2009-2011 Industrial Plan: Strategic Guidelines and Targets.
Pirelli Group has and will continue to develop measures to increase its competitiveness and enhance its efficiency.
More on: http://industrial-plan.pirelli.com/idayPost/jsp/downloadArea.jsp
Reorganization, Business rationalization as well as the development of "green" technologies and products will be the levers supporting Pirelli in this process.
1. MOVING TOWARDS “GREEN PERFORMANCE”
Marco Tronchetti Provera
Chairman and CEO Pirelli Group
2. Disclaimer
This presentation contains statements that constitute forward-looking statements and does not constitute an offer or
solicitation for the sale, purchase or acquisition of securities of any of the companies mentioned and is directed to
professionals of the financial community.
These statements appear in a number of places in this presentation and include statements regarding the intent,
belief or current expectations of the customer base, estimates regarding future growth in the different business lines
and the global business, market share, financial results and other aspects of the activities and situation relating to the
Company.
Such forward looking statements are not guarantees of future performance and involve risks and uncertainties, and
actual results may differ materially from those in the forward looking statements as a result of various factors.
Consequently it is recommended that they be viewed as indicative only.
Analysts are cautioned not to place undue reliance on those forward looking statements, which speak only as of the
date of this presentation.
Pirelli & C. SpA undertakes no obligation to release publicly the results of any revisions to these forward looking
statements which may be made to reflect events and circumstances after the date of this presentation, including,
without limitation, changes in Pirelli & C. SpA business or acquisition strategy or to reflect the occurrence of
unanticipated events.
Statement
The Manager mandated to draft corporate accounting documents of Pirelli & C. SpA, Claudio De Conto, attests – as per
art.154-bis, comma 2 of the Testo Unico della Finanza (D.Lgs. 58/1998) – that all the accounting information contained in
this presentation correspond to the documented results, books and accounting of the Company.
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3. In the next three years
we are going to use the
discontinuity
of the external scenario to
transform
Pirelli Group
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4. Agenda
Global economic scenario
Pirelli Group transformation
Pirelli Group targets
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5. Not all fundamentals are negative
Less investments Low inflation
Less employment Low interest rates
Less consumption Low cost of raw materials
WORLD GDP INTEREST RATES INFLATION
Eurozone USA
Source: Global insight, Monthly Update, Jan. ‘09
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6. A global industrial company can better capture opportunities
RUSSIA GDP
EUROZONE GDP
USA GDP
CHINA GDP
BRASIL GDP
08 09 10 11
Source: Global insight, Monthly Forecast Update, Jan. ‘09
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7. Governmental institutions are massively financing publicly-
funded recovery plans, towards a Green Economy
Consumer Subsidies
US EUROPE
>700 USD/bn financial system Government support to Car
bail-out to keep credit alive purchases in Italy (~2 €/bn)
17 USD/bn package to rescue ~ 6 €/bn support of public loans
Detroit – big 3 to french carmakers
Strong claims by new US “20/20/20” Energy Plan
Administration:
1 million electric cars on
the road by 2015
goal to double production
of clean energy to >10% by
2012
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9. Agenda
Global economic scenario
Pirelli Group transformation
Pirelli Group targets
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10. Pirelli strengths
Examples
Capacity of matching innovation,
technology and industrial
management
Quick success in green-field start-ups
Among the best 10 Global Italian
brands*
Global brand
Estimated brand value* 1.5€/bn (the
highest in the industry)
Rooted multinational player, also Sales in 160 countries, operations
present in emerging markets in 12
1 €/bn NFP ‘08YE
Financial strength 0.8 €/bn committed credit lines,
* “Best Global Brands 2008" by Interbrand ranking not drawn
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11. 5 transformation levers
Competitiveness
Broad geographical coverage
Open collaboration
Leadership team
Portfolio reshaping
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12. All our companies are currently undergoing competitiveness
programs
>140 €/mln Group restructuring costs,
Adjust to global recession
already generating benefits from 2009
Develop distinctive customer “Green Performance” Tyres at LOWER COST
value propositions Green auto-parts (emission reduction
systems) at LOWER COST
Real Estate: -25% ’09 YoY fixed costs
Leaner business models Tyre Break Even Point: -200 €/mln vs.
’08YE*
* At sales level
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13. Broad Geographical Coverage
Group Revenues
Contribution Revenues
‘08 CAGR ’09-‘11
EUROPE 51% stable
MIDDLE EAST 10% stable
ASIA PACIFIC 4% +9.9%
Of which China 2% +22%
NORTH AMERICA 6% +6.3%
LATIN AMERICA 29% +2%
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14. Open collaboration
Examples
Integrated customer Pirelli-Brembo-Magneti Marelli in
Intelligent Tyre Systems
solutions
Co-development with STM, Comau,
Sinteco, Evotek and many other industrial
players
Accelerated innovation Joint Research programs with ENEA,
all leading Italian, European, Russian,
Chinese, US universities (e.g.
Berkeley)
Key innovation areas: biomaterials,
nanocomposites, new fibers, FEA
Creating scale in assets
JV Ambiente / Cleantech fund
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15. Leadership team
GROUP TYRE 09-11 KEY PROJECTS
Dynamic leadership 43 46 √
(avg. age of manager)
Our managers international exposure 50% 50% √
(with significant experience abroad)
Young talent pool >250; >220;
√
(high-potential under 30) 3% of total 4% of total
International career path 3% p.y. 4% p.y. √
of management/staff (in Pirelli)
Leading edge technical capability >1,100 >1,000 √
(R&D people)
>140 √
New reward scheme for 3YP
managers
Leadership team >200
√
(managers involved to beat crisis) managers
Equal opportunities >20% √
(% women managers)
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16. Portfolio reshaping
% Company ’09-’11 Transformation Path
100 Pirelli Tyre Core Business
51 Pirelli Eco technology
100 Pirelli Labs
INDUSTRIAL
51 Pirelli Ambiente Start-up engines
- Photovoltaic Energy
- CDR (Waste-to-Energy) Towards
100 Pirelli Broadband Solutions consolidation play
56 Pirelli Real Estate
1.3 Telecom Italia
34.5 CY Optics Cash
5 Alcatel Submarine
FINANCIAL
~2 CAI
32.7 Eurostazioni Hold Shares
1.8 Mediobanca
5.3 RCS
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17. Tyre strategic guidelines
a success story…
342 358
329
276
250 (*)
219
Superior technology, universally acknowledged
Fast, Focused, Flexible business model (1,500 headcounts reduction in West Europe
already identified in 2H 08)
Dynamic and skilled Management Team
* before restructuring costs
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18. Tyre strategic guidelines
INDUSTRIAL CONSUMER
a success story, a strong rebound story,
keeping best value breaking new frontiers in “Green
in high-growth markets products”
Exploiting a unique cost-competitive Preferred partner of premium and
platform prestige OE brands
Leveraging a favorable balance in Redesign of the industrial footprint to
markets/mix in emerging countries increase competitiveness
Leader in market share & performance Establishing itself into the Green
(mileage, retreading, weight) in our core Performance segment
markets
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19. Eco technology strategic guidelines
Ready-to-use retrofit technology for
What: Particulate Matter reduction with large IP
(Industrial Property) portfolio
Pirelli “common vision” on Green
Transportation (beyond Tyres)
High intrinsic profitability (CM>30%) in a
Why: new fast-growing market
Strong synergies:
worldwide sales and customer support
network of Pirelli tyre
brand identity
In 3-5yrs, a leader in emission control
Where to: technology in Europe / low emission
zones, also for major Vehicles-OEMs
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20. Labs & Ambiente strategic guidelines
LABS AMBIENTE
Continuous search for distinctive Portfolio reshaping:
innovation technologies Opportunity on PV* Energy
(technology-driven business)
First-step incubator for all Group Site Remediation: tactical upside
businesses CDR (Waste-to-Energy): STOP
LOSS
Strong research capabilities make
Pirelli a leader in innovative product & PV* business with very good
process patents perspectives:
3.000 patents (~60 family patents in Solid partnership / lower risk
2008) Subsidies ensure long-term
Patents plan 2009-2011 is 2x the profitability
average of the last 10 years Strong pipeline / generation
contracts (~50 MW)
Photovoltaic
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21. Broadband Solutions strategic guidelines
CURRENT POSITION THE WAY FORWARD
Solid Proprietary Technology in Open to aggregations /
a growing market (Broadband partnerships to address
Communication / Access / diversification into new
Networking) applications & industry domains
High loyalty of existing customers,
track record in acquiring new
customers
Profitable operations, start-up
phase concluded
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22. Real Estate repositioning
A TOUGH SCENARIO PIRELLI RE’S REPOSITIONING
FROM… … TO
Ongoing impact of the “credit
crunch” and capital market liquidity
Extensive use of Deleverage through
crisis structured finance asset disposal and
portfolio optimization
A difficult deal-making
Portfolios oriented towards Portfolios progressively
environment:
Decline in RE investments and trading strategies oriented to mid-long
transactions Complex business model
Higher average times for disposals
term
Rightsizing
Investors interests back to Organization by product Country-based
resilient markets and only on with Pan-European organization with
reliable players approach presence in areas less
exposed to real estate
volatility (Italy and Germany)
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23. Real Estate roadmap towards an optimized portfolio and structure
PERSONNEL EVOLUTION (FTE) AUM EVOLUTION (€/bn)***
~ stable
14.4 **
2,956 11.3 **
Disposals 1,168
NPL 248 1,473
237
800*
RE 1,540 1,236
800
2007 2008A 2009E 2007A 2008A 2009E 2010E 2011E
Extensive cost-cutting Ongoing portfolio rationalization
Focus on key services and activities Selective growth
Focus on core products / markets:
Productivity and result traceability Italy, Germany/Poland
* Including 230 of outsourcing ** Excluding Non Performing loans ***Book value
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24. A sounder equity structure
400 €/mln capital increase
Rationale
P&C does believe in Pirelli RE asset quality
P&C provides a solid basis to allow Pirelli RE to change its model from trade to hold
Conditions
Issue price with reference to theoretical ex-rights price (“TERP”) of Pirelli RE ordinary shares with a
discount in line with international best practices for similar transactions
P&C underwrites its pro-quota and will underwrite any shares which,
at the end of the offer procedure, are not underwritten.
P&C converts part of its financial credit into Pirelli RE equity.
The transaction may be completed within 1H09
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25. Real Estate strategic guidelines
BACK TO BRICKS
Reshaping the business model: Generating value leveraging
Core Italian and German on the good quality of
Real Estate assets the real estate assets
Lean organizational structure & on the company know how
Sound financial structure
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26. Agenda
Global economic scenario
Pirelli Group transformation
Pirelli Group targets
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27. Group targets
€/bln
2008ye 2009 2011
unaudited figures
Group Revenues 4.6 ~4.3 4.7–4.8
Of Which “Green Performance” 19% 25% 40%
EBIT %
After continuous restructuring 1%* 4.5-5.0% ~ 8%
CAPEX 0.3 ~0.7 in 3y plan
NFP <0.8
1.0 1.0
before
dividends
* 4,1% before restructuring costs (144 € /mln)
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