2020 FINANCIAL TARGETS

1. Floor of this range if payment of the EU Commission fine on the cartel of electric cables takes place in 2020, as indicated in the 28 Oct 20 Company press release.


Pirelli has updated the 2020 outlook for the overall market, assuming an improvement in demand compared with previous indications, driven mainly by Original Equipment in APac and North America, while taking a cautious view on Europe because of the recent introduction of new anti-Covid restrictions following the resurgence of the pandemic.

The new outlook foresees a decline of the car market in 2020 of -17% (previous indication -19%) with a fall in Original Equipment of -18% (from -23%) and of -16% in the Replacement channel (previous indication -18%). The Car ≥18” market is confirmed as the most resilient segment: expected -10% (previous indication -13%) compared with -18% in Car ≤17” (previous indication -20%).

Based on this scenario, Pirelli foresees a decline in volumes for the group (Car + Moto) of between ~-17%÷~-18% (previous indication between ~-18%÷~-20%):

  • High Value volumes at -11% (from -14%), with Car ≥18” volumes at -10% (previous indication -13%);
  • Standard at -25% (from previous indication of -26%).

The price/mix is expected now to be ~+1.5% (previous target ~+ 2%) which reflects:

  • A more positive performance in Original Equipment in the second semester, in line with the recovery in car production;
  • A more cautious outlook on Europe, particularly in the Replacement channel, following the recent restrictions.

The impact of exchange rates is expected to be ~-5% (previous indication ~-4%) following the appreciation of the euro against the main currencies in the second half of the year.

Consequently, revenues are now expected to be between ~€4.18÷~€4.23 billion (previous target ~€4.15÷~€4.25 billion).

The targets of the “Costs’ Competitiveness Plan” and the “Covid Actions” cost containment plan are confirmed for a total of €140 million net.

The Adjusted EBIT margin is expected to be between ~11.5%÷~12% (previous target ~12%÷~13%) because of:

  • The changed external context with a worsening of exchange rates which also impact the cost of raw materials (now expected at -€15 million from -€10 million);
  • The increase of other costs (from -€70 to -€90 million), in part non-monetary – linked to the significant reduction of inventories of finished products in the third quarter – and the greater costs of sponsorships and lower proceeds from the sale of raw materials and services.

The target for net cash generation confirmed at ~€190÷~€220 million. The expected improvement in the management of working capital because the greater than expected reduction of inventory, in fact, will offset lower profitability. It should be noted that no economic impact is expected from the sentence of the EU Court of Justice regarding the power cable cartel (the company having already made the relative provisions in the past in its risk and charges funds). In the event that payment were to take place by December 31, 2020, the target for net cash generation would be confirmed in the lower part of the range.

The Net Financial Position confirmed at ~-€3.3 billion at the end of 2020.

Last revised: 11 Nov 2020