News at Pirelli which has approved the new industrial plan to 2025 which plans to recover pre-Covid levels as early as 2022. "Pirelli has faced the difficult moments with a sense of unity and participation - said the CEO Marco Tronchetti Provera - the pandemic has further highlighted that in an ever-changing economic, social and environmental context, resilience is crucial to protect all stakeholders: in short, we are emerging from the crisis much stronger".
At the same time, the board of directors gave the green light to the appointment of Giorgio Bruno as deputy CEO of Pirelli starting next June 15th.
DIVIDENDS
The tire company closed 2020 with a consolidated net profit of 42,7 million which compares with the 457,7 million of the previous year. The board of directors has decided to propose to the shareholders the distribution of a dividend of 0,08 per share. The total amount of dividends is equal to 80 million euro. The coupon will be detached on June 21st, with payment expected starting on the 23rd.
As for the dividend policy, Pirelli expects to distribute a payout of around 50% of the consolidated profit in 2021 and 2022 and around 40% in the following two years. The solid cash flow profile will make it possible to guarantee an improving return on invested capital throughout the plan horizon: from 10,4% in 2020, to 16% in 2021, to 19% in 2022 and finally to 25% in 2025.
THE TARGETS
As regards the current year, the estimates speak of revenues between 4,7 and 4,8 billion, an adjusted ebit margin between 14% and 15%, a pre-dividend cash flow between 300 and 340 million and an NFP of about 3 billion.
For 2022, Pirelli expects revenues between 5,1 and 5,3 billion euros, with an adjusted ebit margin between "over 16" and 17%, a net cash flow before dividends between 420 and 460 million and a net negative between 2,75 and 2,65 billion euros. Finally, by 2025 Pirelli estimates revenues between 5,7-6,2 billion, adjusted ebit margin at 19-20%, pre-dividend cash flows of 1,7-19 billion and a NFP of 1,6-1,4 billion.
THE INDUSTRIAL PLAN
The new plan is divided into two phases: the first, by 2022, plans to recover pre-pandemic values, the second, by 2025, aims to become a leader in high value specialties and generate high cash generation.
In fact, the new plan intends to confirm the group's positioning in the "high value" segment, focusing on an acceleration in tires for specialties, for electric cars and with a rim diameter greater than or equal to 19 inches. The plan also aims to rebalance volumes between original equipment and replacement tires in favor of the latter segment. Finally, an acceleration of growth is expected in China.
Speaking of "high value" car tyres, the goal is to bring the incidence on the total volumes of Original Equipment to 70% in 2025 (in 2019 it was 60%), with rim diameters equal to or greater than 19 inches they will grow by an annual average of 15% in 2020-2022 and by 5% in the following three years, "a faster pace than the market", underlines the company.
The impact of the electric car on original equipment volumes will rise to around 30% in 2025. The weight of the replacement channel in the "high value" auto segment will increase from around 40% in 2019 to around 60% in 2025. The segment equal or Pirelli's above 19 inches is expected to grow by an average of 18% annually until 2022 and 12% in 2022-2025, "also in this case greater than the market, with specialties which at the end of the plan will account for 70% of all High Value Replacement channel”.
INVESTMENTS
For the first two years, i.e. for 2021 and 2022, Pirelli plans to invest t710-730 million euros. Resources will be concentrated on upgrading technology, improving the mix and increasing productivity "to respond to the growing demand for specialties and optimize industrial efficiencies". The amount is equal to 7-7,5% of the total estimated revenues. From 2022 to 2025, investments will grow to 1,2-1,3 billion euros and will expand to increase high value capacity, especially in countries with lower production costs, in line with the expected increase in demand.
The EFFICIENCY PLAN
The company also plans to go ahead with the efficiency plan launched in 2019 which has already made it possible to save 110 million in the first phase. In the two-year period 2021-2022, Pirelli expects 170 million in net savings, a figure that corresponds to 4,5% of the 2020 cost base. In the following three-year period, however, net efficiencies are estimated at 70-100 million, of which 50% is from the benefits of digital transformation.
THE BAG
After the presentation of the new plan, the stock dropped 2% to 5,082 euros in Piazza Affari. He took profits following the rally achieved in recent days. The performance of the shares was also affected by the announcement of the Chinese government's approval of the joint reorganization of the state giants Sinochem and Chemchina, the latter majority shareholder of Pirelli, which will both be headed by a single holding. However, at the moment there do not seem to be any indications of repercussions of this reorganization on the subsidiaries of the two Chinese groups.
THE VACCINES
Together with the plan, the company announced that the Pirelli HangarBicocca will become a massive vaccination hub, according to the provisions of an agreement with the Lombardy Region. "The space for contemporary art will continue its activity in any case, with the opening to the public when allowed by the anti-Covid regulations", the company says.
SECURITY UPDATE TRAINING
Pirelli informed the market on Thursday morning that it had been informed by ChemChina (first shareholder of the company) that the Chinese authorities have approved the reorganization of ChemChina and Sinochem. In particular, states the Pirelli note, “the Assets Supervision and Administration Commission of the State Council (“SASAC”) envisages the establishment of a new holding company by SASAC which will perform the tasks of the transferor on behalf of the State Council and the consolidation of Sinochem and ChemChina in the new holding company. At the conclusion of the joint restructuring, ChemChina will remain the first shareholder of Pirelli”.
