2026.10.01 | TB | Auto | Rino Mastrotto: Auto Leather Restructuring

Analyst-led • 18 Sep 2026

Companies: PAH3 DE, VOW3 DE, BMW DE, 1913 HK, MBG DE, RR. GB

Mauro Viviani (MV) Independent Consultant

Yanmei Tang (YT) — Third Bridge Sector Analyst

Agenda

• 12-24-month automotive growth outlook and the importance of product diversification beyond traditional leather applications for Rino Mastrotto
• Innovation opportunities across seat surfaces, materials, geometry and increasingly complex interior designs
• Relative attractiveness of automotive vs luxury as the stronger medium-term growth engine
• Credibility of the 17-18% EBITDA margin recovery target, given energy inflation, raw material volatility and automotive programme economics

Key Insights

• Automotive demand is flat-to-down, with no meaningful inflection expected before late 2026 and potentially mid-2027, as European OEMs delay requests for quotation, cancel programmes and reduce planned volumes
• Automotive programme volumes have been cut materially, including a Rino Mastrotto programme by c30-40%, while European leather content has fallen c30% vs five years ago as OEMs shift towards textiles
• Expert believes Rino is competitively disadvantaged on pricing because raw hide acquisition costs represent 70-80% of production costs, yet its smaller scale prevents favourable purchasing terms
• Improving automotive penetration likely requires accepting lower margins on initial programmes – price drives 60-70% sourcing decisions, while established suppliers benefit from stronger OEM relationships and purchasing scale
• While luxury fashion offers higher pricing power and potential market share gains with Prada, Gucci and Louis Vuitton, volatile forecasting and structurally declining leather consumption mean growth might not fully offset automotive weakness

Introduction

YT [00:00:01]: Before we start today's Interview, could you please state I agree or I disagree to the following statement: You understand the definition of material non-public information and agree not to disclose any such information, or any other information which is confidential, during this Interview.

MV [00:00:26]: I agree.

YT [00:00:27]: A very warm welcome to Third Bridge's Interview entitled Rino Mastrotto – Automotive Restructuring, Sustainable Innovation & Margin Recovery. My name is Yanmei Tang, and I will be facilitating today's Interview with Mr Mauro Viviani, who is the former Sales Manager for Germany at Rino Mastrotto Group. Mauro, great to have you here with us. Very much looking forward to having a discussion on Rino Mastrotto and also the wider leather supply sector.

Could you give a brief introduction to your background?

MV [00:01:08]: I'm a multilingual textile engineer with more than 20 years of experience in international sales, focus on new acquisition and change management with, sure, we had always the time, the goal, no, I had the goal of profitability improvement, optimisation of process and quality, product development, new customer acquisition, what is my main field. Yes, saying that, of course, sales increase. I'm an expert around a brand and its products, hands-on experience in agile automotive companies in NAFTA and Europe. My industry knowledge is related to development and expansion of sales structures between suppliers, tiers and German OEMs, collaborative research and development between suppliers, tiers and OEMs, development process in the automotive industry from research through the pre-series to the series development. I have a lot of experience in production-oriented and midsized company as well as in global groups. I work for both, and sure, every time in the automotive industry. My last professional engagement was a Sales Manager in Germany for Rino Mastrotto. I was responsible for market growth, multigenerational product planning and brand recognition of Elmo, which is in Kyrkogatan near Gothenburg and Brusarosco leather in the German market.

Questions

00:03:05] How do you assess the current demand environment for Rino Mastrotto's automotive business? How do you expect it to evolve in the next 12-18 months?

MV [00:03:42]: Base case is a little bit poor. I need to say, it's flat to slightly down. Revenue already fell to 11.3% in Q1 '25 on a market described by management as, yes, it is volatile. A lot of programmes has been cancelled by the OEMs in Germany. They do not have really a phase-out, probably the problem is more at the phase-in for RMG. We do not see a catalyst for a demand inflection before, well, probably late 2026. At least at the earliest, I would assume it is more in the mid of '27.

YT [00:04:51]: You would expect the inflection point to come towards late 2026 or early 2027. Do you mean we'll see a bit of growth during this timeline?

MV [00:05:15]: If you're asking me how I would see the next 12-24 months, a growth, which probably is more on a really decent base, I would say, to see it earliest in the late '26, but I assume that it would be more in direction mid of 2027.

00:05:50] You mentioned that a lot of programmes have been cancelled. Are you referring to programmes that naturally came to an end of their contract, or to some of the programmes that Rino signed up for the future but have been cancelled?

MV [00:06:17]: That programme, which I won or I brought it to the company, Rino Mastrotto, this programme has been cut by probably 30-40%. I believe that other programmes there are probably, which is on the pipeline or was on the pipeline, has been cut because you know that the electric vehicle programmes, how can I say, are not bringing that revenue what probably the OEMs has expected. Therefore, they cut it out.

YT [00:07:20]: It's related to completely lost revenue for the future pipeline. It's not about any delays or shifts.

MV [00:07:31]: There are shiftings. There are delays. All this has also an impact on the growth for Rino Mastrotto, of course.

YT [00:08:17]: Different levels of volume lost with projects that you mentioned, is that more specific in any particular project, or is that quite broad-based across projects with OEMs?

MV [00:08:33]: They cut the volumes in all the programmes because the forecast, what was in '23 and probably until mid-end '24, there was not any stable or couldn't be any more stable for '25, '26, '27, '28 and '29. Therefore, the volumes has been cut. The market is not reflecting anymore that volumes, what they settled down in '22, '23 and '24. That's the reason why.

00:09:14] Is the volume loss already factored into the near-term projection you mentioned, and do you expect this impact to be more mid-to-long term?

MV [00:09:47]: It depends from which base are we, or which programme we are talking because if we're talking about the programme what they have won, I believe that the impact is now. If I remember correctly, the programme what we are talking now already started in production. This programme, yes, the volume has been cut by that amount, what I told you. What is in pipeline on the OEM side, that RFQs what they are working on are not closed because they are shifting the closing of the RFQs. They are shifting programmes. I believe that those programmes are not more in terms of volumes, in terms of percentage on leather consumption, are not reflecting that business case, which was in '24.

YT [00:11:43]: On that, you mentioned the dynamic with phasing-out of the programmes.

MV [00:11:55]: One is clear. They do not have any phase-out because they do not have started with programmes. They have started with one programme. This programme will be ending in '30-32. Then they have the first phase-out. I was engaged at that time, six years ago, and they do not have any market percentage here in Germany. Therefore, they do not have any phase-out.

YT [00:12:36]: Are you talking specifically about the German market?

MV [00:12:40]: Yes, exactly. German and European market. If you are talking about US market, probably, yes, there are some phase-out because I remember Chevrolet and SRT, they have some programme in the US and North America and then delivering from South America and Brazil. Probably there is a phase-out, yes. Concentrating on, or specifically viewing on the European business market because I remember at that time, RMG has a, how can I say that, is bought by Neuberger Berman, right, investment group. Then it was a clear goal to conquer the German market.

00:14:00] Rino and the industry have talked about a lot of RFQs [requests for quotation] and nomination activity over the last few quarters. How is that looking for the company?

MV [00:14:23]: The thing is, the market has a big, or is in a volatility phase at the moment. The consequence to that is that the RFQs has been shifted already, as I know, probably not that much. Mercedes-Benz a little bit, BMW a lot. They have cut also the leather until the 5 Series. Everything what is below the 5 Series leather has been cut, has been totally replaced by other textile. It is really hard to get a clear market overview from the OEMs at the moment.

00:15:31] Considering the European market, how much of the leather volume is actually replaced by other textiles?

MV [00:15:44]: It depends. OEM to OEM is a little bit different. On average, I would say, from 30-40%.

YT [00:15:59]: Compared to five years ago, the volume has been cut.

MV [00:16:04]: Yes. 40%, it's too much, but 30%, I would say 30%.

YT [00:16:20]: Given that, how well-positioned is Rino to capitalise on this shift? The OEMs that the company works for have a dynamic similar to what you mentioned regarding 30% replacement in terms of programmes or models, or are they more insulated from this shift?

MV [00:16:58]: The thing is that Rino Mastrotto, as they do not have any market coverage here in Germany, so it's hard to compare. I think that if you are asking if it is harder to get an RFQ and to win in programmes because the competitors are on the other side, losing money. Of course, they would like to recover with the OEMs because they have a much more longer relationship with the different OEMs when I talk about the other Mastrotto Group with Audi or, for instance, Pasubio, he is really sharp in the automotive industry on Porsche side. Then you need to compare it with what can they get from the market which has a shrinking moment nowadays.

00:18:29] How is Rino doing in terms of capitalising on the shift from leather to other textiles, if that's the trend?

MV [00:18:45]: How are they shifting? Yes, of course, the last nomination of winning Prada, which they have bought 10% for the luxury market on fashion side. Probably this could be a lever, which I do not see at the moment, but could be in the future, of course, and they can compensate a little bit.We see that probably you can compensate a little bit, but it is not the time speaking for a growth in terms of that they will have in the next one or two years, a growth in that area with automotive. Talking about only European and German market.

00:20:09] Considering other textiles are replacing leather for suppliers, how is Rino doing in terms of shifting its supply from leather to textiles, given the OEMs' need? I understand that the automotive sector is not growing for most of the suppliers.

MV [00:20:42]: They do not have any textile. They do not have any textile. They brought (inaudible 20.46) but they do not have nothing to do with automotive, as I know. They can't replace it. They can't recover the loss in the leather area with the textile because they do not have textile for the automotive industry.

00:21:14] Given the OEM dynamic that we discussed in terms of the projects allocated to companies such as Rino, are there any pricing dynamics that we should be aware of?

MV [00:21:30]: Yes, of course. If you look, the hides, for instance, it is clear number one of the risk. The industry is increasing the costs to 20-25%, what I have seen in the last two years. When we talk about labour costs, probably in Italy, it is not that high, but sure in Sweden, it could be a little bit more. Even the chemicals, the energy, logistics, that are all risk at the moment because they are rising, rising and rising.

YT [00:22:34]: Are OEMs able to take pricing to pass this cost increase?

MV [00:22:45]: Yes, I know that's a part of, also my job, whole life, yes. It's a really good question. The thing is that probably Rino Mastrotto on the market have more or less a weak position to request that money. Probably they have that capability in one or the other way, I doubt a little bit. Other leather supplier like Pasubio, the other Mastrotto Group, Dani at Audi, at Porsche and then so on, they probably a little bit more. They are stronger than Rino Mastrotto in that case.

00:23:41] Why are players such as Pasubio, better at passing on price increases while Rino cannot?

MV [00:23:53]: This is really a good question, too. The thing is that if you do not have a long-time relationship with one, two or all the OEMs in Germany and all around the world, the thing is that why they should give you money when I know that you have only one programme probably or two programmes? You are not that supplier in terms of you are delivering since many decades of years. You made money with us, and we are making money with you. Therefore, they are on a really weak position, I believe.

00:24:46] I understand Rino's auto division is facing challenges. It seems that the company is relatively small in terms of working with certain OEMs. Does it have any other significant growth opportunities? Do you think the division will slowly decline for Rino vs other segments such as fashion?

MV [00:25:33]: The luxury clearly has the most pricing power at the moment. Automotive and interiors show no comparable evidence structurally weaker on pricing given contract base. Concentrating on luxury and compensating a little bit that, on the other side, the loss of money in the automotive industry because at the moment, it is like that. I doubt that the growing in the luxury fashion market is probably, or can compensate that big loss in the automotive industry. I don't believe that because given the evidence that the luxury market is also not really growing at the moment as probably the forecast which was settled down also here two or four years ago is the same. Therefore, of course, the brands are increasing the margin, but the amount of selling product is decreasing at the moment.

00:27:25] The luxury sector is facing volume challenges. I thought that Rino is doing well and is in a relatively safe place to manage this volume challenge, given the company's client base that includes Prada. However, you don't think that's the case. Is that correct?

MV [00:28:04]: No, it's not the case. Even beyond post M&A synergy capture, which is the biggest or the largest effort, what M&A Neuberger is pushing. Also, here with Superior and Limoges alone, this will not, how you can say that, is not enough to stabilise the EBIT, for instance, or yes, EBIT revenue and volume, not at all.

YT [00:29:05]: Are you saying that the fashion segment's growth is not enough to offset the volume growth in auto?

MV [00:29:18]: (Audio distorts 29.20). Because you have the hides for the automotive industry, it's clear, as I said, the number one risk. The industry-wide cost increase, increase a lot. The cost base we're purchasing goods already run to 56-57% of revenue is a much bigger EBITDA swing factor than labour. How you can compensate that? At the moment, nobody can talk about growth in all terms in that direction. It's not possible.

00:30:24] Can Rino pass cost inflation in the luxury fashion segment to end customers such as Prada? What is the dynamic there?

MV [00:30:53]: This is probably, yes, you can do that because Prada or the fashion industry on that case is working a little bit different. Even here, if you have a forecast for Prada and you work on the forecast and you win a project with a top price and then the volume is not anymore stable for the next year. You see that you have a big difference because fashion is more a forecast for 0.5 year or for one year. Automotive is a forecast from 1-5, almost probably more seven years. This is the big difference between automotive and then fashion industry.

YT [00:32:03]: You're saying fashion volume is also volatile, and it's hard for Rino to manage the volume forecast.

MV [00:32:18]: Exactly.

YT [00:32:23]: What about the margin profile for luxury fashion? While the segment typically carries higher margins than automotive, it also involves smaller batch sizes and greater production complexity. How should we think about the realised margin benefit and its impact at the group level?

MV [00:33:10]: Again, so looking at '25 and '26, you have a luxury creation from 45.2-48.3%. You see that is a six-point revenue. If you look on the percentage, it is probably one-fifth from that what automotive is doing in only one year.

00:33:56] Despite a volatile prediction, Rino is expecting the luxury segment to become a larger share of its revenue. Should we expect this to structurally improve the company's margin?

MV [00:34:22]: Sure, fashion and luxury is a clear opportunity. Factoring is already in use for the parent company and two subsidiaries, as I know, the Limoges and then the other one, which tell us that the infrastructure is existing. It isn't obvious that being pushed by this, its full potential across the wider luxury client base means that you have extending forecast for this, but it's not really, or it is more an existing non-recourse factoring programme. For me, it's difficult to give that this is a proven mechanism. I would say really hard to see that today. I will not give a dollar in it, I would say. This is only my view.

YT [00:35:34]: The volume for luxury fashion is a bit too volatile, while the fixed cost is already high. Therefore, you think there is high risk associated with this.

MV [00:35:51]: Yes. The thing is that leather and fashion industry, it is an amplitude. Now it is on a high level but it's not even on a high level as it was probably 10 years ago. It is high level, yes, it return on a high level. After two years, it will again going, or increasing much more than they increase. Repeatingly, it is since, I believe from the 20th or this century, I believe this is coming and going, coming and going, coming and going. The overall line, what you see is a decrease and not an increase of leather consumption in the fashion industry.

00:36:55] Could Rino win more order book share from the key luxury brands that the company works with?

MV [00:37:08]: Probably yes. The cooperation with Prada is, of course, a good starting point. If they conquer also Gucci and probably Louis Vuitton. What I've heard they have already, they supply to them. As a partner, they will conquer it then it could be a big lever to compensate the automotive increase.

00:37:59] Do you have any feedback on how competitive Rino's product offering is with the luxury fashion houses? Why would companies such as Gucci and Louis Vuitton potentially buy from Rino vs others? How likely would it be able to win?

MV [00:38:29]: It is continuing to win prices increasing with key clients, but no further margin dilution from complexity is an evidence for that at the moment.

YT [00:38:59]: You talked about no further margin dilution because of complexity. What does it mean?

MV [00:39:06]: That means that you see organic growth, but nothing more. The environmental is so much complex at the moment. Everybody is seeking to get a supplier which can stable the margin at the moment. I do probably say Rino Mastrotto is not really, it's not competitive enough. I don't think so. If they have probably with the parent or the other family on Mastrotto, if they have a cooperation on buying hides, well, then, of course. Otherwise, I don't see any other chance.

00:40:08] When you say Rino is not competitive enough, are you saying that the hide quality is not really good enough vs peers, or are you talking about something else?

MV [00:40:32]: I think the quality is really good from Rino. They improved the quality a lot. Even if I remember that they had some problems for other OEMs, they improved the quality even in the US market. No, this is not the case. I think when we are talking about quality, leather quality, they are fine. They are stable. They are good enough. In terms of costs, they are not competitive. They are a small company. They have probably, not that impact on the purchase market at the moment. This is not a lever and it means that the amount of the production is not that enough that they can get better prices in the market at the moment.

YT [00:41:47]: It's more about the purchase price that the company gets. It's not the lowest for it, and therefore, it cannot have competitive pricing for its customers.

MV [00:42:00]: Yes. The acquisition impact is about 70-80%. Therefore, at the moment, it is hard, hard, but for everybody, of course. A little bit more for Rino because they do not have that market share or that companies who they are working with for a long, long time. Saying that, this impact of what the acquisition is bringing is not interesting for other companies like Prada, Gucci and so on.

YT [00:43:04]: You mentioned that the acquisition impact is about 70-80%. What do you mean by that?

MV [00:43:21]: Only on leather production. The leather production is probably the rest, the 30%, what I'm saying. The highest impact is the acquisition of raw hides.

YT [00:43:47]: Rino is trying to increase its volume with luxury fashion houses. Do you think this will give the company more purchase power and therefore, have better raw material purchase prices?

MV [00:44:28]: If you increase the purchase amount, sure, you get a little bit better price in the market. Then, of course, yes.

00:44:44] Rino has another smaller business unit – interior design. Are there any other moving parts in terms of sales growth opportunity or margin dynamics regarding that business unit?

MV [00:45:07]: Yes. If it comes to interior design, I need to say that I do not have any information. I'm sorry about that. I know that interior design, of course, with, not with Frau, with a really big company in Italy. I can't remember the name, which are also providing leather to Maserati. Of course, and then also Elmo is delivering interior design, but I do not have any information, any numbers on that. I'm sorry.

00:45:59] We discussed the challenges Rino faces in passing raw material inflation through to customers. Beyond pricing, what operational levers remain to support margin improvement, and how meaningful could the upside be?

MV [00:46:34]: You mean more M&A?

YT [00:46:40]: No, just with the set-up the company has now, are you seeing any other opportunities for operational efficiencies, such as better plant utilisation, productivity or anything else?

MV [00:46:58]: Yes, it's a really good question. On the automotive market, sometimes, if you want to get a market share, it is good if you can go under best price, let me say like that. Otherwise, you will not win a programme. Why should I buy from a company, which I do not know leather if I have six or 10 other supplier, which are supplying for years and years and years and decades with a good quality, with a price what I align with? Why should I do, to bring a new company with new problems in my company? This is the biggest question, what you have to answer it. In which terms you are interesting enough for an OEM or for a tier 1 to buy your products? One is loyalty. The other one is quality. The other one is reliability. The biggest trigger is the price. Everyone is the price. At the end, you can have the best quality with the nicest colour, with everything, what you wish. If you can compete or it can go under the price line what they have at the moment, why should they get a new supplier into the company? Every time the same game, every time the same game. I worked on it 20 years now. That I can say for sure.

YT [00:49:28]: That's what we discussed previously as well, where you mentioned that the company's acquisition cost is too high. Despite the potential negotiations, there seems to be limited operational levers for it to lower that cost.

MV [00:49:51]: Yes. I think so. Of course, Porsche is one of the OEM who's paying a little bit more for Rino, but if you are going to BMW, Audi, Volkswagen or Mercedes-Benz, they have a gap between probably the same leather of sometimes more than 15-20%. That's not a joke. It is the reality.

YT [00:50:29]: Does it want to actually pay 30-50% less compared to what Porsche sometimes pays?

MV [00:50:39]: Not that much. I'll say 10% to 15%.

00:50:40] Could Rino grow more with OEMs that are more on the premium or luxury side and willing to pay extra?

MV [00:51:02]: That's a strategic question. I have had four years or more than four years, the same discussion. It's a strategic question. If you, as an unknown supplier will enter in the German market or in the European market and even in the US or wherever cars are built in this world. If you are not competitive in pricing, then you will not grow. This is that. This is a strategic question, as I said, if you are saying, "Okay, for the first one, two, three programmes, I will not have that big margin. I will not have that big EBIT and EBITDA, gross margin. Every mathematical percentage, what do you think you need to be economically?" Then you have a good chance.

Why it is? This is my view of the things. If you are saying, "Okay, I will enter in new markets but then I want to be a long-time supplier, and you need to count on me." This is more or less a, I can say only in German, but the word in English. Let me check one word. I'm sorry. This is more an agreement, not on a paper. This is an agreement between the supplier and the OEM or the tier 1. Then after the second, the third or the fourth programme or meanwhile, in the second, third and fourth programme, then you will make more EBIT, more revenue. You have to have the holistic view on that case. A go-to-market strategy, you need to count every time also on how you can convince the European market on several levers. One lever is the price. The price lever probably counts in that case, 60-70%.

For Rino Mastrotto to understand this, I know, I said, I fight on that discussion for more than four years. Sure, they have had probably luck with Volvo again. I do not know that in depth if they have really realised the next big step with Volvo. I doubt on that a little bit, but who knows.

YT [00:55:27]: With that, it's a great place for us to wrap up. I want to close by saying thank you so much for the insights shared with us.

MV [00:56:00]: Thank you.

Transcription ends 00:56:26 of the recorded material