
1Q 2020 RESULTS HIGHLIGHTS € million 1Q’19 1Q’20 Δ YoY Revenues 1,314 1,052 -20.0% Organic Growth1 -18.5% High Value Revenues 895 732 -18.2% % on total Revenues 68.1% 69.6% +1.5 pp EBITDA adjusted2 316 244 -22.6% Margin 24.0% 23.2% -0.8 pp EBIT adjusted3 219 141 -35.6% Margin 16.7% 13.4% -3.3 pp PPA
Slide 23: 1Q 2020 Pirelli Balance Sheet
1Q 2020 PIRELLI BALANCE SHEET € million 31-March-2019 31-Dec-2019 31-March-2020 Fixed assets related to continuing operations (before IFRS 16) 9,070 9,007 8,724 Right of use IFRS 16 472 463 451 Fixed assets related to continuing operations (incl. IFRS 16) 9,542 9,470 9,175 Inventories 1,166 1,094 1,
Slide 24: 1Q 2020 Pirelli Group Cash Flow
1Q 2020 PIRELLI GROUP CASH FLOW € million 1Q’19 1Q ‘20 Adjusted EBIT1 219 141 Depreciation & Amortization (excl. PPA amortization) 97 103 Capital expenditures (78) (57) Rights of use (IFRS 16) (3) (23) Change in working capital / other (836) (861) Operating Cash Flow (602) (697) Financial income / (
Slide 25: 2020E Raw Material Guidance
2020 E RAW MATERIAL GUIDANCE € million 13% Natural Rubber 10% Steel Reinf. 17% Textiles Breakdown FY 2019 A 27% Synthetic Rubber Raw Materials based on 33% on Sales purch. costs 23% Chemicals 10% Carbon Black COMMODITIES - AVERAGE QUOTATION COMMODITIES: AVERAGE COST OF GOODS SOLD 2019 A 2020 E ∆ YoY
Slide 26: 2020E Forex Guidance
2020 E FOREX GUIDANCE € million 13% other 6% GBP 37% EUR 3% RUB Breakdown FY 2019 A 11% BRL based on currency 12% CNY 18% USD MAIN AVERAGE EXCHANGE RATES 2019 A 2020 E ∆ YoY ∆ YoY 2020 E May-20 guid. vs. EUR Feb-20 guid. EUR / USD / 1.12 1.10 -6.9% -6.9% 1.12 USD / CNY / 6.9 7.03 +6.2% -1.0% 7.05 US
Slide 27: Key Car Market Trends: Europe
KEY CAR MARKET TRENDS: EUROPE Market trend FY’18 1Q’19 2Q’19 3Q’19 4Q’19 FY'19 1Q’20 ∆% YoY O.E. -1 Total Car market -3 -6 -3 -5 -8 -16 2 0 0 Replacement -3 -2 -1 -13 1 0 Total (O.E.+Repl.) -3 -4 0 -2 -14 ≥18” 4 1 2 ≤17" O.E. -1 0 of which ≥18” & ≤17” -5 -7 -5 -2 -5 -6 -9 -14 -16 14 12 11 13 15 12 1
Slide 28: Key Car Market Trends: North America
KEY CAR MARKET TRENDS: NORTH AMERICA Market trend FY’18 1Q’19 2Q’19 3Q’19 4Q’19 FY'19 1Q’20 ∆% YoY O.E. Total Car market -1 -4 -3 -1 -4 -10 -11 4 6 3 1 2 Replacement -2 -10 3 3 2 0 Total (O.E.+Repl.) 0 -3 -10 ≥18” 6 4 5 ≤17" O.E. 1 2 of which ≥18” & ≤17” -5 -2 -5 -7 -9 -7 -10 13 13 -16 -16 9 11 8 10
Slide 29: Key Car Market Trends: Asia Pacific
KEY CAR MARKET TRENDS: ASIA PACIFIC Market trend FY’18 1Q’19 2Q’19 3Q’19 4Q’19 FY'19 1Q’20 ∆% YoY O.E. -2 -4 -3 -6 Total Car market -7 -11 -32 1 2 5 5 0 3 Replacement -41 1 Total (O.E.+Repl.) 0 -2 -2 -1 -1 -37 ≥18” 17 8 8 ≤17" 3 O.E. of which ≥18” & ≤17” -6 -1 -8 -2 -7 -6 -9 -13 -28 -33 11 10 11 4 1
Slide 30: Key Market Trends: Russia & Nordics / South America
KEY MARKET TRENDS: RUSSIA & NORDICS / SOUTH AMERICA Market trend FY’18 1Q’19 2Q’19 3Q’19 4Q’19 FY'19 1Q’20 ∆% YoY 12 8 7 6 3 O.E. Russia & Nordics -9 -16 7 Replacement -2 0 -8 -5 -10 -19 8 1 Total (O.E.+Repl.) -8 -1 -8 -4 -19 6 O.E. -4 -1 -4 -3 -3 South America -17 4 Replacement1 -7 -8 -3 -6 -3 -5 T
Slide 31: Raw Material Costs Trend and Mix
RAW MATERIAL COSTS TREND AND MIX Main raw materials price trend 54.8 ; +22% YoY 71.5 ; +31% YoY 64.2 ; -10% YoY 1.651 ; +20% YoY 1.365 ; -17% YoY 1.406 ; +3% YoY $ / kg Brent Oil (in $ / barrel) Natural Rubber (in $ / kg) yearly avg. ; Δ YoY $ / barrel 2.25 85 2.00 75 1.75 65 1.50 55 1.25 45 1.00 35
Slide 32: Manufacturing Footprint as of March 31st, 2020
MANUFACTURING FOOTPRINT AS OF MARCH 31ST, 2020 U.K. Germany Romania Russia U.S. ▬ Burton – Car ▬ Breuberg – ▬ Slatina – Car ▬ Kirov – Car ▬ Carlisle – Car Car / Moto ▬ Rome – Car ▬ Voronezh – Car Mexico ▬ Silao – Car Italy ▬ Bollate – Car China ▬ Settimo – Car ▬ Yanzhou – Car / Moto ▬ Jiaozuo – Car
Slide 33: 1Q 2020 Results
1Q 2020 RESULTS Milan, May 13th, 2020