Piaggio & C. SpA

Good afternoon, this is the Coruscall Conference Operator. Welcome and thank you for joining the Piaggio 9th Month 2025 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 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 this conference call. The conference call will be hosted by Michele Polannino, Piaggio Group Chief Executive Officer, and Alessandra Simonotto, Piaggio Group Chief Financial Officer. Today, we are also pleased to have with us Matteo Canalino, Piaggio Group Executive Chairman. You can access the slides supporting today's conference call and presentation on the Piaggio Group website. As you would expect, before we begin, I would like to remind you that during today's call, we may make forward-looking statements, which are based on Piaggio's current expectations and projections about future events. By their nature, such statements are subject to risks, uncertainties, and other factors that could cause actual results to be materially different from those expressed. These factors are discussed in the safe harbor statement on page 2 of today's presentation. I would also like to remind you that the members of the press and been invited to participate in this conference call in a listen-only mode. With that, I will now hand over the call to our CEO, Michele Colanino.

Thank you, Raffaele. Good afternoon, ladies and gentlemen, and thank you for joining our call. I would like just to introduce the call with some aspects regarding the nine months of Piaggio Group 2025. Well, first of all, it's easy to see and note to everybody that we have some of the tiny markets in U.S., Europe, and Asia. This is a fact. And it's also well known that we have external problems around the business that are affecting the worldwide situation. We have wars. We have tariffs in U.S. We have exchange rates increase. in raw material costs, and last but not least, the beginning of our Green Deal electric portal in Europe since July 2025. 2025 has been characterized in Europe by the change of regulations, as you know, from Euro 5 to Euro 5 Plus, that has determined some declining for us in the market, never saying the less that the entire market in Europe has declined since the beginning of the year. We are very satisfied with some products. We are not satisfied with other products. But what I have to say is that our strategy not to reduce price point for our four brands is confirmed, and it will be confirmed in the future. I'm also considering that, you know, Asian brands are entering the markets around the world with cheap price, sometimes consequence of not so fair competition from the Chinese, especially, answering into Europe in the, you know, also four-wheel but also two-wheel vehicles with low prices. We will not go into the price war. The second aspect that is very, very important to me is that in the nine months of 2025, if we consider that we lost 153 million of revenues we have been able to achieve two relevant targets. First of all is the 30.4 gross margin percentage on revenues, the best ever number that we ever achieved. And the second one is that if you consider the first nine months of 2024, with 153 million more in revenues, we had a cash absorption of 27 million euros in the nine months of last year, while this year we generated 6 million of cash. It means that the company is very well managed from a productivity point of view all around the world. As you can see from our slides, we have continuously invested in our factories and products up to 100, more than 100 million this year. And obviously, as a consequence of the investments done in the past, we have an increase in our amortization cost, given that the percentage of amortization is increasing because of declining revenue. but amortization is just consequence of investments. If we go market by market, I told you about U.S. and Europe that are mainly two-wheel vehicles for us moving to India. The market is slightly growing in three-wheel vehicles. It is growing in cheap products and two-wheel vehicles, and we are fairly satisfied about our sales in three-wheel markets. Considering, once again, I will never stop telling you that Electric vehicles in India are still losing money. We have the technology, we have the products, we have the dealers, but it's not the moment to push too much on electric mobility on three-wheel vehicles given that the cost is not declining as someone, not Piaggio Group, was forecasting. On the internal combustion engines, we are happy with our three-wheel cargo business in India. As you know, the passenger business is in downtown, is managed by brokers mainly, and we are, you know, starting to have a slightly, very slightly positive news about three-wheel passenger business downtown Mumbai, Delhi, and Bangalore. India is growing, so it's a place where we will invest with confidence that the country continues to grow at a stable page, so that we know that it's, you know, it's not, it's not a country where you have a peak of industrialization for the time being. Every year, they grow, and they will continue to grow, I think, in a stable way. So India interesting for the Piaggio Group, and it remains interesting for the next years. Moving to China. China is a big question mark. You know that the savings from households have touched peak for the last 22 years, rising to 39%. So Chinese people are saving money. They're not spending their money in consumer business. And that's why not only the two will be because market has been affected, but all the consumer business has been affected in China. And we are in the middle of the real estate prices over there. It will take years to be fixed. So China, even if it is a fantastic country and a big market for every business, has to be managed with the proper way not thinking of, you know, autistic for the next five years. They will come back for sure. They are a giant and the market is very interesting for us. It's known that there's a fight between China and U.S. and this is affecting also the exchange rate linked to the dollars. That's why I think, but that's my view for the future, it's better not to have too much positivity in all the countries linked to the Chinese-U.S. war. I'm especially thinking about South America, but it's an argument I will tell you later. So given a short consideration of those nine months, I cannot say I'm not satisfied because of the gross margin we have achieved. because we generated slight amount of cash instead of burning it, and because we continue to invest for the long-term period on our products. Obviously, it is difficult to predict what happens tomorrow morning. We are analyzing every aspect for the 2026 projections, especially on the cost side, because we have to analyze whether to protect ourselves, first of all, on costs, and then speak about revenues. We are building up our budget strategy, and we are foreseeing some slightly, slightly recovery in Asia, so we are not so negative for the future. India, I told you, is a place that I trust. It's not an easy place to be, but Piazza is well known. We will enter the segment of two wheel vehicles that we never touched next year and end of next year with products that can compete with the biggest part of the market that is a low street price market. As you know, we are just concentrated on the premium market, but we have the possibility now to achieve costs that are interesting for us in India also mass market. It is not such a big investment, but to invest money in India, I think it's more interesting than investing in other countries nowadays. That's what I have to say, Fraile, commenting the slightest numbers. I repeat once again, we are investing. You know we are investing in new facilities in Mandela for the Moto Guzzi brand. We will inaugurate next year. We have invested a lot. We know the processes for safety of people in our factories and also to be able to enhance every day, if it is possible, people's job place. You know that we are continuing to develop our robotic division in Boston, where we are developing the brain of our robots for delivery, and the full autonomous vehicles will be ready next year. It is an interesting market. For now, the sales are not interesting to the Piaggio Group, because we are investing with people, nothing else, to develop the software. and the brain of the robots. Robotics will be the biggest part of our world tomorrow. There will be a huge increase in technology where software will be more prominent than steel. We will be able to do both of them. As you know, we are also investing on the electromobility in parallel to the thermic one because I think and I expect that the technology of the batteries that is the driver of the electromobility will be interesting in the next 10 to 15 years, given that the autonomy will grow and the recharge time will be lower. Until that, thermic will be electric, especially in Europe and U.S. But we will be ready in Italy, where we are investing in the head and in the heart of the vehicle, so we will not invest in batteries. We will not invest in cables. Those are all from the shelves purchasing material and components. We will invest in software and in the electric engine produced in Italy for Europe, obviously, in the U.S. Then we will see in Asia. We have a lot of plans and we can do whatever we want without having the necessity to build new walls. We have the capacity in Vietnam, Indonesia, and China. We have the capacity in India. We have the capacity and installed capacity. It's everything is installed capacity in Europe. Last but not least, because I think and we think that Asia, if we go back, it takes time, but if we go back to positive time, we open a new direct presence in the Philippines. The Philippines we estimate could be the new Jakarta, especially, you know, the big town of Manila. And that's why it's intelligent to have a direct presence there instead of having importers or not controlling the dealer's distribution network. For the beginning, it would be just distributions of our vehicles. Then, you know, we never know. We can estimate to have a local production facility, but it's not forecasted for the next two to three years. We have enough in Asia to fulfill the needs of Philippines and all the surrounding areas. That's it. I think it's just a brief comment on the numbers. And, you know, I have to say that, okay, we lost revenues. It happens. The markets go down. We also lost some 1% market share here and there, but that's because we don't want to enter into price war. We want to stay with high-margin products, stay with high-margin vehicles around the world, and not to think of being able to go into the marginal net result that needs millions and millions of vehicles. It's not our job for the time being. It's not our job for the next two to three or five years, whatever you want, but it's not our job. And so it's better to have high price. It's not so high. The right price to have high margins. That's what we want to do. Maintaining or trying to maintain more than 30% of the gross margin and more than roughly 17% on the EBDA. I think that's our target, and we work for it. Once again, productivity is attacked. We manage transportation costs that, you know, were so high in the past. We now see overcapacity around the world and bigger fleets from ships coming from Asia and India, so we can think about at least a stabilization of the transportation costs but also slightly reduction for the future. Obviously, it doesn't belong just to the Piaggio Group, but, you know, bigger fleets and bigger capacity with low numbers of items to be transported means that the price could go down. Another aspect is very relevant. I was saying before, and then finish, is South America. South America is a big market for two-wheel vehicles. We're not there. We're reporters. For the time being, I'm still convinced that South America is the next place to be. But given the situation between the U.S. administration around the world, I estimate that Brazil and Mexico that are very linked to the dollar could have some impact from the situation. So it's better to wait and see what happens between the actual U.S. administration and Brazil and Mexico. I'm thinking about tariffs. I'm thinking about the exchange rate between U.S. dollar. So it's an interesting country, but it's becoming a little bit risky. We have put on hold Brazil. We have not put on hold the other countries of South America. So Brazil, just because of our relation with the United States, that is going to be difficult, I think, in the future. It doesn't mean that we're not able. We are able, but it's better to analyze deeply what can happen on the exchange rate with Brazil and on the market. So Colombia, Argentina, Chile, Uruguay, all the South American countries apart, Brazil, the value of it is very interesting as a business. It could be risky with the financial exchange rates risk with the U.S. dollar. So that's a fact, you know. The U.S. administration is targeting South America, and who knows what happens. So that's what happens on the U.S. dollar. geopolitical situation up to now as it is quite unpredictable. Thank you, Raffaele, I think.