Pirelli updates outlook to reflect higher volumes, costs

Milan, Italy – Pirelli & C. SpA has updated its 2020 outlook for the overall market, assuming “an improvement in demand” compared with previous indications.

The demand, Pirelli said in its quarterly report 11 Nov, will mostly be driven by the original equipment (OE) segment in the Asia-Pacifi (APAC) and North America, regions.

The tire maker said it was taking “a cautious view” on Europe due to the recent introduction of new anti-Covid restrictions following the resurgence of the pandemic. 

For the full year, Pirelli foresees a decline in volumes for the group of between around 17% and 18%, up from previous indications of 18%-20% announced in August. 

With a 1.5% positive price/mix effect and an expected 5% negative currency impact the Italian tire maker now expects revenues to come in at around €4.18-€4.23 billion. This compares against the previous target of €4.15-€4.25 billion announced in August. 

Pirelli expects its adjusted EBIT margin to come in at around 11.5% and 12%, down from the previous indication of around 12%-13%.

This, it said, was due to "a worsening of exchange rates"  - now to expected to have a negative €15 million impact - which will also affect the cost of raw materials.

In addition, Pirelli now expects a €20-million increase in costs linked to the reduction of inventories of finished products in the third quarter. The costs, it said, are now estimated to stand at €90 million.

In its updated full-year outlook Pirelli said it anticipated a 17% decline in the car market in 2020, up from an estimated fall of 19% earlier in August.

Demand in the OE segment is set to fall 18%, up from an earlier estimate of a 23% decline.

Pirelli also increased its estimates for the replacement channel by two percentage points to a 16% drop.

The Italian tire maker said its “car new premium” market, with tire sizes bigger than 18 inch, was its “most resilient segment”, with an expected decline of 10%.

The standard segment is set for an 18% decline, up from the previous forecast of 20% drop, according to Pirelli.