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Edited Transcript of PIA.MI earnings conference call or presentation 26-Feb-20 1:00pm GMT

Full Year 2019 Piaggio & C SpA Earnings Call

Pontedera, Pisa Mar 9, 2020 (Thomson StreetEvents) -- Edited Transcript of Piaggio & C SpA earnings conference call or presentation Wednesday, February 26, 2020 at 1:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Alessandra Simonotto

Piaggio & C. SpA - CFO

* Raffaele Lupotto

Piaggio & C. SpA - EVP of IR

* Roberto Colaninno

Piaggio & C. SpA - Chairman & CEO

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Conference Call Participants

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* Emanuele Gallazzi

Equita SIM S.p.A., Research Division - Research Analyst

* François Robillard

Intermonte SIM S.p.A., Research Division - Research Analyst

* Gabriele Gambarova

Banca Akros S.p.A., Research Division - Analyst

* Massimiliano Vecchio

Unione di Banche Italiane S.p.A., Research Division - Senior Analyst

* Michele Baldelli

Exane BNP Paribas, Research Division - VP of Equity Research of Italian Mid Cap

* Monica Bosio

Banca IMI SpA, Research Division - Research Analyst

* Niccolò Guido Storer

Kepler Cheuvreux, Research Division - Equity Research Analyst

* Renato Gargiulo

Fidentiis Equities S.V.S.A., Research Division - Analyst

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Presentation

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Operator [1]

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Good day, and welcome to the Piaggio Full Year 2019 Financial Results Conference Call.

(Operator Instructions)

Mr. Raffaele Lupotto, Executive Vice President, Head of Investor Relations, is going to chair the meeting. Go ahead.

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Raffaele Lupotto, Piaggio & C. SpA - EVP of IR [2]

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Yes. Hello. Thank you. Thank you very much for taking your time to follow this conference call on Piaggio Full Year 2019 Financial Results. Today's conference call will be hosted by Mr. Roberto Colaninno, Piaggio Chairman and Chief Executive Officer; and by Mrs. Alessandra Simonotto, Piaggio Group chief Financial Officer; and myself.

All the available materials are available in the Investors section of Piaggio Group website. At the end of the presentation, as we said before, we will be available to answer the questions you may have.

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's events.

By their nature, forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to be materially different. Finally, 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 call to our Chairman and Chief Executive Officer, Mr. Roberto Colaninno.

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Roberto Colaninno, Piaggio & C. SpA - Chairman & CEO [3]

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So good afternoon, everybody. First of all, I would like to start the call, giving our view on the next month, and at the same time, clear on how we manage our production activity. In Piaggio Group, we adopt a production plan system used to forecast our production needs for the following 4 months. Namely for two-wheeler, the plan is deployed for 3 areas, EMEA and Americas, India and Asia Pacific, and China. For light commercial vehicles, the plan is deployed for 2 areas, EMEA, India and the country where India developed on these exports.

With this plan -- having all that in mind, today, we have a clear view on our supplier need for the next 4 months, and I'm very glad to say that we don't see any material negative effect on our production and sales 'til the end of April and May. According to the information we had at the beginning of this week, 100% of our Chinese supplier has already reopened the facility, all confirming their delivery time.

Similarly, all the Italian supplier are not experiencing any production issue, also that they -- in the -- also the very few suppliers which are headquartered in the focus area of the virus outbreak, (inaudible). In fact, they have no inventory to meet our need and the components for several months, and they will operate also with the facility located in all other regions.

On top of our production plan, we have an order to speed up the procuring process, especially from Asia and the Southeast Asia. We have put in place a plan to replace maritime shipping with train shipping or just as needed to air shipping. If we look at our next production launch, I can confirm that we don't see any issue at this moment, both for light commercial vehicle and two-wheeler. Vehicle developed together with Foton are still expected to be launched at the end of 2020, and as stated in the prior conference call. Similarly, we don't foresee any delay in the launch of new bike and scooter.

In these regards, I'm glad to announce you that the new [Aprilia SXR] recently presented on India has received an extremely positive welcome from the market, so strong that we have already received a request to open around 80 dealers on top of what we have today. Shop to sell this new vehicle started from September 2020. If we look at demand trends and our sales by geographic area, the first 2 months have been very positive. We expect it to be a positive trend to be confirmed for the whole first quarter 2020. In our market, demand is very strong, and we have already received all of two-wheeler to meet our first quarter budget target that is above 2011 -- 2019 level.

Some positive trend for two-wheeler Asia where we expected volume and revenue on the -- versus to the first quarter of 2019. In India, we are successfully finishing the passage from Bharat IV to Bharat VI, that corresponded to Euro 4 to Euro 5. And recently, we have also successfully launched the Ape E-city and before presented the new Aprilia SXR . Despite that, the overall volume, both for light commercial vehicle and two-wheeler in India, will be lower than the first quarter of 2019, affected by the expected demand weakness ahead of introduction of our Bharat VI but there is no news because this trend is widely expected by local producer and financial market. To sum up, we expected to the end of the first quarter 2020 with results in line with the same period of 2019 that has been already the best first quarter on the record.

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Raffaele Lupotto, Piaggio & C. SpA - EVP of IR [4]

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Thank you. Now I hand over the call to Mrs. Alessandra Simonotto, and we can saw -- see the lines that you have found on the website.

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Alessandra Simonotto, Piaggio & C. SpA - CFO [5]

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Thank you, Raffaele. Good afternoon to everybody. In order to make our (inaudible), I will concentrate only on a few important points. I'm glad to start with -- the call with some slides that summarize the great strides made by the company in the last years in the pursuit towards improvement of operational and financial performance. If you take a look to Page 4, you can see 2019 was another extraordinary year despite the persistent weakness in India, which represents one of Piaggio key markets. As you can see, the key point under core [end line] line is cash generation, which is our top priority.

We have been able to generate EUR 73 million of free cash flow, the best result into the date despite a significant step-up in capital expenditure. From the cash generations passed down the ratio net debt on EBITDA to 1.9 (sic) [12.9]. Another step in the long-lasting path towards company's deleveraging. This outstanding performance stemmed from the strong improvement of all key operating metrics. Net sales went up 9.5%, the highest growth rate to date with all geographies positively contributing.

Operating margin rose significantly, notably with the EBITDA reaching the best absolute result in percentage margin today. EPS grew 29.8%, the best performance over the last 11 years.

On Page 5, you have a picture of the medium-term dynamic. Since 2013, when the European two-wheeler market demand reached the trough, the group steadily improved all key financial metrics, start improving the ability to cut the cost base whilst retaining the ability to grow, enhancing mix and increasing efficiency. Noteworthy in 2019, we added another milestone to our journey of solid and profitable growth with European scooter demand still 50% below 2007 level. This gives you a sense of the magnitude of the result, I believe, the achievable, with improved demand driven by the replacement cycle.

Additionally, as you can see at -- on Page 6, these strong results has -- have been achieved leveraging some key brands, all delivering outstanding results. Notably Vespa and Moto Guzzi achieved the best results since IPO.

Let's move to Page 7, on which we summarize our industry's demand trends in a nutshell. Europe demand posted healthy growth, suggesting that the longer weighted replacement cycle is well underway. While Asia grew, lost steam across the year, and India demand kept declining, dragged down by multiple external shocks coupled with the first negative effect linked to the introduction of Bharat VI engine.

Let's move to -- now to Page 8 to have an in-depth analysis of trend by business.

As said before, revenues grew at the fastest rate to date, 9.5% or 7.7% in constant currency. This performance stemmed from cyclonized growth in all cash-generating units and in all businesses. Looking at the gap between volumes and revenues trends, you can notice that the key driver of growth has been the stronger positive price/mix effect in all geographic areas and all business segments. This effect has been driven by our strict pricing policy coupled with our ability to pursue cost with selective price increases, leveraging the strong appeal of our brand.

Looking more closely at the performance by geographic area, India revenues grew despite the negative volume trend, also benefiting from a positive demand upswing in the latter part of the year. Asia Pacific confirmed strong momentum across the year, posting strong growth, boosting volumes and revenues. Growth keep on growing strength from the outstanding performance of Indonesia, Thailand and China, all with revenue surging more than 40%.

I would like to spend more time commenting on the positive performance in two-wheeler, EMEA and Americas. As highlighted in last conference call, in Europe, our retail sales grew broadly in line with market demand trend, while the lower trend of our selling volumes, showed on the slide, was driven by actions aiming at curbing dealer stock. Despite that, revenues in the area grew around 8% behind the positive contribution of all major countries and stronger positive mix effect.

Lastly, EMEA and the Americas, light commercial vehicles kept on posting sound results with synchronized growth of European and export sales.

Let's move now on to Page 9 to look at the breakdown of the performance by product. As I said before, revenue growth stem from all product segments. As highlighted before, both bike and scooters revenue growth has been boosted by strong plans, bike's outstanding performance has been mainly driven by Moto Guzzi, which revenues surged by 79%. Aprilia bikes reported good performance too, ending the year with volume and revenues on the rise. Scooter stepped on benefiting from the healthy performance of Vespa and MP3 as we saw before in the presentation.

Let's move now to Page 10 to have a look at the EBITDA bridge. As said before, EBITDA grew by 13%, reaching EUR 228 million and margin on sale at 15%, both representing an all-time peak. This outstanding result was driven by healthy gross margin performance. In fact, excluding the currency effect, the percentage gross margin would have been 30.3%, broadly in line with last year. Notably, as you can see in the chart, the strong improvement of net sales has largely offset the negligible negative mix effect. Cash operating expenses ended up versus prior year, reflecting high net effort to support new initiatives, helping marketing expansion and upfront costs for new product development.

Moving to Slide 11. We can see the net result, ex IFRS 16, surged 30%, reaching EUR 47 million despite higher D&A, which has been inflated by the write-down of some assets.

I will skip now Page 12 that summarize the figures. We have just discussed to move directly to Page 13 to have an in-depth analysis of cash and net debt.

In my opinion, the most significant slide as it specify our ability to reduce debt whilst returning value to shareholders through dividends and buybacks. In detail, operating cash flow grew versus last year, primarily on the back of our EBITDA. Working capital cash generation reached an all-time peak, mainly driven by lower inventories, positive contribution of EUR 9 million crawling, higher contribution on payables, positive contribution of EUR 45 million crawling, while we have been reduced receivables despite had ideal revenues. Positive contribution, EUR 9 million rolling while keeping factoring broadly in line with prior year. Capital expenditure was significantly higher than last year, plus EUR 26 million, driven by heightened focus on new product launches and need to develop new engines to fulfill new emission standards, both in India and in Europe.

Lastly, change in equity was higher than last year, mainly reflecting higher dividend paid. As a result, we produced $73 million of free cash flow, which passed the adjusted net debt ex-IFRS 16 at EUR 409 million.

On Page 14, we have a picture of the CapEx evolution since the company has been listed. You can notice there have been 2 sides in CapEx, driven by opposite purposes. The former driven by the need to open up new plants in Asia to fuel [locker] grow, the latter linked to the strong push on the introduction of brand new products, technologies and engine. Also to comply with the new framework of our regulation standards.

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Raffaele Lupotto, Piaggio & C. SpA - EVP of IR [6]

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Thank you. Okay. So now we are ready to answer the questions you may have. So we are waiting for your questions. Thank you.

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Questions and Answers

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Operator [1]

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(Operator Instructions)

The first question is from Monica Bosio with IMI Intesa Sanpaolo.

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Monica Bosio, Banca IMI SpA, Research Division - Research Analyst [2]

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Yes, the first one is, first of all, thanks for the highlights on the fourth quarter. Looking at the entire 2020, can you just help us to figure out the volume trend by regions? And the pricing impact by regions because in 2019, the volumes in EMEA grew by just 2.4% because of the destocking. Now the destocking is over, I would like to know what do you expect for Europe in 2020 and also for the other areas? -- also in terms of price effect. The second question is on India. It seems that the government will launch a scrappage incentives plan for the scooters. Can you give us just some -- your feeling? And what do you expect from this? And very last question is on Vespa. Revenues increased by 7%. Can you just give us the volumes update on Vespa? And how much is the Vespa in Europe?

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Raffaele Lupotto, Piaggio & C. SpA - EVP of IR [3]

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Yes, Monica, Raffaele answering. So I will start from the very end. So Vespa sold, last year, across the world, well above 200,000 units in between 200,000 and 210,000 units, with total revenues that are quite important in the region. More than EUR 400 million of Vespa sold last year. Then going through the -- so you can get something between EUR 400 million and EUR 450 million of revenues. Going to the Indian government vehicle scrappage incentive. So what we know is that this scrappage policy is in its final stages, and they're waiting for the final clearance of the union cabinet as stated recently by the Financial Minister, okay, according to this news, it seems that the commercial vehicles older than 15 years, with this (inaudible) vehicle eligible for scrapping. That means that if you give back on all vehicles, you will receive a sort of discount or lower fees when you will purchase any one. But this is what we can't see on the price, and we are still waiting for the final decision. If these will be decided and the scrappage incentives will be developed as expected, clearly, that will help the market, and above all, the market starting from April when the introduction of the Bharat VI vehicle will be compulsory. So maybe that will revert the market trend -- the negative market trend that we have seen now.

It seems that the final decision is very -- will be taken very, very soon. So this is what we know, okay? Then in terms of our launch, we gave and our CEO gave you the trend with an in-depth analysis of the trend by geographic area for Q1 and even more because we said that we have enough capacity to serve our markets until at the end of April, also May, I would say. So this is what we can say in terms of trend by geographic areas. The only thing that we can add is -- and then -- I don't know if I understood well, your question is that, clearly, going back to Europe, and as said by the CEO, the two-wheeler market started in an amazing way in Europe, not just in January, also February. So across Europe, the market went up around 15% in -- or even more in January.

The trend is confirmed so far in February, with all European countries having a positive market trend, namely in over 50cc scooter and motorbikes. And some countries, above all, are very strong also in February, such as France, Italy and Spain, in some cases also topping 20%, 25% growth. So which is the situation and what we think about the European market and the replacement cycle that should be the real driver of growth going forward. Then, sorry, I missed one question, I don't remember, which is the other question?

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Monica Bosio, Banca IMI SpA, Research Division - Research Analyst [4]

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Yes. Basically, the price effect. And I know that the market in Europe is -- has started very well. I was just wondering what do you expect for your volumes because the destocking process is over, and now you should perform in line with the market.

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Raffaele Lupotto, Piaggio & C. SpA - EVP of IR [5]

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We can't give a guidance in terms of volume. So you know what we -- do we see Europe on top of this replacement cycle? Long lasting replacement cycle is the fact that we are just one year ahead of the introduction of the Euro 5 engine vehicles. So probably with the ease of the market, we'll see at the end of the year, the classical prebuying demand upswing, and this is what we can see.

Normally, in India (inaudible) or if you go back in 2017, 2018, the previous price effect is not very high. So it's more volume, less the price. The only thing I can add for other regions is -- in India, you can see just looking at our website, all the producers increasing price -- are increasing prices significantly just to cope with the cost increase with Bharat VI vehicles. But again, you can see the level of price increase and just looking on the different website or different producers. And then although 1 second...

Yes, and then as said by the CEO, clearly in Asia, we are foreseeing our Q1 trend positive. And we have good expectations for free on a full year basis. So the trend is good. Keep in mind that both in India and in Asia, we are delivering well, and we are also launching our dealer network. So this is going to describe our growth in these areas. There is a few that want to ask -- want to understand.

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Roberto Colaninno, Piaggio & C. SpA - Chairman & CEO [6]

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How is your market there? What is very positive? Is the trend on Thailand market, on the -- and the Indonesian market and China market. Despite the market in China is very few quantity of scooters but they said that the price is very good and very profitable in these areas. So the news that we have -- from Asia in that -- on a total market, including India for 2020 is very positive.

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Operator [7]

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The next question is from Francois Robillard with Intermonte.

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François Robillard, Intermonte SIM S.p.A., Research Division - Research Analyst [8]

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So first one is on the tax rate. You had the recent use flow on the new finance loan in India scrapping basically another corporate tax rate for foreign company. How does it affect your view for tax rate guidance for 2020 onwards? Then another question is on the CapEx spike, I recall that guidance for CapEx for 2019 was EUR 130 million, EUR 135 million and came in at EUR 141 million. Can you explain us why such a spike in the fourth quarter? And then finally, on European volumes, at the end of 2020 will also be the end of the Euro 4 model? Do you expect some spike in sales by year-end as it was the case in 2016 for your 3D models? And do you expect to benefit from that?

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Alessandra Simonotto, Piaggio & C. SpA - CFO [9]

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First of all, the tax rate in India. We believe that clearly, the impact is positive and will be positive in 2020. We are working to reduce the tax rate in 2020, even if it is too early in this moment to give you a specific target. So you have seen that we have met the target ever I talked before in the conference call in October. So we talk about 42%, and this is what we have reached at the end of 2019. We've been working on the same -- on this target for 2020, but it's too early to see -- to say something about this big target for the year.

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Raffaele Lupotto, Piaggio & C. SpA - EVP of IR [10]

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Yes. And as far as the European market is concerned, if I remember what was your question, clearly, yes, in terms of retail market, so sell out probably at the end of this year, 2020, there will be a spike from sales(inaudible) because people will tend to buy all the -- maybe Euro 4 vehicles. Yes, so there is also here with me, the Head of the European says that he is confirming that. So this is a trend that we expect. And on CapEx, despite adjusting to new introduction of new engine and new vehicles, essentially, what you can call a normal in the financial community, we call maintenance CapEx is very low -- has been very low.

So I remind you that we have introduced -- we have introduced a brand new engine in India, brand-new engine already this year in Europe. Several new scooter and motorbikes in Europe, in India. So a lot on the product, and we are enlarging and sensing our product lineup. And then keep in mind that also, we are working strongly in India because we introduced a full range of new Bharat VI vehicle. New vehicle will come into the market with different engine maybe. And also, we are in the final step or final stage of the development of the new 4-wheeler vehicle with our -- with the Foton company in China. And so there is the last step of CapEx and then you will see the outcome at the end of 2020. So that's the real reason behind the spike in capital expenditure. So need to comply with our new regulation standard and deliver the strategy to integrate force and strengthening the product lineup. I don't know if it's clear or not.

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François Robillard, Intermonte SIM S.p.A., Research Division - Research Analyst [11]

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Just a quick follow-up. So for Europe, for sale, it's clear that you expect something on sell-out. But on sell-in -- I didn't get if you expect a net positive impact for you on sell-in. And on CapEx, what are your expectations -- will be for 2020?

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Raffaele Lupotto, Piaggio & C. SpA - EVP of IR [12]

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Yes. No, first of all, for selling, as we said, and as you have said, already Q1 start in a very good way. We are in a very volatile year. Clearly, not taking on account-- (inaudible) taking after this coronavirus affect will last not so longer. Clearly, the trend of the market should be forcing of sell-in data should be positive, clearly. So you will have maybe mid-single digit or even more growth in term of selling this year in Europe.

CapEx in 2020, we don't give a clear guidance. We just show you that in the slide that probably the level of Capex, will remain -- in absolute terms, high, in relative terms compared to revenues, lower than maybe this year. So if it -- this is the only thing we can say right now. Thank you.

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Operator [13]

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The next question is from [Renato Deloitte] with (inaudible).

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Unidentified Analyst, [14]

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My first question is on India. I was wondering if you can provide us any indication about your expected price impact this year. Also given the shift to the new Bharat VI engines? Second question is on Europe. If you can just remind us or if any update about your current utilization rate or your production capacity in Europe, given your projections on volumes for this year? And last one, a quick one just on Vespa Elettrica, you can give us as any update about our how things are going?

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Raffaele Lupotto, Piaggio & C. SpA - EVP of IR [15]

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So starting with the last question, on Vespa Elettrica, yes. So the -- we launched the Vespa Elettrica in -- at the end of 2018. We had a medium-term target of around 3,000 units and it is exactly the target that we achieved. So also, there has been a good answer for the new Vespa Elettrica that can reach 70 kilometers per hour. So we launched the product just in November, and sold probably more than 500 units. So they're satisfied.

And going back to production capacity. We don't disclose the capacity in Europe. Imagine that we have enough capacity to follow the market for several years. Again, it may be that was also the sense of the slide that I had at the end of the presentation. In terms of capital expenditure for clients, everything has been done. So we had enough capacity in Europe, in Asia and in India to follow the medium-term market trend or market dynamic we see.

Then there was the other question on -- sorry?

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Unidentified Analyst, [16]

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On India...

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Raffaele Lupotto, Piaggio & C. SpA - EVP of IR [17]

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On India. So as I was saying before, if you look on the -- there are specific website, you see that everybody in two-wheeler sector is increasing prices between 15% and 25% in some cases. So they are on website. And the -- similar thing in -- for the commercial vehicles. It depends on the kind of engine, price increase will be higher. We've seen some competitors for diesel engine and less for better engine. Consider it as a rule of thumb in between 10%, 25%. I know that the range is a wide range, but consider it as a rule of thumb. So these are price increase that you can find on website. Okay. And then you can guess what we are doing in the future.

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Unidentified Analyst, [18]

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Okay. If I may, just a very, very quick follow-up on the quarter, on the last quarter of the year, I see around EUR 2 million of write-downs. Can you give us an indication about what's inside?

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Alessandra Simonotto, Piaggio & C. SpA - CFO [19]

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More or less, it's something normal in our lives. As you know, we have to define if something is -- to scrapping. And this is what we have done this year.

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Operator [20]

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The next question is from Emanuele Gallazzi with Equita.

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Emanuele Gallazzi, Equita SIM S.p.A., Research Division - Research Analyst [21]

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I have a couple of questions. Well, the first one is on the EBITDA. If you can share with us your expectation for 2020? And the second one is on the project with Foton. You confirmed the timetable, but I was wondering if you could give us an update about this project and your expectations, let's say, for 2020 and maybe 2021?

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Raffaele Lupotto, Piaggio & C. SpA - EVP of IR [22]

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As for EBITDA, unfortunately, this is a particular year so we don't give a guidance in terms of EBITDA, I'm sorry, for that. So we gave you the idea of the trend, what we have achieved in Q1, which are sort of expanded trends by geographical, but we don't give a guidance as far as now for the full year. It is also normal because normally we don't give a guidance in February, we wait at least 'til Q1 to give a specific guidance in terms of EBITDA.

As far as Foton, yes, we answered before, everything is on track. We are not experiencing any problem there. In the past, as the CEO said in prior conference call, we said that we aim at launching the new product at the end of 2020. And so far, this is what we can confirm. So there are no news or good news, if you want for Foton.

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Operator [23]

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The next question is from Massimiliano Vecchio with UBI Banca.

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Massimiliano Vecchio, Unione di Banche Italiane S.p.A., Research Division - Senior Analyst [24]

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My first question is on the net working capital. You had a very strong performance in 2019, strong cash generation despite revenues going up. You're ending the year with [very good] inventories. I was wondering if you can help us understand what should happen in 2020 and some drivers on how we can model this item. Second question is on the new model launches, you mentioned that several times during the conference call. I was wondering if you can give us the top 2 or 3 models that you will launch this year and also the timing of these launches?

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Raffaele Lupotto, Piaggio & C. SpA - EVP of IR [25]

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Yes. Yes, so in terms of product launches, clearly, the bright spot for this year will be the launch of the Aprilia 660 that we showed so during the last motor show in Milan in November. So we can't wait to launch the product. Then we just launched, as you know, the new brand-new Medley. We will be launching the -- some [model year] vehicles. And then in India, as I was mentioning before, and the CEO was mentioning before, we just presented the new [Aprilia SXR] and the market has felt very, very well. So as we said, there are people ready to open up to 80 point of sales, just to be ready to sell these new vehicles in India. In India, too, we have just launched the Ape E-city elettrica, with swappable batteries. Maybe that we are -- we will be launching something, again, electric in that field in India during the year -- across the year.

On top of that, some other vehicles, which are the range in India for (inaudible). So we are enforcing our proven (inaudible) from a commercial vehicle.

And then as you -- I was mentioning before, the new product has been developed together with Foton. So it is for...

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Massimiliano Vecchio, Unione di Banche Italiane S.p.A., Research Division - Senior Analyst [26]

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(inaudible) 650? Can you -- the timing is right now, I guess, if I understand correctly?

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Raffaele Lupotto, Piaggio & C. SpA - EVP of IR [27]

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Probably, yes, it will be the -- September -- probably will be available for customers. You can try it maybe in May when there is a bigger gateway in Mugello but then maybe to wait until September to buy the vehicle in the -- in our dealer network, yes.

So -- and then, that's it, Massimiliano? Probably something else? No.

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Massimiliano Vecchio, Unione di Banche Italiane S.p.A., Research Division - Senior Analyst [28]

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The net working capital, if you can help us?

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Raffaele Lupotto, Piaggio & C. SpA - EVP of IR [29]

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Yes, net working capital. It has [been possible]. You want detail about the net working capital in 2019 or to have an overview in 2020, it will be?

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Massimiliano Vecchio, Unione di Banche Italiane S.p.A., Research Division - Senior Analyst [30]

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2020, and...

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Raffaele Lupotto, Piaggio & C. SpA - EVP of IR [31]

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Do you know how our working capital works, so it's always a delta versus prior year. We reached the best EBIT cash generation with the working capital in 2019. It's impossible to reach the same level in 2020, I would say. Clearly, probably, we aim at creating, again, cash with working capital with a lower extent. So you can squeeze the receivables or inventories continuously. So it's always a delta versus prior year gain to keep on generating cash through working capital.

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Massimiliano Vecchio, Unione di Banche Italiane S.p.A., Research Division - Senior Analyst [32]

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Sorry, [in France], you will still generate some cash in 2020 and (inaudible)?

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Raffaele Lupotto, Piaggio & C. SpA - EVP of IR [33]

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Yes. Yes.

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Roberto Colaninno, Piaggio & C. SpA - Chairman & CEO [34]

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Absolutely.

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Raffaele Lupotto, Piaggio & C. SpA - EVP of IR [35]

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Yes.

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Massimiliano Vecchio, Unione di Banche Italiane S.p.A., Research Division - Senior Analyst [36]

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But there was no (inaudible).

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Raffaele Lupotto, Piaggio & C. SpA - EVP of IR [37]

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Not that there isn't any expense. Maybe, you're looking at something between EUR 20 million, that would be our best guess now, and we'd be very lucky.

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Massimiliano Vecchio, Unione di Banche Italiane S.p.A., Research Division - Senior Analyst [38]

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Okay. So there was nothing extraordinary, let's say, in 2019. It was...

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Raffaele Lupotto, Piaggio & C. SpA - EVP of IR [39]

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In terms of working capital? No. Probably not because it's always a delta compared to prior year. So it very difficult to achieve a record level in one year to go and to squeeze even more -- some items such as the receivables and inventories.

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Massimiliano Vecchio, Unione di Banche Italiane S.p.A., Research Division - Senior Analyst [40]

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Okay. So you're happy with the current level of inventory that you have and the dealers have?

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Raffaele Lupotto, Piaggio & C. SpA - EVP of IR [41]

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You can work on that because there are differences between geographic areas, and namely, clearly, in the -- what we call DSO. So we, for example, we reduced the DSO in Europe last year. So we are working -- there are spaces for more efficiency, but this is what we can do. We can forecast announce.

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Operator [42]

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The next question is from Niccolò Storer with Kepler.

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Niccolò Guido Storer, Kepler Cheuvreux, Research Division - Equity Research Analyst [43]

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The first one is on 2019 volumes. If you could help us understanding the breakdown, in particular in Southeast Asia among the main countries, so Vietnam, Thailand and Indonesia, and also in Western country between Europe and North America? And the second one is on pricing effect in Western countries, 2019. If you can tell us how much of the, around 6% is attributable to volume, to mix and how much to pricing, and which are the drivers that you've seeing for current year?

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Raffaele Lupotto, Piaggio & C. SpA - EVP of IR [44]

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Sorry, when -- the breakdown is for 2019. I mean, Asia in...

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Niccolò Guido Storer, Kepler Cheuvreux, Research Division - Equity Research Analyst [45]

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'19.

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Raffaele Lupotto, Piaggio & C. SpA - EVP of IR [46]

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'19?

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Niccolò Guido Storer, Kepler Cheuvreux, Research Division - Equity Research Analyst [47]

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'19, yes.

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Raffaele Lupotto, Piaggio & C. SpA - EVP of IR [48]

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Yes, roughly, because we don't disclose the numbers. So we can just say that everything press release and the -- on the slide, that there has been some countries performing very, very well, Indonesia, Thailand and China, namely. That is -- putting all together, these countries probably have a size that is higher than Vietnam, but that's it. So we can't disclose anymore. In terms of Western countries, on the contrary, we can give you the number of North America because it will be disclosed also in our annual report.

So we saw in North America, around 11,000 two-wheeler and the remaining part are EMEA, what we call the domestic Europe plus North Africa and other countries. So -- And this is the reason, in this case, it's something that is disclosed, and we can give you. That's it. Then the price/mix effect. We said probably during the speech also, it's mainly mix effect and then pricing. Both were positive in Europe last year. More mix is very easy to understand why because we have been extremely successful with some motorbikes that have an average selling price higher than scooter, namely the Moto Guzzi V85. We saw more than 6,000 units of this vehicle, and as you've seen, we reached the best results ever in terms of volumes and revenues from Moto Guzzi V85. So the mix effect has been the main part of the effect. And then there's been also good pricing with some good products such as Vespa and the -- for MP3, but a lower effect.

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Niccolò Guido Storer, Kepler Cheuvreux, Research Division - Equity Research Analyst [49]

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It's -- I mean it's reasonable assuming that in 2020, this mix effect would be probably a bit lower?

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Raffaele Lupotto, Piaggio & C. SpA - EVP of IR [50]

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Lower, yes, because the debt impact that can be -- maybe, yes. Maybe -- yes. Yes.

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Operator [51]

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The next question is from Michele Baldelli with Exane BNP Paribas.

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Michele Baldelli, Exane BNP Paribas, Research Division - VP of Equity Research of Italian Mid Cap [52]

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I've got a couple of them, mostly focusing on balance sheet. First one is about the reverse factoring, if you can give us the amount of the reverse factoring and also the direct factoring on the receivables side? The second one is a curiosity about the fact that the parent company is giving loans that's, let's say, detail on the cash flow statement loans given. I was wondering if these loans given are to the Piaggio Fast forward initiative?

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Alessandra Simonotto, Piaggio & C. SpA - CFO [53]

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So about the reverse factoring, so the factoring on payables, the amount at the end of 2019 was around EUR 198 million, EUR 16 million about September 2019. More importantly, that weight of the reverse factoring on total payments remains stable, so 38% in 2019. About the factoring on receivables, it was around EUR 100 million, EUR 13 million more than in December 2018. And this reflects higher revenues, in fact the weight on revenues remained pretty much stable at around 6%.

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Raffaele Lupotto, Piaggio & C. SpA - EVP of IR [54]

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And then maybe we can elaborate later because we have understood very well the second question. So sorry, for conversational sake, we will go on with the conference call. Okay?

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Operator [55]

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The next question is from Gabriele Gambarova with Banca Akros.

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Gabriele Gambarova, Banca Akros S.p.A., Research Division - Analyst [56]

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Just a couple of questions, (inaudible). One was on this new [Aprilia] model you launched -- you are launching on the Indian market. Can you give me some more details on the positioning of the kind of vehicle? And the second one was on Moto Guzzi. Is it possible to know how many bikes you sold in 2019?

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Raffaele Lupotto, Piaggio & C. SpA - EVP of IR [57]

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Yes, Moto Guzzi were around 11,000 vehicles. So in terms of volumes, it is the best results ever. As far as the new [Aprilia SXR] , we'll be pricing between the normal Aprilia SXR and the Vespa scooter, and all these scooters have a premium price in the market. So well above competitors. So we still -- we are adding a vehicle in the premium part of the market. So this is what we can see.

Again, looking at website, you can see that actual room on buy price, we have the Vespa that can receive an INR 130,000, INR 140,000, the Vespa -- the Aprilia SXR will be something lower, but something above the -- close to INR 100,000, at which we have sold in the Aprilia SR 125, something in between.

In the -- the kind of the clients and more also the target is always the same.

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Gabriele Gambarova, Banca Akros S.p.A., Research Division - Analyst [58]

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Okay. And do you think you will grow in terms of volumes there, thanks to both new dealerships, new models? What is the sentiment on the Indian two-wheeler?

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Raffaele Lupotto, Piaggio & C. SpA - EVP of IR [59]

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Absolutely. As Alessandra was underlining during the conference call, already last year, we achieved the best sell-out ever in India for 2 years, okay? So the sell-out, and not sell-in what we have seen in 2 years. Clearly, the aim is to grow the people, to keep on growing in India. As we said, we are also strengthening the dealer network. We are adding maybe 80 point of sales in the medium term just to launch -- to sell this product. So the aim is to keep on growing and to strengthening our positioning in the premium part of the market.

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Operator [60]

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The next question is a follow-up from Monica Bosio with IMI Intesa Sanpaolo.

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Monica Bosio, Banca IMI SpA, Research Division - Research Analyst [61]

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I was wondering if you can give us an idea of the electric to scooter market in Europe. Obviously, most is related to the sharing of the vehicles, but I was just wondering if you can give us some highlights on the private consumption, excluding the sharing operations?

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Raffaele Lupotto, Piaggio & C. SpA - EVP of IR [62]

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Yes, Monica, last year, the market has been in the region of 57,000 two-wheelers electric sold. So with a big jump versus prior year. But keep in mind, the main part of these electric two-wheelers were two-wheelers sold to scooter ranking companies who were happy to see around -- around -- we are estimating around 85% of the market was still -- 85% or so we are confirming here. So 85% of the market was just focused -- concentrated, sorry, in the B2B segment.

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Monica Bosio, Banca IMI SpA, Research Division - Research Analyst [63]

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B2B?

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Raffaele Lupotto, Piaggio & C. SpA - EVP of IR [64]

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B2B.

Monica, hold on. Yes, Vespa Elettrica is 7% market share in the total market.

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Monica Bosio, Banca IMI SpA, Research Division - Research Analyst [65]

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7%?

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Raffaele Lupotto, Piaggio & C. SpA - EVP of IR [66]

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Electric market. Really, B2C market. B2C market, not B2B, really.

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Operator [67]

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There is no question at the moment.

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Raffaele Lupotto, Piaggio & C. SpA - EVP of IR [68]

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Yes. So I think that we can...

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Operator [69]

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Excuse me, there is a follow-up from Renato Gargiulo from Fidentis.

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Renato Gargiulo, Fidentiis Equities S.V.S.A., Research Division - Analyst [70]

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Just a very quick one. Thank you for the clarification on coronavirus, I was wondering. So it's clear that you are not expecting any delay in shipments, et cetera, but can we expect any, let's say, extra cost looking to the first part of the year related to shipments? You were talking about replacing some maritime shipping with... et cetera?

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Raffaele Lupotto, Piaggio & C. SpA - EVP of IR [71]

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No. No, none additional cost as far as we know.

I think that now we can close the call. Thank you very much for attending this conference call. As usual, if you need more clarification, more information, and also Michele Baldelli, we'll try to answer your question, sorry. I'm available now, later and when you want, okay? Thank you. Bye-bye.

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Operator [72]

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The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.