- Premium performance above expectations, revenues equal to 60% of Consumer business
- Strong price/mix growth: +7.1% thanks to price increases and better sales mix
- Operating result (Ebit before non-recurring and restructuring charges): +5.7% at 918.5 million euro
- Consumer business profitability markedly improved, at 16.2% in 2015
- Apac and Nafta areas with greatest revenue and profitability growth
- Venezuelan unit deconsolidated
- Board renewed, Ren Jianxin confirmed as Chairman and Marco Tronchetti Provera as CEO and Executive Vice Chairman
The Board of Directors of Pirelli & C. SpA, today reviewed and approved the group’s results for the year ended on December 31st, 2015. Pirelli’s 2015 operating performance was in line with targets and characterized by:
- Revenue growth of 4.8% to 6,309.6 million euro, above the 2015 target of “over 6.25 billion” euro, thanks to the great improvement in the price/mix component (+7.1% compared a target of “equal to or above” +5.5%) as a consequence of price increases, greater sales in the Replacement channel, diverse geographic and product mixes. This performance more than offsets the decline in volumes (-1.6%, mainly in emerging markets and the Industrial business) and forex volatility (-0.6%);
- Premium segment performance above all forecasts, with an increase in volumes of +12.7% (target “equal to or above” +10%) and grew as a percentage of Consumer revenues to 60% from 55% at the end of 2014;
- Ebitda before non-recurring and restructuring charges grew 6.4% to 1,242.7 million euro (1,168.0 million euro in the same period of 2014);
- Ebit before non-recurring restructuring charges grew by 5.7% to 918.5 million euro (2015 target 925 million euro, 869.2 million euro in 2014), with a margin of 14.6% (14.4% in 2014). This result benefits from the achievement of efficiencies of 94.4 million euro in implementation of the 350 million euro 4-year 2014-2017 plan (92 million euro of efficiencies in 2014);
- At the geographic level, Apac is confirmed as the area of greatest growth both in terms of revenue and profitability (revenues +26.4% and Ebit margin above 20%), followed by the Nafta (revenues + 21.7%, Ebit in the low twenties);
- Research and development expenses totaled 214.4 million euro, equal to 3.4% of total sales, of which 176.5 million euro for activities linked to Premium products, approximately 6% of segment sales;
- Significant progress towards the Group’s sustainability targets. In 2015, Green Performance tyres accounted for 48% of Tyre sales.
The Lombardy Regional Government and Pirelli today signed a competitiveness agreement which calls for a free grant regional contribution of 1.9 million euro for the “Total Safety System” R & D project conducted by Pirelli at its research centre in Milan.
The project, which is being developed by Pirelli Tyre and will last 24 months, has a total cost of 5.35 million euro and is part of the activities linked to the development of a new generation of tyres based on the concept of “total safety”. The research activity, therefore, will extend to all phases of product conception and planning: from the use of new materials, to the development of new fully automated finished product checking, to the implementation of new application safety systems based on tyre sensors.
The high level of innovative content in the “Total Safety System” project will allow, in addition, a further improvement in the level of productivity, quality and efficiency, as well as the know-how for the various technologies. The project will allow Pirelli to study new product mixes oriented towards segments with higher value added, anticipating market demand and this maintaining the level of competitiveness. From this project, Pirelli expects, also, positive results in the environmental and social arena with regard to road safety, through the continual reduction of vehicular fuel consumption and raising the number of kilometres in a tyre’s life.
The agreement – which is part of the programme of the Lombardy Regional Government aimed at developing and enhancing the value of human capital also through training courses, as well as production, environmental and infrastructure resources and with the goal of strengthening local employment generating ancillary employment along related supply chains – favours further growth in the group’s R & D at Pirelli’s Milan headquarters, where the group’s main R & D centre is located employing 400 people. The contribution from the Regional Government will facilitate the employment of 12 new R & D staff members between 2015 and 2017, who will be in addition to the 130 already involved in the activities linked to the project’s implementation.
“The competitiveness agreement with Pirelli demonstrates how the synergies between the public and private sectors bring concrete results here in Lombardy,” said the President of the Regional Government Roberto Maroni. “Our goal is to raise investment in research and innovation up to 3% of the region’s GDP, a figure which is now close to 2%. These are two strategic which represent a natural vocation for our territory as well as a great opportunity for growth”, he explained. “The Lombardy Region invests resources in technological development also as a way of creating employment”, Maroni continued. “We want to move forward on this road”.
“The centre in Milan – said Marco Tronchetti Provera, Executive Vice Chairman and CEO of Pirelli – represents the main driver of our Research and Development and enables Pirelli to compete and continue to grow on international markets. The contribution of the Regional Government is an important recognition on the part of the institution of the work conducted until now and will enable the launch of a project aimed at the creation of tyres that are always safe and environmentally sustainable, able to offer clients not only safety and high performance, but also solutions that respect the environment”.
• REVENUES: 4,711.9 MILLION EURO, AN INCREASE OF 4.0% COMPARED WITH 4,528.7 MILLION ON 30 SEPT. 2014; +3.3% EXCLUDING POSITIVE FOREX EFFECT OF +0.7% • PREMIUM REVENUES: 2,262.5 MILLION EURO, AN INCREASE OF 17.0% COMPARED WITH 1,933.9 MILLION ON SEPT. 30 2014 • PRICE/MIX: +4.8% DUE TO THE GOOD PREMIUM PERFORMANCE, PRICE INCREASES AND GREATER SALES IN THE REPLACEMENT CHANNEL • TOTAL VOLUMES: -1.4% (+0.4% CONSUMER AND -7.1% INDUSTRIAL), IMPACTED BY THE WEAKNESS OF THE SOUTH AMERICAN AND RUSSIAN MARKETS • EBIT: +2.9% TO 648.1 MILLION EURO (629.7 MILLION ON 30 SEPT. 2014) • EBIT MARGIN 13.8% (13.9% ON 30 SEPT. 2014) • NET PROFIT FOR CONTINUING OPERATIONS: 291.2 MILLION EURO (297.4 MILLION EURO ON 30 SEPT. 2014) • NET FINANCIAL POSITION NEGATIVE 1,685.5 MILLION EURO (-2,003.9 MILLION EURO ON 30 SEPT. 2014 AND -979.6 MILLION ON 31 DEC.2014)
• CASH GENERATION BEFORE DIVIDENDS CONFIRMED AT EQUAL TO OR ABOVE 300 MILLION EURO BEFORE DISPOSAL OF STEELCORD • NET FINANCIAL POSITION CONFIRMED AT AROUND 850 MILLION EURO • INVESTMENT CONFIRMED AT BELOW 400 MILLION EURO • PREMIUM GROWTH CONFIRMED AT ABOVE OR EQUAL TO +10%
• PRICE/MIX GROWTH OF APPROXIMATELY ≥5.5% (HIGHER THAN PREVIOUS ESTIMATE OF ~+4%) THANKS TO SALES IN THE REPLACEMENT CHANNEL AND MATURE MARKETS
• VOLUMES ESTIMATED TO FALL BY BETWEEN 0.5% AND 1% AS A RESULT OF RAPIDLY WORSENING ECONOMIC SCENARIO IN BRAZIL AND RUSSIA
• FOREX EFFECT ~-1.5% (PREVIOUS ESTIMATE ~+1%)
• TOTAL REVENUES SEEN GROWING ~+4% TO >6.25 BILLION EURO (PREVIOUS ESTIMATE >6.35 BILLION)
• EBIT BEFORE NON-RECURRING AND RESTRUCTURING CHARGES 925 MILLION EURO (PREVIOUS ESTIMATE 960 MILLION EURO), IMPACTED BY THE WORSENING MACROECONOMIC CONDITIONS, PARTIALLY OFFSET BY PRICE/MIX AND EFFICIENCIES
• EBIT OF APPROXIMATELY 870 MILION EURO AFTER NON-RECURRING AND RESTRUCTURING CHARGES OF 55 MILLION EURO (PREVIOUS ESTIMATE 930 MILLION EURO AFTER CHARGES OF 30 MILLION) LINKED TO RESTRUCTURING ACTIONS AND COSTS RELATING TO THE SEPARATION OF THE INDUSTRIAL BUSINESS UNIT
As a result of the agreement to sell 100% of the steel-cord activities signed on 28 February 2014, this business has been classified as a “discontinued operation” and as a consequence the results for the first 9 months of 2014 and the first nine months of 2015 have been reclassified in the accounts under the heading “results for disposed continuing operations”. The economic indicators for the first 9 months of 2015, as do the comparative data to 30 September 2014, refer to continuing activities.
The Board of Directors of Pirelli & C. SpA today reviewed and approved the intermediate results for the 9 months ended on 30 September 2015. The results for the first 9 months of 2015 were characterized in particular by:
- Strengthening at the high end range, with Premium volumes growing 11% and equal to 60% of Consumer revenues (56% in first 9 months 2014);
- Improvement of price/mix component (+4.8% in first 9 months of year, +7.0% in third quarter); which was above the target of ~+4% forecast for 2015, thanks to greater sales in the Replacement channel and the different geographic mix (higher sales in Europe, Nafta and Apac);
- Overall volume reduction in the first 9 months of the year of 1.4% (-3.3% in the third quarter) which reflects the different demand dynamics between mature markets (+4.5% in the first 9 months, +7.3% in the third quarter) and emerging ones (-4% in the first 9 months, -8.4% in the third quarter) which were impacted by the deteriorating macro-economic contexts of Russia and South America, as well as the slowdown in the Chinese market;
- Forex volatility (+0.7% impact on revenues in the first 9 months of the year) was particularly accentuated in the third quarter (-4.2%) because of the devaluation of the Brazilian Real and the Ruble;
- Organic consolidated revenue growth (excluding forex impact) of +3.3% in the first 9 months (+3.7% in the third quarter), underpinned by the good performance of the Consumer business (+5.9% in first 9 months, +6.4% in the third quarter) which offset the decline of Industrial (-5.1% in first 9 months, -4.9% in the third quarter). If the forex impact is included, consolidated revenues posted growth of +4% in the first 9 months (-0.5% in the third quarter);
- The achievement of efficiencies worth 72.6 million euro (81% of the full-year target of 90 million euro) as part of the 4-year 350 million euro plan (2014-2017) announced in November 2013 (efficiencies of 92 million euro in 2014);
- Profitability improvement, with Ebit of 648.1 million euro, an increase of +2.9% compared with the first 9 months of 2014 and a substantially stable margin of 13.8% compared with 13.9% in the first 9 months of 2014 (13.1% in the third quarter, unchanged compared with the same period a year earlier);
- A slight decline in the net result for continuing operations to 291.2 million euro (-6.2 million euro compared with the same period in 2014) which reflects the greater fiscal charges linked to the devaluation of the Venezuelan Bolivar and the interest rate increases in the emerging markets where Pirelli operates;
A net financial position of negative 1,685.5 million euro compared with -2,003.9 million euro on 30 September 2014 and -979.6 million euro on 31 December 2014, because of the usual seasonality of working capital.