Pirelli to cut costs, ‘contain' investment under new plan 

Milan, Italy – Pirelli & C SpA is to reduce costs and contain investment under a 2020-2022 industrial plan, to be presented in the first quarter of next year.

As well as a continuing focus on the high-value segment, the plans will “bring significant reinforcement to the competitiveness of [the] business model,” Pirelli said in a third quarter financial report.

Measures to improve competitiveness will include a “significant reduction of the cost-base and break-even point” from the start 2020, according to the statement issued 29 Oct.

And, noting an increasingly challenging and evolving trading environment, Pirelli said it would contain investments, particularly those aimed at increasing production capacity.

The tire maker anticipates demand for high value tires in the OE segment to grow during the plan-period, but at a lower rate compared to the past.

The replacement channel, it noted, remains ‘resilient,’ helped by the continued growth of the world car parc, particularly in the premium and prestige segments.

Without going into further details, Pirelli added that it would adopt a “selective approach” to high-value growth as part of the new plan.

In addition, the company said it would consolidate its “technology and innovation leadership” towards improving its offerings for future mobility.

Pirelli went on to emphasise its commitment to increasing the environmental efficiency of its products in all phases of their lifecycle.

This, it said, included tapping into renewable raw materials, bringing about energy consumption savings and offering ultra-low rolling resistance tires.

Pirelli reported 7.6% year-on-year increase in earnings (adjusted EBITDA) to €1.0 billion, on 2.8% higher sales of €4.0 billion in the first nine months of the year.

The Italian firm linked the gains to a 5.4% improvement in price/mix, which contributed €120 million to earnings, helping offset a negative 67.6-million rise in materials costs and €53.9 million volumes-decline.

Pirelli noted that the first nine months of 2019 were marked by weakness in the car market, which also continued into the third quarter “beyond expectations”.

The slowdown of the car market impacted tire demand, with a decline of 6.3% in OE in the first nine months of the year, the Italian tire maker added.