Release Date: March 04, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Piaggio & C. SpA (PGGCY) achieved its best-ever EBITDA margin percentage on net revenues in 2024.
• The company reported an increase in gross margin percentage to 29.2%.
• Piaggio & C. SpA (PGGCY) has successfully managed its productivity and cash flow generation.
• The company is launching its first-ever electric vehicle in April, indicating a move towards electrification.
• Piaggio & C. SpA (PGGCY) has a stable debt profile with a maturity of roughly four years, ensuring financial security.

Negative Points

• The company experienced a decline in revenue due to a destocking strategy, resulting in a EUR110 million impact.
• Debt levels have risen as a consequence of the destocking process.
• The Asian market, particularly China, remains challenging with flat or negative growth.
• High interest rates in the United States have negatively impacted the market.
• The European market is stagnant, affected by changes in Euro 5+ legislation and high interest rates.

Q & A Highlights

• Warning! GuruFocus has detected 7 Warning Signs with PGGCY.

Q: Can you elaborate on the destocking process and its impact on revenues in Western countries? How much of the lost revenue do you expect to recover in 2025? A: Michele Colaninno, CEO: The destocking process is largely complete, with 95% done in 2024. The remaining 5% is part of normal management. Revenue recovery in 2025 will depend on market growth. We expect some market share increase, but the destocking was necessary to maintain dealer profitability.

Q: What are your expectations for CapEx and free cash flow generation in 2025? A: Michele Colaninno, CEO: CapEx will slightly decrease as we finish investments in Mandello Lario and electromobility in Italy. We are investing in technology and software to stay competitive. Free cash flow generation will be managed carefully, focusing on strategic investments.

Q: Are you planning to manufacture scooters in India for export to Europe? A: Michele Colaninno, CEO: We will localize production in India for the local market and some export markets, but not for Europe or the United States. Europe and the U.S. will continue to be supplied by our facilities in Italy.

Q: What feedback are you receiving from European dealers about Euro 5+ products and market conditions? A: Michele Colaninno, CEO: Dealers are satisfied with the Euro 5+ product range. The destocking process was necessary due to legislative changes and economic factors like inflation and interest rates. We expect stability in the European market, which is rich and offers good margins.

Q: What are your expectations for gross margin and inventory levels in 2025? A: Michele Colaninno, CEO: We aim to maintain the 29.2% gross margin achieved in 2024. We are working to reduce inventory levels, which were affected by logistics delays. We have taken measures to manage raw material prices and currency exchange rates to support margins.

Q: How is the premium segment performing in Southeast Asia, and what are your expectations? A: Michele Colaninno, CEO: The premium segment in Southeast Asia is stabilizing. We see potential for improvement in Indonesia, while China remains challenging. We are focusing on enhancing our brand visibility and value in the region, particularly with the Vespa brand.

Q: What improvements do you expect in 2025 compared to 2024? A: Michele Colaninno, CEO: We are focusing on increasing the top line. Achieving further EBITDA margin improvements will be challenging given the current economic situation, but we are working towards revenue growth.

Q: How is competition affecting your market position, particularly in Europe and Asia Pacific? A: Michele Colaninno, CEO: In Asia Pacific, we face low competition in the premium segment. In Europe, competition has been affected by some competitors' pricing strategies. We maintain our brand value and avoid low-price competition, focusing on our premium positioning.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.