Pirelli SpA, Europe’s third-largest tiremaker, announced a new business plan which targets a bigger operating profit margin, looks at a partnership for its steel-cord unit and aims to sell 150 million euros ($202.5 million) in financial assets by 2017 as it adapts to shifts in global car markets.
The Italian company’s annual update takes on added significance this year as investors look ahead to a likely sale in 2017 of the 26 % stake owned by the holding company that controls Pirelli.
The latest plan aims to accelerate Pirelli’s shift into the premium tyre segment, which it expects to account for 44 % of sales by 2016, against 38 % now. The company also said it is targeting tyre revenues of 7.5 billion euros ($10.1 billion) in 2016, from about 6.2 billion euros this year and that it will seek a partner for its pollution filters business while holding on to its fashion brand PZero.
The asset disposals, and gross cash generation of 3 billion euros in the period, will finance 1.6 billion euros in investments and a dividend payout of 40 % of net income, the Milan-based company said today. The board agreed to the steel-cord division strategy to expand its international role.
The tiremaker scaled back earnings forecasts for 2013 and coming years amid a contraction in Europe’s car sales to a two-decade low and questions about economic growth elsewhere.
Pirelli rose as much as 5.3 % to 10.79 euros, the highest intraday price since Oct. 23, and was trading up 3.9 % at 10:05 a.m. in Milan. The stock has gained 23 % this year, valuing the company at 5.17 billion euros.
Via Reuters, Bloomberg