Piaggio & C : Earnings Document

Piaggio Group

First Half of 2023 Financial Results

CORPORATE PARTICIPANTS

ROBERTO COLANINNO - CHAIRMAN AND CHIEF EXECUTIVE OFFICER
ALESSANDRA SIMONOTTO- CHIEF FINANCIAL OFFICER
RAFFAELE LUPOTTO - EXECUTIVE VICE PRESIDENT, HEAD OF INVESTOR RELATIONS
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Operator
Good morning. This is the Chorus Call Conference Operator. Welcome, and thank you for joining the Piaggio
Group First Half 2023 Financial Results Conference Call. As a reminder, all participants are in listen-only mode.
After the presentation, there will be an opportunity to ask questions.
At this time, I would like to turn the conference over to Mr. Raffaele Lupotto, Executive Vice President and
Head of Investor Relations. Please go ahead, sir.
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MANAGEMENT DISCUSSION	1

Raffaele Lupotto - Executive Vice President, Head of Investor Relations

Thank you very much. Hello, everybody. And welcome to our first half of the 2023 earnings call. Joining me today are Roberto Colaninno, Chairman and Chief Executive Officer; and Alessandra Simonotto, Chief Financial Officer.

You can access the slides supporting today's call on the internet at the Piaggio Group website. As you may expect, before starting the presentation, I need to remind you that during today's conference call, we will use forward-looking statements based on Piaggio's current expectations and projections about future events. By their nature, forward-looking statements are subject to risks, uncertainties, and other factors that could cause actual results to be materially different. Also, I remind you that the press has been invited to participate in this conference call in a listening-only mode.

And with that, we can now turn the call over to Roberto Colaninno.

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Roberto Colaninno - Chairman and Chief Executive Officer

Okay. Good morning to everybody. I've just finished the Board of Directors, where I described the results of Piaggio first six months of '23. Just to be synthetic, Piaggio was able to achieve record results in every sector. That means sales, gross margin, EBITDA, EBIT, net profit and debt. We have never been able, since I'm involved with Piaggio, to achieve such results. Why are we able to achieve these results? Well, the organization of Piaggio around the world has achieved the possibility to be a big player in all markets. But

-Piaggio Group: First Half of 2023 Financial Results conference call -

what is more important is that we are able to be in line with different requests of these markets. And Piaggio was able to be a big player in all markets as EMEA, Italy, United States and India, where the market is beginning to react in a positive way, especially on three-wheelers and especially on the request on electric three-wheelers. Regarding Vietnam, Indonesia, generally speaking the Southeast of Asia, we see that Piaggio was able to maintain and to increase the results, financial results of '23 on '22 and was able to absorb some negative impact of some markets without increasing in a substantial way the prices.

In other terms, the results of Piaggio over the first six months are achieved mainly for the productivity activity where we are able to gain some important point that impact positively on all the results of the company. And this is done without increasing price in each country, or without increasing the price in a substantial way. This gives us the possibility to look for the next six months with a possibility to achieve the results as we have in our plan and we believe in a positive way the results to the end of the year.

This result is because we were able finally to introduce the productivity management system in each area, production, engineering and sales. To be able to increase productivity is not so easy for Italian companies, because productivity means to be able to adapt the company to the customer requirements and customer care. So for instance, we have achieved very good results on spare parts. We are very satisfied in the transformation of the company to become an important actor on the electric market. We were able also, with the investments in new products, to maintain and we will maintain on the last six months of the year the ability, let's say, to satisfy the customer requirements, especially in the motorcycle and especially in the bigger scooter size products.

I want to remark that regarding the motorcycle, Guzzi is coming with a very unexpected results in terms of quantity and in terms of sales in the first six months. And as we have decided, we proceed in the new restructuring of the company, of the factory, let's say, beginning by the end of the year to follow the trademark Guzzi as the market requirements.

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Generally speaking, the results will be achieved based on the validity of the trademark of Piaggio that is leader in all the markets. Aprilia, Vespa, Moto Guzzi, Piaggio, and let's say not only the two-wheeler but also the three-wheeler and now in Italy and in Europe, we are working to be ready to develop an electric version of four-wheeler commercial vehicle.

We are working hard with our supplier and our partner to be able to achieve the results on this market that we consider very important. But I want to underline that the ability of the company to reduce the cost of production and to control all the general expenses give the results that we are showing today. We expect not to be finished on the second six months to increase the cash control, especially to reduce the stock and specially to reduce the credit exposition and to maintain the leadership in Europe, Italy, Spain, United States and to follow again what is the India three-wheeler trend.

We consider the results of Asia very satisfying in the terms of the results because it's much better than last year, let's say, in terms of EBIT and on top of everything, the EBITDA.

EBITDA at the group, we expect it to be able to go in the same way of the first six months and to maintain the same level of EBITDA on the year of '23. So, in our vision, despite all the problems around the world, Piaggio today is in a position from a strategic point of view to be able to control all the situation that can be a situation can cause problem on a different market.

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We don't expect that, that to have a problem on the quality of the products. We don't expect to have a delay on the new products launches planned before the end of the year and we expect to be able to get the opportunity emerging in Indian market where we were able to wait and to trust in the potential of the market because the terms that we have is a positive evolution on the famous three-wheeler, let's say, traditional and electrical. With the cash flow and with the investments, we have the possibility to control this and we expect that the debt is going down as it's down until today on the same way.

So generally speaking, we see positively the results of Piaggio today, that aren't fortuitous, but are results based on the general organization of the group, the capability of the group to control productivity, to control production, to control the fixed costs that are generally expensive. And to follow what the market in terms of sales required to us. So we don't expect to increase price for the next six months in a substantial way. We expect to reconfirm the positive trend of productivity. We confirm to be able to do better on the cash point of view and to be able to reduce the financial cost due to interest increase on all over the market.

So more than this, I don't know what to say more than this. I hope, but now we are sure, to achieve all the target that we have explained, that we have described in our strategic plan. That means again margin, that is EBITDA, that is EBIT, to reduce financial cost and to increase cash flow.

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Raffaele Lupotto - Executive Vice President, Head of Investor Relations

Okay, thank you very much. So, we are ready now to answer the questions that you may have. Thank you.

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QUESTION AND ANSWER SECTION

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Monica Bosio - Banca Intesa San Paolo

Yes. Good afternoon and thanks for taking my questions. So I have three. The first is on the second part of the year and on the current consensus. In the first half, the group delivered an improvement in the EBITDA in comparison with the first half of 2022 of roughly EUR39 million. The consensus is expecting for year-end an improvement in the EBITDA in comparison with the full year 2022 of EUR31 million. So, I'm just wondering, how do you feel? Do you feel confident with the consensus or maybe even better? Nothing seems to deteriorate over the second part of the year. There is room to do something better than what the market is expecting.

My second question is on your expectations for the European two-wheeler market in July, and what do you see for the APAC market in the second part of the year?

The third question is on the new products. Thanks for introductory words. Are you planning to launch some electric two-wheels for Europe by the end of the year? Thank you very much.

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Roberto Colaninno - Chairman and Chief Executive Officer

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You have a very long list of questions. I hope to be able to satisfy you and reply correctly to your questions. Starting with the last of your demands it is very easy to respond. We believe to launch before the end of the year the new motorcycle version of 400 cc made in India with the name of Aprilia. And this, I would say that, first prototype is already done and satisfied very much all us about the design, about the results and about the cost of this product.

Why India? Because this type of product is new for us, so the size of 400 is a product that is required by all world market and naturally quality and price is the two win-win condition and I believe that India is able to satisfy these two conditions. Then we begin to work, as I said, on the new electric porter that should be ready next year, around the middle of next year. And I want to underline to you how we have changed the mentality of Piaggio Italy that was, as you know, a thermic company producing diesel and gasoline engine to a company that produces electric vehicles and we started with the four-wheeler, with the new commercial vehicle, where today we are very successful, with the thermic engine, and we believe that this electric version will be very welcome from the market.

In terms of scooters, I think that we are working now very hard to reinforce the mark -- the trademark of our products around the world. So with a very specific strategy in communication, where we have a new one idea and despite the traditional advertising, the newspaper and the magazine, we have an idea in terms of how to develop the requirements of the people with our products. In other terms, Vespa will be our product where we work in order that the market can appreciate more and more the design, the technical performance and all the style that this type of product is confirmed to be a leader in the market, not only in Italy and Europe, but also in India and China and in the United States.

The demand regarding how we see these results of the six months. Our idea is that the EBITDA will remain between 15%, 16%. This is based specifically with the new productivity system that gave in Italy, in the company in Italy and in the other company around the world a very unexpected result in positive terms.

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So productivity, new advertisement, new products and to be more close to the quality, to the customer and to be able to satisfy the quality care system to be able to be in a better condition than our competition and to keep the price as it is, without increase and in the meantime to have the advantage on the point that we gain on the productivity level.

I believe I forgot to respond to other questions.

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Raffaele Lupotto - Executive Vice President, Head of Investor Relations

Maybe, because Monica, you are very good in asking four, five, six questions in two questions. One was the demand in Europe in July, if I'm not mistaken, right?

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Monica Bosio - Banca Intesa San Paolo

Yes

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Raffaele Lupotto - Executive Vice President, Head of Investor Relations

-Piaggio Group: First Half of 2023 Financial Results conference call -

Okay. According to our data, demand growth accelerated in July in terms of demand, trending up overall, I would say, high-single digit. Notably, as of yesterday, Italy was growing 18%. At the end of last week, Spain plus 17%, Germany plus 11%, France plus 2%. These are the data that we have now. Clearly, very precise concerning Italy. And with that, I think that we answered to all your questions.

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Monica Bosio - Banca Intesa San Paolo

Maybe on the second part in APAC, because APAC is being penalized by Vietnam. So what do you expect for the second part of the year?

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Roberto Colaninno - Chairman and Chief Executive Officer

As you know, it depends how you look the results of Vietnam. Financial results of Vietnam, the first six months of the year are just fantastic and have been achieved even if the market is not so brilliant, let'-s say as last year on the second part of the semester. But this, I think, is normal because if you are present worldwide, it is difficult to say that all markets move on the same way on the same time. In Europe we have a war. In Vietnam, we have a problem in China, but for instance in a country like Thailand, the situation is much better.

In Indonesia, where we have just opened a factory, the result is much better than what it was Indonesia before we started with a new plant. And you see Vietnam is just in the middle of Thailand and Indonesia. So why Vietnam this year, the market of Vietnam is not so brilliant. I say that we are looking at that and we want

to revamp this situation to our customers. But we never forget that the result of EBITDA, EBIT of Vietnam. So 5 the terms and conditions of different markets when you are working internationally and when you are working more close to be a multinational than just a national company, that exports in the other countries, you have to be able to move on in order to solve the problem, in order to guarantee the results and to improve the financial results. And what is naturally at the end of the story, when I look at the net profit, when the EBITDA EBIT, when the margin, industrial margin is better than last year, much better than last year, okay,

we will move on in order to be able to bring more customers from our competitor to us, moving on with the new products, with the new color, with the new proposal to the market. It's a normal dynamic that is all in the country. If you look at the banks, they have completely different dynamics, even working in the same market. Everybody moves on in different way.

Now we are not afraid of our situation in Vietnam. It's normal. India for instance, nobody believed that India started again with positive demand of the three-wheelers and with the electric three-wheeler market. And in the last three months of the year, India is moving well in this type of market. If this trend is confirmed India demand should reach the same numbers of pre- COVID. India is a huge market. In the meantime, we are not able to keep the risk direct to Africa. This is not because the Africa isn't important. It's that we don't want to have risk and export where customer could not be satisfied with our product and so on.

So I hope to be able to give you a feeling that Piaggio today is not a national company. It's an international group, active in the different markets with products, with the capability to produce, to sale, and to have that capability to understand the markets, how they are moving, and which are the problems that we need to solve.

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