Piaggio & C. S.p.A.

Hello. Thank you very much for taking your time to follow this conference call.

Joining me today are Roberto Colaninno, Chairman and Finance Chief Executive Officer, Michele Colaninno, Chief of Strategy and Products, Alessandra Simonotto, Chief Financial Officer, and myself. You can access this live supporting this call at piaggiogroup.com website.

Before starting the presentation, I need to remind you that during today's conference call we will use forward-looking statements based on Piaggio current expectations and projections about futures at the end. By their nature, forward-looking statements are subject to risks, uncertainties, and other factors that could cause actual results to be materially influenced.

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. I am very happy to present today, the results of Piaggio '21.

Everybody, I believe has read already the results? And I believe that you are more interested to try to understand what we are underway to do regarding '22.

Based on our budget, the target of '22 is quite, let's say, quite good. The challenge is very, very interesting.

Based on the results on '22, where we have achieved all the growth that we have thinking on the beginning of '22, that we have done everything on time and on 100%. New products, technology, electrical projects of Piaggio, new factory in Indonesia, the new factory of Moto Guzzi, the big investments on marketing and all the styling and the new products, this is all what we have done on '22 and the strength of the big results with regards on 22nd -- 2021 as we expected the results on 22nd.

For instance, we expected the result on '22 by the end of the year. We are -- the first results of the new factory of Indonesia, where we expected to waive the same report for the results that we have obtained in, let's say, South East of Asia.

From that part, we have done a lot of new organization in China, where the results of the last year sales restaurant were incredible growth. And we expect it to have a -- more sales on '22nd.

We expected that that India, at least, will be able to restart with the new situation and solve all the problems coming from the virus. We expected it to increase sales in all Asia Country.

So we expected that where that bigger results for sales of motorcycle in United States and in Europe. If you want to, Piaggio, due to the strong organization in the factory where we are in China, where we are in Vietnam, where we are in India, where we are in Indonesia.

So, we are out from the two main area of Europe. Unfortunately, that is huge.

Now, with these results, sales of the first period of the year are very -- let's say, is very good and we expected that the market reacted very well also because in whole world the cost of gasoline is rising, go up in very severe number, and the people thinking to discover for that urban transportation [Indiscernible] vehicle products. We expected also that the people discover motorcycles, and we see that the number of Aprilia and Moto Guzzi is quite good in all the markets around the world [Indiscernible] the new model of Aprilia and the Guzzi is very welcome from all the market, and especially for the young people.

Our marketing policy gave very unexpected good results especially in China, especially in United States, in Italy, and generally speaking, in Europe, but one of the points that give us more than let's say, [Indiscernible] and more to be safe sure that we are able to reach our target and get the market reaction. And the market responds to the new model, for instance, Tuareg, Moto Guzzi, and other Aprilia model in the first two months and based on the order that we will see is very, very good.

Let's take to know the problems of supplier and then components. They are naturally remaining some problems but we see that now, especially from the Asia market, first positive results where there's our supplier beginning to be in line with the timing, in line with the quantity.

The transportation costs remain higher. But we are working now to fund the new, let's say, packages in order to save space on the container and on the tools, transportation tools.

Naturally, we want to avoid the use airlines for transportation of our products because the cost is too high. But we see that with the good production scheduling and with a good performance of our stock it would be possible to have a good working capital and to control better our suppliers, and to agree with our supplier and more definitely supply steady stream.

Let's say that we have achieved on '21 some results where the market, and I remember on the last conversation we had where I said that we tried to achieve €240 for the EBITDA and some of their analysts consider them difficult and we were able to achieve €240.6 on EBITDA. So let's say that this -- I want to say that our organization, in terms of cost control and sales developed, let's say, achieve the system to be flexible, as well as fleeting to give us the results in order to give us the possibility to have to react and to have the proper reaction action.

The proper reaction when we resisted the difference between the reality and the budgets. What -- how we base our future is quality of the progress, customer, organization, organization production, and the organization on all the purchasing in terms of working capital, in time to react quickly.

And to react all the time when it is necessary to obtain a position to take the right decision on that. Even the quality is very hard target for us.

Quality in terms of customer systems terms -- in quality in terms to be a good technical performance, and also able to be -- to control the costs and try to reduce the cost also to a good performance of design to cost electrical [Indiscernible]. We -- as you know already -- we proceed on the transformation exercise of Piaggio from [Indiscernible] company to electrical company.

This -- we projected to the base in the next three year -- we have already built the laboratory and the building dedicated to electrical products. We have already hired 45 technical people that will dedicate to electrical technology.

We work in some partner connection with some important supplier and very high scale on electrical problems. And I want -- and I can't say that up to date, we are preferencing line --online with the project updates big change on the company.

Naturally, this does not mean that we going out from target. We believe that the [Indiscernible] will be for many years of progress to the market when we acquired, especially on the Asian market.

And then based on the [Indiscernible] also that we believe that India problems will be solved by during this year. And then we can have an advantage of our organization and we reignite the advantages the results and to show you the market that become, again, very profitable and very interesting.

We see our future not so problematic also negative as we can see on the lots of the newspaper and a lot of reporting. We can say that the first two months, what we had with the customer reaction, what we have from different, I'd say market sector, but also from the oil global market at the States, China, Southeast Asia, India, Indonesia, Europe.

By the way, we don't have nothing with Russia. We have nothing with Ukraine.

So our relation is with all the world outside the world that today is managing a so terrible situation. We say that our future for Piaggio in one way guarantee this geographical distribution can guarantee the different market for different products and is able to [Indiscernible] already, and we have developed again an extraordinary marketing policy for the young people.

We have a new design, and we have a new relation with some stock very close to the young population in China and America especially where we get already the products and all that. Our financial situation does not have any problems.

We can look all the investments on CaPEX without any problems on the long term. We can have all these investments without putting particular problems with the company.

We have under the control the credit. We can say that today our currently position will not have any problems in term of that credit.

We have the same situation with the supplier. We have a good position with the credit room.

So we say that we have the problem to manage. We have the problem to managing times.

That is our normal job. We want to reduce costs through productivity increasing strategy.

The productivity is for us the first target that we want to improve. We consider productivity and customer care the two main strategies of all our deployments of our strategies on '22.

Okay. Thank you very much, sir.

Now is the time that we comment on the slide that you will find on our website.

Good afternoon. We decided to go on with Phase 3 of the presentation on the most important growth financial KPI.

And we are comparative on the new goals, the KPI, not only with 2020 results, but also with 2019 results that is the last year before the COVID-19 pandemic. As you can see in 2021, we achieved all-time high cash-generating generation and all key metrics against the peak level exceeding update targets.

Net sales increased by 27% from €1.3 billion of 2020 to €1.7 billion in 2021. EBITDA increased by 29.3% from €186 million in 2020 to €241 million in 2021.

In line versus the targets forecasting during the conference call of nine months results are the best results ever. Comparing to 2019, net sales increased by 9.7%, from €1.5 million of 2019 to €1.7 million in 2021 and the EBITDA increased by 5.6%.

Internal soft net debt will be a significant improvement in respect to €424 million of December 21, 2021. Recovering around €43 million excluding December 2021 at €380 million confirming that leverage started some years ago.

Comparing to 2019, net debt of €430 million, we improved €49 million. Going to Page 4, we have tried to underline the results of the group in the next line here to underline the strong growth or the profitability achieving in 2021 an average of 1.6.

On Page 5, you can appreciate, and we have been able to do these results on leveraging, thanking to our brands. And Page 5, you can appreciate the good performance of all of our brands both for Scooters and motorcycles with a growth up to more than 50%.

On the following three pages, we have tried to resume what happened to our brands in 2021. Beginning from Page 6 with Moto Guzzi, we celebrated the 100 years of the brand achieving the highest results ever thanks to the success of the new mode launched in the last two years.

During the celebration, we have unveiled a new project V100 Mandello, and we have also presented [Indiscernible] projects for the new factory in Mandello designed to [Indiscernible] the next 100 years of Moto Guzzi. Moving to page 7, talking about our previous round.

We would like to apply the outstanding results of the new range of bikes 660 Aprilia Tuono and new Tuareg. That that's Aprilia getting the highest revenue today and opening 2022 with strong order book.

With our Aprilia racing, as you know, in 2021 we get back with new Aprilia racing factoring team and the new factoring team will begin the race in the next weekend as you all know. On page 8 here, Vespa celebrated in 2021 to serve 75 years with special edition and some new collaboration just like Vespa Dior in collaboration with [Indiscernible] and opening a new kind of partnership with [Indiscernible], and we all are waiting the results on the night of the Oscar on 27 of March.

All this collaboration has contributed to the evaluation of Vespa brand made for the first time by Interbrand. Now, the next three pages 9, 10 and 11, you can have a look of what we have done about sustainability point of view with Vespa, gita, gitamini, and the new Piaggio 1 launched at the end of 2021, that in the fourth quarter has sold more than 6000 units.

While going to page 12, you can have a look about the new launches in 2022, like V100 Mandello, Tuono 660 Factory, RS GT, and the new collaboration with Justin Bieber for Vespa, and the Chinese designer Feng Chen Wang for Piaggio 1. And now, going to Page 15, we have summarized our industry's key demand trend for 2021.

In the America demand on the rise across all throughout this summer and all countries. We went overall plus 4% in India and plus 8.7% in the U.S.

versus 2020. Confirming a multi-year growth trajectory understatement by the combination of a regression cycle, aversion toward public transport, and macro recovery.

In Belize, Germany, the Netherlands and U.S., end in double digits above the pre-pandemic level. About Asia Pacific, despite the uneven trends across the year, overall demand ends well above 2020.

Asian size demand regains strength in Q4, once lockdown measures had been lifted and ending at plus 15.6% versus previous year, shedding a positive light for 2022. China, confirmed and grow end in 2021 when it's up above 2020 and 2019 levels with an increase of 11.8% versus 2020.

India, demand ended in line with previous year, but significant below pre -pandemic level, loss in two years, and like I mentioned, vehicles due to the effect of COVID-19 second wave. Moving to Page 14, we can have a detailed analysis of volumes and net sales by [Indiscernible].

Volumes and net sales new at the fastest rate today in North segments, making accepting India like Commercial Vehicles boosted by significant positive mix price efforts. Two - wheelers EMEA & Americas continues to grow thanks [Indiscernible] device positive market dynamics and mix the price effect.

Two - wheelers at the Pacific, volumes and revenues have added to a fresh new recognized benefitting from stronger and equity and countries diversification. Two - wheelers India, spiked to all-time ICG revenues outstripping market trends with not [Indiscernible].

CV, EMEA & Americas either revenue 2009 mainly on the back of the successful launch of the new Porter NP6. CV India underperform mainly reflecting weak of the domestic market there.

Going to Page 15, we can have a look at the breakdown of volumes and net sales by product. As mentioned before, motorbikes have been the driver for revenue, also skyrocketing by 70% [Indiscernible] the success of the new products launched: Aprilia RS and Tuono 660 and Moto Guzzi V7.

Scooters performed extremely well too benefiting from the combined strong growth in all geographic areas. In this context, I would like to highlight the very strong performance of Borsa and the new [Indiscernible].

Light Commercial Vehicles revenues grew underpinned by the strong performance of the new Porter NP6 more than also the negative performance. Moving to Page 16, you can have a look of the EBITDA.

In Q4 we achieved all targets provided in Q3 conference call. We successfully managed the supply chain challenges mitigating inefficiencies and normalizing the use of [Indiscernible].

Additionally, most of the Q3 of negative aspects arising from the recall campaign has been restored. Those elements together with strong revenue growth and better mix with be EBITDA uplifted to €48 million, the best Q4 results on the record.

On a full-year basis, EBITDA grew reaching an all-time high [Indiscernible]. The key driver has been the strong revenue growth, more than offsetting the [Indiscernible] dilutive effects, stemming supply chain disruption and from higher raw material costs.

The data in cash OpEx that you see in the chart is just a reflection of the unusual low level of last year when we halted the activities in view of the third wave of COVID-19. Conversely, and more importantly, cash OpEx has been lower than 2019, and the ratio of cash OpEx on revenues in 2021 has been lower versus 2020 and 2019; a remarkable result in my opinion, which specifies the group's ability to keep a strong grip on cost.

On Page 17, we see the remaining P&L figures that we have not shared with you enough. The most important is net profits.

Net profits surged 92% to €60 million, despite higher D&A, reflecting a recent year [Indiscernible] capex, whilst benefiting from lower financial expenses stemming from lower average in debt and 1.7 percentage points of lower cash. Moving to Page 18, you can have an in-depth analysis of cash flow, net debt, and liquidity.

It is the most significant slide since it signifies our ability to reduce debt while returning value to shareholders through dividends. As we saw before, net debt went down by €43 million versus December 2020, and €49 million versus December 2019.

The cash leverage down to 1.6, which signify that we are fully on track with our long-term goal to keep leverages under control. These outstanding results stemming from strong operating cash flow, which grew versus last year, commonly on the back of IGA EBITDA.

Working capital, with generating cash €49 million, thus topping an all-time high, mainly driven by containment of receivables, which weighed on sales went down by 4% versus 4.9% in 2020, and 4.7% in 2019 and high contribution of payables more than upsetting this spiking in revenues. As expected, capital expenditure was significantly higher than last year, plus €14 million, driven by [Indiscernible] focus on new global launches.

This trend is consistent with our multi-year approach discussed in previous conference calls. Change in equity was higher than last year, mainly reflecting higher dividend paid for €39.6 million versus €32.9 million in 2020.

Lastly, as you can see in the slide, we have recently secured additional financing for €115 million that [Indiscernible] our maturity profile and leading the wait in average debt maturity to 2.7 years. Thank you.

Thank you, Alessandra. We are now ready to answer the questions you may have.

Thank you.

Good evening -- I'm sorry, good afternoon everyone and thanks for taking my questions. I got a few ones.

The first is on the EBITDA outlook. I know that you do not give the guidance but the consensus is pointing to strengthening to round €275.

I was wondering if you feel comfortable with this level as you should be able to offset wholly the raw material price increases and energy cost through price mix. Just a confirmation on this.

The second question is on APAC, may we project still double-digit growth for APAC area for 2022? The third one is on education.

Are you planning to launch any related vehicles in 2022? And the last, I'm sorry, is a housekeeping question, can we keep it the same tax rate for 2022?

Thank you very much.

Good afternoon. We have reached in 2021 a lower tax rate than the one we have shared with you on the conference call because we chose to organize all the -- just a moment.

I don't remember. The [Indiscernible] 104 of 2020 [Indiscernible] forms.

And these helped out to get these lowest tax rate than the 48% -- 38% but we're not going to use them. And but now we don't see, as I speak in our tax rate or so.

I believe that we work also for 2022 in debenture. 38, and we will find something new.

And some other opportunities we work for getting that in our figures.

Thank you.

[Indiscernible] Posting flat 2022, it's always exciting. Remember where we don't have new launch in 2022 of new electric vehicle.

We would work on our range of jobs also in 2022, but no something new this year.

Regarding the Asia expectations, as I say before, we are very positive in the Asian market. We see that to the performance of '21 was wider from the Southeast Asia and China and Thailand.

Now, we confirm the same positive trend for this country, but we believe, based on the -- to be confident that we are able to start with a new plant in Indonesia, to continue to sell in Indonesia by October, November, December. We expected big results because through our check for that market, we know that Vespa is very, very welcomed.

Bear in the fact that Indonesia has about 300 million people, we expect to have in Indonesia the same results from the market point of view that we get on [Indiscernible]. Naturally, this is based on our forecast to be [Indiscernible] production starter, and if we are a little bit delayed, we are to postpone the production starting.

But anyway, we are very, very confident that the Indonesia market should be a very nice surprise for the Piaggio Group.

What about your confidence on the current consensus? You expect that your price mix will continue to upset all the raw material prices increasing plus the energy cost?

Thank you.

I don't want to go into details because it's a very technical issue and it's a little bit complicated to explain just on the phone. But we have introduced in '21 a technical software production program in order to keep under control the quantity of the number of components that we use for each process.

And then we want to achieve the target to reduce the quantity of the raw material. And not to change in the quality naturally.

And the reduced scrapped through a better design of material that we use for each specific costs. The result of the wheel in '21 is very good to say this.

Even it's not definitely. We expect it to improve these systems on '22 and thank you for this system.

We hope to be able to keep under control material costs increasing. Fortunately, we're beginning to see, especially from the Asia supplier, that the price is not going up on the same way than for instance January last year.

They are beginning to be soft. Now, I cannot predict what we did [Indiscernible] on the low material, generally speaking, because this is impossible to predict.

But we we hope that through the territory system, organization, and especially to keep on the control the quantity of the products should be able to counterbalance the price increase.

Thank you very much, very useful. Thank you.

Hi. Good afternoon, everyone, and thank you for taking my question.

First one is on your CaPEX targets, so you mentioned earlier in 2021, some -- being around 460 million over -- between 2021 and 2023, the sale was 155 million with quite a big push on new product launch and everything since next year you see already in the end the delivery of the Indonesian factory and no new product launch, can we expect something less in terms of CaPEX in 2022 and in 2023 compared to 2021? That's my first question.

Then second question, on your gross margin for the quarter. Can you confirm that this figure was positively impacted by the 4 million of supplier one of costs that we saw in the third quarter, it's well reverse, and if so, can you give us a bit more detail on the whole different moving parts to a greater share of motor bikes compared to scooters in this quarter impacted your gross margin?

Thank you very much.

Raffaele Lupotto speaking. So we can confirm around €450 million of Capex in two years as we said before.

It is a [Indiscernible]. Then, there is a question concerning the growth margins and then [Indiscernible].

Yes, [Indiscernible]. We have to cover -- if you remember, we discussed that we have had in the third quarter a negative effect of €4.5 million for [Indiscernible].

And in the fourth quarter, we have record €3 million.

Thanks for [Indiscernible] I didn't quite understand your answer to Monica's question above the low tax rate in the fourth quarter of this year? Can you just come back on that and explain how come this tax rate was so low in the fourth quarter?

And what we can expect for next year?

The closing of any quarter is based on the tax rate used while the [Indiscernible] the companies. So normally, if you don't know some different things, you have to use the tax rate that you normally use for the [Indiscernible] in a multi-year plan.

So as I said in the other conference call, the 38% tax rate was the one that we have used for the budget of 2021. At the ending of the year, when you are preparing also the audit fiscal declaration, you are in strategy and/or [Indiscernible] during the year and you can consider averaging.

So as already said, we have used fiscal declaration of 2021 while the decree 104.2020 allowed for the Italian company for a realignment between the value of the [Indiscernible] and the fiscal value of some assets. We have used just like many other companies in Italy, and we should bring up this 1.7 less in the tax rate.

Yes. Good afternoon and thanks for taking my questions.

So the first one regards the Indian market. You said that you expect it to improve.

So I was wondering if you saw any improvement in registrations in [Indiscernible] in the first two months of the year, and if you can give us an idea of this recovery. I saw that in Q4 your sales were down heavily -- still heavily, and I'm wondering if there is any kind of structural problem because of the COVID-19 issue there I guess.

So any color, any number on expectations on India for both the three and 2-Wheelers would be very welcome.

As you know, India is a big country. It's got 1.5 billion people.

Its costs are crossing a terrible timing due to the virus -- pandemic problems. The pandemic problems today seem to be on the way to be solved.

I want to underline seems to be, because it's quite difficult to get exactly situation from the whole country of India. But we know for instance that the school, that until yesterday was closed, now is open.

The bank and to everybody are akin to work with the market. All the dealer shop, now is on the way to be re-opened.

Country sides, when you get into by three-wheeler, especially for work. This is a good sign that really notes we take in our experience in the last two months.

Trying to speak in the -- for me, but also for the people that work in India, it's too early to say that India's problems is over. Naturally, we are against the more [Indiscernible] time, and this can help a lot for all our culture problems.

Even though some of time is positive, this can help a lot the general situation of India. But naturally all depends from the situation of the riders.

We can say from a positive point of view that India is not involved in any war around the area. They have no problem with Pakistan, and they have no problem with the other countries.

They have the problem of the pandemic situation, and they had the problem out there, finance market that need to finance all the buying problem of the people. Never forget that the people -- a lot of people outside to agriculture area are working on transportation; transportation of people, transportation of goods.

The majority of this transportation is done by three-wheeler, and this is the first of that give us the positive sign regarding to go against a positive time. We need to await another one, two months ' time before to say definitely the India problem is over or not.

Naturally, worse than this cannot go on. So even this more positive sign is positive, and because the big number is very positive.

So keep your finger crossed and wait one month, and then we look how we go all the rest of the year.

Okay. Thank you very much, Mr.

Colamino. If I may just a couple of question to follow on.

On the free cash flow, where do you see the net financial position heading this year and what could be the role of working capital released €40 million to €50 million this year -- last year? So I was wondering if you can give a hand even in 2022.

Raffaele speaking. So what we can say is that we keep on working in order to reduce [Indiscernible] So this is the best answer to your question.

Thank you.

Thank you.

Yes good afternoon, everybody. Two questions from my side.

The first one is on the price mix in Western countries. After a very strong year 2021, what we should expect for 2022?

Even in terms of mix between the Scooter and Motorbikes in Europe. And the second one is just a quick comment on the current level of dealer’s stock in Europe.

Thank you.

So you can expect positive price mix also in 2022. Okay?

Okay.

This was the only question, right?

No, the other one was on the current level of dealer's stock in Europe.

Okay.

Just to have an idea.

The dealer stock, so -- is at the same level of the end of 2019, but the ratio of dealer’s stock compared to total sales or total demand is really lower. So still down compared to 2019 if you consider these ratios.

Okay?

Okay. Thank you very much.

Okay. That might bring the call to an end.

Thank you very much for attending this meeting. As usual, if you need to have further clarification you can call me later, okay?

Thank you. Bye.