Piaggio & C. SpA

Good afternoon. This is the Coral School Conference Operator. Welcome and thank you for joining the Piaggio Full Year 2024 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. Should anyone need assistance during the conference call, they may sing with 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.

Yes, thank you very much. Hello, everyone, and welcome to the full year 2024 Financial Results Conference Call. Today's conference call will be offered by Piaggio Group Chief Executive Officer, Mr. Michele Colanino, and Piaggio Group CFO, Alessandra Simonotto. Today we have also the pleasure to have with us, Calgary Group Executive Chairman, Mr. Matteo Polanino. You can access the slides supporting this conference call on the internet at the Calgary Group website. As you may expect before starting the presentation, I need to remind you that today's conference call may use forward-looking statements based on Calgary's current expectations and projections about future events. By their nature, forward-looking statements are subject to risks, uncertainties, and other factors that can cause actual results to be materially different, as mentioned in the same airborne statement, including on page 2 of today's presentation. Also, I remind you that the class has been invited to participate in this conference call in a listening-only mode. With that said, let me turn the call over to our CEO, Mr. Michele Polanini.

Thank you, Raffaele, and good afternoon to you all, ladies and gentlemen, and thank you for joining the PIADRE conference call of the day. Let me say, even if today is not the perfect day to speak about numbers, given what's happening around the world, especially due to geopolitical situations that you know perfectly, I would like to say and point out that 2024 for Piaggio Group is pointing out good results in terms of EBDA margin, reaching the best ever percentage on net revenues that we ever achieved, and at the same time, an increase in gross margin percentage up to 29.2%. This is given by a strong management of the productivity around the world by all the teams that every day work in our company and with the attention of the cash flow generation and operating cash flow. As far as revenues is concerned, the declining that we have pointed out is the consequence of the strategy that you know we started at the beginning or at the end of 2023 destocking our dealers network around the world, especially in Europe, but not only in Europe. Giving you a number, the value of the destocking has been around 110 million zeros. It means that we have a beginning of 25 that is quite satisfying considering the healthy of our dealers. And you know that I am particularly interested in having our partners making money. With a solid and healthy dealer distribution network, we can continue with the selling strategy following the markets that, as you know, can go up or can go down. But we don't have the necessity to stop deliveries because dealers are affected financially. And dealers are entrepreneurs. having high interest rates to pay, having a consumer finance situation that is a little bit frustrating because of interest rates, but I'm positive about their sustainability in the future. Another important key aspect of the 2024 results is the debt. The debt has arisen as a consequence of the stocking. It means that we have inflow of less value compared to the stock of 110 roughly million euros. We have increased our capex in our factories, our plants, and our iconic brands and products because I think that we have to fill the gap with the worldwide competition in some a medium-range bike and we have done the job. We have to renew the line in Europe given to the change in legislation both for two-wheeled vehicles Euro 5 to Euro 5 Plus and light commercial vehicles, the Porter, where we are investing and we will launch in April our first ever electric vehicle in our group. What I expect is that the situation that we are having around the world, let's say, not manageable by us, and I mean wars, I mean Suez Canal, I mean trade wars that probably will arise around the world, I mean interest rates that are slightly going down, all aspects that are affecting the consumer business let's say the premium consumer business around the world, not just in our segment, but as we see on papers, it's spreading on major business that are in the upper premium or luxury business. The Asian situation is not bleeding as it was in the 2024. It's starting recovering a little bit in Vietnam and Thailand. It is positive in Indonesia, still positive in Indonesia. I'm satisfied about the Indonesian market in 2024. It's still flat or bad in China. And this is for every business related to consumer business. As far as India is concerned, I'm satisfied. We've done a good job. We can do better. We will do better in the medium to long term because we will enter new markets on the two-wheeled vehicles. so not just the Vespas and the previous medium-range bikes, but also other scooters for mobility over there. We have electric vehicles being sold on the three-wheeled market. We have new vehicles that are coming out in the next and coming months in India, especially on the light mobility for goods, so the three-wheeled vehicles. So I'm positive on India. Europe, it is stagnant. The beginning of the year is reflecting the change in Euro 5 Plus legislations. That's normal. Nothing strange on the market. We have some adjustment in stocks, given that the dealers cannot sell any more Euro 5 and they have to sell Euro 5 Plus. To be pragmatic, we decided that the inflow and the selling of these all new vehicles, Euro 5 Plus, will be not suddenly done by Piaggio Group, We have begun at the beginning of 2025 with the Euro5 Plus vehicles. We will continue until the end of March, substituting selling of new vehicles. So we are taking a low-page selling for Euro5 Plus, respecting, obviously, all the obligations that we have from the low. The United States has been affected in 2024, given 99% because of high interest rates. We don't have major problems there. It's a big market for us. It's an interesting market for the medium-range bikes. So we are satisfied of the new Aprilia bikes that we are introducing, that we have introduced. And I think that we need some stability. That's what I think, given that entrepreneurs cannot substitute politicians and policymakers. but I want to be positive, let's say, and I hope that our policy makers will find a solution for the situation that we are seeing since the beginning of 2025. As you can see, we have slightly declining inventories, that is positive, it's not growing, let's say, even though we have a longer period due to the Suez Canal that impact working capital and inventories. It seems that since June, if nothing gets worse, the situation can be positive in that site, so ships starting to enter the Suez Canal and not being obliged to go around Africa to reach Europe, coming from Asia, I mean. As you can see, we have a decline in commercial tables, and that's positive to work properly with our suppliers, because we work with our suppliers and we have to work together. You know, we are not enemies, we are friends. As I said, we have a stocking of 100 million euros, increasing capex for 20 million, and an operating cash flow positive of around 200 million euros. This is very briefly what we are pointing out in our slides that, as you can see, are also showing our product range and our iconic brands that we are selling around the world. As you can see, we have approved a dividend, and that's positive, even if it is reflecting the reduction in net income. I think that shareholders will be satisfied about the payout. That is not decreasing. It's maintained stable. And we are managing also a positive return on stock investments. given that the percentage of the total amount of the dividends is roughly 10% on the actual value of the share listed on the stock. That is to say that we are continuously investing in our product. I don't see any necessity to reuse the investments page. We will have, for sure, a slight reduction this year, given that the electric port has will enter the market, and that all the homologations are finished. So, in the next years, I foresee a declining necessity of capital expenditure in new products, as far as in production facilities, where, as you know, we are totally renewing the Moto Guzzi house in Mandello Lario, and that's one of the reasons of the increasing in CapEx, and we are investing in safety processes for our workers, and obviously we are investing, as you are aware of, in electrifying our engines production in Italy, also through the possibility and the opportunity given by the recovery plan that has been delivered by European unions in the last years. So we will be investing in this electrification of our product range, Without any hurry, as you know, we decided not to rush too much in electrifying our vehicles because we foresaw something that would have taken more period of time compared to what is in the future of the electrification of the world. I repeat and I point out that two-wheel vehicles are not under the legislation of any reduction of CO2 emissions and obligation to convert all the product range because the electric two-wheel vehicles market has a weight of just 0.5 of CO2 emissions all over the world compared to the total and overall emissions of CO2. The ratio between net financial position and ABDA is still under control, below two. So I'm not worried about the number because we know why we have this increase in debt. The stocking and investments. So it's, let's say, momentum that we will recover in the coming years and we will continue to push on productivity, perfect investments and return on investments, and hoping to have, let's say, negative but positive vision for the medium to long term period. What's happening around the world I don't have to tell you. You know everything. The market now is overall down in every single listed market because of trade wars between US, Europe and China. Let's hope that they will find a solution because I am not in favor of these situations given that the policies about Paris you know, it's a temporary relief, perhaps for some economy, but in the medium term is a disaster. So let's see what happens. Just to give you a brief description of what at the ASEM level and the chairman in Brussels we are discussing is that we don't need any tariffs between Europe and U.S. We are in favor of good competition, fair competition, and even because the balance between U.S. and Europe on our vehicles is quite flat. It's the same. We don't have any need of tariffs, import or export. Let's hope that also United States will take the same direction that we are aiming at the Aetna level. And that what I think it's a good way to manage the business instead of having unfair competitions. The maturity of our debt is safe. We have roughly four years of debt profile. We don't have any IRA this year. We don't have any IRA next year. So we are very happy about the situation of our relation with banks and bondholders. So this is a fact. Fortunately or not fortunately, there is a strategy. We have secured our debt profile. So we can concentrate now on doing our day-by-day job. Sellout is the priority. So to have a consequence of, let's see here, increasing revenues and the consequence of increasing revenues is everything that is below revenue. This is very briefly what we decided today during the Board of Directors and we approved all the numbers and this is what we have achieved last year.