Piaggio & C. SpA

Good afternoon. This is the Corusco conference operator. Welcome and thank you for joining the Piaggio first half 2024 results conference call. 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, Head of Investor Relations of Piaggio. Please go ahead, sir.

Thank you very much. Hello, everybody, and welcome to the first half of 2024 Financial Results. Today's conference call will be hosted by Piaggio Chief Executive Officer, Michele Conanino, and Piaggio Chief Financial Officer, Alessandra Simonotto. Today we have also here Matteo Colannino, our group executive chairman. You can access the slides supporting today's conference call 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, you 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 risk uncertainties, and other factors that could cause after results to be materially different. As mentioned, also in the safe harbor statement included on page three of today's presentation, we can have some data that are based on forward-looking statements. Also, I remind you that the press has been invited to participate to this conference call in Alisson-Gonlimoye. With that said, let me turn the call over to our CEO, Mr. Michele Colanino.

Thank you, Raffaele. Good afternoon, ladies and gentlemen. Thank you for attending the conference call of the first half of 2024. I will briefly describe what happened during the period, and then I think it would be interesting to have some question and answer timings after this presentation, as you have seen the slides on the website. Well, revenues are down due to mainly Asia and USA for the first half of 2024. Europe, we are managing the safe balance between sell-in and sell-out with a reduction still to be done on the dealer stock, so to be aligned with the new regulations of Euro 5+. and so to be prepared for the beginning of next year. India is showing a positive momentum for the time being. We are happy with the growth that, you know, in India is continuous but slow growth, and I prefer that we can manage this kind of situation instead of hysteria that we have some other parts of the world If you take China, for instance, if you take Vietnam, for instance, so India, I'm still positive. I would like to point out the positive cash flow that we registered this first semester compared to a reduction or to absorption of 2023, even though we see an increase, some slight increase in costs. that we have been able to counterbalance through productivity around the world. And I won't speak of costs. I refer mainly to logistic costs. And you know why? It is because we have two wars ongoing in Europe, the Red Sea problem and the logistics linked to transportation. On the raw material, we are starting to see some growing that we will obviously counterbalance, taking some action for the next semester, but even for the next year time, so to be aligned with the margins that we have registered these first six months. For the remaining time of the year, as I pointed out during the board of directors, We do not see a big recovery in Asia, even though we are seeing some markets, especially Vietnam, where, as I told you in the last conference call, we should have reached the bottom and with now a stabilizing market and hopefully slightly growing by the end of the year. China is still a question mark because it's not stable. just Piaggio products, but all the consumer market in China has been affected by the situation over there. If you ask me, I think that in a medium period, all the Asian countries will come back to good performances, even though don't remember that this is the second best six months that we have registered ever. So if I would say a slight comment on this, I'm happy about the margins. I'm happy about the cash flow, and I'm happy about the strategy that we put in place on the product side, on the marketing side, and on the development of the dealer's distribution network all over the world. We have an increase of cost of debt that is near nothing, nothing as a consequence of the increase of interest rates that is roughly 7 million compared to the first half of last year. and we have an increasing percentage of OPEX compared to revenues. We have 1% more percent of OPEX related to the revenues. That means that we are not stretching the costs, but we are investing slightly more on OPEX compared to revenues. So the percentage on this could have been tighter but we didn't stop nothing around. Markets are evolving through electric vehicles very slowly all around the world even though we are continuing investing in electric mobility slowly compared to what has been the predictions of the last years due to the market that is not there. It will come for sure but it takes time. Given that, we are investing both on thermic engines and electric engines in two-wheel vehicles and in three- and four-wheel vehicles. So I would say that 2024 and first half of 2025 will be the peak of capital expenditure due to some key points, electric mobility, renewing of the entire Mandello Motobuchi factory museum and all the stuff around the production site, investing in new digitalization of the plants, of the production plants, so to be in line or better compared to the competition with the production processes. So a lot of things have been done. A lot of things, we have to do a lot of things more in the coming years, but as I have to see a medium to long-term strategy, given that I'm not interested in just tomorrow morning, I would confirm to you that the strategy is okay. The product line is quite okay. We have to introduce some minor changes new vehicles but we are not to hurry up so the biggest part of the work the job has been done both in scooters bikes three wheel and four wheel uh obviously we have some technology introduction we will continue to invest in r d we will conveniently to invest in our trademarks protection we will continue to invest on brand equity because i'm convinced this is the way to counterbalance the competition arising on the small mobility that Piaggio is in. By the end of the year, we will have, I think, markets that will continue as the first half, and so as a consequence of it, you can imagine what would be the target that we have in mind with the actual forecasts. I think that I have pointed out the main key points that, you know, after the first quarter, as characterized also the second quarter, we will push to try to maintain these level of margins to be in line on the full year basis or slightly better than last year on a full year basis, remembering that for the next year but also this is happening now we can have some slight cost increase that is not due to the business that is due to the actual geopolitical situation so we can do nothing I think that we can do better in the United States I think that we could be better also in Indonesia I'm pushing for it because those are two markets that are interesting for me You know, China, we follow the market. If the situation is due to, you know, problems of the country, we cannot counterbalance this. I think that Vietnam will confirm that the bottom has been reached. And I also think that we have to put in place a strategy, a new strategy for the two-wheel market in India. It is true that it's going and moving towards an high level of consumer business, but some mistakes have been done over there, especially on two wheels. On three wheels, I'm happy. So I'm putting in place a new organization chart to be able to catch the opportunities on the big two-wheel vehicle market in India. Having said that, timing is not... It's not so easy to predict what happens around the world, especially from a political situation. We will have elections in the United States that everybody is waiting for to see what happens. India has closed the election period, so it is now Mr. Modi next year's. Indonesia is closed. We will see what happens in the United States. And that obviously will in some way affect the worldwide market in the way of the other. If you ask me how to try to have a fair competition on the, let's say, more global mobility business, I don't think that, you know, fares and barriers, import barriers, can help the situation. I'm speaking about Chinese products. I think that to be fair competitive in a world of costs, everybody should produce in the same place. So I would prefer, and I'm speaking also about this as the president of the Association of the European and Worldwide Manufacturers, to be in a fair market, you have to have the same cost basis. This is not today. It will not happen, I think. But, you know, as we are investing on our products, on a branding situation to give to the customers a better experience and technology that is up to date for the customers, today, frankly, I would not say it is intelligent to go in the mass market or to fight on the cost basis. The cost basis is that. We produce in Europe, we stay in Europe. We produce in Vietnam, we stay in Vietnam. So I don't see any close down of factories around the world. I don't even see any new investments for new factories because we have enough and we are in the right place in the right momentum. We will be ready if and when barriers would be put in place by countries around the world. This is a very slight introduction to what is the first half of 2024. Now I would say, because you have seen the slides, if you agree, Raffaele, I would jump the presentation by Alessandra, that is here with me, but ready for question and answer. Great.