PIRELLI: CONTAINS COVID-19 EFFECTS, ADJUSTED EBIT POSITIVE 66.7 MILLION
EFFICIENCIES AND COST REDUCTIONS, IN LINE WITH YEAR’S TARGETS, LIMITED COVID-19 IMPACT ON HALF YEAR RESULTS
CASH ABSORPTION SUBSTANTIALLY ZERO IN THE 2nd QUARTER THANKS TO SIGNIFICANT REDUCTION OF INVENTORIES
The Pirelli & C. S.p.A. Board of Directors approved the 30 June 2020 consolidated results
- Revenues: 1,816.4 million euro, down 31.6% compared to 30 June 2019 (-28.5% the organic variation) due to the strong reduction in demand and foreign exchange volatility, while the price mix improves
- Adjusted Ebit: 66.7 million euro thanks to the contribution of efficiencies and cost containment actions that limited the impact of the reduction in demand and the slowdown (440.5 million euro in the first half of 2019)
- Total net result: -101.7 million euro (+307 million euro in the first half of 2019)
- Net cash flow: -757.5 million euro (-817.4 million euro in the first half of 2019, -640.5 million euro net of dividends distributed in 2019)
- Net financial position: -4,264.7 million euro substantially unchanged compared to -4,261 million euro as at 31 March 2020
- Liquidity Margin: 2,174.1 million euro as at 30 June 2020, the maturities on financial debt guaranteed for approximately 3 years
2020 TARGETS
- Main operational drivers confirmed: volumes, Price/Mix, efficiencies and cost cutting
- Revenues expected between about 4.15-4.25 billion euro (previous indication around 4.3-4.4 billion euro) as a consequence of greater exchange rate volatility
- Adjusted ebit margin expected at around 12%-13% (previous indication around 14%-15%) impacted by exchange rates, raw materials and increases in other costs, predominantly non-monetary
- Investments confirmed at around 130 million euro
- Cash generation expected between about 190 and 220 million euro (previous indication around 230-260 million euro)
- Net financial position confirmed at about -3.3 billion euro
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- Angelos Papadimitriou coopted to Board of Directors
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Milan, 5 August 2020 - The Board of Directors of Pirelli & C. Spa met today and approved the results as at 30 June 2020.
In the first half of 2020, the tyre sector was also strongly impacted by the Covid-19 emergency globally and by the related lockdown measures, with a general worsening of the economic conditions, a decrease in consumption and production. The demand for car tyres in the first half recorded a decline of 28% of volumes, more marked in the second quarter (-36%) due to the spread of the pandemic. The experience gained in China, where production and commercial activities have returned to normal in recent months, enabled Pirelli to respond promptly to the profound change of scenario at a global level, defining an action plan communicated to the market in April.
This plan, previously outlined to the financial community and whose first benefits are already visible in the first half of the year, envisages a series of actions intended to:
- guarantee the health and safety of its employees by adopting all the necessary prevention measures;
- protect profitability and cash flow generation through cost containment and remodelling of investment programmes;
- reinforce the financial structure. The signing of a new “sustainable” banking line for 800 million euro (over 5 years) and, in general, the optimisation of the financial structure by extending the maturities on debt is included as part of this operation;
- launch the recovery through the gradual reopening of the plants, collaborate with the sales network (for example in the adoption of health standards and in the digitisation of services), simplify the product range with greater focus on Speciality products and ≥19 inch rim products.
Pirelli’s results in the first half of 2020 are characterised by:
- revenues of 1,816.4 million euro, declining by 31.6% compared to the first half of 2019 (-28.5% the organic variation) due to the aforementioned decrease in demand. The High Value revenues were 70.8% of the total (+3.5 percentage points compared to 67.3% in the first half of 2019);
- profitability (adjusted Ebit) positive for 66.7 million euro (440.5 million in the first half of 2019). This figure reflects the negativity of the second quarter (Adjusted Ebit -74.4 million euro) due to the sharp drop in demand and the impact of the slowdown;
- Total net result of -101.7 million euro, with a second quarter negative for 140.2 million euro. The adjusted net result (excluding non-recurring and restructuring charges and others, direct costs related to Covid-19 and the amortization of intangible assets included in the PPA) was equal to -13.4 million euro;
- net cash flow of -757.5 million euro compared to -817.4 million in the first half of 2019 (-640.5 excluding the dividends distributed in 2019). Lower investments (CapEx and financial investments in equity investments) and improvement in the management of net working capital mitigated the impact of the decreased operating performance. The cash absorption in the second quarter of the year was substantially zero (-4 million euro), mainly related to the significant reduction of inventories;
- The Net Financial Position as at 30 June 2020 was negative for 4,264.7 million euro (-3,507.2 as at December 2019, substantially unchanged compared to 4,261.0 million euro as at 31 March 2020);
- liquidity margin of 2,174.1 million euro, with maturities on debt guaranteed for approximately 3 years also thanks to the right of the company to extend the bank debt with due date 2021 (for 253 million euro) and 2022 (for 1,747 million euro), to 2022 and 2024 respectively.