Pirelli & C. S.p.a. · MIL:PIRC
Pirelli & C — H1 2018 Earnings Presentation
30 slides from Pirelli & C's earnings presentation, Aug 7, 2018
Slide 1: Pirelli, Global High Value - 1H 2018 Results
1H 2018 RESULTS PIRELLI, GLOBAL HIGH VALUE 7 August 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_ > 1H’18 RESULTS: PIRELLI’S HIGH VALUE BUSINESS MODEL PROVES VERY RESILIENT IN VOLATILE ENVIRONMENT ▬ High Value Market (HVM) growing faster than expected ▬ Pirelli gaining Market Share in HVM, thanks to very effective homologation pull-through ▬ Pirelli best-in-class in Price/Mix impro
Slide 4: Agenda
AGENDA_ 1H’18 RESULTS HIGHLIGHTS & FY’18 OUTLOOK 1H’18 RESULTS IN DETAIL APPENDIX 1H 2018 RESULTS PIRELLI, GLOBAL HIGH VALUE 3 7 August 2018
Slide 5: 1H 2018 Results Highlights
1H 2018 RESULTS HIGHLIGHTS_ € million REVENUES EBIT ADJ.1 w/o start-up costs2 ∆ YoY -2.0% organic +6.8% 2,685 2,630 443 473 +5.5% Standard -4.5% High Value 58.2% +7.8% 64.0% +12.7% 1H 2017 1H 2018 1H 2017 1H 2018 Margin 16.5% 18.0% NET INCOME before discontinued operations NET FINANCIAL POSITION 2.7
Slide 6: 1H 2018 Performance by High Value Regions
1H 2018 PERFORMANCE BY HIGH VALUE REGIONS_ € million SALES Δ org. EBIT KEY HIGHLIGHTS 1H’17 1H’18 YoY % growth adj. margin1 1,130 1,155 +2.3% +4.1% ▬ Strengthening of High Value -9.4% with a strong growth in O.E. driven by a wide HIGH VALUE REGIONS homologation portfolio SALES EUROPE +11.2% Mid-teen
Slide 7: 1H 2018 Performance by Standard Regions
1H 2018 PERFORMANCE BY STANDARD REGIONS_ € million SALES Δ org. EBIT KEY HIGHLIGHTS 1H’17 1H’18 YoY % growth adj. margin1 456 ▬ Proactive reduction of 355 -22.2% -2.2% exposure to lower rim sizes ▬ Negative impact of May truck STANDARD REGIONS -4.2% Mid-single drivers strike in Brazil SALES LATAM di
Slide 8: Our Pillars Strategy Is in Progress
OUR 3 PILLARS STRATEGY IS IN PROGRESS_ 1H 2018 achievements I ▬ More than 200 High Value homologations, enriching our portfolio that now accounts 2,350 homologations, o/w 88% High Value ▬ +1.5 million High Value capacity (Europe, NAFTA and LatAm) reaching 58% of total capacity PILLAR 1: HIGH VALUE ▬
Slide 9: Our Competitive Edge Boosted by an Enhanced Homologation Portfolio
OUR COMPETITIVE EDGE BOOSTED BY AN ENHANCED HOMOLOGATION PORTFOLIO_ PIRELLI YEARLY HOMOLOGATIONS MARKED TYRES HOMOLOGATIONS New Premium Products Standard Products Pirelli tot marked portfolio Germany product list vs. Peers +25% ~2.5x ~2.5x 1,665 2,077 >1,000 402 >400 1H17A 1H18A TIER 11 avg 327 315
Slide 10: ≥18” Outgrowing the Standard Segment 10x
≥18” OUTGROWING THE STANDARD SEGMENT 10x O.E. + REPLACEMENT ≥18” TYRE MARKET million tyres EUROPE ~10x ≤17” growth (almost flat) ~5x ≤17” growth (+1.9%) ▬ Almost double-digit growth, driven by ≥+10% Replacement; high–teen growth confirmed in +10% 241 the O.E. channel 217 196 Other NAFTA regions ▬ Hi
Slide 11: FY 2018 Outlook Update
FY 2018 OUTLOOK UPDATE_ 2017A 2018E (7 Aug. 2018) € million ▬ Volumes: flat (vs. +2% ÷ +2.5 May guid.) ▬ High Value Volumes: ≥+13% (confirmed) Revenues 5,352 ~€ 5.4 bln ▬ Standard volumes: ~-9% (-6% ÷ -5% May guid.) ▬ Price/Mix: +6.5% ÷ +7.5% (confirmed) High Value weight 58% >60% (from ≥60%) ▬ FX:
Slide 12: Agenda
AGENDA_ 1H’18 RESULTS HIGHLIGHTS & FY’18 OUTLOOK 1H’18 RESULTS IN DETAIL APPENDIX 1H 2018 RESULTS PIRELLI, GLOBAL HIGH VALUE 11 7 August 2018
Slide 13: 1H 2018 Net Sales Bridge
1H 2018 NET SALES BRIDGE_ o/w organic € million +5.5% ▬ High Value +13.1% (o/w Car ≥18”+18.3%) +6.7% ▬ Standard -11.3% 179 (186) -2.0% 2,685 (32) 2,630 (16) -1.2 % -6.9% -0.6% Net Sales Volume Price/Mix FX IFRS 15 impact1 Net Sales 1H’17 1H’18 ▬ o/w Car ≥18”+18.0% o/w organic Group -0.9% 2nd Quarter
Slide 14: 1H / 2Q 2018 Operating Performance
1H / 2Q 2018 OPERATING PERFORMANCE_ € million internal levers ∑ +86 external levers ∑ -52 19.0 3.6 (37.3) (11.5) (23.3) 450.1 112.8 (16.9) EBIT adj. 416.2 1H (12.5) 17.1% margin 15.5% 2017 Volume Price/mix Efficiencies Start-up D&A / Other2 Raw Mat. Other FX 2018 EBIT adj. costs1 input costs 443.0 4
Slide 15: 1H 2018 Net Income Bridge
1H 2018 NET INCOME BRIDGE_ € million (62.0) 108.4 181.9 8.4 59.5 67.6 Net Income Δ EBIT Δ Net income / Δ Financial Δ Taxes Net Income bef. disc. oper. loss from equity income / charges bef. disc. oper. 1H’17 participations 1H’18 % on Sales 2.5% 6.9% 1H’17 1H’18 Net Income related to cont. oper. 68 1
Slide 16: 1H 2018 Cash Flow and Net Financial Position
1H 2018 CASH FLOW AND NET FINANCIAL POSITION_ € million 63 55 (155) 3,939 3,917 31 (137) 63 16 36 ▬ Non rec. / restr. 38 ▬ Minorities 19 726 ▬ EBITDA adjusted1 (300) ▬ Non rec. / restr. 12 ▬ FX / other 6 ▬ CapEx 94 ▬ FX / other 4 ▬ ∆ WC / other 69 3,219 ▬ EBITDA adjusted1 (288) ▬ CapEx 85 ▬ ∆ WC / o
Slide 17: Current Capital Structure (June 2018)
CURRENT CAPITAL STRUCTURE (JUNE 2018)_ € million NET FINANCIAL POSITION GROSS DEBT MATURITY Cash & Cash equivalents 4,695 (778) 1,813 (590) 3,917 (188) 1,382 Loan 3,171 Bond Fin. receivables & other 1,792 601 1,179 594 Other 792 302 592 732 200 102 200 3 3 21 2 Gross Fin. Net Fin. 2018 2019 2020 202
Slide 18: Agenda
AGENDA_ 1H’18 RESULTS HIGHLIGHTS & FY’18 OUTLOOK 1H’18 RESULTS IN DETAIL APPENDIX 1H 2018 RESULTS PIRELLI, GLOBAL HIGH VALUE 17 7 August 2018
Slide 19: 1H / 2Q 2018 Results Highlights
1H / 2Q 2018 RESULTS HIGHLIGHTS_ € million 2Q’17 2Q’18 Δ YoY 1H’17 1H’18 Δ YoY 2Q Highlights Revenues 1,346.0 1,320.0 -1.9% 2,685.3 2,630.3 -2.0% Sound organic growth on the back of: Organic Growth1 +5.3% +5.5% ▬ Strong High Value volumes (+13.4%), with market share increase in Car ≥18”, and High Va
Slide 20: 1H Pirelli Balance Sheet
1H PIRELLI BALANCE SHEET_ € million 30/06/20171 31/12/2017 30/06/2018 Fixed assets related to continuing operations 9,132 9,121 8,881 Inventories 937 941 983 Trade receivables 968 653 864 Trade payables (1,140) (1,674) (1,052) Operating net working capital related to continuing operations 766 (80) 7
Slide 21: 1H Pirelli Group Cash Flow
1H PIRELLI GROUP CASH FLOW_ € million 1H’17 1Q‘18 2Q‘18 1H‘18 (carve-out) EBIT adjusted1 416 218 232 450 Depreciation & Amortization (excl. PPA amortization) 130 70 68 138 Capital expenditures (216) (85) (94) (179) Change in working capital / other (768) (929) (69) (998) Operating Cash Flow (438) (7
Slide 22: 2018E Raw Material Guidance
2018E RAW MATERIAL GUIDANCE_ € million 14% Natural Rubber 10% Steel Reinf. 16% Textiles breakdown 1H 2018 A 27% 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 38% EUR 3% RUB breakdown 1H 2018 A 10% BRL based on currency 12% CNY 17% USD ∆ YoY MAIN AVERAGE EXCHANGE RATES 2017 A 2018 E ∆ YoY 2018E Aug. guidance vs. EUR May guidance EUR / USD / 1.130 1.188 -5% -5% 1,215 USD / CNY / 6.752 6.494 +4% -1% 6,34 USD
Slide 24: Key Car Market Trends: Europe
KEY CAR MARKET TRENDS: EUROPE_ Market trend 2Q’17 3Q’17 4Q’17 FY’17 1Q’18 2Q'18 1H’18 ∆% YoY 5 5 O.E. 1 1 2 Total Car market (1) (6) 6 3 2 Replacement 0 (3) 0 (5) 4 6 Total (O.E.+Repl.) 1 1 0 (4) (4) ≥18” 14 12 New Premium & Standard 10 10 8 10 ≤17" 4 3 O.E. 2 (2) (2) (1) (5) (9) 20 12 13 11 10 2 2
Slide 25: Key Car Market Trends: NAFTA
KEY CAR MARKET TRENDS: NAFTA_ Market trend 2Q’17 3Q’17 4Q’17 FY’17 1Q’18 2Q'18 1H’18 ∆% YoY O.E. Total Car market (3) (4) (3) (2) (3) (6) (10) 1 3 0 Replacement (2) (2) 0 (2) Total (O.E.+Repl.) 2 (2) (1) (1) (2) 0 (4) ≥18” New Premium & Standard ≤17" 4 6 5 O.E. (1) 0 (1) (5) (8) (7) (7) (8) (12) (9)
Slide 26: Key Car Market Trends: APAC
KEY CAR MARKET TRENDS: APAC_ Market trend 2Q’17 3Q’17 4Q’17 FY’17 1Q’18 2Q'18 1H’18 ∆% YoY O.E. 5 5 1 2 2 Total Car market (1) (2) 5 6 3 5 2 Replacement 1 2 3 6 1 4 3 2 Total (O.E.+Repl.) 0 ≥18” New Premium & Standard 23 23 20 ≤17" 14 15 14 O.E. 10 2 3 (3) (3) (1) (5) (1) 14 15 13 14 12 13 13 Replac
Slide 27: Key Market Trends: Russia & CIS and South America
KEY MARKET TRENDS: RUSSIA & CIS AND SOUTH AMERICA_ Market trend 2Q’17 3Q’17 4Q’17 FY’17 1Q’18 2Q'18 1H’18 ∆% YoY 23 24 22 22 18 16 10 O.E. Russia & CIS 25 20 17 14 15 15 2 Replacement 24 21 17 15 14 15 5 Total (O.E.+Repl.) 27 17 16 20 11 8 9 O.E. South America 8 13 10 7 2 Replacement1 (7) (3) 15 12
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 5.50 140 5.00 120 4.50 4.00 100 3.50 3.00 80 2.50 53.6 54.8 60 2.00 45.0 1.50 1.65 1.37 40 1.38 1.00 0.
Slide 29: Pirelli Manufacturing Footprint as of June 30th 2018
PIRELLI MANUFACTURING FOOTPRINT AS OF JUNE 30TH 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 ▬ Y
Slide 30: Pirelli, Global High Value - 1H 2018 Results
1H 2018 RESULTS PIRELLI, GLOBAL HIGH VALUE 7 August 2018