Business outlook in 2015

In 2015, China and mature markets will be the drivers of world economic development and will offset the volatility of the economy in South America and Russia. In particular, GDP growth is expected for Europe 1.7%, the United States +3.1% and China +6.5%. The global market for car tyres is expected to grow by 2.5% (about 1.46 billion pieces) driven by the development of the Premium segment expected to increase by 7% (+1% expected growth of non-Premium) thanks to a greater spread of high-end vehicles (9.3% Premium weight in the global fleet against 8.9% in 2014). In percentage terms, Premium in the world in 2015 will reach 25% of the global car tyre market, a growth of one percentage point over the previous year. In such a scenario Pirelli confirms the strategy of focusing on Premium with the aim to:

  • improve in mature markets the positioning of the replacement channel by leveraging stronger presence in original equipment;
  • seize the many Premium growth opportunities in emerging countries.

Based on the performance for the year 2014 and the market trends for the current year, for the year 2015 Pirelli expects the following results:

  • EBIT of around euro 930 million after non-recurring and restructuring expenses;
  • Investments below euro 400 million;
  • Cash generation before dividends exceeding euro 300 million.

The consolidated turnover is forecast at around euro 6.4 billion due to the following drivers:

  • growth of the price/mix component equal to or greater than + 4%;
  • growth in Premium volumes equal to or greater than +10%;
  • growth in overall volumes equal to or greater than +3%;
  • negative translation effect forecast at about -1%;
  • efficiencies for about euro 90 million, in line with the planned for the period 2014-2017 for a total of euro 350 million.

The target of Operating Income (EBIT) is expected to be approximately euro 930 million, after having incurred restructuring costs of approximately euro 40 million.

The 2015 targets conservatively assume the continuation of the difficult economic situation in Venezuela and Argentina, which in 2014 recorded a decline in real GDP respectively by about 3.5% and 1%, and high exchange rate volatility. The car tyre market is expected to decline year on year by 40% in Venezuela (-30% in 2014) and to be substantially stable in Argentina (-7.5% in 2014).

In particular, with reference to Venezuela, in 2015 the targets take into account a forecasted exchange rate of 20 bolivars to the US dollar which will lead to a devaluation of the net financial position in Venezuela for euro 70 million - already included in the forecast of cash generation before dividends exceeding euro 300 million - and a negative impact of approximately euro 30 million in terms of financial expenses for foreign exchange loss related to past trade payables.

In addition, the 2015 targets forecast for Venezuela temporary measures the impacts of which will be offset by efficiency actions in South America, such as reduction of production and momentary interruption of finished products import.

If the scenario were to be worse than the above, resulting in a further reduction of Venezuelan capacity up to 30%, and sales volumes in Argentina by 10%/15%, there would be a risk on the 2015 consolidated EBIT target (euro 930 million), estimated today at euro 30 million.

The contribution of Consumer and Industrial Businesses to the Group EBIT target of euro 930 million will be as follows:


EBIT margin before restructuring costs expected equal to or greater than 16% of revenue in growth between +6%/+6.5% that will reach around euro 4.9 billion reflecting:

  • growth in volumes of about +3% of which Premium development equal to or greater than +10%;
  • growth of the price-mix equal to or greater than +4%;
  • exchange rate impact -1%.


EBIT margin of around 12% (substantially stable compared to 2014, net of the complete deconsolidation of the steelcord business) on turnover growth of +7%/+7.5% that equals to approximately euro 1.5 billion deriving from:

  • increased volumes by +4.5%/+5%;
  • price/mix of about +4.5%;
  • exchange rate impact -2%.

It is recalled that following the sale of the steel cord business, in 2015 Industrial Business will suffer the total deconsolidation of the relative activities (which contribute to the Business Plan approximately euro 90 million to revenue net of "Intercompany Eliminations" and about euro 30 million to EBIT) and not just a component of activities to third parties already deconsolidated in 2014 (euro 73.5 million net of "Intercompany Eliminations" and about euro 7 million on EBIT). The investments are expected below euro 400 million and 37% will go to developing essentially Premium capacities and 35% to the improvement of mix and quality. Cash flow before dividends will exceed euro 300 million, with a ratio on turnover of about 4.7%.