Piaggio & C. SpA

Good afternoon. This is the Coruscall conference operator. Welcome and thank you for joining the full year 2023 financial results. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Raffaele Lupotto, Investor Relations of Piaggio. Please go ahead, sir.

Thank you very much. Hello, everyone, and welcome to the full year 2023 financial results. Today's conference call will be hosted by our CEO, Mr. Michele Colannino, and the group here for Alessandra Simonotto. You can access the slides and support in this conference call on the Internet at on the Internet at Piaggio Group website. As you may expect, before starting the presentation, I need to remind you that during today's conference call, we may 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 cause actual results to be materially different. as mentioned in the safe harbor statement, including page three of today's presentation. Also, I remind you that the press has been invited to participate in this conference call in a listen-only mode. With that said, let me turn the call over to our CEO, Mr. Michele Colanino.

Yeah, thank you, Raffaele, and good afternoon to you all listening to the conference call today. Well, first of all, I think that all of you know and are aware of the overall global situation from a geopolitical standpoint, so I'm not focusing on what's happening around the world because it's unpredictable and difficulties are arising over the Red Sea situation due to the Ukraine and Israel-Palestine war. Having said that, given a global view of what happened in the 2023 year, You've seen that Asia has been in a declining market starting April last year, and it's still continuing to decline, especially in China and Vietnam, while it is, I would say, flat in Indonesia, but we achieved the best results ever over there, and slightly declining in Thailand, even though also there we have very positive results And among the other markets over there, we are still seeing, you know, growing business for us, even though we entered Taiwan, Philippines, and all other countries since three or four years or so. We are in a growing situation. Having said that, I think that the China situation that everybody of you knows has been affected by two main factors. issues that are related to the real estate market over there and the stock exchange situation in Shanghai and Shenzhen that has been declining for all the 2023 years that have affected quite all the consumer business over there in the country. And we know that China is, you know, the largest population among the Asia-Pacific area and is, you know, somehow affecting all the surroundings and neighbor countries. We have achieved, I think, very positive results because it's the second best year ever in the Asian market. We are investing and we are not negative, even though the situation will remain unstable for the next two or three months for what is concerned with China and Vietnam. You know that Vietnam has also introduced anti-corruption laws that have created some confusion in the consumer business over there, but I think that this is a situation that will be solved during the 2024 year. India instead has grown in 2023, and it's forecasted to continue that growing pace As the election is coming, Mr. Modi will be, you know, fairly reelected, and the country is investing massively in infrastructure, projecting an 8% GDP growth for 2024 year. As far as Europe and United States are concerned, we have seen a quite flat situation in the will be an interesting year for Europe due to new legislative norms that are coming both for two-wheel vehicles and four-wheel vehicles. Euro 5 Plus is entering for two-wheel market and active and passive safety is entering for the Porter, so the small commercial vehicle that we are reprojecting to respect the law. And as you know, we will also launch the electric version at the beginning of 2025. So the situation that we have seen in the markets for 2023 has been very positive. I would say unbeatable first quarter last year and then declined since April in Asia. That has affected the revenue stream from 23% decline at a constant exchange rate in the overall Asia. But if we consider the last five, six years, we have been constantly growing, achieving, I repeat, the best result ever for the Group. Obviously, we have markets that are going up and markets that are going down. You know, that's life. It happens. And it will be like this for, you know, every country in the world. But the geographical situation of the Piaggio Group has been designed to have, you know, counterbalancing areas. It's declining in Asia, growing in India. So the strategy that we put on the table for the industrial footprint entails is correct. For what is concerned with the cash flow, we have achieved the best ever operative cash flow in 2023, reaching 2,027 millions of euros. Obviously, these have not offset the decline in revenues. That means less in cash, as you obviously know, and that has driven the Piaggio Group to register a minus 4.4% overall the year in revenues. That has also been driven... through a strategic decision we took last year to sustain the margins of our group. We could have done as other competitors have done in the Asian market and European market, so putting in place big discounts on the market. That would have brought the revenues perhaps not to decline, but that would have caused confusion in the market for the pricing point of our brands that we want to maintain at the high premium level and we don't want to enter the discount wars. That is to say that this premiumness of the brands has to be also driven through the dealer's distribution network among the world. Dealer stock is very important. We manage it and we do not want to, you know, increase selling on a stable geopolitical situation of the beginning of this year. Because then it means that if dealers will not achieve the sell-out targets, discounts are coming on the market. And this is, you know, the country that I want to do because we are investing in big marketing and brand equity operations around the world in all the brands that we manage. So Aprilia, Motoguzzi, Vespa. the Piaggio Porter and all the dealers' communication must be in line on the strategy that we have as a free rouge all over the world. The Red Sea situation is under control for the Piaggio Group. We anticipated some purchasing activity in order not to be affected if the Red Sea situation worsened in the coming months. So, it is better to have inventories instead of having increase in price of logistics and delay in time of delivery. This is a strategy that will, you know, it's a full year strategy. I don't want to look at just tomorrow morning, but I have to take count of what happens all over the year. I repeat, we don't have any major impact from the debt situation up to now. If the situation remains stable, I don't foresee any major problem coming. We will enter a 2024 year that is continuously showing high interest rates, and that also is affecting some consumer finance business that we have around the world, because obviously an increase in interest rates has impact on the consumer performance finance programs that we have together with our financial partners. I think, but this is just my view, that the first six months of the year will not show a solution for those problems, so interest rates will remain high and perhaps the leaders of the world will not be able to solve the situation in Ukraine, Palestinians and the Red Sea. We, everybody of us, hope so. But, you know, that's not belongs to our decisions. So, 2024 will be an important year. We launched four new, totally new products at the beginning of the year. We launched the Vespa Dragon in Hong Kong at the beginning of January. We launched the new Stelvio Moto Guzzi 1.100cc. We are launching now the new Aprilia RS457. We are renewing the Vespa brand around the world. So a lot of stuff will come on the market for the PR group in the next months. If you mix this with the new legislations coming, I repeat, we have to manage carefully dealer stock because I want to be sure that our margin can stay at the highest level we reached in 2023, that is 16% EBITDA and 9% EBITDA. best-ever results of the Piaggio Group. And I think margins were, once again, the key pattern to success. I don't follow revenues with discount. I follow 16% of EVDA. And, obviously, cash flow must remain strong. If we are able to, you know... follow that strategy, I think that at least 2024 will be like 2023. We're working for this. It's not given, obviously, because we will see what happens geopolitically, and we obviously forecast a recover of the Asian market somewhere in the year. We've been in Vietnam last week with the regional managers, to have a real touch of what's happening. I have to say that we are well positioned as brands in the premium market. I'm very confident about Indonesia, where especially Jakarta and the Bali Isle are the major markets that we serve. As you know, we opened a new factory there. I think that Vietnam, that is where we have our biggest facility in the Asian market, has reached the top-down But I don't know if tomorrow or the day after will be the time when Vietnam will come back to previous years. Other than that, I have to take care about the next year's business plan. It's not just tomorrow morning. And I'm seeing a growing growth in the Asia. I repeat, you have somehow markets that are going down or up, but the growing curve will be confirmed in the next 10 years. because Asia is big, Asia is rich, and I'm positive they will solve their actual problems. Obviously, this is quite a positive view for the next years, but we have to be prudent. Being prudent means that we have to manage productivity, as we have done in the past and as we will do in the future, so to maintain the margin. The gross margin must remain at the page of today. Obviously, the uncertainty is there. So, pragmatism and prudency are the driver for this year, even though it's because we will have United States elections at the end of the year. I hope that the Federal Reserve and the ECB will start reducing interest rates starting from June or at least maximum September, but this is just a forecast that we have through banks and financial institutions. We have registered an 11 million increase due to interest rates growth last year, and obviously this is a consequence. As you know, we have renewed the bond in September, and that has cost us quite 2.3 or 3 million euros of renewing fees and costs. So I'm very happy about the brands. I'm very happy about the product strategy. I'm very happy about the product line. You know, this is... if markets continue to do as 2023. What we see is that Europe will remain quite flat, due mainly for the introduction of Euro 5+, not because the consumer business has been affected too much, while the United States, I'm positive with the introduction of the new motorbike over there. This is just a brief introduction. I think that is a good overall conclusion. And I'm waiting for question and answer together with Alessandro Simonotto and Raffaello. Okay.