Pirelli & C. S.p.a. · MIL:PIRC
Pirelli & C — H1 2014 Earnings Presentation
36 slides from Pirelli & C's earnings presentation, Aug 5, 2014
Slide 1: Pirelli H1 2014 Results
PIRELLI H1 2014 RESULTS MILANO – AUGUST 5, 2014
Slide 2: Agenda
AGENDA KEY MESSAGES H1 2014 RESULTS 2014 OUTLOOK & TARGETS H1 2014 TYRE OVERVIEW APPENDIX H1 2014 RESULTS 1
Slide 3: Key Messages
KEY MESSAGES Pirelli H1 snapshot > Premium: worldwide value growth driver, better than expected > Record profitability - Strong results from favorable balance of price/mix, forex and raw materials - Efficiency gains well on track 2014 Outlook > Industry: globally resilient - Premium demand outperfor
Slide 4: Agenda: H1 2014 Results
AGENDA KEY MESSAGES H1 2014 RESULTS 2014 OUTLOOK & TARGETS H1 14 TYRE OVERVIEW APPENDIX H1 2014 RESULTS 3
Slide 5: Pirelli Key Financial Results
PIRELLI KEY FINANCIAL RESULTS H1 13* H1 14 Δ yoy Q2 13* Q2 14 Δ yoy Q2 2014 Highlights Revenues 3,090.0 2,986.9 -3.3% 1,575.4 1,513.7 -3.9% • On-going organic growth, especially Organic growth** 6.7% 5.5% in Europe, Asia Pacific, Russia and Nafta EBITDA before Restr. Costs 529.3 582.8 10.1% 276.3 30
Slide 6: H1 2014 Performance by Region
H1 2014 PERFORMANCE BY REGION Tyre Sales Consumer Sales Industrial Sales Tyre Ebit Margin** €/Mln Organic Organic Organic D YoY D YoY D YoY growth* growth* growth* Total 2,980.8 -3.0% +7.1% 2,288.3 +1.5% +10.2% 692.5 -15.3% -1.5% 15.0% (+2.1 pp) Europe Mid-teens Europe 35% +9.7% +9.5% 42% +9.9% +9.7
Slide 7: Premium: Our Growth Engine Across Regions
PREMIUM: OUR GROWTH ENGINE ACROSS REGIONS €/Mln D YoY Organic growth* • Tangible benefits from investments in OE: Total 1,139.8 1,285.1 +12.7% +16.6% marked tyres +20% yoy • Reinforced market share in the ≥ 18" tyre segment in the European market growing double digit in H1. Market share increase in
Slide 8: Pirelli Net Income H1 2014 vs H1 2013
PIRELLI NET INCOME H1 2014 VS H1 2013 €/Mln 11.4 1.1 193.8 (2.9) (13.6) 47.7 150.1 of which in H1 2014: Prelios (16.3) Alitalia (11.2) Net Income ∆ EBIT ∆ Results Financial ∆ Taxes Discontinued Net income H1 ‘13 from Income/ Operations H1 ‘14 particip. charges H1 2014 RESULTS 7
Slide 9: Debt Structure as of June 30, 2014
DEBT STRUCTURE AS OF JUNE 30, 2014 Net Financial Position Gross Debt Maturity €/Mln 2,470.9 576.1 136.9 Cash & Cash 56.9 Equivalent 137.1 108.8 Committed 499.1 837.1 42.0 28.1 Line 850.0 1,894.8 95.1 Drawdown 77.0 Rev. 614.0 Cred. Fin. Facility Debt Capital maturity 1,158.7 223.1 Receivables Market
Slide 10: Pirelli H1 2014 Net Financial Position
PIRELLI H1 2014 NET FINANCIAL POSITION €/Mln 96.8 12.9 58.9 1,965.6 (304.6) 159.6 5.9 (1.4) 1,935.2 474.6 110.1 1,322.4 EBIT before restr. costs 232.2 EBIT before restr. costs 206.7 Depreciation / amortization: 73.3 Depreciation / amortization: 70.6 Investments*: (78.3) Investments*: (65.3) D NWC &
Slide 11: Agenda: 2014 Outlook & Targets
AGENDA KEY MESSAGES H1 2014 RESULTS 2014 OUTLOOK & TARGETS H1 2014 TYRE OVERVIEW APPENDIX H1 2014 RESULTS 10
Slide 12: 2014 Pirelli Outlook by Region
2014 PIRELLI OUTLOOK BY REGION Premium growth ahead of plan with consistent growth of market share, Europe and Apac above expectations compensating slower development of South America Car Tyre Market 2014 Tyre BusinessTarget Highlights Highlights Revenues EBIT%* +5% yoy High single-digit Europe o/w
Slide 13: South America: Maintaining Solid Profitability Through Challenging Scenario
SOUTH AMERICA: MAINTAINING SOLID PROFITABILITY THROUGH THE CURRENT CHALLENGING SCENARIO Macro scenario: slower growth, Tyre market: lower OE Pirelli: solid profitability and supportive fundamentals demand, resilient Replacement confirmed market leadership Brazil GDP growth* yoy Car OE Car Replacemen
Slide 14: FY 2014 Targets Confirmed
FY 2014 TARGETS CONFIRMED at constant consolidation perimeter* Better Premium growth and unchanged focus on value counterbalance lower growth in Industrial Steel Cord FY 2014 2014 targets 2014 targets Included in discontinued May 2014 Update August 2014 operations** Revenues ~6.2 €/bln Confirmed ~90
Slide 15: 2014 Consumer & Industrial Targets Update
2014 CONSUMER & INDUSTRIAL TARGETS UPDATE at constant consolidation perimeter* Consumer Business Industrial Business 2014 targets 2014 targets 2014 targets 2014 targets Steel Cord May 2014 Update August May 2014 Update August business 2014 2014 Discontinued Revenues ~4.6 ~4.7 Revenues ~ 1.6 ~ 1.5 ~9
Slide 16: 2014 Profitability Guidance Confirmed
2014 PROFITABILITY GUIDANCE CONFIRMED Benign raw material trends support investments in Premium growth and counterbalance lower Industrial volumes 2014 targets 2014 targets May 2014 Update August 2014 ∆ vs old Driver Impact Impact guidance Volumes >+5% of sales ~ +4.5% of sales -30€/mln Ebit Price/M
Slide 17: Agenda: H1 2014 Tyre Overview
AGENDA KEY MESSAGES H1 2014 RESULTS 2014 OUTLOOK & TARGETS H1 2014 TYRE OVERVIEW APPENDIX H1 2014 RESULTS 16
Slide 18: Key Tyre Results
KEY TYRE RESULTS Q2 2014 Highlights Q1‘14 ∆% Q2‘14 ∆% H1‘14 ∆% • Delivering on our value strategy, stepping ahead towards 2014 targets Revenues 1,469.5 -2.4% 1,511.3 -3.6% 2,980.8 -3.0% • Solid organic growth led by Consumer in o/w Premium 639.9 +12.9% 645.2 +12.6% 1,285.1 +12.7% Europe, Asia Pacifi
Slide 19: Pirelli Tyre Operating Performance
PIRELLI TYRE OPERATING PERFORMANCE 54.0 5.8 (28.3) (21.5) 21.3 (7.0) (3.5) 229.1 206.3 2.0 +31.5 -0.2 EBIT Volumes Price/ Raw FX Other Input Efficiencies Depreciation Restr. EBIT Q2 ’13* Mix Materials Costs (Labour & other costs Q2 ‘14 Energy / other) 93.3 13.7 (47.5) (51.0) 48.9 (34.2) 26.0 (5.8) 4
Slide 20: Consumer Business: Pirelli Performance
CONSUMER BUSINESS: PIRELLI PERFORMANCE Q1 ‘14 ∆% Q2‘14 ∆% H1‘14 ∆% Revenues 1,128.7 1.1% 1,159.6 +1.8% 2,288.3 1.5% o/w Premium 639.9 12.9% 645.2 +12.6% 1,285.1 12.7% % revenues 56.7% +5.9p.p. 55.6% +5.3p.p 56.2% +5.7p.p. EBITDA before Restr. Costs 219.4 +12.6% 245.1 +20.4% 464.5 +16.6% Margin 19.4%
Slide 21: Industrial Business: Pirelli Performance
INDUSTRIAL BUSINESS: PIRELLI PERFORMANCE Q1‘14 ∆% Q2‘14 ∆% H1‘14 ∆% Revenues 340.8 -12.2% 351.7 -18.1% 692.5 -15.3% EBITDA before Restr. Costs 60.9 -3.3% 63.6 -17.7% 124.5 -11.3% Margin 17.9% +1.7% 18.1% +0.1% 18.0% +0.8% EBIT before Restr. costs 47.6 -3.8% 49.3 -21.7% 96.9 -13.9% Margin 14.0% +1.3p
Slide 22: Efficiency Program: 54% of 2014 Target Already Reached in H1
EFFICIENCY PROGRAM: 54% OF 2014 TARGET ALREADY REACHED IN H1 2014-2017 Efficiency Plan H1 2014 results ~30 ~350 48.9 ~320 H1 2014 Highlights 54% • Materials: scrap Materials efficiencies and spec Materials 56% simplifications • Labour: productivity improvement 24% • Allocation Mix: fully Labour expl
Slide 23: 2014 Raw Material Guidance
2014 RAW MATERIAL GUIDANCE Breakdown FY 2013 Guidance 2014 Guidance 2014 (based on purchase cost) (March 2014) (August 2014) Average Cost of Goods Sold €/Mln Synthetic Rubber 2013A 2014E Δ yoy 2014E Δ yoy 29% Natural Rubber 24% Natural Rubber ~2,700 ~ 2,250 +80 ~2,100 +105 TSR20 ($/ton) Brent Oil 10
Slide 24: Appendix
AGENDA H1 2014 RESULTS 2014 OUTLOOK & TARGETS TYRE BUSINESS H1 2014 OVERVIEW APPENDIX H1 2014 RESULTS 23
Slide 25: Pirelli Group – Q2 Results
PIRELLI GROUP – Q2 14 RESULTS Profit & Loss and Net Financial Position by Business Unit Pirelli tyre Other Pirelli & C. Cons. Q2’13* Q2’14 Q2’13 Q2’14 Q2’13* Q2’14 SALES 1,567.9 1,511.3 7.5 2.4 1,575.4 1,513.7 EBITDA before Restr. Costs 280.8 308.7 (4.5) (3.2) 276.3 305.5 % of sales 17.9% 20.4% 17.5
Slide 26: Pirelli Group – H1 Results
PIRELLI GROUP – H1 14 RESULTS Profit & Loss and Net Financial Position by Business Unit Pirelli tyre Other Pirelli & C. Cons. H1’13* H1’14 H1’13 H1’14 H1’13* H1’14 SALES 3,072.9 2,980.8 17.1 6.1 3,090.0 2,986.9 EBITDA before Restr. Costs 538.6 589.0 (9.3) (6.2) 529.3 582.8 % of sales 17.5% 19.8% 17.
Slide 27: Pirelli Group Cash Flow
PIRELLI GROUP CASH FLOW €/Mln 1Q’13* 2Q’13* 1H’13* 1Q’14 2Q’14 1H’14 EBIT before restructuring costs 181.7 204.2 385.9 206.7 232.2 438.9 Depreciation / Amortization 71.3 72.1 143.4 70.6 73.3 143.9 Net investments (79.7) (84.3) (164.0) (65.3) (78.3) (143.6) Working capital / other variations (468.4)
Slide 28: Pirelli Balance Sheet
PIRELLI BALANCE SHEET €/Mln FY’13 1H’14 FIXED ASSETS 4,043.0 3,896.8 Inventories 987.3 1,043.7 Trade receivables 666.4 974.0 Trade payables (1,244.5) (1,053.7) NET OPERATING WORKING CAPITAL 409.2 964.0 Other payables/receivables 3.0 40.9 Net Working Capital 412.2 1,004.9 Net Invested Capital of disc
Slide 29: Pirelli Group – 2013 Quarterly Results – Restated
PIRELLI GROUP – 2013 QUARTERLY RESULTS – RESTATED* Q2’13 Q2’13 Q3’13 Q4’13 FY’13 Tyre Group Tyre Group Tyre Group Tyre Group Tyre Group SALES 1,505.5 1,541.6 1,567.9 1,575.4 1,489.4 1,496.4 1,468.3 1,474.6 6,030.6 6,061.0 EBITDA before Restr. 257.8 253.0 280.8 276.3 282.3 277.5 299.0 288.2 1,119.9 1
Slide 30: Consumer Business: Key Market Trends
CONSUMER BUSINESS: KEY MARKET TRENDS 2Q’13 3Q’13 4Q’13 FY’13 1Q’14 2Q’14 H1’14 % yoy 8% 3% 5% 2% 4% 0% 0% OE Europe* 9% 7% 5% 6% 3% 2% 0% REPLACEMENT 6% 5% 5% 5% 4% 3% 4% America OE North 0% 3% 2% 4% 3% REPLACEMENT -3% -1% 22% 4% 6% Mercosur OE -10% -11% -25% -19% 17% 11% 4% 9% 4% 3% 4% REPLACEMENT*
Slide 31: Industrial Business: Key Market Trends
INDUSTRIAL BUSINESS: KEY MARKET TRENDS 2Q’13 3Q’13 4Q’13 FY’13 1Q’14 2Q’14 H1’14 % YoY 24% 2% 7% 6% 7% 1% OE Europe * -4% 12% 9% 6% 7% 14% 8% 2% REPLACEMENT 51% 33% 34% 11% OE Mercosur -1% -17% -30% 16% 8% 10% 6% 5% 0% REPLACEMENT** -4% 40% China 24% 18% 17% 13% N/A OE * Turkey included and Russia e
Slide 32: H1 2014 Pirelli Tyre Mix
H1 2014 PIRELLI TYRE MIX Sales by Business Sales by Segment Consumer Car 77% 69% Agro 3% Truck Motorbike Industrial 8% 23% 20% Sales by Channel Sales by Region Replacement South America NAFTA 76% 32% 12% Asia Pacific 9% MEAI 8% Russia OE Europe 4% 24% 35% H1 2014 RESULTS 31
Slide 33: June 2014 Pirelli People
JUNE 2014 PIRELLI PEOPLE Headcount People by Region NAFTA 39.299 South America 3% 37.979 37% Asia Pacific 11% MEAI 9% Russia Europe 9% Dec. 2013 Jun. 2014 31% People by Contract People by Cluster Management Temps & Agency 1% 8% Employees Workers 92% Staff 80% 19% H1 2014 RESULTS 32
Slide 34: Pirelli Plants in the World
PIRELLI PLANTS IN THE WORLD U.S.A. U.K. ITALIA GERMANY RUSSIA Rome Car Burton Car Bollate Car Breuberg Car/Moto Kirov Car Carlisle Car Settimo Torinese Car Voronezh Car Figline Valdarno Steel Cord MEXICO ROMANIA Guanajuato Car Slatina Car / Steel Cord VENEZUELA CHINA Guacara Car Yanzhou Car / Moto /
Slide 35: Raw Materials
RAW MATERIALS Raw Material Price Trend Brent Oil (in USD/bbl) Natural Rubber: Sicom Natural Rubber (in USD/tons) Brent: www.oilnergy.com Yearly Average 4,519 3,380 3,156 111.0 98.5 111.7 108.9 2,517 2,531 80.2 75.2 1,801 Q1/08 Q2/08 Q3/08 Q4/08 Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Q4/10 Q1/11 Q
Slide 36: 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