The Board of Directors of Pirelli & C. SpA approved consolidated results for the year ended on 31 December 2019
The Board of Directors of Pirelli & C. SpA approved consolidated results for the year ended on 31 December 2019.
- Revenues: 5,323.1 million euro, an increase of 2.5% compared with 2018 (2019 target ≥5,300 million)
- Adjusted Ebit: 917.3 million euro with a margin of 17.2% (2019 target >17%/17.5%)
- Net cash flow before dividends and IFRS 16 impact: 332.9 million euro (2019 target 330/350 million euro). Cash flow before dividends after IFRS 16 impact of 344.1 million euro
- Net Financial Position: 3,024.1 million euro (3,507.2 million including leasing debt of 483.1 million euro following the application of the IFRS 16 accounting principle), a reduction compared with 3,180.1 million euro on 31 December 2018. The ratio of net financial position to Adjusted Ebitda before start-up costs is 2.42x, or 2.59x including IFRS 16 impact (target 2.42x/2.36x, including IFRS 16 impact 2.59x/2.53x)
- Research & Development expenses: 232.5 million euro in 2019, of which 215.7 million euro destined to High Value activities (6.1% of segment’s revenues)
- Further improvement in results in environmental, social and economic context: Pirelli world leader in sustainability within the Automobiles and Components sector of the Dow Jones World indices
The economic, asset and financial data as of 31 December 2019 were formulated applying the new IFRS 16 – Leases accounting principle that establishes a new way of accounting for leasing contracts, with significant effects in particular on the representation of the Group net financial position and EBITDA. It should be noted that the comparable 2018 data have not been restated.
Milan, 2 March 2020 – The Board of Directors of Pirelli & C. SpA met today and approved results for the year ended on 31 December 2019.
In 2019, the tyre sector was characterized by weak demand (-1.4% compared with 2018), particularly in the Original Equipment channel (market -5.9%) in line with the decline of global auto production. With the aim of guaranteeing a sufficient level of factory saturation and containing inventory, many sector operators sent production, originally intended for the Original Equipment channel, to the Replacement market, with a resulting impact on prices. This reduction mainly applied to the Standard segment and High Value products with a lower level of technological content.
In this context, Pirelli pursued its strategic focus on High Value, a segment that is more resilient (Car ≥18’’ market growth +5.9%) and less exposed to competitive pressure, consolidating its leadership and strengthening its presence in products characterized by a high level of technological content. In the Standard segment, where demand remains weak (market -2.7% in 2019), Pirelli continued to reduce its exposure to less profitable products, at the same time reducing inventory levels (Car Standard inventory -23% in terms of volume), which had increased at the end of 2018 because of the Brazilian economic crisis. The company closed 2019 with inventories equal to 20.5% of revenues, compared with 21.7% at the end of 2018.
Pirelli, as already announced on 19 February with the presentation of 2020-2022 Industrial Plan with Vision 2025, ended 2019 with results in line with expectations:
- Revenues at 5,323.1 million euro (target ≥5.3 billion euro), an increase of +2.5% compared with 2018 (organic variation +2.2%), thanks to further reinforcement in the High Value segment, which accounts for 66.5% of consolidated revenues (+2.8 percentage points compared with 63.7% in 2018);
- Profitability (adjusted ebit margin) of 17.2%, in line with target (>17%÷17.5%). Adjusted Ebit was 917.3 million euro. The contribution of internal levers (price/mix, efficiencies and cost containment actions) limited the negative impact of the external context (increase in cost of production factors, weak demand and pressure on prices);
- Total net profit 457.7 million euro, an increase of 3.5% compared with a profit of 442.4 million euro in 2018. The 2019 result in part benefitted from the contribution of tax credits in Brazil, while the 2018 result was positively impacted by the Patent Box subsidized taxation regime applied to the years 2015-2018.
- Solid cash generation, with a net cash flow before dividends and the impact of IFRS 16, of 332.9 million euro, in line with the target of 330-350 million euro, thanks to the effective management of investments and working capital. In the fourth quarter, net cash flow before dividends and IFRS 16 was 978.2 million euro, an improvement of 120 million euro compared with 858.2 million in the fourth quarter of 2018;
- the ratio of the net financial position to Ebitda before start-up costs was in line with the target. In 2019, the Net Financial Position was 3,024.1 million euro (3,507.2 including 483.1 million euro stemming from the IFRS 16 accounting principle), compared with 3,180.1 million on 31 December 2018. The ratio of the net financial position to Adjusted Ebitda before start-up costs was 2.42x, or 2.59x including the impact of the IFRS16 accounting principle (2019 target 2.42x/2.36x, or 2.59x/2.53x including the impact of the adoption of the new IFRS16 accounting principle)