Frankfurt September 16, 2009 IAA Investor & Analyst Conference Pirelli Tyre Francesco Gori CEO & Managing Director Pirelli Tyre

Transcription

1 Pirelli Tyre Francesco Gori CEO & Managing Director Pirelli Tyre

2 Disclaimer The information contained in this presentation is to be regarded as strictly private and confidential and is being provided to you solely for your information and cannot be distributed to any other person or published, in whole or in part, for any purpose. This presentation has been prepared by Pirelli & C. Real Estate S.p.A. (the "Company ). The information contained in this presentation does not purport to be comprehensive. Neither the Company nor any of its respective directors, officers, employees, advisers or agents or any other person accepts any responsibility for/or makes any representation or warranty, express or implied, as to the truth, fullness, accuracy or completeness of the information in this presentation (or whether any information has been omitted from the presentation) or any other information relating to the Company, whether written, oral or in a visual or electronic form, transmitted or made available. Therefore, the Company expressly disclaims any liability based on, or relating to, the recipient's use of this presentation. The information and opinions contained in this presentation are provided as at the date of the presentation and are subject to change without notice. The information in this presentation includes forward-looking statements which are based on current expectations and projections about future events. These forward-looking statements are subject to risks, uncertainties and assumptions about the Company its subsidiaries and the relevant markets. In light of these risks, uncertainties and assumptions, the events in the forward-looking statements may not occur. This presentation is not intended for potential investors and does not constitute or form part of any offer to sell or issue or invitation to purchase or subscribe for, or any solicitation of any offer to purchase or subscribe for, any securities of the Company, nor shall it or any part of it nor the fact of its distribution form the basis of, or be relied on in connection with, any contract or investment decision. Neither this presentation nor any part or copy of it may be taken or transmitted into the United States (US) or distributed, directly or indirectly, in the US. This presentation does not constitute an offer of securities to the public in the United Kingdom. Persons into whose possession the contents of this presentation comes should observe all restrictions. By attending the presentation you agree to be bound by the foregoing terms. 1

3 Agenda Pirelli Group overview Pirelli Tyre Positioning and strategy 2009 Outlook Targets Annex 2

4 Pirelli Group snapshot Core Business Start-up engines Business towards consolidation 100% Pirelli Tyre 51% Pirelli Eco Technology 100% PZero 51% Pirelli Ambiente 100% Pirelli Labs 58% Pirelli RE 100% Pirelli BB Solutions 5 th global tyre player leading company for high range products the Group company aiming at a leadership position in Emission Control Technologies Pirelli fashion project: developing synergies with core business while maximising Pirelli brand value a player on renewable energy and sustainable development sector Pirelli industrial businesses engine of innovation leader in Italy and one of the main players in Europe with 14.7 /bln of AUM (as of June 09) a BB solutions provider for home and small office A green performer multinational company focusing on the automotive sector 3

5 Pirelli Group We want to use the discontinuity of the external scenario to transform Pirelli Group & seize new opportunities leveraging on Strenghts Capacity of matching innovation, technology and industrial management Rapid success in green-field start-ups Global brand Rooted multinational player also present in emerging market Financial strength 5 transformation levels Portfolio reshaping Competitiveness Leadership team Broad geographical coverage Open collaboration 4

6 Pirelli Group targets /bln 1H 09A Group Revenues 2.1 ~4.3 (vs. 4.7 in 2008) of which Green Performance 25% (+6pp yoy) % EBIT % After continuous restructuring 4.7% % (vs. 1%* in 2008) ~ 8% CAPEX ~0.7 in 3y plan NFP 1.1 ~0.8** (1.0 in 2008) * 4,1% before restructuring costs (144 /mln) ** target revised in July 2009 (previous target: = 1.0 bln ) <0.8 before dividends 5

7 Agenda Pirelli Group overview Pirelli Tyre Positioning and strategy 2009 Outlook Targets Annex 6

8 Pirelli Tyre: the advantage of a fast, focused & flexible business model updated 09 Industry Issues Market demand drop / price discipline Pirelli Strengths & Strategy A sound positioning 75% to 80% Replacement ~50% Emerging Countries a favourable product/mix Low Production volumes > 70% of production capacity in low cost Countries (almost 80% in 2011) First movers in restructuring actions Cost cutting program 09-11: 300 /mln savings Cash Management strong reduction in raw material and Finished Product inventories Investments focused on quality mix and competitiveness improvement Tight/safe credit policy 7

9 1H09 Top Line trend: Pirelli vs. main peers Top 4 competitors* Pirelli performance highlights Volumes -15.7% Market share increase in all major markets -22.2% Price/mix +6.4% +6.0% Price/mix holding well in both Industrial and Commercial Segments (respectively +7.4% and +5.9% yoy) Sales -11.6% -21.2% Top line QoQ improvement in a still recessive market environment: +6.7% 2Q revenues vs. 1Q09 * Simple average: Michelin, Bridgeston excl Diversified Prod.; Goodyear, Continental: Rubber Group excl Conti Tech 8

10 1H09 Profitability Trend: Pirelli Tyre vs. main peers Pirelli performance highlights -1.2 pp Top 4 competitors* Pirelli Tyre profitability trend rebound in 2Q09 in both Consumer & Industrial segments 8.8% 7.6% 7.5% -5.9p.p. raw materials price reduction (raw material price index: -10% QoQ, -16% yoy) increasing cost efficiencies (45% of 200 /mln 2009 gross savings achieved in 1H09) 1.6% 1H09 margins in line with 3Y plan targets Ebit margin 1H08 Ebit margin 1H09 * Simple average: Michelin, Bridgeston excl Diversified Prod.; Goodyear, Continental: Rubber Group excl Conti Tech 9

11 Pirelli Tyre positioning in the consumer business SALES BREAKDOWN BY AREA % of sales volume North America 100% 100% 10% 29% 54% Segment Prestige PIRELLI STRENGTH Pirelli segment share (08) # 1 PRODUCTION BY AREA % of production volume High cost 100% 100% 60% 39% Europe Asia Pac & Africa Latam 32% 33% 6% Market in % 26% Pirelli in 2008 Premium Synergic Strong, 2-digits Low, 1-digit Low cost 40% Top 4 competitors in % Pirelli in 2008 Historical leadership in South America Low exposure to North America Solid foothold in Europe, due to high OE pull-through Growth opportunities in Asia-Pacific markets with new China source Source: Tire Business Report, Pirelli estimates Leading brand in Prestige niche Development partner of most premium car makers Leading supplier to the Automotive Industry in South America Leader in the Motorcycle business Only high-end, high added value products in high cost countries Production Footprint is moving forward (~71% in low cost countries by 2011) 10

12 Motorbike: world leader with Pirelli and Metzeler PRODUCT RACING TWO PREMIUM BRANDS Performance, Passion, Lifestyle Technology & Touring A CONSUMER ORIENTED BUSINESS Passion and Fun, no Cyclic Business Internet: 1.5 million surfers connected Co-marketing (Events, Promotions) OE Partnerships TECHNOLOGY AND INNOVATION New product / process Patents First Winter Tyre First 0 Front on Enduro Street Continuous stream of New Products 11 We Race What We Sell, We Sell What We Race World Superbike: exclusivity until 2012 Moto Cross: 51 World Championship Victories DAKAR 09: 1st and 2nd

13 Consumer Business: Pirelli economics in 1H 09 /mln, % Profit & Loss Revenues EBITDA (before restructuring costs) margin EBIT (before restruct.costs) margin 1Q 09 Δ% 2Q 09 Δ% 1H 09 Δ% % % 1, % Price/mix still holding well % % -3.0 p.p. 12.9% % 6.2% -3.5 p.p. Revenues drivers 1Q % % +0.9 p.p. 12.2% -1.1 p.p % % 7.8% +0.6 p.p. 7.0% -1.5 p.p. 2Q 09 1H 09 Price/Mix +6.6% +5.1% +5.9% Volume -14.7% -9.8% -12.3% Rev. (before Exch. rate -8.1% -4.7% -6.4% Exch. Rate -1.3% -1.8% impact) -2.3% 12 Pirelli volumes better than market trends in all regions except Russia, where credit risk remains high Ebit margin rebound thanks to raw materials price reduction and cost efficiencies

14 Industrial Business: a unique competitive position SALES BREAKDOWN BY AREA PIRELLI STRENGTH % of sales volume % of production volume 100% Mature PRODUCTION BY AREA 100% Area ~25% Mercosur Pirelli rank 100% #1 40% ~40% High cost Southern EU and Near-East #2 North Africa #1 ~87% ~75% Emerging 60% China Market in 2008 Sales focus in high 100% ~13% ~60% new entry Pirelli in 2008 Top 4 competitors in 2008 growth Leading position in Pirelli areas key markets Steelcord technology Source: TyreBusiness Report, Pirelli estimates Low cost 13 Pirelli in 2008 Product cost leadership supported by a low-cost production base (~89% in low cost countries by 2011)

15 Industrial Business: Pirelli economics in 1H 09 /mln, Percent Profit & Loss 1Q 09 Δ% 2Q 09 Δ% 1H 09 Δ% Price/Mix holding well Revenues EBITDA (before restructuring costs) margin EBIT (before restruct.costs) margin % % % % % % 11.9% -1.0 p.p. 14.8% +1.4 p.p. 13.4% +0.2 p.p % % % 7.5% -1.7 p.p. 10.8% +0.8 p.p. 9.2% -0.4 p.p. Revenues drivers 1Q 09 2Q 09 1H 09 Price/Mix % +6.8% +7.4% Volume % -20.9% -23.1% Rev. (before Exch. rate -18.5% -14.1% -15.7% -2.1% -3.4% impact) Exch. Rate -3.5% 14 Increasing market share in all regions Double digit margin confirmed in a difficult market scenario thanks to the exposure to the rapid developing countries Positive impact from raw materials price decrease

16 Three drivers for deep, sustainable change Cost competitiveness 360-Degrees eco-innovation Bio-materials Green factory: Settimo Torinese Processes NEXT MIRS & TCM Supply Chain Industrial restructuring & cost-cutting Enter and establish position in Green segments with Cinturato P7 and Snowcontrol II Market 15

17 Pirelli Tyre 2009 Cost reduction program update COST REDUCTION PROGRAMS Labour 15% rightsizing in high-cost countries; bonus and pay freeze for management and staff in 2009 Raw materials 360 purchasing contracts renegotiation Selective adoption of spot purchases to best capture the benefits of price decrease Reduction of usage and weight Other Costs Crash program for the reduction of discretionary / indirect expenses (except R&D and marketing) Savings from lower energy costs, lower transportation / logistic rates 16 1H 09 ACHIEVEMENTS 82% of the target (over 1,200 headcount) -10% Q0Q Raw Material Price Index (-16% yoy) >50% vs. 09 target 45% of 200 mln of 2009 gross savings already achieved in 1H09

18 Pirelli Tyre R&D expenses still top of the sector, getting greener and greener R&D EXPENSES KEY PROJECTS 2008, % of Tyre revenues PRODUCT Pirelli GREEN TYRE % of total sales Green Cybertyre 3.5% 100% Michelin Traditional 100% 3.2% PROCESS Sumitomo 3.2% Yokohama 3.0% Bridgestone 2.9% Toyo Continental Hankook Goodyear 2.7% 2.5% 2.1% 1.9% 20% MATERIALS 2008 Organic-derived, bio-ingredients such as Rice husk ash Source: Tire Business 31 Aug Next MIRS TCM low energy high quality compound mixer 17 40% 2011

19 Greener and Greener: already in line with the new regulation Cinturato (P7 launch April 09) THE PRODUCT THE MARKET SEGMENT Environment-sensitive consumers asking for low-impact products THE TECHNOLOGY Distinctive features thanks to new bio-materials LRR improvement at high performance level THE PRODUCT The Green Performance tyre already homologated on the new platforms of premium OEMs (R:01 launch May 09) 18 A truck product family combining the new European Tire regulation standards with high cost efficiency KEY BREAKTHROUGHS OF THE 01 SERIES Mileage: 30% higher than previous products Retreadability: 4 lives Lower rolling resistance: 3% savings on annual fuel consumption Lower environmental impact: lower rolling noise; no high aromatic oils

20 Greener and Greener: the Cinturato P7 vs. its peers Mileage Mileage 19 Fuel Consumption Fuel Consumption

21 Agenda Pirelli Group overview Pirelli Tyre Positioning and strategy 2009 Outlook Targets Annex 20

22 Consumer: tough 2009 market outlook with replacement demand recovery from 2010 MARKET OUTLOOK Car tires, Mln pieces, Percent (Sept. 09 update) OUR GROWTH STRATEGIES North America Total: -7% -6% 1000 Replacement Keep increasing the market share in the Replacement segment: new products, new customers, brand pull Europe Replacement: Mature: Emerging: -2% -3% 0% slightly pos OE: Mature: Emerging: % -16% -20% -15% -10% OE More selective and focused on OEMs, while increasing sales in Replacement with the new Cinturato brand and new Winter products LatAm Defend OE leadership and improve Replacement market share thanks to better competitiveness vs. low cost imports from Asia 200 Asia-Pacific Source: LMC, Pirelli estimates Exploit competitive China source to increase service and coverage in Asean, Japan, Pacific, Taiwan, Korea

23 Industrial: Market Outlook & Pirelli response MARKET OUTLOOK (Sept. 09 update) OUR GROWTH STRATEGIES Mln pieces, Percent, Radial + truck tires Europe Total: -12% -14% 140 Replacement Share growth in premium segments: Highway, Regional and Megatrailer, Green products 120 Africa, Near and Middle East Replacement: Mature: Emerging: 80 Market leadership consolidation -8% -10% -5% LatAm Market leadership and growth in Mexico OE: Mature: Emerging: 40-25% -33% -35% -50% -15% OE 20 China, Far East and Pacific Leverage local sourcing and market share growth SteelCord Source: LMC, Global Insight, Pirelli estimates Leverage vertical integration and innovation on Premium Products

24 Agenda Pirelli Group overview Pirelli Tyre Positioning and strategy 2009 Outlook Targets Annex 23

25 Pirelli Tyre Capex and Cash management plan Million NET INVESTMENTS RENEWAL RATIO NET CASH FLOW BEFORE DIVIDENDS NET FINANCIAL POSITION BEFORE DIVIDENDS Capex / Depreciation -20% ,266 1, Industrial: lean business system Consumer: China, Romania, new green factory in Italy EBITDA recovery Strong reduction in raw material & finished good inventory Tight / safe credit policy Including 150 mln cash-out for restructuring

26 Pirelli Tyre Targets: back to full steam by 2011 Million, Percent REVENUES EBIT % 8.7% 4, % -6-7% % 4,100 3, % %* % 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 Note: at current exchange rates *Before restructuring costs 25

27 Agenda Pirelli Group overview Pirelli Tyre Positioning and strategy 2009 Outlook Targets Annex 26

28 Pirelli a real sustainable multinational company Worldwide leader in Autoparts and Tyre industry Best in class for Economic, Environmental and Social dimension; Pirelli rating: 88% (+11pp yoy) vs. Autoparts & Tyre average 48% rating 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

29 1H 09 Pirelli Tyre Mix Sales by segment Car 62% Sales by region Moto 10% Steelcord & others 2% Truck 26% Raw materials mix Natural Rubber 23% Synt. Rubber 24% Europe 44% Latin America 32% MEA 10% North America 8% Sales by channel Carbon black 12% Replacement 81% Chemicals 17% Steelcord 10% Textiles 14% 28 Asia Pacific 6% OE 19%

30 1H 09 Pirelli Tyre People Headcount Dec 08 Jun 09 Headcount by contract Permanent 92% Temps & Agency 8% North America 1% Europe 39% Asia Pacific 7% MEA 11% 29 Latin America 42% Headcount by cluster Blue Collar workers 81% Management 1% Headcount by region Staff 18%

31 Pirelli Tyre Italy U.K. Burton-on-trent Carlisle Car Car Bollate (Mi) Car Carlisle Car Settimo Torinese Car Settimo Torinese Truck Figline Valdarno Steelcord Spain Germany Breuberg Car/Motorcycle Merzig Steelcord Turkey Manresa Izmit Izmit Car U.S.A. Romania Rome (GA) Slatina Slatina Car Venezuela Guacara Car/Truck Steelcord Car Steelcord China Car Yanzhou Car/Truck Brazil Campinas Car Feira Brazil de Santana Car/Truck Santo André Truck/Agro Gravatal Motorcycle/Truck Sumaré Steelcord 30 Egypt Argentina Alexandria Merlo Car Truck

32 Recent Pirelli Tyre Highlights: April 6, 2009 Pirelli Tyre introduces Cinturato P7, the first green-performance tyre for medium and highpowered cars May 20, 2009 Pirelli Tyre introduces the R:01 Series. The new regional tyre for medium heavy trucks offers higher mileage, reduced consumption, better retreading potential May 21, 2009 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 and handling in wet and dry, aquaplaning, rolling resistance and price May 22, 2009 Gettyre.it has gone live, making it the first site dedicated to shopping for motorcycle tyres and related services May 2009 Pirelli tyre keeps winning both in Superbike and world and national Rallys 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 July 2, 2009 Pirelli celebrates its 80th anniversary of its industrial and commercial presence in Brazil while announcing that will invest another 200 million Dollar in Brazil between 2009 and

33 Targets for the consumer business REVENUES EBIT % Million, Percent 8.8% 8.8% % 2,861 2,801 2, % -4-6% % 5.0%* sales reduction driven by lower OEM demand Channel mix (Replacement vs. OE) improving margins in all markets, supported by new product family (CINTURATO) Strong cost reduction supporting EBIT improvement from 2009 Note: at current exchange rates *Before restructuring costs 32

34 Targets for the industrial business Million, Percent REVENUES 1,300 EBIT % 1, %* 8.4% % 8.1% -8-10% 1, 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 Note: at current exchange rates *Before restructuring costs 33 slowdown needed to adjust inventories 2011