Pirelli Technology Day
GROUP OUTLOOK FOR 2004 - 2006 PERIOD PRESENTED
FORECASTS FOR THE THREE YEARS:
STRONG IMPROVEMENT OF EBIT: CAGR (COMPOUND AVERAGE GROWTH RATE) +25%
REDUCTION OF NET FINANCIAL POSITION: FORESEEN AT 1,350 MILLION EUROS IN 2006
INDUSTRIAL ACTIVITIES
CAGR OF EBIT: 23%
ROS IN 2006: APPROX. 7%
CAGR OF REVENUES: BETWEEN 3 AND 4%
ENERGY CABLES AND SYSTEMS SECTOR: CAGR OF EBIT +25%, ROS IN 2006 APPROX. 6%, THANKS TO INNOVATION IN PRODUCTION PROCESSES AND FOCUS ON HIGHER ADDED VALUE PRODUCTS
TELECOM CABLES AND SYSTEMS SECTOR: CAGR OF SALES +10%, POSITIVE EBIT AND ROS IN 2006 EQUAL TO APPROX. 5%, THANKS ALSO TO BROADBAND TECHNOLOGIES AND SECOND GENERATION PHOTONICS
TYRES SECTOR: CAGR OF EBIT +10%, ROS IN 2006 EQUAL TO APPROX. 9%, THANKS TO FOCUS ON HIGH PERFORMANCE SEGMENTS, TO MIRS TECHNOLOGY AND TO GROWTH ON NORTH AMERICAN MARKET
REAL ESTATE ACTIVITIES
CAGR OF EBIT INCLUDING INCOME FROM EQUITY PARTICIPATIONS: NOT BELOW +20% IN 2004 - 2006 PERIOD
THE NEW THREE YEARS PLAN WILL BE PRESENTED ON 1ST JUNE
Milan, 17 May 2004 - Pirelli Technology Day took place today at new Headquarters of Pirelli RE in Milano - Bicocca. During the meeting, Chairman Marco Tronchetti Provera presented to financial community Group's outlook for the 2004-2006 period, as well as main technologies and research projects carried on in all its activity sectors.
In the last two years, Pirelli completed an important process aimed at relaunching and developing its activities, based on increased efficiency, on EBIT growth and on focus on new technologies, thus consolidating and strengthening its position and presence on international markets.
Thanks also to reduction and rationalization measures, Pirelli can today maximize benefits of any upturn in energy and telecommunication sectors and reach further goals in terms of EBIT, market share and new products, thus confirming its role of leader in new technologies and innovation.
R& D and innovation activities - where Pirelli employs approximately 1,500 people - play a key role, with 2003 investments equal to 3.4% of its sales. This is witnessed by more than 400 patents registered in the last two years.
Pirelli has today also a strongly motivated management team, with an international career path.
Group's outlook for 2004-2006 period
Guide-lines:
focus on higher value-added market segments,
strong commitment to innovation of products,
further increased efficiency of organizational structure and business models,
development of opportunities in new markets.
Targets:
strong improvement of EBIT: CAGR of +25%,
total growth of sales: approx. 10%,
better net financial position, forecast at 1,350 million Euros in 2006, compared to 1,745 million at end 2003.
Industrial activities
Pirelli aims at strengthening its position of innovation leader in all its Sectors through:
the growth in " high performance" segments,
a market approach integrating products, systems and services,
a further development of international presence.
For Industrial activities, Pirelli therefore forecasts:
CAGR of sales between 3 and 4%,
CAGR of EBIT of 23%,
ROS in 2006 equal to approx. 7%.
Energy Cables and Systems Sector
In the three years period, outlook is based on:
an increased presence in higher value-added market segments,
the realization of innovative production processes,
the development of products based on new materials,
a commercial approach diversified by client.
On the basis of the above guide-lines the targets are:
CAGR of sales of 2%,
strong improvement of EBIT, with a CAGR of 25% and ROS at 6% in 2006.
The Group also forecasts a continuous attention to efficiency and rationalization of resources, with a particular attention to quality standards of its services.
In a market where utilities' investments are still stagnant and prices of lower value-added products are still under pressure, Pirelli growth drivers will be a better mix of its solutions, a stronger focus on high voltage cables and systems - capitalizing on its leadership in submarine systems and cables for extreme applications (offshore platforms, mines and power plants).
Telecom Cables and Systems Sector
In a market where recovery signals in demand of optical cables and fiber can be detected, with prices still under pressare, Pirelli expetcs to grow in the sector through:
a new business model based on Group's technological leadership,
a complete and excellent product portfolio,
a competitive costs structure.
Innovative technologies for broadband access and second generation photonics will have a growing importance: in 2006 these activities will account for one third of Sector's revenues.
Thanks to these factors, Pirelli forecasts:
CAGR of sales of 10%,
positive EBIT and ROS in 2006 equal to approx. 5%.
In particular, Pirelli is already marketing its innovative gateways for broadband access, winning important contests for some of the main European carriers. Pirelli forecasts that in 2004 revenues from these activities could reach 50 million Euros.
During second half of 2004, Pirelli also forecasts to market first products of second generation photonics, thanks to which costs of telecommunication networks could be reduced. In particular, first solution marketed will be a tunable laser for data transmission on long haul fiber optic cables.
Tyres Sector
After a period when a strong growth of all economic indicators and a performance better than competitors were posted, Pirelli forecasts of a further improvement are based on continuous growth in high performance segments - where Pirelli is one of the leading international players - on growth in Truck and Moto segments and on increasing contribution coming from MIRS innovations and from its application to traditional processes.
The guide-lines of the Sector are:
boost of innovation, thanks to focus on new " high performance" products based on proprietary technologies: MIRS for tyres production and CCM - Continuous Compound Mixing for new materials industrialization,
growth in North American market,
production delocalization.
On the basis of the above guide-lines the targets are:
a CAGR of sales of 4%,
a CAGR of EBIT of 10%,
ROS in 2006 growing at 9%.
Also in this Sector, Pirelli aims at confirming its leadership capitalizing on MIRS technologies through:
increased production volumes in three plants in Germany, UK and the USA,
focus of MIRS technology on runflat, SUV and motorcycle tyres,
the application of some MIRS technologies to traditional production processes, with positive effects on flexibility and quality.
Pirelli aims also at reaching a 12% share of North American " Performance" market segment, thanks to a selective business model, both in Original Equipment and in Aftermarket, to a logistic system that integrate MIRS plant in Atlanta, Georgia, and new Brasilian plant in Feira de Santana, and to the appreciation of Pirelli brand in the US, as witnessed by recent JDPower award.
In the next three years, Pirelli forecasts to develop Tyres Pressure Monitor systems, able to interact with electronic systems of the vehicles thus improving driving safety.
Pirelli Labs
Pirelli Labs, the excellence R& D center of the Group, has already launched many research project, also in parternship with important international centers: MIT, CNR and Politecnico of Milan. These projects focus on:
new generation optical components and chips based on nanotechnologies,
new materials for cables and tyres,
fuel cells.
The main research projects will be capable of generating a significant proportion of additional value for the Group in the three-year period.
Real Estate activities
Real Estate activities, managed by subsidiary Pirelli & C. Real Estate, have reached in 2003 maximum targets outlined in " 2003-2005 Three Years Plan" . The new three years plan will be presented to financial community and media on June 1st 2004.
For the 2004-2006 period, Pirelli RE foresees a CAGR of EBIT including income from equity participations not below 20%, thanks to integration of asset management and service provider activites, to new funds launch and to development of new activities in the field of non performing loans and in distribution of real estate and financial products through its franchising network.
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