pirelli presentation @ iaa investor analyst · 2017-08-25 · disclaimer iaa investor & analyst...

Pirelli Tyre

Francesco GoriCEO & Managing Director Pirelli Tyre

IAA Investor & Analyst ConferenceFrankfurt – September 16, 2009

Disclaimer

1IAA Investor & Analyst ConferenceFrankfurt – September 16, 2009

The information contained in this presentation is to be regarded as strictly private and confidential and is being provided to yousolely for your information and cannot be distributed to any other person or published, in whole or in part, for any purpose.

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2

Agenda

Pirelli Group overview

Pirelli Tyre

Annex


2009 Outlook

Positioning and strategy

2009 -2011 Targets

Pirelli Group snapshot


Core Business100% Pirelli Tyre

51% Pirelli EcoTechnology

Start-up engines

100% Pirelli Labs

51% Pirelli Ambiente

100% PZero

Business towardsconsolidation

58% Pirelli RE

100% Pirelli BBSolutions

5th global tyre playerleading company for high range products

Pirelli industrial businesses’ engine ofinnovation

a player on renewable energy andsustainable development sector

Pirelli fashion project: developing synergieswith core business while maximising Pirellibrand value

leader in Italy and one of the mainplayers in Europe with 14.7 €/bln ofAUM (as of June ’09)

a BB solutions provider for home andsmall office

the Group company aiming at aleadership position in Emission ControlTechnologies

A green performer multinational company focusing on the automotive sector

leveraging on

Pirelli Group 2009 – 2011

4

Strenghts 5 transformation levels

Capacity of matching innovation,technology and industrialmanagement

Rapid success in green-field start-ups

Global brand

Rooted multinational player alsopresent in emerging market

Financial strength

Portfolio reshaping

Competitiveness

Leadership team

Broad geographical coverage

Open collaboration

We want to use the discontinuity of the external scenario to transform PirelliGroup & seize new opportunities


1H’09A

Group Revenues

EBIT %

After continuous restructuring

CAPEX

2009 2011

2.1 ~4.3(vs. 4.7 in 2008)

4.7–4.8

4.7% 4.5-5.0%(vs. 1%* in 2008)

~ 8%

~0.7 in 3y plan

NFP 1.1 ~0.8**(1.0 in 2008)

<0.8before

dividends

€/bln

* 4,1% before restructuring costs (144 €/mln)

5

Pirelli Group targets

** target revised in July 2009 (previous target: = 1.0 bln €)


of which “Green Performance” 25%(+6pp yoy)

40%

6

Agenda


Pirelli Tyre

Annex


2009 Outlook

2009 -2011 Targets


Pirelli Tyre: the advantage of a fast, focused & flexiblebusiness model updated

Pirelli Strengths & Strategy

A sound positioning 75% to 80% Replacement ~50% Emerging Countries a favourable product/mix

> 70% of production capacity in low costCountries (almost 80% in 2011)First movers in restructuring actionsCost cutting program 09-11: 300 €/mln savings

strong reduction in raw material and FinishedProduct inventoriesInvestments focused on quality mix and

competitiveness improvementTight/safe credit policy

7

Market demand drop / pricediscipline

’09 Industry Issues

Low Production volumes

Cash Management


1H09 Top Line trend: Pirelli vs. main peers

* Simple average: Michelin, Bridgeston excl Diversified Prod.; Goodyear, Continental: Rubber Group excl Conti Tech


Sales

Volumes

Price/mix

-22.2%

-21.2%

+6.0%

Top 4competitors*

-11.6%

-15.7%

+6.4%Price/mix holding well in both

Industrial and CommercialSegments (respectively +7.4%and +5.9% yoy)

Market share increase in allmajor markets

Top line QoQ improvement in astill recessive marketenvironment: +6.7% 2Q revenuesvs. 1Q09

Pirelli performance highlights

1H09 Profitability Trend: Pirelli Tyre vs. main peers

* Simple average: Michelin, Bridgeston excl Diversified Prod.; Goodyear, Continental: Rubber Group excl Conti Tech

Ebit margin 1H08 Ebit margin 1H09


-5.9p.p.

7.5%

1.6%

Top 4competitors*

-1.2 pp

7.6%8.8%

increasing cost efficiencies (45% of 200 €/mln2009 gross savings achieved in 1H09)

1H09 margins in line with 3Y plan targets

Pirelli Tyre profitability trend rebound in 2Q09in both Consumer & Industrial segments

raw materials price reduction (raw materialprice index: -10% QoQ, -16% yoy)

Pirelli performance highlights

10

Pirelli Tyre positioning in the consumer business

PIRELLI STRENGTHSALES BREAKDOWN BY AREA

NorthAmerica

Europe

Prestige

Premium

Synergic

Strong,2-digits

Low,1-digit

Segment Pirelli segmentshare (08)

% of sales volume

100% 100%

PRODUCTION BY AREA

Highcost

Lowcost

% of production volume

100% 100%

Asia – Pac& AfricaLatam

Historical leadership in SouthAmerica

Low exposure to North AmericaSolid foothold in Europe, due to high

OE pull-throughGrowth opportunities in Asia-Pacific

markets with new China source

Leading brand in Prestige nicheDevelopment partner of most

premium car makersLeading supplier to the Automotive

Industry in South AmericaLeader in the Motorcycle business

Only high-end, high added valueproducts in high cost countries

Source: Tire Business Report, Pirelli estimates

# 1

26%

10%

54%

29%

10%

6%

33%

32%

Market in2008

Pirelli in2008

60%39%

Top 4competitors

in 2008

40%61%

Pirelli in2008


Production Footprint is movingforward (~71% in low costcountries by 2011)

11

Performance, Passion, Lifestyle

PRODUCT

Technology & Touring

A CONSUMER ORIENTED BUSINESS

TWO PREMIUM BRANDS

TECHNOLOGY AND INNOVATION

RACING

“We Race What We Sell, We Sell What We Race”World Superbike: exclusivity until 2012Moto Cross: 51 World Championship VictoriesDAKAR ‘09: 1st and 2nd

Passion and Fun, no Cyclic Business Internet: 1.5 million surfers connected Co-marketing (Events, Promotions) OE Partnerships

New product / process Patents First Winter Tyre First 0° Front on Enduro Street Continuous stream of New Products

Motorbike: world leader with Pirelli and Metzeler


€/mln, %

1Q’09

Revenues

margin

EBITDA (beforerestructuring costs)

EBIT (beforerestruct.costs)

Profit & Loss

670.5

77.4

11.5%

41.9

6.2%

-10.4%

-28.8%

-42.6%

Δ%

margin

-3.0 p.p.

-3.5 p.p.

1H ‘09 Δ%

1,372.0

167.8

12.2%

96.5

7.0%

-8.2%

-15.3%

-23.6%

-1.1 p.p.

-1.5 p.p.

2Q ‘09 Δ%

701.5

90.4

12.9%

54.6

7.8%

-6.0%

+1.1%

+1.5%

+0.9 p.p.

+0.6 p.p.

Consumer Business: Pirelli economics in 1H‘09

Price/mix still holding well

Price/Mix

Exch. Rate

Volume

Rev. (before Exch. rateimpact)

Revenues drivers

+6.6%

-14.7%

-2.3%

-8.1%

+5.1%

-9.8%

-1.3%

-4.7%

+5.9%

-12.3%

-1.8%

-6.4%

1Q’09 2Q ‘09 1H ‘09

Pirelli volumes better thanmarket trends in all regionsexcept Russia, where creditrisk remains high

Ebit margin rebound thanksto raw materials pricereduction and costefficiencies


13

Industrial Business: a unique competitive position

SALES BREAKDOWN BY AREA PIRELLI STRENGTH

Area Pirelli rank

Mercosur

Southern EUand Near-East

North Africa

#1

#2

#1

% of salesvolume

PRODUCTION BY AREA% of productionvolume

Source: TyreBusiness Report, Pirelli estimates

~13%

High cost

Low cost

Top 4competitors

in 2008

~87%

100% 100%

China new entry

60%

40%

Pirelli in 2008

Emerging

Mature

100% 100%

Market in2008

~25%

~75%

Sales focus in high growthareas

Leading position in Pirellikey markets

Steelcord technology

Pirelli in2008

Product cost leadershipsupported by a low-cost productionbase (~89% in low cost countriesby 2011)


~40%

~60%

€/mln, Percent

Industrial Business: Pirelli economics in 1H‘09

Price/Mix holding well

Increasing market share inall regions

Double digit marginconfirmed in a difficultmarket scenario thanks tothe exposure to the rapiddeveloping countries

Positive impact from rawmaterials price decrease

14

1Q’09

Revenues

margin

EBITDA (beforerestructuring costs)

EBIT (beforerestruct.costs)

Profit & Loss

256.4

30.4

11.9%

19.1

7.5%

-22.0%

-28.1%

-36.8%

Δ%

margin

-1.0 p.p.

-1.7 p.p.

1H‘09 Δ%

543.9

73.0

13.4%

50.1

9.2%

-19.1%

-17.4%

-22.6%

+0.2 p.p.

-0.4 p.p.

2Q‘09 Δ%

287.5

42.6

14.8%

31.0

10.8%

-16.3%

-7.6%

-10.1%

+1.4 p.p.

+0.8 p.p.

Price/Mix

Exch. Rate

Volume

Rev. (before Exch. rateimpact)

Revenues drivers

+ 7.2 %

- 25.7 %

-3.5%

-18.5%

+6.8%

-20.9%

-2.1%

-14.1%

+7.4%

-23.1%

-3.4%

-15.7%

1Q’09 2Q‘09 1H‘09


Costcompetitiveness

Market

360-Degreeseco-innovation

Bio-materialsGreen factory:

Settimo TorineseProcessesNEXT MIRS & TCMSupply Chain

Industrialrestructuring &

cost-cutting

Enter and establish position inGreen segments with “CinturatoP7” and “Snowcontrol II”

Three drivers for deep, sustainable change


COST REDUCTION PROGRAMS

Labour

Rawmaterials

15% rightsizing in high-costcountries; bonus and pay freeze formanagement and staff in 2009

360° purchasing contractsrenegotiation

Selective adoption of “spotpurchases” to best capture thebenefits of price decrease

Reduction of usage and weight

Crash program for the reduction ofdiscretionary / indirect expenses(except R&D and marketing)

Savings from lower energy costs,lower transportation / logistic rates

45% of 200 €mlnof 2009 grosssavings alreadyachieved in 1H09

Pirelli Tyre 2009 Cost reduction program update

1H’09ACHIEVEMENTS

82% of the target(over 1,200 headcount)

Other Costs

-10% Q0Q RawMaterial Price Index(-16% yoy)

>50% vs. ’09target


17

R&D EXPENSES KEY PROJECTS

Source: Tire Business 31 Aug. 2009

“GREEN” TYRE

Traditional

Green

2008, % of Tyre revenues % of total salesPRODUCT

PROCESS

MATERIALS

Cybertyre

Next MIRS “TCM” low

energy highqualitycompoundmixer

Organic-derived,bio-ingredientssuch as Ricehusk ash

Pirelli Tyre R&D expenses still top of the sector, getting greener andgreener

3.5%

3.2%

3.0%

2.7%

2.9%

2.5%

1.9%

Pirelli

Michelin

Sumitomo

Yokohama

Toyo

Bridgestone

Continental

Goodyear

100% 100%

20%40%

2008 2011

3.2%

2.1%Hankook


Greener and Greener: already in line with the new regulation

THE TECHNOLOGY

THE MARKET SEGMENT Environment-sensitive consumers asking for

low-impact products

THE PRODUCT The Green Performance tyre already

homologated on the new platforms of premiumOEMs

Distinctive features thanks to new bio-materialsLRR improvement at high performance level

Cinturato (P7 launch April’09)

KEY BREAKTHROUGHS OF THE 01 SERIESMileage: 30% higher than previous products

Retreadability: 4 lives

Lower rolling resistance: 3% savings on annualfuel consumption

Lower environmental impact: lower rolling noise;no high aromatic oils

THE PRODUCT A truck product family combining the new

European Tire regulation standards with highcost efficiency

(R:01 launch May’09)


Mileage Fuel Consumption

Mileage Fuel Consumption

Greener and Greener: the Cinturato P7 vs. its peers


19

20

Agenda


Pirelli Tyre

Annex


2009 Outlook

2009 -2011 Targets


Source: LMC, Pirelli estimates

Car tires, Mln pieces, Percent

North AmericaKeep increasing the market share in the

Replacement segment: new products, newcustomers, brand pull

EuropeMore selective and focused on OEMs, while

increasing sales in Replacement with the newCinturato brand and new Winter products

LatAmDefend OE leadership and improve Replacement

market share thanks to better competitiveness vs.low cost imports from Asia

Asia-PacificExploit competitive China source to increase

service and coverage in Asean, Japan, Pacific,Taiwan, Korea

OE

Replacement

Total: -7% -6%

0

200

400

600

800

1000

2008 2009 2010 2011 2012

2009 Replacement: -2%Mature: -3%Emerging: 0% slightly pos.

2009 OE: -18% -16%Mature: -20%Emerging: -15% -10%

Consumer: tough 2009 market outlook with replacementdemand recovery from 2010

OUR GROWTH STRATEGIESMARKET OUTLOOK


(Sept. ’09update)

OUR GROWTH STRATEGIES

Industrial: Market Outlook & Pirelli response

Source: LMC, Global Insight, Pirelli estimates

OE

Mln pieces, Percent, Radial + truck tires

Replacement

Total: -12% -14% EuropeShare growth in premium segments: Highway,

Regional and Megatrailer, Green products

Africa, Near and Middle EastMarket leadership consolidation

LatAmMarket leadership and growth in Mexico

China, Far East and PacificLeverage local sourcing and market share

growth

SteelCordLeverage vertical integration and innovation on

Premium Products0

20

40

60

80

100

120

140

2008 2009 2010 2011 2012

2009 Replacement: -8%Mature: -10%Emerging: -5%

2009 OE: -25% -33%Mature: -35% -50%Emerging: -15%

MARKET OUTLOOK


(Sept. ’09update)

23

Agenda


Pirelli Tyre

Annex


2009 Outlook

2009 -2011 Targets


24

NET INVESTMENTS RENEWALRATIO

NET CASH FLOW BEFOREDIVIDENDS

NET FINANCIAL POSITION BEFOREDIVIDENDS

1.0-1.1

2009 2010-2011 2009 2011

1.4

Capex / Depreciation

2006-2008 2009-2011

Industrial: “lean” business systemConsumer: China, Romania, new

green factory in Italy

EBITDA recoveryStrong reduction in raw material &

finished good inventoryTight / safe credit policy

Including 150 mln €cash-out forrestructuring

-20%

Pirelli Tyre Capex and Cash management plan

€Million

1,016

1,266250

0


25

Top line recovery after a negative growth in 2009

Higher cost efficiencies and lower raw materials prices impacting progressively on P&L, from 2009 onwards

In current scenario, 2009 profitability can be better than 2008

Additional restructuring will support increasing profitability beyond 2011

€Million, Percent

REVENUES EBIT %

Note: at current exchange rates

8.0÷8.5%

6.5 ÷ 7.0%

Pirelli Tyre Targets: back to full steam by 2011

+9÷+10%-6÷-7%3,950

4,162 4,100

2006 2007 2008 2009 2011

8.6%8.7%

6.1%*

*Before restructuring costs


26

Agenda


Pirelli Tyre

Annex


2009 Outlook

2009 -2011 Targets



Pirelli a real sustainable multinational company

Best in class for Economic, Environmental and Social dimension; Pirelli rating:88% (+11pp yoy) vs. Autoparts & Tyre average 48% rating

Worldwide leader in Autoparts and Tyre industry

Excellence Areas: Health & Safety, Brand Management, Innovation Management,Human Capital development, Labour practice indicators, Talent attraction &retention, Environmental Reporting, Climate Strategy, Standards for Suppliers

Included in all major sustainability global indexes:

Best Italian Company for Corporate Governance

27

Car62% Moto 10%

Steelcord& others

2%Truck26%

Sales by segment Sales by region

LatinAmerica

32%

MEA 10% AsiaPacific

6%

Replacement81%

Europe44%

Raw materials mix Sales by channelSynt. Rubber 24% Carbon

black12%

Chemicals17%

Textiles 14%Steelcord 10%

NaturalRubber

23%

OE 19%

NorthAmerica

8%

1H’09 Pirelli Tyre Mix


28

Headcount by clusterBlue Collar workers

81%

Management1%

Staff18%

Headcount by region

Headcount by contract

Europe39%

North America1%

LatinAmerica

42%Asia

Pacific7%

Permanent92%

Temps &Agency

8%

MEA11%

Headcount

Dec ‘08 Jun ‘09

28.601

1H’09 Pirelli Tyre People

27.241


29

U.K. Germany

Turkey

Romania

China

EgyptArgentinaBrazil

Venezuela

U.S.A.

Spain

Feira de SantanaSanto André

GravatalSumaré

BrazilCampinas Car

Car/TruckTruck/Agro

Motorcycle/TruckSteelcord

Guacara Car

Rome (GA) Car

Manresa Car

Burton-on-trent CarCarlisle Car

Carlisle Car

ItalyBollate (Mi) CarSettimo Torinese CarSettimo Torinese TruckFigline Valdarno Steelcord

Breuberg Car/MotorcycleMerzig Steelcord

Izmit SteelcordIzmit Car/Truck

Slatina SteelcordSlatina Car

Yanzhou Car/Truck

Alexandria TruckMerlo Car

Pirelli Tyre


30

Recent Pirelli Tyre Highlights:

April 6, 2009

May 21, 2009

May 20, 2009

Pirelli Tyre introduces Cinturato P7, the first green-performance tyre for medium and high-powered cars

Pirelli wins the 2009 Tyre of the Year Award of the English magazine Auto Express.Pzero beats three other competitor brands in several areas, including braking andhandling in wet and dry, aquaplaning, rolling resistance and price

Pirelli Tyre introduces the R:01 Series. The new regional tyre for medium heavy trucksoffers higher mileage, reduced consumption, better retreading potential

July 2, 2009 Pirelli celebrates its 80th anniversary of its industrial and commercial presence in Brazilwhile announcing that will invest another 200 million Dollar in Brazil between 2009 and2011

June 9, 2009 Pirelli Tyre wins the “2009 National Award for Innovation” promoted by Confindustria.Chairman Marco Tronchetti Provera receives the award from the President of Italy,Giorgio Napolitano

May 22, 2009 Gettyre.it has gone live, making it the first site dedicated to shopping for motorcycle tyresand related services

May 2009 Pirelli tyre keeps winning both in Superbike and world and national Rallys


31


2009 sales reduction driven by lower OEM demand

Channel mix (Replacement vs. OE) improving margins in all markets, supported by new productfamily (CINTURATO)

Strong cost reduction supporting EBIT improvement from 2009

€Million, Percent

REVENUES EBIT %

8.0÷8.5%

6.5 ÷ 7.0%

8.8%

5.0%*

8.8%

2006 2007 2008 2009 2011

Targets for the consumer business

+9÷+10%-4÷-6%2,735

2,861 2,801

2006 2007 2008 2009 2011



32

€Million, Percent

7.0 ÷ 7.5%

8.0 ÷ 8.5%

REVENUES EBIT %


Historical profitability level restored after expected slowdown in 2009

Unmatchable cost-competitive structure Best cost / benefit ratio for fleet users

Favourable product / mix balance on a geographical basis

2009 results affected by production slowdown needed to adjust inventories

+9÷+10%-8÷-10%

Targets for the industrial business

8.4% 8.6%*

8.1%

2006 2007 2008 2009 2011

1,214

1,300 1,299

2006 2007 2008 2009 2011



33

pirelli presentation @ iaa investor analyst · 2017-08-25 · disclaimer iaa investor & analyst...

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