Pirelli & C. S.p.a. · MIL:PIRC
Pirelli & C — Q1 2018 Earnings Presentation
30 slides from Pirelli & C's earnings presentation, May 14, 2018
Slide 1: 1Q 2018 Results - Pirelli, Global High Value
1Q 2018 RESULTS PIRELLI, GLOBAL HIGH VALUE 14 May 2018
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 “Compan
Slide 3: Key Messages
KEY MESSAGES_ > 1Q’18 RESULTS: GOOD PERFORMANCE IN SPITE OF EXTERNAL HEADWINDS ▬ Strengthening in High Value: +13% volume growth with a market share gain ▬ Significant reduction of exposure to less profitable standard products and shift towards higher rim sizes ▬ Top-of-the-Industry price/mix improv
Slide 4: Agenda
AGENDA_ 1Q’18 RESULTS HIGHLIGHTS & FY’18 OUTLOOK 1Q’18 RESULTS IN DETAIL APPENDIX 1Q 2018 RESULTS PIRELLI, GLOBAL HIGH VALUE 33 14 May 2018
Slide 5: 1Q 2018 Results Highlights
1Q 2018 RESULTS HIGHLIGHTS_ € million REVENUES EBIT ADJ.1 w/o start-up costs2 ∆ YoY organic +4.5% -2.2% 220 229 1,339 1,310 +5.7% Standard -5.0% High Value 57.9% +7.5% 63.6% +13.4% 1Q 2017 1Q 2018 1Q 2017 1Q 2018 Margin 16.4% 17.5% NET INCOME before discontinued operations NET FINANCIAL POSITION +86
Slide 6: 1Q 2018 Performance by High Value Regions
1Q 2018 PERFORMANCE BY HIGH VALUE REGIONS_ € million SALES Δ org. EBIT KEY HIGHLIGHTS 1Q’17 1Q’18 YoY % growth adj. margin1 ▬ Strengthening High Value 570 578 +1.3% +3.1% position, with market share -14.0% increase ▬ Proactive reduction of HIGH VALUE REGIONS Standard in the less SALES EUROPE +11.8%
Slide 7: 1Q 2018 Performance by Standard Regions
1Q 2018 PERFORMANCE BY STANDARD REGIONS_ € million SALES Δ org. EBIT KEY HIGHLIGHTS 1Q’17 1Q’18 YoY % growth adj. margin1 227 189 -16.7% +1.4% ▬ Accelerated exit from less profitable products within the Standard segment STANDARD REGIONS +0.4% High-single ▬ Increased exports to North SALES LATAM digi
Slide 8: Progressing Along the Pillars of Our IPO Plan
PROGRESSING ALONG THE 3 PILLARS OF OUR IPO PLAN…_ 1Q 2018 achievements I ▬ More than 120 High Value homologations PILLAR 1: ▬ +0.7 mln High Value capacity (Europe, NAFTA and LatAm) HIGH VALUE ▬ Increasing share of Car Dealer + Pirelli Retail + Tier 1 clients in our distribution network, reaching 53%
Slide 9: Supported by New Organizational Structure
…SUPPORTED BY NEW A ORGANIZATIONAL STRUCTURE_ Pirelli Executive Staff functions Vice - Chairman & CEO Internal Audit M. Tronchetti Provera Corporate Affairs, Compliance & Company Secretary Institutional Affairs Senior Advisor Human Resources Planning and Controlling Senior Advisor Cultur
Slide 10: 2018 High Value Market Outlook Confirmed
2018 HIGH VALUE MARKET OUTLOOK CONFIRMED_ O.E. + REPLACEMENT ≥18’’ TYRE MARKET (million tyres) EUROPE ~8x ≤17” growth (+1.2%) ~5x ≤17” growth (+1.9%) ▬ High-single digit growth, well balanced +9% between O.E. and Replacement +10% 236 217 196 Other regions NAFTA ▬ High-single digit growth, mainly dri
Slide 11: FY 2018 Outlook Update
FY 2018 OUTLOOK UPDATE_ € million 2017A 2018E 2018E (26 Feb. 2018) (14 May. 2018) • - 0.5 p.p. on total volume (due to -1pp on Standard) • - 1.0 p.p. linked to FX • - 0.6 p.p. IFRS 15 impact2 Revenues 5,352 ≥+6% YoY ~+4% YoY ~+10% Net of FX ≥+9% Net of FX High Value weight 58% ~60% ≥60% Top line imp
Slide 12: Agenda
AGENDA_ 1Q’18 RESULTS HIGHLIGHTS & FY’18 OUTLOOK 1Q’18 RESULTS IN DETAIL APPENDIX 1Q 2018 RESULTS PIRELLI, GLOBAL HIGH VALUE 11 14 May 2018
Slide 13: 1Q 2018 Net Sales Bridge
1Q 2018 NET SALES BRIDGE_ € million Organic Growth +5.7% +7.2% ∆ YoY tot. 96 (98) 1,339 (20) -2.2% (8) 1,310 -1.5% -7.3% -0.6% ▬ High Value +12.8% ▬ Standard -10.6% Net Sales 1Q’17 Volume Price/Mix FX IFRS 15 impact1 Net Sales 1Q’18 1 In accordance with IFRS 15 (starting from January 1st, 2018), som
Slide 14: 1Q 2018 Operating Performance
1Q 2018 OPERATING PERFORMANCE_ € million Internal levers ∑ +46 External levers ∑ -32 3.5 9.0 (21.4) (13.8) 1Q’17 (15) (11.4) 62.7 218.4 1Q’18 (11) (7.2) 205.0 (8.0) EBIT adj. Volume Price/mix Efficiencies Start-up D&A / Other2 Raw Mat. Other FX EBIT adj. 1Q’17 costs1 input costs 1Q’18 margin 15.3% 1
Slide 15: 1Q 2018 Net Income Bridge
1Q 2018 NET INCOME BRIDGE_ 92.4 € million 1.9 21.8 3.9 15.3 49.5 Net Income Δ EBIT Δ Net income / Δ Financial Δ Taxes Net Income bef. disc. oper. loss from equity income / charges bef. disc. oper. 1Q’17 participations 1Q’18 % on Sales 3.7% 7.1% 1Q’17 1Q’18 Net Income 50 92 PPA amortization +26 +29 N
Slide 16: 1Q 2018 Cash Flow and Net Financial Position
1Q 2018 CASH FLOW AND NET FINANCIAL POSITION_ € million 68 (155) 3,939 31 55 (5) ▬ Non rec. / restr. 38 ▬ Minorities 19 929 ▬ FX / other 11 3,219 (288) 85 NFP FY’17 EBITDA CapEx ∆ WC & Taxes Interests Other Financial Industrial NFP 1Q’18 adjusted1 Others assets sale reorg. 1 Before amortization of P
Slide 17: Current Capital Structure (March 2018)
CURRENT CAPITAL STRUCTURE (MARCH 2018)_ € million NET FINANCIAL POSITION GROSS DEBT MATURITY Cash & Cash equivalents 4,679 (740) 1,621 1,515 (601) 3,939 (139) Loan 3,101 Bond Fin. receivables 1,312 & other 1,589 643 594 Other 792 306 593 786 200 200 2 106 3 32 1 Gross Fin. Net Fin. 2018 2019 2020 20
Slide 18: Agenda
AGENDA_ 1Q’18 RESULTS HIGHLIGHTS & FY’18 OUTLOOK 1Q’18 RESULTS IN DETAIL APPENDIX 1Q 2018 RESULTS PIRELLI, GLOBAL HIGH VALUE 17 14 May 2018
Slide 19: 1Q 2018 Results Highlights
1Q 2018 RESULTS HIGHLIGHTS_ € million 1Q ’17 1Q ’18 reported reported Δ YoY 1Q Highlights Revenues 1,339.3 1,310.3 -2.2% Organic Growth1 +5.7% Solid organic growth on the back of: High Value Revenues 775.4 833.9 +7.5% ▬ Sound High Value volumes (+12.8% in 1Q’18, Organic Growth1 +13.4% +17.1% in Q’17
Slide 20: 1Q Pirelli Balance Sheet
1Q PIRELLI BALANCE SHEET_ € million 31/03/2017 31/12/2017 31/03/2018 Fixed assets related to continuing operations 9,214 9,121 8,958 Inventories 925 941 940 Trade receivables 1,045 653 876 Trade payables (1,062) (1,674) (1,062) Operating net working capital related to continuing operations 908 (80)
Slide 21: Pirelli Group Cash Flow
FY PIRELLI GROUP CASH FLOW_ € million 1Q‘17 1Q‘18 EBIT adjusted1 205 218 Depreciation & Amortization (excl. PPA amortization) 65 70 Capital expenditures (98) (85) Change in working capital / other (892) (929) Operating Cash Flow (720) (726) Financial income / (expenses) (77) (55) Taxes paid (46) (31
Slide 22: 2018E Raw Material Guidance
2018E RAW MATERIAL GUIDANCE_ € million 14% Natural Rubber 10% Steel Reinf. 17% Textiles breakdown Q1 2018 A 26% Synthetic Rubber raw mat. based on 34% on Sales purch. costs 23% Chemicals 10% Carbon Black AVERAGE QUOTATION OF COMMODITIES AVERAGE COST OF GOODS SOLD OF COMMODITIES 2018E 2017 A 2018 E ∆
Slide 23: 2018E Forex Guidance
2018E FOREX GUIDANCE_ € million 14% other 6% GBP 36% EUR 3% RUB breakdown FY 2017 A 13% BRL based on currency 11% CNY 17% USD ∆ YoY 2018E MAIN AVERAGE EXCHANGE RATES 2017 A 2018 E ∆ YoY March guidance vs EUR Feb guidance EUR / USD / 1.130 1.215 -7% -7% ~1,17 USD / CNY / 6.752 6.340 +6% -1% ~6.85 USD
Slide 24: Key Car Market Trends: Europe
KEY CAR MARKET TRENDS: EUROPE_ Market trend FY’16 1Q’17 2Q’17 3Q’17 4Q’17 FY'17 1Q’18 ∆% YoY 3 4 5 O.E. 1 1 Total Car market (1) (6) 4 7 3 2 Replacement (3) 0 (5) 4 6 4 1 Total (O.E.+Repl.) 0 (4) (4) ≥18” 14 12 New Premium & Standard 10 10 10 8 ≤17" 1 1 4 2 O.E. (2) (2) (5) 19 (9) 16 13 12 11 4 6 2
Slide 25: Key Car Market Trends: NAFTA
KEY CAR MARKET TRENDS: NAFTA_ Market trend FY’16 1Q’17 2Q’17 3Q’17 4Q’17 FY'17 1Q’18 ∆% YoY O.E. 2 2 Total Car market (3) (6) (4) (3) (10) 2 2 1 Replacement (2) (2) 0 (2) 2 2 Total (O.E.+Repl.) (2) (4) (1) (1) (2) ≥18” New Premium & Standard ≤17" 4 0 4 3 O.E. 0 (1) 0 (1) (5) (8) (7) (7) (12) (9) 14
Slide 26: Key Car Market Trends: APAC
KEY CAR MARKET TRENDS: APAC_ Market trend FY’16 1Q’17 2Q’17 3Q’17 4Q’17 FY'17 1Q’18 ∆% YoY O.E. 7 5 5 1 2 Total Car market (1) (2) 5 7 4 6 3 5 Replacement 2 6 6 3 6 1 4 Total (O.E.+Repl.) 0 ≥18” 27 26 New Premium & Standard 22 22 19 ≤17" 13 O.E. 5 9 2 2 (3) (3) (1) (5) 11 13 14 15 13 14 11 Replaceme
Slide 27: Key Market Trends: Russia & CIS and South America
KEY MARKET TRENDS: RUSSIA & CIS AND SOUTH AMERICA_ Market trend FY’16 1Q’17 2Q’17 3Q’17 4Q’17 FY'17 1Q’18 ∆% YoY 24 23 24 22 20 18 O.E. Russia & CIS (11) 25 21 20 17 9 0 2 Replacement 21 24 21 17 11 5 Total (O.E.+Repl.) (2) 27 20 17 16 20 12 O.E. South America (11) 15 13 10 8 7 2 Replacement1 0 16 1
Slide 28: Raw Material Costs Trend and Mix
RAW MATERIAL COSTS TREND AND MIX_ MAIN RAW MATERIALS PRICE TREND Natural Rubber: Sicom Brent Oil (in $ / barrel) Natural Rubber (in $ / kg) Yearly Average Brent: www.oilnergy.com $ / kg $ / barrel 5.75 150 5.25 130 4.75 4.25 110 3.75 3.25 90 2.75 70 2.25 54.8 1.75 53.6 45.0 1.65 50 1.38 1.25 1.37 0.
Slide 29: Pirelli Manufacturing Footprint as of March 31st 2018
PIRELLI MANUFACTURING FOOTPRINT AS OF MARCH 31ST 2018 U.K. Germany Romania Russia ▬ Burton – Car ▬ Breuberg – ▬ Slatina – Car ▬ Kirov – Car U.S. ▬ Carlisle – Car Car / Moto ▬ Voronezh – Low-cost countries Car ▬ Rome – Car Mexico ▬ Silao – Car Italy ▬ Bollate – Car China ▬ Settimo – Car Venezuela1 ▬
Slide 30: Pirelli, Global High Value - 1Q 2018 Results
1Q 2018 RESULTS PIRELLI, GLOBAL HIGH VALUE 14 May 2018