Investments for 900 million euros focused on technological development, cost cutting for 510 million e 3% annual revenue growth. These are the pillars of the new business plan 2020-2022 presented Wednesday by Pirelli which confirms the strategic vision on the High Value segment, destined to acquire ever greater weight: at the end of the period it will represent 73% of revenues from around 67% in 2019. Payout also confirmed at 40%.
The data on investments is down compared to the previous three-year period (1,3 billion) to support, explains the group that presents the new industrial strategies in Milan, greater cash liquidity compared to the previous three-year period.
In the new plan, Pirelli confirms the centrality of the high value segment, in which it foresees an average annual growth rate of volumes of approximately 9%, against the 6% of the market average.
The group aims for one cash generation for about 1,5 billion. As for the revenues, the goal is to reach 5,8 billion euros by the end of the plan, with an average growth of around 3% a year. For the adjusted ebit margin on the other hand, an increase to 18-19% is estimated in 2022, against 17,2% in 2019.
Even for the net financial position an improvement is expected: from -3,3 billion in 2020 to -2,5 billion in 2022.
Also, the group confirms the dividend policy with a pay-out equal to 40% of the consolidated net profit.
A separate chapter is that of innovation and sustainability. The group foresees an increasing use of materials deriving from renewable and recycled sources, with the 2025 goal of using more than 40% renewable materials (over 60% target by 2030) in the new product lines. The Plan pushes investments in sustainable mobility, in particular on tires for electric vehiclesthe. Already today there are 74 homologations obtained by Pirelli which is working on the development of 286 projects. For the “carbon neutrality” the expected deadline is 2030.
Pirelli's 2020-2022 business plan "is based on a realistic interpretation in the face of the difficult current scenario", which is why the presentation was delayed precisely to have better visibility of the market and "to align our strategy to adapt to a rapidly changing context. He said it the managing director of the group, Marco Tronchetti Provera, presenting the new plan to analysts.
THE NUMBERS OF 2019
Pielli's board of directors also approved the 2019 accounts, closed with revenues for 5,323 billion, a result up 2,5% compared to 2018 and slightly higher than the target of 5,3 billion.
THEadjusted ebit it settled at 917,3 million, with a margin of 17,2%, in line with the targets.
THEdebt, excluding the impact of the new accounting standard Ifrs 16, decreased by 3,024 billion, an improvement of 156 million euro compared to 2018. The ratio between the net financial position and the adjusted ebitda without start-up costs is equal to 2,42 ,XNUMX, also in this case in line with expectations.
Le research and development expenses reached 232,5 million euros in 2019 (4,4% of sales), of which 215,7 million allocated to High Value activities (6,1% of segment revenues).
THE CONSEQUENCES OF THE CORONAVIRUS
Pirelli reports that two out of three factories in China are shut down due to thecoronavirus epidemic. The group “immediately adopted control and prevention measures for all employees in the world – reads the note – with particular attention in China, where all expatriate workers have returned to their countries of origin with their families. Operations have been suspended in 2 of the 3 factories that the group has in China, where at the moment only the Car/Moto factory in Yanzhou is operating at a reduced rate”. The productive consequences - Tronchetti Provera then indicated during the presentation to the analysts - highlight a loss of 80% of sales volumes in China in the month of February and, thanks to the restart of the activity of some important car manufacturers, the estimate on March is -30%.
China contributes approximately 12% of Pirelli's total sales. The expected impact on adjusted EBIT in the first quarter of 2020 is approximately €30 million, but the loss should be reabsorbed during the year. Should the crisis continue, Pirelli will update its estimates with the presentation of data for the first quarter in May.
At the end of the morning, Pirelli's share on the Stock Exchange gained more than 4%, achieving the best rise of the Ftse Mib.
