We strengthened our positioning in the High Value segment, with a market share increase in the key Regions (Europe, North America and Asia Pacific), and a higher contribution from High Value to the overall results: ~58% of total revenues (+2 p.p. vs previous year) and ~83% of EBIT (+2 p.p. vs previous year).
We posted a sound profitability improvement: the adjusted EBIT before start-up costs reached €927 million (+10% YoY), well in line with the target, despite the lower than expected top line growth. The gap versus our Revenue target was mainly attributable to higher Forex volatility and accelerated reduction of our exposure to the Standard segment.
The optimal management of financial and fiscal charges resulted into a strong increase of the Net Income (+60% year over year).
Finally, Pirelli posted a strong cash flow generation (€200 million before extraordinary transactions) that led to a Net Financial Position to adjusted EBITDA ratio of 2.7 times.
2017 results highlights
1. EBIT adjusted excluding PPA amortization, non recurring, one-off, extraordinary items and start-up costs;;
Source: FY2017 Results Presentation
The achievement of the abovementioned targets derives from the implementation of, among others, the following actions:
- strengthening of the partnership with Prestige and Premium car manufacturers with a high-end portfolio of approximately 2,160 homologations capable of providing insight into future demand;
- expansion of High Value production capacity mainly in Europe, NAFTA and Apac by reconverting in-part the capacity of the Standard segment. The total capacity at the end of 2017 was approximately equal to 76 million tyres (71 million in 2016), of which 55% were High Value (54% in 2016);
- increased distribution coverage in Europe, NAFTA, Apac and LatAm with a focus on channels such as car dealers, retail and Tier 1 clients, where Pirelli exercises greater control and records higher sales. In particular, for 2017 the share of sales generated by these channels reached 48% (41% in 2016);
- the continued development of business programs that target new end-customer needs (such as Cyber™ and Velo), digital transformation of the Company and the conversion of Aeolus brand production into Pirelli brand production. These activities were reflected in the startup costs of ~50 million euro in 2017;
- efficiencies equal to approximately 1.0% of revenues for 2017 linked to industrial and product activities such as the optimization of raw materials costs, the simplification of products and the reduction of tyre weights, the production increase in countries with low industrial costs, improved productivity and the simplification of processes, plus the optimization of energy and other costs.