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Class Editori News

Marco Tronchetti Provera walks toward the reappointment as Pirelli’s number one

July 22, 2019


Abstract : The Italian company is finally producing a definite outline of its new shareholder agreements. Busy last few months for the group, as Camfin – holding a 10%, and which reference person is Tronchetti Provera himself – has been meeting ChemChina – owning a 45.

MILAN, July 19 (Class Editori) – Marco Tronchetti Provera could be reappointed for another 3 years (up until June 2023) as Pirelli’s number one. It looks like the group’s new shareholder agreements should be released shortly since, at least according to the CEO’s mid-May announcement, the renewal discussion was commenced earlier than normal.

The group’s last few months have been busy as Camfin – holding a 10%, and which reference person is Tronchetti Provera himself – has been meeting ChemChina – owning a 45.5% share – in view of the current agreements expiring on June 2020. The Pirelli model serves as an example for the protection of the Italian nature of business in case of acquisitions. Despite Equita Sim’s reduction of the share’s target price from 7.7 to 7.5, the value remains on top of most exchange prices in force at the moment (the share closed down 3.06%, at €5.2) – so recommendations are still on buy.

Experts revised the sector’s estimates “in light of June’s market data, recently released by Michelin, showing the weakening of the automotive market (in particular the European one). The same has been indicated by Nokian as well”. As it follows, the analysts have shaved a 1% and 5% off their 2019 predictions for Pirelli’s turnover and adjusted net profits respectively. “Even after the revision,” wrote Equita, “Pirelli exchanges with multiples compression, so it is important for its second quarter results to show the group’s capacity to start generating free cash flow again. The group should also release further details regarding the renewal of the agreement with its Chinese shareholders (confirmed by Tronchetti himself during the assembly), and regarding the Chinese’s placement risk (as rumors have often reported),” concluded the analysts.

Looking at the first quarter results – to be discussed during the next Board of Director meeting, to be held on August 1st – yesterday Mediobanca proposed its theories on the matter, expecting a decrease (on a year-to-year basis) in Pirelli’s EBIT for the second quarter, lowering the margin for over 100 base points.

Even Mediobanca agrees that the group’s 2019 guidance seems to be at risk. “According to our calculations,” wrote the experts, “In order to achieve the guidance’s average targets, Pirelli should increase its EBIT by 9% during the current year’s second quarter. It makes for a quite aggressive move, in our opinion”. They concluded noting that the group’s share “exchanges at 9.5 times the price/profit multiple for 2019, aligned with the average interesting tire producers and parts suppliers”.

(Source:Class Editori)

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Keyword: Marco Tronchetti Provera

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