MILAN, Feb. 19 (Class Editori) - Despite the repercussions of the coronavirus epidemic, Pirelli continues to believe China as an opportunity. “Alongside the USA, I continue to believe China as one of the main growth opportunities we have at disposal”, as Marco Tronchetti Provera, the executive deputy chairman and CEO of Pirelli, has explained during the presentation of the new strategic plan.
The activities are currently blocked in two of the three factories of the group in China, while they have been resumed at a slower pace in the factory Car/Moto in Yanzhou. According to Bicocca, the People’s Republic accounts for “12% of the total sales”. Coronavirus will have an expected impact on the EBIT Adjusted in the first quarter of almost €30 million, which “should be cushioned within one year”, according to expectations. Whether the crisis should last longer, as a note of the group has stated, the group will update its forecasts in May, when the data of the first quarter will be presented.
Within the end of this week, the foreign workers who had to come back to their country of origin with their families because of the coronavirus emergency could start to return to China.
The industrial plan 2020 establishes revenues amounting at €5.8 billion and increasing by almost 3% per year; an improving EBIT adjusted margin ranging between 18% and 19%, as well as less investments compared to the previous year: 900 million focused on technological development and 510 million (accounting for 11.5% of the total of the cost basis) on cost reduction.
A plan which is proving the central role of the High Value segment, which is intended to acquire increasingly more influence (at the end of the plan it will account for 73% of the revenues compared to about 67% in 2019) with a leadership consolidation, also thanks to a further reinforcement of the competitive barriers, the digital technologies usage - also in terms of prevision of the demand typology and localization – as well as products development and increasingly sustainable processes.
In the High Value segment (Car pneumatic= 18”) Pirelli is expecting to outperform the market of about 3 percentage points, with an average yearly growth rate of volumes amounting at about 9% (almost 6% of the market esteemed growth). In the standard segment (car pneumatic= 17”) the group will continue the reduction, however by seizing the opportunities related to 17” and by relying on low cost production sites (Russia and Latin America).
The further reduction of exposure in the segment is expected with an average annual decrease in terms of volumes by 4.2% in 2019-2022 (-0.3% is the average annual decrease expected for the market). In the standard, these actions, together with the production focused on areas which offer a lower productive cost, will allow the price/mix increase and the profitability, which is expected to be double digit at the end of the plan.
A plan which will be implemented thanks to three main programmes: cost competitiveness launched in the fourth quarter of 2019; trade development, addressed to both the first equipment and the spares channel; technological innovation in order to introduce new processes and launch new products. Thanks to more limited investments, an increase in cash flow compared to the previous plan is expected: 1.5 billion for the three-year period.
(Source:Class Editori)
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