Pirelli Major 2020-2022 Plan & 2019 Financial Results

February 27, 2020 |

Pirelli’s Major Industrial Plan for 2020-2022 and Preliminary 2019 Financial Results

The financial highlights of Pirelli’s Industrial Plan include:

Cost reductions over 3 years, of 510 million Euros, gross of inflation
Investments over the period of the plan reduced to about 900 million Euros, focused on technology, compared with 1.3 billion in the previous 3-year period
Cash generation of 1.5 billion Euros in the 3-year plan period

The importance of high value segments was confirmed and the company intends to focus on the following higher earning sectors:

Bigger focus on tyres larger than 19 inches and special tyres
In the standard segment, they will focus on 17-inch tyres, and reduce the number of smaller sizes

Pirelli’s new plan has 3 key elements; cost competitiveness, commercial development and technological innovation.

The key action points are based on:

Solid competitive barriers thanks to links with premium / prestige carmakers, technology, commercial / industrial distribution, brand and ESG performance.
In the original equipment sector, being very selective with the growth of the client base.
In the replacement sector capitalise on the pull-through effect of homologations and new SUV / CUV clients.
Acceleration of process and product innovation with 20 new product lines.
Improvement in the prediction of consumer needs thanks to a new data analytics platform.
New lTI incentive plan for management in support of 2020-2022 objectives.
The goal of 100% electric energy from renewable sources by 2025 and carbon neutrality by 2030.

2022 revenues at 5.8 billion Euros, with average annual growth of about 3%
Adjusted EBIT margin growing to 18 to 19% in 2022
900 million Euro investment over period of plan
Cash generation of about 1.5 billion Euros over the 3 years
Dividend policy confirmed with pay-outs equal to 40% of consolidated net profit
Net financial position at -3.3 billion Euros in 2020 and at -2.5 billion Euros in 2022

Revenues: 5,323.1 million euro, an increase of 2.5% compared with 2018, (2019 target ≥5,300 million).
Adjusted EBIT: 917.3 million Euros with a margin of 17.2% (2019 target >17% / 17.5%).
Net cash flow before dividends and IFRS 16 impact: 332.9 million Euros (2019 target 330 / 350 million Euros). Cash flow before dividends after IFRS 16 impact of 344.1 million Euros.
Net Financial Position: 3,024.1 million Euros (3,507.2 million including leasing debt of 483.1 million Euros following the application of the IFRS 16 accounting principle), a reduction compared with 3,180.1 million Euros on 31 December 2018. The ratio of net financial position to adjusted EBITDA before start-up costs is 2.42x, or 2.59x including IFRS 16 impact (target 2.42x / 2.36x, including IFRS 16 impact 2.59x / 2.53x).
Research & Development expenses: 232.5 million Euros in 2019 (4.4% of sales), of which 215.7 million Euros was destined to High Value activities (6.1% of the segment’s revenues).

Source: Pirelli