|Pirelli Shares||Results 2012||Strategy and Targets||About Pirelli Careers|
- After successfully completing a strategic shift towards becoming a pure Tyre company in 2010 (tyres are 99% 2012 of revenues), Pirelli aims to further strengthen its focus on those products with the highest technological content, with the objective of becoming global leader in the Premium segment in 2015.
To achieve this objective, Pirelli will rely upon:
- the strength of its brand – whose value was assessed to amount to 2.3 billion Euro at the end of 2011;
- an unprecedented extension of the product range, with the launch 18 new products between 2011 and 2015 which will account for 57% of Car revenues in 2015;
- the development of communication channels – from digital marketing to CRM – as well as innovative distribution channels with the aim of consolidating its ties with Premium clients; - the development of the business in those Regions where Premium is expected to grow at higher rates - South America, MEA, Asia Pacific, Russia,
- a more efficient, Premium-oriented production structure, with increasingly new plants located in countries where demand is growing and industrial costs are favourable
- the local-for-local model: in 2015, in each Region, an average of 82% of sales will be produced locally, as against 71% in 2011 (76% in 2012).
- Pirelli’s strategy on consumer tires is globally focused on the most high-value added segments, Prestige and Premium, which although representing only 13% of total market volumes (in 2013) grow three times faster than the market. Premium tyres have always been part of Pirelli DNA – historically supplying prestigious brands like Ferrari, Lamborghini, Porsche, Bentley, Maserati - but the company has made it its strategic focus starting from 2005 with the rationalization of its industrial footprint converting 13 mln capacity in low-value tyres into Premium. Pirelli Premium offering is declined through the P Zero, Cinturato, Scorpion and Winter series.
Differently from peers, Pirelli has a regional strategy for the industrial segment: truck, bus and agricoltural tyres. South America, Middle East Africa and China represent our key markets where we progressively introduce our latest technology products based the different requirements of each customer (Winter conditions, on/off road, highways and regional roads) and produced entirely in facilities located in low cost countries.
- In Europe – more than 50% of the global Premium market – Pirelli has a Premium market share of 14%; this value is higher in the OE channel due to our long term partnership agreements with the most important Premium OEMs. Pirelli’s goal is to progressively reduce the gap between OE and Replacement taking advantage of the strong pull-trough effect granted by our homologations for the most prestigious cars. From the industrial standpoint, Pirelli relocated capacity in low-cost countries in close proximity to OEM production lines (in Romania for example) and converted plants in high-cost countries in highly automated facilities producing the highest mix possible. This strategy led us to gain additional cost efficiencies and brought our profitability, today, at double-digit Ebit margin.
- Russia is one of the most dynamic and interesting markets for tyres, thanks to winter tyres representing 60% of the market, the existence of import duties and limited competition in the tier-1 marketplace. Pirelli decided to enter the market via a Joint Venture with Russian Technology, a government agency tasked with the objective of revamping the local industry. The JV acquired two production assets in 2011 and 2012 are currently in the ramp-up and industrialization phase while undergoing the necessary upgrades for them to get up to Pirelli quality system.
- North America is an interesting opportunity to Pirelli. European OEMs becoming more prominent in the region, and consumer preferences have shifted upwards in favor of more technologically advanced tyres. Pirelli took advantage of this trend leveraging on its partnerships with OEMs and a selective approach to distribution channels. Profitability in the region was up strongly over the last year, from a low single-digit range to double-digit Ebit margin. New opportunities are coming from the ramp up of the first Pirelli plant in Mexico (5,5 million pieces in 2017), with benefits ranging from an increased local-for-local content of our sales in Nafta, to working capital, logistics and duty cost reductions.
- Pirelli leads the South American tyre market in all product categories. With an industrial presence dating back over a century and 7 plants, Pirelli is the only tyre maker able to offer a complete portfolio of products ranging from Car to Truck, from Moto to Agro and OTR tyres. The strength of Pirelli’s brand, #1 in Brazil, and the widest distribution network of the industry, grant Pirelli the ability to lead the development of the Premium market in the area.
- This is the largest tyre market in the world, accounting for 33% of total car tyre volumes and 46% of total truck tyres. Pivotal to Pirelli’s ambitions in the region is the factory in China, the only factory in the country able to manufacture runflat, OE approved tyres. It’s the only Pirelli factory in the world which manufactures Premium Car, Moto and Truck radial tyres and it’s going to become the largest Pirelli site in the world.
- In this region, Pirelli has two competitive production facilities for the car (Turkey) and truck segment (Egypt). Capacity is currently being freed up from mass market OEM to increase the more profitable Replacement segment. Moreover, Pirelli is reinforcing the retail sales network and franchising in key markets while improving the product mix.
- Our Premium Tyres are characterised by:
- high performance, marked with the following speed codes, W (up to 270 km/h), Y (up to 300 km/h) or Z (over 300 km/h);
- Runflat technology allows then to cover a distance of 80 km at 80 km/h in the case of puncture;
- Winter with a velocity coefficient > H (up to 210 km/h);
- SUV equipped with a velocity coefficient > H (up to 210 km/h);
- for competition driving (Motorsport).
Premium tyre sales represent 47% of Pirelli's consumer sales in 2012.
- Pirelli's exposure to the Replacement channel (76% of 2012 sales compared to an average of 70% for competitors) renders the company's operations more flexible and less exposed to possible negative trends in the automotive industry and the demand for original equipment. The significant focus on Premium, moreover, allows to take advantage of a market which is able to grow three times as fast as the overall market and mitigates moments of market downturn showing a contraction equal to one third of that of the overall market.
- The global car tyre market in 2013 is expected at approximately 1,327 million pieces, growing by about one percentage point as compared with 2012, mostly thanks to emerging markets (+4.6%).
In total, the Premium segment at the end of 2013 will represent over 13% of the global car market with a growing weight in emerging markets to over 8%, in the Nafta area to over 13% and in Europe to over 24%.
The global truck market is estimated at around 134 million pieces in 2013, growing by about 3 percentage points as compared with 2012. Emerging markets are expected to grow by 4.2%.
- Pirelli’s expects for 2013:
- Group revenues to grow by 4%-5% to 6.3-6.4 billion euro
- Group Ebit between 810 and 850 million euro
- Investments at about 400 million euro
- Cash flow generation, before dividends, greater than 200 million euro before Prelios impact and Net Financial Position below negative 1.2 billion euro before Prelios impact.
- Pirelli is one of the most recognized Italian brands worldwide. Its value has been estimated by Interbrand at 2.27 billion euro in 2011. Pirelli’s brand is moreover strengthened by the company’s involvement in F1 as official tyre supplier for the three years between 2011 and 2013 and by its fashion and industrial design project PZero.
- The main financial participations of Pirelli & C as of the 31st of December 2012 were: RCS (5.3% of share capital) and Mediobanca (1.8% of share capital).
Last Revised: 10 Jun 2013