Good day, and welcome to the Piaggio first nine months of 2022 financial results conference call. All participants will be in listen only mode. At the end of today's presentation, there will be a question and answer session. To ask a question, you may press star then one on your telephone keypad. Mr. Raffaele Lupotto, Executive Vice President, Head of Investor Relations, is going to chair the meeting. Please go ahead.
Thank you, and hello, everyone, and welcome to our Q3 2022 earnings call. Today's conference call will be hosted by Roberto Colaninno, Chairman and Chief Executive Officer, Michele Colaninno, Chief Executive of Global Strategy, Product, Marketing and Innovation, and Alessandra Simonotto, Chief Financial Officer. You can access the slides supporting today's 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, we may use forward-looking statements based on Piaggio's current expectations, 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. Now, I would like to turn the conference over to Roberto Colaninno.
Good afternoon, everybody. Well, Piaggio, even we are in the macroeconomic situation, extremely complex, continues to be extremely good. The Piaggio Group closed the first nine months of 2022 with its best results ever and double-digit growth, driven primarily by excellent performance in the APAC area, which will be further boosted by the new manufacturing facility we shall be opening in Indonesia next month. About these new investments, where we think to be able to repeat the excellent results that we obtain in Vietnam, we believe that Indonesia, which is the one of the more favorable country in term of two wheeler market, find Piaggio already with its best trademark, Vespa. The market is very favorable to our products and is ready to give us extraordinary results, as soon as we start the sales and production.
We believe that this company, this plant beginning to produce at the beginning of 2023, and we expect to have the results for the Vespa products much higher than what we have fixed in our budget. This give to us the opportunity to think that even 2023 will be an excellent month, an excellent year for Piaggio, primarily due to the international position of Piaggio. I remember. I want to remember just for the people that don't know the situation, that we have India factory, then we have Vietnam factory, then we have a China trading company, then we have now Indonesia and the United States trade company, plus the company in Italy and one of the best sales organization in all European markets.
If you consider that our trademark is a trademark that the market considers have the biggest value in relation to the other trademarks with Vespa, Moto Guzzi, Aprilia, Piaggio and Ape regarding Indian market. We consider that this combination, the position of the plant, the position in the best market on the worldwide consideration and the trademark value could put us in the condition to say that even 2023 will be excellent year. Naturally, we consider the situation complex in some condition or some consideration, but due to our logistics position and the position on a worldwide market able to compete with this situation and to be able to be successful even the situation is difficult. We have learned.
We have already decide what is our program of new products that we launch on 2023 in the two-wheeler and especially in the scooter and bikes. Regarding bikes, we base our success story on 2022, also on the success story that Aprilia Racing be able to achieve in the GP competition. The results of the Aprilia Racing is better than our expectation, and we are open, we are very sure that we will receive other surprise on the last.
Race.
Huh?
In the last race.
On the last race that will conclude the GP racing on this year. All this condition give to us the possibility to have the best relation with the market and the best relation with our customer. We are done all what we budgeted on 2022. We are completing the new line of products. We are completing the launch of the reorganized service-production department to increase productivity. Overall, we are introduce some quality elements that improve our quality and our consideration in mind to our customer. The new Moto Guzzi V100 Mandello, for instance, is one of the best products that existing in the market for technology, for design, and also for performance of this motorcycle. The new Vespa that is in production now is already in the market, has received a very welcome from the customer.
I think that Piaggio is look on very positively, see the future based on the decision that we have done this year and the last year in terms of products, quality, organization, customer care, and all the other performance in terms of growing on technology that the new market require. We are not concerned about next year. We are positive. We are confident, even the difficulty around the world, and we are sure that the market will appreciate this our position and what we have take as a decision in 2022 and 2021.
Okay, thank you very much. I think that now Alessandra will comment on the slides that you have seen and download from the website. Thank you.
Okay. Thank you, Raffaele. Good afternoon and thank you to you all for joining us today. We can start as usual from page four of the presentation you have found on our Internet site. This slide as usual provides a summary of the highlights of the group. As you can see, we have kept also in this nine months results, a record set of results, and we are very pleased with our performance despite mounting economic and geopolitical uncertainties, supply chain challenges, and the spike in energy costs. As you can see, let's say EBITDA and earnings per share kept on growing in Q3. All these key financial metrics reached both in Q3 and the first nine months results, the best results since IPO.
Net debt had been further lowered, thus confirming our ability to keep our commitment to reduce leverage. On page five, from page five to page seven, you can find the snapshot of the performance by brand. The strength and desirability of our brands continues to grow in an uncertain time. As you can see, all top brands posted outstanding results, reaching the highest revenues to date. In this context, motorcycles took again the spotlight, with Moto Guzzi setting a fresh record high both in volumes and revenue, and Aprilia Motorcycles reaching the best revenues since the IPO. Clearly, speaking about motorbikes, I am very pleased to confirm that the new Moto Guzzi V100 Mandello that you can see at page eight received an enthusiastic welcome from the press. Going to page nine, we have highlighted the actual results of Asia Pacific.
Revenues in the area, after a staggering performance since 2018, accelerated this year, ending the first nine months up by 55%. As highlighted already in prior calls, this result stemmed from the synchronized growth of all key markets, among which Vietnam and Indonesia took the lead, both with revenue surging 2x above prior year. The strong performance of Indonesia is particularly important, as the opening of the new plant in Q4 should further boost our space in the country in 2023. Now we can move to page 10 to look at 2022 key market demand. In a nutshell, in EMEA and the U.S., demand slid as the year progressed, mainly dampened by the negative trend of motorbikes, while scooters show more resiliency, ending the first nine months above prior year.
Asian five countries posted diverging trends with China edging down, while demand in Asia five countries strengthened as the year progressed. Also, India saw sequentially stronger demand trends, also benefiting from a very easy basis of comparison. More importantly, unfortunately, demand was still significantly below the pre-pandemic levels, namely with LCV still 47% below 2019 levels. Going to page 12, you can see that the growth of volumes and revenues have been driven by the synchronized positive performance of all geographies and businesses. Western countries confirmed steady and positive performance, notwithstanding the poor basis of comparison and the gloomy macroeconomic scenario. Country-wise, I would like to highlight the performance of U.S., which posted the strongest Two-Wheelers revenue growth in this area, mainly driven by the success of our motorbikes, and of Germany, which posted strong growth, mainly driven by scooter sales.
It is worth also mentioning the strong performance of LCV, driven by the new Porter and Piaggio. Asia Pacific was the brightest spot, as commented before, with growth that further accelerated in Q3, boosted by the synchronized growth of all key markets, as we already said. India rebounded, mirroring demand trends, mainly benefiting from low year-ago base. Moving to page 14, we can have a look at the breakdown of the performance by product. As mentioned before, motorbikes posted terrific results, with revenues soaring up by 35%, propelled by the success of our brands, coupled with positive price effect. Scooters performed extremely well, reaching an all-time revenue high, mainly benefiting from the outstanding performance of Vespa, which topped the new record high on the back of growth of all geographic areas.
Additionally, it is worth mentioning the success of the new Aprilia SR GT and the new version of the MP3 launched this summer. Moving to page 16, we can have a look at the EBITDA evolution. EBITDA grew to EUR 85 million in Q3, thus reaching EUR 237 million , a new all-time high with the percentage margin on sales at 14.5%. This is an extraordinary result in my opinion if we consider the growing number of negative externalities mentioned before. As we saw in prior conference call, the key level of the EBITDA uplift has been the strong revenue growth more than offsetting the hefty dilutive effect stemming from inefficiency of the supply chain and higher input costs. Cash OpEx growth has been kept under strict control, resulting in a ratio of cash OpEx on revenue lower than last year.
Moving to page 17, we can see the remaining P&L figures. I would like to highlight the EBIT grew by EUR 37 million with an increase of 0.9 percentage point and of its ratio on net sales. Net profit grew to EUR 19 million, despite higher depreciation and higher financial expense. Now let's move to page 18, in which we can have an in-depth analysis of net financial position both evolution and leverage. As you can see, and in my opinion, it is a very significant rise, since it testifies our ability to reduce debt while returning value to shareholders through dividends and buybacks, despite the negative dynamic of working capital due to the complexities in supply chain management, which forces us to prioritizing the industry inventories build up.
Capital expenditures ended in line with prior year and with the multiyear target provided in prior conference calls. Lastly, you can see leverage has been further trimmed consistently with our long-term targets. Thank you.
Thank you very much. Now we are ready to answer the question you may have. Thank you.
We will now begin the question-and-answer session. To ask a question, you may press star then one when using your touch-tone phone. To withdraw your question, please press star then two. The first question is from Monica Bosio with Intesa Sanpaolo. Please go ahead.
Just to check. Can you hear me well?
Yes, we can hear you, Monica.
Thank you very much. Good afternoon, and thanks for taking my question. The first one is on the short term and medium term view. As for 2022, it's clear that following these very strong results, the consensus for fourth quarter estimates are too conservative, and I'm expecting a beat. I was wondering, as for 2023, the company is expecting a further improvement. Now the consensus is pointing to an EBITDA in the region of EUR 287 million. Taking into account that Europe is likely to slow down and Asia is likely to keep going double digits, are you comfortable with these set of numbers, or do you think that they could be even too prudent?
The second question is on the demand in Europe and the softening of the demand. How do you see the demand in Europe in October? What about for light commercial vehicle in India? The very last is on the new products. Are you planning to launch new electric two-wheel products in Europe in 2023? Thank you very much. Hello?
Yes. Hello, Monica. One second, please. Starting with the second question. Concerning Europe in October, you ask, market demand, we don't have reliable data apart from Italy. As of yesterday the Italian market was growing around 31%. Concerning the-
31%?
31%. Yes. You know, October is October. Okay.
Yeah.
Not a really meaningful month. Considering EBITDA for 2022 and 2023, if we have understood the array. That was the question, the first one. Okay.
Yes.
Okay.
Understood. Well, Monica, you are talking about EUR 287 million for 2023.
EUR 287 million for 2023, this is the consensus, EUR 287 million. I'm just asking if you feel comfortable with this consensus number or if you would feel that it could be even too prudent if you look at the expected growth in Asia.
Well, about 2023, in my view, it's very, very early to give any forecast because we have to look and understand what will happen in the next months about raw materials, about the war in Ukraine and Russia, first of all.
Indonesia.
Even if we have the Indonesia plant, that will help us to reach better result than now. Probably, as you can see, we will have different things that will work together. From one side, all the macroeconomic matters that we have already faced in 2022. On the other side, the Asia area and the Indonesia plant that will begin to work at the end of November, as you can see in the last slide of the presentation, and that will help us to reach better results in that area. In this moment, for me, it's too early to give you a figure.
Okay. I fully understand. For the potential launch of new electric scooters in Europe, are you planning an introduction of new electric products?
Not as of now. If there will be new things in our agenda, you will know it in the next conference call.
Okay. Thank you. Sorry, just a follow up.
Monica, please wait.
Okay. Go on, Monica.
Just thank you for the answer. Just a follow-up. Can you quantify the increase in energy cost in the third quarter and over the nine months of 2022? Thank you.
Okay. That's 3x the one that we have had in 2021.
Okay, thank you.
Only for the Indian plants, clearly. Because the problem of energy cost is not something that affects the production plant in India and India now.
Okay. On overall, at the group level, is it three times or at least or less?
Well, as the most expensive from an energy cost is the Italian plants, you can, we can say that the three times is all the cost of energy.
Okay. Thank you very much.
Because as you know, in Italy we produce engines, we produce vehicles, we are painting the painting shops. We have a lot of things that we do really in Italy while in the other countries, the production plants are more or less different. The Italian plants are the most expensive one from the energy point of view. When we talk about the amount of energy cost in 2022, P&L, when we talk about three times, it is the total cost of energy.
Okay. Very clear. Thank you. Thank you very much.
The next question is from Niccolò Storer with Kepler Cheuvreux. Please go ahead.
Good afternoon. Two questions, please. The first one is on debt expectations for year-end. I see that Q3 was overall in line with expectations, even in a context of better P&L results. What should we expect for the end of the year? At the moment, I think that consensus is expecting something in the EUR 370 million range. And the question is, could this be better? The second one is on Q3 performance in Western countries. I've seen that you had apparently a very strong price mix effect. The question is, where is this coming?
Is it something that we have to maybe bring also to Q4, or it's just a one-off? Thank you.
Good afternoon, Mr. Storer. The first question, debt expectation. As of now, we believe that the consensus, so more or less EUR 370,000-EUR 70 million could be a range, a good range for us. I don't expect in this moment any other figure. About the second question, the very strong mix effect is not a price effect. It is a product mix effect. If you see our slides, we have said that the motorcycle kept a different weight on our sales. Moto Guzzi and Aprilia have reached a very important result, the highest result as of now and from the IPO for both the brands.
As you well understand, the price of a motorcycle is higher than scooters, even if we talk about Vespa. This is why the mix of price effect is different.
Thank you.
The next question is from Gabriele Gambarova with Banca Akros. Please go ahead.
Yes, good morning, and thanks for taking my questions. The first one is on Indonesia. Mr. Colaninno mentioned the budget and the possibility to exceed the budget. I was wondering if you can share with us the target of the budget if it's for Indonesia. Possibly if you can add something, some color on pricing, because I saw that in Asia the average selling price was a nice EUR 2,700. Should we assume a similar pricing for next year? This is the first one. The second is on Europe. I guess I wonder if you have any indication, any assumption on the market next year. I was wondering if in the past you saw
I mean, I'm wondering if you can assume to profit, to benefit from the inflationary scenario. I mean, people not able to afford a car might buy Two-Wheelers. I don't know, something. Let's say a question I put you. I don't know if you empirically saw this trend in the past or you have any kind of statistics on this. The last one is on logistics. Logistics costs, they clearly, you know, a drag in 2022, I think, EUR 15 million. Should we assume that this EUR 15 million will be. I mean, you will recover them in 2023, considering that logistics costs are coming down abruptly? Thank you.
Thank you. First question, the answer is yes. Concerning Indonesia, we can provide budget figures. Regarding Indonesia, yes. You can imagine APAC pricing similar to 2022. There is another question. You come on. No, we don't believe that you will see a trading down from cars to scooters or motorbikes so far. That was the question, if I know.
Okay, thank you.
You.
Next question is from François Robillard with Intermonte. Please go ahead.
Hi, good afternoon, everyone, and thank you for taking my question. First one is on the inventory levels at for dealers. Can you just comment on the situation and how the recent supply chain evolutions have impacted supply and inventory levels both on your side and at dealer levels? Maybe going back on one question of Gabriele that was not answered about the European market assumptions for next year. Quite a lot of your price mix and volume that were in the first nine months this year were motorbikes, which might be more leisure products compared to the more day-to-day used scooters.
In a potential recessionary market next year, what are your expectations in terms of motorcycles for Europe, if you can share them? Yeah, finally, my final question about pricing in Europe, do you expect some pressure to come on the pricing side for you next year in Europe? Thank you very much.
First of all, inventory level and supply chain evolution. As you can see in our figures, the inventory level is higher than last year, more or less for two reason. The first one is that the mix of product is different from last year. This is one of the reason why the inventory is growing. The second one is that even if we are facing a different impact of COVID-19 on our supply chain, the COVID-19 exists. We have to manage the inventory and the supply chain, having in mind that the Chinese supplier, but also the Taiwanese or whatever in the world, can close their door for one week, two weeks, three weeks, and we can stop the production from one side.
From the other side, that the time of shipping that we have in this period is more or less as long as in 2021. We didn't come back to 2019. The shipping times are more or less longer than 2021, so more or less 40 days more. The suppliers have faced the COVID pandemic in any case, also in 2022. This is why the inventory has reached this level. If you calculate the ratio of inventory on net sales, we are at the same level as 2021.
There was a question on inventory on dealer network, if I'm not mistaken, François. You know, the key metric that you have to look at is essentially the ratio between the dealer stock and the total market size. I can say that the ratio is the same as 2021, 2020, even below 2019. Okay. That's the answer.
Yeah, thank you. On pricing and for 2023, expectations.
We don't expect to increase prices in 2023 in Europe. Roughly. Okay. Roughly. There will be a mix effect, maybe positive. We will focus mainly on mix effect, as we did in 2022, rather than on price effect.
Right. Thank you, Raffaele. Thank you.
Yes. Thank you.
The next question is from Emanuele Gallazzi with Equita. Please go ahead.
Good afternoon, everybody. Just one question from my side, follow up on consensus EBITDA, just to be sure I understood correctly. You basically confirmed the target, EBITDA at EUR 270 million in line with the consensus, which should imply a fourth quarter EBITDA down almost 30% year-on-year or 20% adjusted. Is it right?
No. We didn't say that. We didn't speak about the 2022 EBITDA on target before. We were answering to 2023 consensus figures.
Oh, okay.
To 2022.
Okay. You are confident with the EBITDA consensus on 2023? That's the message.
Based on the information that we get in this period to form and to decide the next budget of 2023, we consider as a target of the company to satisfy the consensus on 2023.
Okay. Very clear. Thank you.
Thank you.
The next question is from Michele Baldelli with BNP Paribas. Please go ahead.
Hi, good morning, everybody, and thank you very much. So just a couple of questions. The first one relates to the tax rate. During a strong growth in APAC, is it fair to assume that there could be some room at the end of the year to see tax rate a little bit better than in the first nine months? The second question relates to the revenue per unit that you have restated in Europe, in particular in the fourth quarter. Is it something that you see as sustainable, or it was just a quarter if you go a little bit more than the previous quarter? Thank you.
Michele, sorry, we had a problem. Can you repeat the second question, please?
Yes. On the revenues per unit of the sales made in Europe, I thought that it was a kind of similar to EUR 4,000, if I'm not wrong. Basically, I just want to understand, given that this number is higher than the previous quarters, is it something that you think could have been impacted by mix, so basically that you sold a higher level of motorbikes than normal and so on? Or could it be something?
Okay. No, no.
-sustainable?
Yeah, no. Understood. No, it's absolutely a mix effect. We have strong market trends with high-end products. It's pretty much clear also if you look at presentations. Strong brands are delivering strong results. That means also a very good mix effect. Concerning tax rate, I think Alessandra would like to answer you.
About the tax rate for the end of the year, am I right? Because we have some problem with the line.
Yes. With tax rate, is there any kind of improvement possible by the end of the year versus nine months, given the strong growth in APAC?
Well, we are working, as usual, for the end of the year, for all the figures of the end of the year, because this is our work. I can say today that if the tax rate at the end of the year will be different from the one that we use for any interim results, just like the nine-month results. In this moment, what we can have in our hands is the 38% that we have used for the closing of the nine-month results. We will work also on this figure, as usual.
Okay, thank you. Just lastly, sorry, because you said that there was a strong growth in October. Is it fair to say that this growth was driven by the incentive from the electric scooter side that the government
No, Michele, absolutely not.
No? Okay.
We have motorbikes going up and scooter over 50 cc going up. No, no. It's not linked to incentive.
It's a clean picture.
Okay. Thank you very much.
Yes. We will always be prudent because it's always October, as I said before. Yes, the figures are very strong.
Sure, sure. Okay.
Yeah. I can add both motorbikes and scooters are growing strongly or were growing.
Okay. Thank you.
The next question is from Jordan Meighan with BNP Paribas. Please go ahead.
Hi, it's Jordan Megan from BNP Paribas on the credit side. Thanks for taking my questions. I just wanted to ask two. With net leverage at 1.3x on your measure, I mean, that is quite low historically for the company. I just wanted to ask, is the company happy with leverage at these levels, or do you think deleveraging needs to continue given a more challenging macroeconomic backdrop? Secondly, I think factoring of receivables stepped up by quite a bit in the second quarter. Can you just comment on how that maybe developed into the third quarter? Thanks.
I think from the last one. Yes, factoring receivables was in the region of EUR 300 million. The ratio on sales is below prior year and prior quarters. This is what we can tell you. Concerning leverage, the real goal is to go on keeping very low leverage and possible to deleverage the company. That was also the meaning of the slide that we have published. Trimming further leverage if it's possible. Yeah, that's the goal.
Okay. That's great. Thank you.
Thank you. Bye.
The next question is a follow-up from Niccolò Storer with Kepler Cheuvreux. Please go ahead.
Thank you. My question is about a clarification about new launches. If I understand well, you said that you are not planning to launch any new electric vehicle in the coming future, so end of this year and 2023. Is this a sort of step back, sort of retreat from your previous plans? Can you explain why this? Because the impression was that you were probably eager to launch something new after the Piaggio 1. Thank you.
Okay. We are working now to change the line that produce new Porter, that today is a thermal engine, an electric line. We are concentrate to be able to have a new Porter electric engine in the next 6-7 months of next year. We feel that this target is quite difficult to achieve due to the fact of all complexity of the machinery and all the complexity to adapt the Porter thermal to the Porter electric. In the meantime, we go on with all the group of Piaggio to look and to concentrate, to change the performance of the people to be able to be work on electric zone then to thermal zone only. This is not a simple game to achieve. It's quite complicated.
Before to launch a new electric products, we want to be sure that the quality and the performance of the electric scooter will be more achievable and more performant for the market. We have done some experience, and we see that today what the market want is something different than what the company had presented until now.
Thank you.
The next question is from François Robillard with Intermonte. Please go ahead.
Hi. Yeah. Just a follow-up to wrap it up on the expectations for the fourth quarter, compared to what we were seeing in the third quarter. If I understood it correctly, is it fair to say that we may expect just a continuation of those trends? They'll be strong Asia Pacific, still robust Europe and North America, and India with like commercial vehicle in the fourth quarter. No change in trends compared to what we see in the third quarter or the fourth quarter of 2022. Thank you.
Yes, we can confirm. The trend will be pretty much similar to the one that you have seen in Q3. Yeah.
Thank you.
You're welcome. I think that this is the last question, so this answer draws the call to an end. Thank you very much for attending today's conference call. As usual, if you need further info, you can call me later. Thank you. Bye.
The conference call has now concluded. Thank you for attending today's presentation. You may now disconnect.