Dear Stakeholder,
In 2018, the singularity of our business model, focused on the High Value segment, allowed us to achieve our profitability targets, the slowdown of the automotive market not-withstanding. In order to enhance the group’s profitability, we moved to accelerate the focus on High Value, which represents 64% of sales (57.5% in 2017) and 83% of profitability, and is not as exposed to the fluctuations of the economic cycle as the lower tiers.
Combined with cost containment, this offset the faster decline of the Standard segment and allowed us to reach an Adjusted Ebit margin before start-up costs of 8.2%, over the one billion euro level, and an adjusted Ebit margin before start-up costs of 19.3%, rising from 17.3% in 2017. Net profit, thanks to improved financial and fiscal management, was over 440 million euro. These figures are the result of a team approach capable of responding to the signals coming from our markets with flexibility and speed. This perfectly captures the spirit of “Power is nothing without control”, the Pirelli catchphrase, which this year reaches its 25th anniversary and we have chosen as the title of our Annual Report.
The group’s digital transformation has also been of fundamental importance in the achievement of our goals, driving the progressive evolution of our operating processes and technology with the aim of greater horizontal integration in the way we work, in order to manage the growing complexity and uniqueness of our business model on a global scale. The revision of processes and data analysis have, in fact, increased our ability to foresee and be ready for market demand and, above all, to supply our customers – both car makers and consumers – with products that are always more tailor-made, technologically sophisticated, high performing, safe and sustainable.
Thanks to our Research & Development, where we invested over 6% of High Value revenues, we launched Cyber Car, the first connected tyre for Original Equipment. Capable of “talking” to the car and of delivering important measurements for car and passenger safety, as well data of use in the development of the product itself. With the passion that has set us apart for almost 150 years, we have created products suited to the new forms of sustainable mobility, developing tyres for electric vehicles and new products for cars, motorcycles and bicycles.
This year we also achieved significant improvements in results in the environmental, societal and economic context, earning positions at the top of the key international sustainability indices. We also developed a new natural rubber policy to promote sustainable and responsible behavior along the entire supply chain.
Our constant all round efforts have further strengthened the Pirelli name which stands among the leading brands in terms of reputation in Italy and worldwide. A brand which has further solidified its links to the world’s most important sporting competitions to which we contribute our skills and from which we also draw to improve ourselves. For the fourth time, in fact, we renewed the contract for the FIA Formula 1 World Championship for which we will be the Global Tyre Partner until 2023. As well as continuing to excel in the Superbike championship, we have also linked our brand to the world of sailing through a partnership in which Pirelli is co-title sponsor of Luna Rossa in the challenge to win the America’s Cup in 2021 – a competition with the same DNA as Pirelli, based on technology, speed and passion.
The results already obtained and plans that will enable us to remain competitive in the years ahead are the fruit of the work of all the women and men of Pirelli. Our people are the basis for everything, with their teamwork, commitment and passion. It is all of you whom I must thank for the confidence and trust of our stakeholders.
Marco Tronchetti Provera
