Pirelli & C. S.p.a. · MIL:PIRC
Pirelli & C — Pirelli & C Spa Azioni — 1H 2023 Earnings Presentation
34 slides from Pirelli & C's earnings presentation, Jul 27, 2023
Slide 1: 1H 2023 Financial Results
1H 2023 Financial Results July 27th, 2023 1H 2023 Financial Results
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 1H’23 KEY MESSAGES 2 PIRELLI & C. – 1H’23 RESULTS 3 FY’23 OUTLOOK AND TARGETS 4 APPENDIX 2 1H 2023 Financial Results
Slide 4: Key Messages
Key Messages › Solid 1H’23 results in a still challenging environment • Outperformance in ≥18’’ Repl. despite a softer than expected market demand • Price/mix and efficiency covering 1.3x Raw Mat, FX & Inflation headwinds • Sound cash flow trend in line with business seasonality; efficient stock man
Slide 5: 1H'23 Results highlights
1H’23 Results highlights Strong operating performance confirming the resilience of our business model € million Net Sales Adjusted EBIT1 7.5% +7.4% 3,197 3,438 482 517 STD H.V. 72% 74% 1H’22 1H’23 1H’22 1H’23 margin 15.1% 15.1% Net Income Net Financial Position 1H net cash flow bef. dividends: -€535
Slide 6: Pirelli Sustainability achievements in 1H'23: for People, Planet and Mobility
Pirelli Sustainability achievements in 1H’23: for People, Planet and Mobility Area KPIs 2022A 2025T 1H’23 PROGRESS • Accident frequency index reduction and gender balance in SAFETY FIRST Accident Towards zero accidents 0.20 ≤ 0.10 management positions among Short Term Incentives’ KPIs frequency inde
Slide 7: Agenda
Agenda 1 1H’23 KEY MESSAGES 2 PIRELLI & C. – 1H’23 RESULTS 3 FY’23 OUTLOOK AND TARGETS 4 APPENDIX 6 1H 2023 Financial Results
Slide 8: 2Q/1H'23 Car volumes – Pirelli vs. Market
2Q/1H’23 Car volumes – Pirelli vs. Market Trend improving vs. 1Q but below expectations (destocking in EU & NA. , slow China recovery) Pirelli outperformance confirmed in ≥18’’ driven by North America and APac Market TOTAL ≥18” ≤17” Pirelli 1Q 2Q 1H 1Q 2Q 1H 1Q 2Q 1H 20 6.5% 6.5% 5.7% 4.9% 4.8% TOTA
Slide 9: 2023 Strategy implementation: 1H 2023 delivery in line with targets
2023 Strategy implementation: 1H 2023 delivery in line with targets Commercial Innovation • Widening our OE portfolio: ✓ • +5.7% vs. market +4.8% • Outperforming in Car ≥18”: ✓ • ~150 new car homologations (86% ≥19’’, ~50% EV) • EV portfolio reaching ~400 homologations worldwide • strong focus on ≥1
Slide 10: 1H'23 Commercial program delivery
1H’23 Commercial program delivery Higher weight of ≥18” on Car Volumes, with increasing incidence of Elect and sales in US and APac 1H’23 A Volume variance (Car) Key Programs Highlights Volume trend Market 1H ’22 A 42% 58% H.V. Repl. Confirmed weight of H.V. Regions (>90%) PULL H.V. Repl. ≥18” YoY i
Slide 11: Innovation program delivery - New P Zero generation
Innovation program delivery - New P Zero™ generation Meeting High-End Consumers demand for Safety, Performance and Sustainability › Designed for High-End Electrified Vehicles › The choice of Prestige Car Manufacturers › Derived from Pirelli’s Motorsport experience › Unmatched Eco-Safety Performances
Slide 12: Eco-Safety champion for High-End EV, designed for sustainable mobility
Eco-Safety champion for High-End EV, designed for sustainable mobility MATERIALS • > 55% Bio-based and Recycled materials1 • -12kg of fossil and mineral based materials2 First UHP product with GHG EMISSIONS sustainability features CO2 eq. improved by 24%3 verified by third party DURABILITY Wear rate
Slide 13: Wave Competitiveness programs: 1H results
Wave 3 Competitiveness programs: 1H results Achievements in line with expectations and the seasonality of programs’ delivery 2022 2023 E FY ACT Focusing on: FY GUI 1H ACT › Modularity Equally split ~50% Product Cost › Design speed and virtualization in 1H/2H of FY › Industrial IoT and flexible f
Slide 14: Operations: Pirelli to acquire 100% of Hevea-Tec
Operations: Pirelli to acquire 100% of Hevea-Tec • Founded in 1999, Hevea-Tec is the largest independent natural rubber processor in Brazil Jaci, São Paulo • Enterprise Value: ~€21m • Deal expected to close by the end of 2023, after the approval from Antitrust authorities Potential Benefits SUSTAINA
Slide 15: 1H/2Q'23 Sales bridge
1H/2Q’23 Sales bridge Growth driven by solid price/mix improvement despite soft market demand and weak FX € million -2.1% +12.5% +10.4% -2.9% +7.5% 3,197 3,438 400 (94) (66) STD 3,531 H.V. 72% 74% 1H’22 Δ Volumes Δ Price/mix Organic Growth Δ Forex 1H’23 2Q’23 -1.1% +10.2% +9.1% -5.4% +3.7% 1Q’23 -3.
Slide 16: 1H'23 adjusted EBIT bridge
1H’23 adjusted EBIT bridge Profitability supported by price/mix and efficiency covering 1.3x Raw Mat, FX & Inflation headwinds € million Net impact +94 Net impact +195 Net impact -101 (99) 345 (51) 30 (131) 517 482 1H (16) (14) (29) R&D / mktg. Exp. -8 Stock & Others -5 margin 15.1% 15.1% 1H’22 Volu
Slide 17: 1H'23 Net Income bridge
1H’23 Net Income bridge Earnings driven by improving operating performance € million 233 (1) 4 (17) 243 36 (12) Net Income Δ adj. EBIT Δ non rec. / Δ Net income / Δ Financial income Δ Taxes Net Income 1H’22 restr. costs loss from equity / expenses 1H’23 participations % of sales 7.3% 7.1% 1H 2022 1H
Slide 18: 1H'23 Net Financial Position
1H’23 Net Financial Position Net Cash Flow bef. div. 1H’23 at -535M vs -464M in 1H’22 - stable yoy excluding LTI impact (-468M) € million Net Cash Flow (bef. dividends): -535 M Operating Cash Flow: -302 M 3,087 61 65 107 2,553 876 Incl. ~€67 mln of 3 • Non-rec / restr. 23 (739) years Long Term • FX,
Slide 19: Total Gross Debt structure as of June 30th 2023
Total Gross Debt structure as of June 30th 2023 Liquidity margin fully covering debt maturities up to 2025ye. ESG-financing weight on gross debt at ~58% € million Net Financial Position Gross Debt maturity 4,798 (1,711) Liquidity position 1,554 Loan 1,356 (1,477) Bond 2,794 (234) 3,087 IFRS 16 1,399
Slide 20: Agenda
Agenda 1 1H’23 KEY MESSAGES 2 PIRELLI & C. – 1H’23 RESULTS 3 FY’23 OUTLOOK AND TARGETS 4 APPENDIX 19 1H 2023 Financial Results
Slide 21: 2023 Global Car Tyre Market Outlook
2023 Global Car Tyre Market Outlook A more cautious view due to softer trend in China and EU and weaker South American market High Value resilience confirmed Car tyre market (million pcs) 1,430 ~ flat ~ -2% ≥18" ~+5% (vs. ~+7% old) O.E. 302 ~+5% ~+3% REPL ~+2% (vs. ~+3% old) ≤17" 1,128 +7pp ~-2% ~-3
Slide 22: FY 2023 targets: Stronger Price/mix driving to Ebit margin upgrade
FY 2023 targets: Stronger Price/mix driving to Ebit margin upgrade Adjusted Ebit and Cash generation confirmed despite a more cautious view on demand and forex € billion 2022 A 2023 E • Vol.: ~-2% ÷ -1% (old: flat / ~+1%) TARGET @11 May ’23 TARGET @27 July ’23 • Price/mix: ~+7% ÷ ~+8% (old: ~+4.5% ÷
Slide 23: Agenda
Agenda 1 1H’23 KEY MESSAGES 2 PIRELLI & C. – 1H’23 RESULTS 3 FY’23 OUTLOOK AND TARGETS 4 APPENDIX 22 1H 2023 Financial Results
Slide 24: 2023 Forex guidance
2023 Forex guidance 25% other 32% EUR Revenues Breakdown FY 2022 A based on 8% BRL currency 11% CNY 24% USD 2022 A 2023 E ∆ YoY 2023 E ∆ YoY Main avg. exchange rates (Jul guid) (vs. EUR) (Feb guid) (vs. EUR) EUR / USD / 1.05 1.10 ~-4% 1.08 ~-2% EUR / CNY / 7.08 7.63 ~-7% 7.50 ~-6% EUR / BRL / 5.45 5
Slide 25: A globally acknowledged sustainability leadership
A globally acknowledged sustainability leadership Major ratings Last update Score Positioning in the reference sector 2022 86 Top score ATX Auto Components 2023 TOP 1% ESG Max Score 2022 A Max Score SUPPLIER 2022 ENGAGEMENT Max Score LEADER 2023 4.5 / 5 Top score Auto parts 2023 11.2 Top ESG Rated 2
Slide 26: Key Car Market Trends: Europe
Key Car Market Trends: Europe Market trend (∆% YoY) 1Q’22 2Q’22 3Q’22 4Q‘22 FY22 1Q’23 2Q’23 Total 27 18 11 13 1 3 O.E. -16 8 5 Replacement 0 -5 -9 -10 -9 3 4 Total (O.E.+Repl.) 0 -1 -5 -6 -5 ≥18” & ≤17” 26 28 24 11 14 10 17 8 1 7 9 O.E. ≤17" -10 -5 ≥18” -20 22 16 11 6 3 7 Replacement -1 -2 -1 -4 -7
Slide 27: Key Car Market Trends: North America
Key Car Market Trends: North America Market trend (∆% YoY) 1Q’22 2Q’22 3Q’22 4Q‘22 FY22 1Q’23 2Q’23 Total 19 12 9 7 8 7 O.E. -1 6 Replacement1 -6 -8 -5 -8 -8 -9 4 Total (O.E.+Repl.) -3 -4 -2 -5 -5 -7 ≥18” & ≤17” 15 19 19 8 8 11 10 11 O.E. 5 7 5 5 2 ≤17" ≥18” -9 15 1 1 2 3 Replacement1 0 0 -8 -4 -8 -
Slide 28: Key Car Market Trends: Asia Pacific
Key Car Market Trends: Asia Pacific Market trend (∆% YoY) 1Q’22 2Q’22 3Q’22 4Q‘22 FY22 1Q’23 2Q’23 Total 26 16 O.E. 0 4 1 -7 -2 12 4 Replacement 0 -6 -7 -14 -13 12 14 0 Total (O.E.+Repl.) -3 -3 -11 -8 ≥18” & ≤17” 24 32 23 O.E. 10 14 5 6 2 4 ≤17" ≥18” -1 -1 -4 -1 -9 12 16 9 6 4 Replacement -5 -1 -7 -
Slide 29: Key Car Market Trends: Russia, MEAI / South America
Key Car Market Trends: Russia, MEAI / South America Market trend (∆% YoY) 1Q’22 2Q’22 3Q’22 4Q‘22 FY22 1Q’23 2Q’23 Russia, MEAI 14 7 O.E. -1 0 0 -4 -14 3 Replacement 0 -4 -3 -8 -10 -8 2 3 Total (O.E.+Repl.) -3 0 -6 -7 -11 South America 30 15 9 O.E. 5 1 -4 -14 Replacement1 1 0 -1 -2 -4 -2 -7 2 4 Tota
Slide 30: Economic results summary
Economic results summary € million 2Q 2023 2Q 2022 ∆ YoY 1H 2023 1H 2022 ∆ YoY Net Sales 1,737.8 1,675.9 +3.7% 3,437.5 3,197.0 +7.5% Organic variation +9.1% +10.4% adjusted EBITDA1 379.4 362.2 +4.7% 739.1 695.3 +6.3% % of net sales 21.8% 21.6% +0.2 p.p. 21.5% 21.7% -0.2 p.p. reported EBITDA 367.9 35
Slide 31: Consolidated Balance Sheet
Consolidated Balance Sheet € million 30/06/2023 31/12/2022 30/06/2022 Fixed assets 8,821.7 8,911.1 9,017.1 Inventories 1,418.7 1,457.7 1,396.8 Trade receivables 895.1 636.5 936,4 Trade payables (1,405.1) (1,973.3) (1,454.2) Operating net working capital 908.7 120.9 879.0 % of net sales1 13.3% 1.8% 1
Slide 32: Net Cash Flow
Net Cash Flow € million 1Q 2023 2Q 2023 1H 2023 1H 2022 Adjusted Operating income (EBIT) 248.1 269.3 517.4 481.6 Amortiz. & depreciations (excl. PPA amortiz.) 111.6 110.1 221.7 213.7 Investments in tangible and intangible assets (Capex) (53.2) (70.3) (123.5) (115.7) Increase in right of use (15.1) (
Slide 33: Raw material costs trend and mix
Raw material costs trend and mix Main raw materials price trend 64.2 ; -10% YoY 43.2 ; -33% YoY 70.8 ; +64% YoY 98.9 ; +40% YoY 1.406 ; +3% YoY 1.317 ; -6% YoY 1.678 ; +27% YoY 1.548 ; -8% YoY $ / kg Brent Oil (in $ / barrel) Natural Rubber (in $ / kg) $ / barrel yearly avg.; Δ YoY 1.95 130 115 1.70
Slide 34: Pirelli manufacturing footprint
Pirelli manufacturing footprint U.K. Germany Romania •› Burton – ›• Breuberg – •› Slatina – Car Semi-finished Car / Moto •› Carlisle – Car U.S. •› Rome – Car Russia •› Kirov – Car •› Voronezh – Car China Mexico •› Yanzhou – Italy Car / Moto •› Silao – Car •› Jiaozuo – Car •› Bollate – •› Shenzhou –
Pirelli & C Spa Azioni — 1H 2023 Earnings Presentation on 6ix