Piaggio & C. SpA (PIA) Earnings Call Transcript & Summary

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Piaggio Group First Quarter 2023 Financial Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Raffaele Lupotto, Executive Vice President, Head of Investor Relations. Please go ahead, sir.

Thank you. Thank you. Hello, everybody. Thank you for joining us to follow this earnings call. Joining me today are Roberto Colaninno, Chairman and Chief Executive Officer; Michele Colaninno, Chief Executive of Global Strategy, Product Marketing and Innovation, 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 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 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 listen-only mode. With that, let me turn the call over to our CEO, Roberto Colaninno.

Good afternoon to everybody. As you will see, the results of the first quarter is quite good. Just to reconfirm that this quarter is in line with our budget configuration. So the results that we show, is in line with our expectations. As you know, the Piaggio Group is present in all the world's market and the vision that we have is globally intensive. And based on that, we see that the market evolution of the first 3 months is in line on what we expected for the future months. They are where we look our business as Europe where we have some country going extremely well, Italy, Germany, Austria, other country as Holland and France is a little bit delayed, based on different questions. But generally speaking, Europe present sales line very stable. The second news are is Asia where we are present in India, in Vietnam, in Indonesia and China. So I won't say that our regime is based on 100% experiment -- experience on the production and sales and marketing and products develop. We see that India presents some number that can be sure that the year '23 would be much better than '22, especially on the 3-wheeler. Vietnam, Indonesia, Philippines is in line with the last year business. And we expect that even this year, we maintain the same quantity price EBIT and results as last year. I want to underline that last year, we have a very, very positive results. China is a little bit delayed. Generally speaking, the factory is a huge duty that we have to pay for the products that we importing China from Europe. And instead, the products that China buy from Vietnam is very good. And, due to the fact that the duty is very close to be 0. United States is -- [indiscernible] of the United States is on the good developed stable, especially on the motor cycle, we have a good result, and we expected the same things for the rest of the year. Say this, I want to underline that we are totally -- we are totally looking the productivity management system because we don't want -- we try not to increase price, but to find, to confirm and to increase the margin through productivity strategy. We find very high results already in the first 3 months after the reorganization in production, especially and due to the raw material cost, especially on the gas and electricity where the price of '23 in relation with the price of '22 is going down, slowly by going down. So productivity plus decrease on price give us a big positive vision for the rest of the year. In terms of investments, we go on with the electrical new technology, that cost to us in terms of new organization, new people that we already complete all the plan. And now, we are on the way to be in the [indiscernible] area. Let's say that the electrical market is not so enthusiastic, as all everybody thinking about the market, generally speaking, is a little bit reluctant to be open to electrical system due to the main problems that is infrastructure, the price and they say, generally speaking, the general organization. In terms of problems on the political and position the problems around the world. Our market is a little bit out of this type of problem. We don't have any problem from the Ukraine war, we don't have problem with China and United States. We don't have problem in other part of the world. So that now, especially in the some countries of Africa, the situation is very critical. The 2-wheeler market fortunately is little bit independent for this type of situation. Regarding the inflation -- inflation because our budget is based much more on productivity and cost reduction than price increase. We follow this strategy for the rest of the year because we have seen some advantage coming from the raw material market coming from transportation cost and coming also from the high results in terms of reduction for the production technology and the production engineering and of the growth. We confirm, so the results of the first 3 months also for the rest of the year in terms of range of productivity. And based on that, we are positive on the results. The new -- we are on the way to manage a big evolution on training, on advertising and promotion and on the sales distribution organization, where we base our future strategy to support production and new products. We have a big plan on sales organization. We have a big plan on support the trade name as Vespa, Moto Guzzi and Aprilia. And we have a big work to do on the sales organization and how we sell our products. So we said that this year, for us means productivity, sales organization, advertising, promotion and quality of the growth.

Okay. Thank you very much. So we are ready now to answer the question you may have. Thank you.

[Operator Instructions] The first question is from Monica Bosio with Intesa Sanpaolo.

I have a few questions. The first one is on the progress of the EBITDA in the first quarter. In the first quarter, the group's EBITDA improved by roughly EUR 20 million. The consensus is for year-end, an improvement of EUR 30 million. So that in the first quarter, the EBITDA improvement covered 2/3 of the year we expected improvement on the EBITDA. At this point, I would wonder, if you can share your view on the consensus that looks to me a very, very low hanging fruit, just a check from your side? The second question is on the inventories. Are you still expecting a decrease in inventories across the year, as you said in the previous call? The third question is on the European growth. The market -- the 2-wheel market in Europe -- in the fourth quarter, the market was positive by roughly 5%. Piaggio was positive in EMEA by plus 3.5%. What do you expect for the second quarter also on the back of the positive figures of April? Should we expect for the full year, a positive trend or at least a flat trend for Europe, even accounting macroeconomic slowdown. And the very, very last question for me. You mentioned the productivity actions. Do you plan to cover -- do you expect that the productivity actions almost offset the full effect a potential decline in pricing? Thank you very much.

Starting from EBITDA. As I have already told that we base our budget evolution based on productivity. The first results of productivity is we are able to introduce in the way of efficiency is the cost reduction. So it means that EBITDA will be in a positive position in relation with this our target. Naturally, the first 3 months that you see that our results confirm that the productivity action is quite positive, confirmed that it's possible to achieve, even was not so sure when we developed the budget. Based on that, we -- I don't say that we are sure, but we expect it to have the same trend of a positive influence on EBITDA, if we are able to maintain our productivity action plan. I want to be clear that the concept that we have about the productivity is not to work more aware that the people have to work more than today, but I have to work better that today and to find the system to put these people to work better. Number one, the project has to be in line with exactly the technology of the production -- of the production line. The project has to be in line with our supplier and the project has to be in line with the technology that we are -- we have in the competitive this moment. If we are able to do this, and maximize this, naturally, the productivity will be a positive impact on our cost and our EBITDA. The second one, the trend or the stock. And naturally, we want to reduce the stock because this is a part of our productivity. And this productivity will impact on the cash flow. And for us to fund the cash flow this year, let's say, that is moving part, important than the economic results. We believe that all the 2-mile that is in place from the inflation from the province, country or and so on and so on, will be some effective on the interest cost of the money and the liquidity, the [indiscernible] of our dealers that have to have the money to buy and to stock the products for a sort of period of time. So for us, the cash flow is the first of all that we want reach to inventory reduction, credit to as the strategic tools for sales and productivity again. Other questions that you asked. The market in Europe. The first -- based on the first quarter and also April that is already done. I want to say that the trend of Italy is fantastic, very good. Germany is they say that it's good. France had some problems due to the new legislation that is in line -- is effective by January in the Paris [ RL ]. Spain is good. Holland is not good. But fortunately, it's not a big market. All the north countries, England, Norway, Sweden and -- is in line with the less a normal market, is no down, there's no growth, but its in line that guarantee anyway, the quantity that we have budgeted. India, India is a huge market -- the number of people in India now is the first country for population. India started this year, the market in India started quite good, in respect to the last year. But is not enough -- is not in line with the potential of the Indian market. But we expected that the growing there will be huge in a short time. Vietnam, Indonesia, Thailand, the Philippines is a market, I call this market as gold market because the results, EBIT in line with the market evolution. And let's say, Piaggio have a guarantee through the marketing policy that we have developed in the last period of time to be a huge competitor with the other one, especially Honda and the other Yamaha and the other Japanese. And today, because our strategy, especially through Vespa products has to be very top line plans. We have now -- we now have the results of that. China is in line with our budget. So generally speaking, we confirm the positive view on the market that we have done in the first quarter.

Okay. Thank you.

The next question is from Niccolò Storer with Kepler Cheuvreux.

I have one question related to the performance of Western countries in Q1. We have seen a very strong price/mix effect in Western countries average selling price above EUR 4,500. So I was asking which are the drivers behind this performance, if it's price, if it's mix and if it's mix, if it's just something related to geographies or maybe the -- I mean, the contribution of the U.S. So maybe it's also a matter of mix Vespa versus in motor bikes versus other lower cost scooters?

Raffaele speaking. Essentially is from mix effect and some mix reflects the premium nature of our brand and products. And this is the real answer. We have seen the same kind of effect, positive effect, both in U.S. and Europe.

And so I mean, there is not a one-off. I mean you should -- you expect also could be going forward?

Yes. The only thing will change going forward of Q2, Q3, you can have a movement of average revenue per unit, just because there is a different trend in the scooter and motorbikes trend in Europe, motorbikes are very strong in Q1, normally in Q2 and Q3, scooter as a market are slightly bigger than motorbikes. That's it. But at a product level, no, nothing less.

Okay. And so, maybe a follow-up on pricing. Basically, from what the Chairman said, we should not expect any further price increases on products in 2023?

Yes. If there are negligible, so low single digit, nothing very important.

The next question is from Anna Frontani with Berenberg.