It will be the 20th Pirelli tyre factory in the world. Pirelli announced the construction of its new Mexican factory at Guanajuato on Friday 5 November. The plant, which will be built in the town of Silao about 400 kilometres from Mexico City, will produce high and ultra-high performance tyres for cars and light trucks.
Pirelli will invest about $210 million in Mexico and generate 700 direct jobs. The new installation will cover an area of 120,000 square metres and will be operational from 2012 with a daily production of 10,500 tyres and an annual volume of 3.5 million units by 2014, which will climb to 5 million in 2015.
Among those attending the presentation event were the governor of the state of Guanajuato, Juan Manuel Oliva Ramírez, the Italian ambassador to Mexico Roberto Spinelli and the mayor of Silao Roberto Tovar Torres; from Pirelli there were Guillermo Kelly, CEO Pirelli Latin America, Giovanni Pomati Pirelli Tyre senior vice-president, operations, Mauricio Canineo general manager of Pirelli Mexico and Giuliano Menassi head of the industrial project in Mexico.
“We are proud to become members of the Silao community, in Guanajuato”, said Guillermo Kelly. “This new facility is important because it complements our production capability in the Latin America area. The new factory location is also crucial as it will allow us to better serve both our Mexican customers as well as Nafta markets such us the U.S. and Canada. Additionally, the plant will feature the latest technology developed by Pirelli, including Runflats”
“With great pride we give a warm welcome to our state to the Italian company Pirelli, a world leader in High Performance tyre manufacturing”, declared Juan Manuel Oliva Ramírez, the governor of the state of Guanajuato. “Because of its high technology and high profile of the jobs created, this new plant in Silao is an example of the type of projects we are actively seeking and will continue to attract in the future given the significant advantages offered by the State of Guanajuato as an foreign investment destination”.
PIRELLI TO FOCUS ON PREMIUM SEGMENT IN ALL AREAS, PREMIUM GROWING FASTER THAN MARKET, AND ON AREAS OF RAPID ECONOMIC GROWTH;
INVESTMENT OF 1.9 BILLION EUROS IN 5-YEAR PERIOD;
STRONG GROWTH IN ASIA-PACIFIC, LEADERSHIP CONSOLIDATION IN LATAM, NEW OPPORTUNITIES IN MATURE MARKETS IN PREMIUM SEGMENT EXTENDED TO GREEN AND SUSTAINABLE PRODUCTS;
INCREASED ‘LOCAL-FOR-LOCAL’ PRODUCTION, BRINGING OFFER CLOSER TO DEMAND;
LAUNCH OF NEW MEXICAN PLANT TO SERVE NAFTA AREA: INITIAL INVESTMENT 210 MILLION DOLLARS;
IN 2015, TWO THIRDS OF PROFITABILITY WILL COME FROM RAPIDLY GROWING ECONOMIES AND LATAM;
AVERAGE ANNUAL REVENUE GROWTH OVER THREE YEARS SEEN AT 8%, WITH EBIT MARGIN RISING TO BETWEEN 10.5% AND 11.5% IN 2013;
TYRE SECTOR DIFFERENT TO AUTOMOTIVE, MORE PROFITABLE, LESS EXPOSED TO THE ECONOMY, MORE FLEXIBLE;
FOCUS ON PREMIUM SECTOR AND EFFICIENCY PLAN WILL OFFSET INCREASES IN RAW MATERIAL COSTS;
BY 2015, 60% OF PRODUCTION WILL COME FROM PLANTS LESS THAN 10 YEARS OLD;
ITALY’S SETTIMO TORINESE PLANT TO BE THE GROUP’S MOST ADVANCED, INVESTMENT OF 155 MILLION EUROS, FULLY OPERATIONAL IN 2011;
CONTINUED FOCUS ON RESEARCH AND DEVELOPMENT, MAINTAINING CONSTANT PROCESS AND PRODUCT INNOVATION;
SUSTAINABILITY PLAN: BY 2015 WATER CONSUMPTION TO FALL 35%, ENERGY CONSUMPTION TO FALL 15%, WITH CONSEQUENT DECLINE IN CO2 EMISSIONS;
PIRELLI BRAND VALUE ESTIMATED AT 1.8 BILLION EUROS BY INTERBRAND.
SOUND FINANCIAL SITUATION: NET DEBT/EBITDA RATIO APPROX 0.6 IN 2015; DEBT STRUCTURE IMPROVED, MATURITIES LENGTHENED
THE PLAN DOES NOT INCLUDE M&A OPERATIONS OR CAPITAL INCREASES
Milan, 4 November 2010 – The Board of Directors of Pirelli & C. approved the 2011-2013 industrial plan, with vision to 2015. The plan was illustrated today to the financial community by Pirelli & C. Chairman Marco Tronchetti Provera and Chief Operating Officer Francesco Gori, with the support of Maurizio Boiocchi, the head of Research and Development, and Ugo Forner, Guglielmo Fiocchi, Andrea Pirondini and Alberto Pirelli, respectively the heads of the Car, Moto, Truck and Agro business units.
“Pirelli has concluded its transformation into a pure tyre company and reached its targets ahead of schedule. In a world that is changing fast and in which new areas of growth are emerging, we have developed a plan which puts the company in the best possible position to compete”,said Mr. Tronchetti Provera.
“The strategies and the actions envisaged – he added –will allow Pirelli to achieve average annual growth of 8% over the period of the plan, with profitability (Ebit margin) rising to between 10.5% and 11.5% in 2013. This result will be mainly achieved through an even greater focus on the Premium segment, which is growing at a faster pace than the rest of the market and also within the replacement segment. The latter, which represents 75% of Pirelli’s revenues, minimizes the tyre segment’s exposure to slowdowns in the auto sector and gives it a higher structural profitability than auto. That focus will be achieved by increasing investment and production capacity in the premium segment, as well as through a re-balancing of our production among rapidly growing economies (RDE), Latin America and mature markets (with about two thirds of our profitability deriving from the RDE and Latam areas) and a technological upgrade of our production sites and machinery so that by 2015, 60% of production will be in plants less than ten years old. These actions will allow us to offer products which are constantly being renewed (in 2013, 30% of total sales will be new products), always more tailored to the specific needs of customers, with reduced environmental impact and greater competitiveness thanks to continued innovation in materials and processes. All of this leveraging the brand’s potential and counting on a young and multi-ethnic management team.”
INDUSTRIAL PLAN 2011-2013 AND VISION TO 2015
GUIDELINES AND OBJECTIVES
Why a new plan?
The effectiveness of the actions implemented on the basis of the 2009-2011 plan, helped by a recovery in tyre demand from the end of 2009, permitted Pirelli to raise its financial targets three times in the course of 2010 and to reach, one year ahead of schedule, goals set for 2011 in the previous industrial plan.
In line with its strategy of focusing on the tyre sector, as outlined in the 2009-2011 industrial plan, Pirelli proceeded with the disposal of non-strategic activities (Telecom Italia, Alcatel-Lucent Submarine, Oclaro, Pirelli Broadband Solutions) and concluded the separation from the group of Pirelli Real Estate, transforming itself into a ‘pure Tyre company’ 98% of whose revenues are already derived from the activities of that sector.
Alongside the tyre activities, the company is also pursuing the Pzero fashion and high-tech project and in line with Pirell’s ‘green performance’ strategy, the activities of Pirelli Eco Technology and Pirelli Ambiente, respectively operating in emission control technology and the energy and environment areas.
In the light of these factors, Pirelli has defined a new 2011-2013 industrial, with vision to 2015.
New Plan Scenario 2011-2013
The dynamics of the tyre sector
The tyre sector, over the last ten years, has seen constant expansion: between the years 2000 and 2008 the average annual rate of growth in value was 9% while the decline of approximately 10% seen between 2008 and 2009, as a consequence of the global economic crisis, was recovered in 2010. Over the next five years, average annual growth in the sector is expected to be 7%.
In this context, Pirelli was the only operator, among the majors, to increase its market share, up 0.7 percentage points, thanks to constant product innovation and effective management of operations.
The ‘Premium’ market: continuing growth and new opportunities
The auto park is in constant growth, driven by demand from rapidly growing economies (RDE), and the park of cars with premium tyres, an area in which Pirelli is pre-eminent, is growing even faster. The market of vehicles (car and light car vehicles) with Premium tyres is expected to grow 5.2% between 2010 and 2015, while the auto park is expected to grow by 3.1%. In mature markets, as in growing economies, changes in consumer behaviours offer new business opportunities in that they re-define the ‘Premium’ segment, which is no longer solely associated with performance and luxury, but with products linked to issues of sustainability and safety, areas dominated by Pirelli due to its advanced skills and technology.
Tyre and automotive: two sectors with different dynamics
Revenues in the tyre sector are based principally on volumes which are affected only in part by negative economic cycles: sales are strongly driven by replacement which at the market level accounts for 70% of sales in the car and light truck vehicle segment (over 80% in the truck segment) and for Pirelli over 75% of sales. This dynamic makes the tyre sector more flexible and less exposed to possible slowdowns in the auto sector and demand for original equipment. This guarantees the sector a higher structural profitability: the Ebit margin of the ten major tyre makers is estimated to be 7.3% in 2010, compared with 5.7% for the ten major auto component makers and 4.3% for the ten major car makers. The tyre sector is also less subject to volatility linked to raw material costs.
Greater importance to ‘local for local’: bringing production closer to demand is crucial
The global economy can be defined, more and more, as a plurality of macro-areas divided by tariff and other barriers (technical requirements, product certification, additional costs linked to administrative import procedures). In these regions, which are constantly growing and are the engines of world growth, it is crucial to be present with local production facilities capable of meeting ever stronger local demand (‘local for local’ production).
Pirelli today
Pirelli today is already a macro-regional player, the leader in high growth Latin America and with a geographically competitive industrial presence. Today, 75% of its production is located in high-growth countries, with growing demand and favourable industrial costs. The company holds a pre-eminent position in the ‘Premium’ segment, has consolidated relationships with the most prestigious car marques and offers a complete range of ‘green’ products, which today already account for more than 36% of its sales.
With a brand value estimated by Interbrand of approximately 1.8 billion euros, the Pirelli brand represents a potential to be leveraged and will become even stronger through its involvement with Formula One.
In the tyre sector, Pirelli is among the companies that invest most in research and development (approximately 3% of sales annually) with the aim of continual product and process innovation, and to take advantage of business opportunities linked to new technologies. The company is particularly attentive to material innovation, both in the field of renewable materials and of natural and synthetic rubbers, also through the development of partnerships. This also extends to the development of partnerships, as is the case in natural and synthetic rubber. Its management is multi-cultural and young: the 280 top managers that lead the company come from 15 nations and are on average under 46 years of age.
Pirelli in 2015
In 2015, around 60% of Pirelli’s production capacity will consist of plant and machinery launched in 2005 or after, and therefore less than 10 years old. The company will have facilities that are highly specialized in the ‘Premium’ segment and located in high-growth countries with favourable industrial costs. The geographic distribution of production facilities will ensure a balanced presence between mature markets and rapidly growing economies (RDE), which together with Latin America will account for two thirds of the group’s profits. The reinforcement of its position in these regions will reduce the company’s exposure to possible economic downturns which could affect mature areas such as Europe and the USA, where, however, Pirelli will be able to take advantage of new opportunities stemming from the broadening of the Premium segment, as noted earlier.
Pirelli will continue to offer a complete range of Premium tyres, which are always being renewed and are capable of satisfying the specific needs of different customer types. Thanks to these actions, Pirelli will be transformed, as demonstrated by the expected evolution of the composition of sales by segment, region, channel and plant age. In 2015, Pirelli expects that 73% sales will come from the Premium Car and Light Truck segment (66% in 2010) and 76% from the After Market (75% in 2010). Changing perspective, 57% will come from fast growing economies (RDE, Latam, Apac, Russia, Emea, equal to 52% in 2010) and over 60% from new sites or new machinery (30% in 2010).
The transformation of Pirelli in numbers
Pirelli’s transformation and growth will be supported by a total investment of 1.9 billion euros between 2011 and 2015, an increase from the 1.5 billion euros invested between 2006 and 2010. Almost all this investment (99%) will go to the tyre sector, to meet growing demand in the market, in particular in the premium segment, in a market in which production over-capacity is not foreseen.
For the third consecutive time, Pirelli has been rewarded by the readers of SportAuto, the authoritative German magazine for motoring enthusiasts. Replying to a survey conducted by SportAuto among its readers, Pirelli was especially liked in the ‘sportsmanship’ category as a result of the number of points it scored in the ‘stability when cornering’ ‘safety at high speed’ and ‘excellent braking performance’ areas. Pirelli also won the ‘emotionality’ class due to the readers’ appreciation of our tyres in the ‘I like the brand’ and ‘sport look’ sectors.
“We are very pleased that Pirelli has been rewarded again by the well-informed readers of SportAuto”, said Michael Borchert, manager, sales and marketing of Pirelli Germany when commenting on this important result. “This is further confirmation of the high quality of our products, which is perceived and rewarded by our motorists. I am convinced that, with the support of participation in the Formula 1 World Championship, Pirelli will be able to further improve the quality and performance of its tyres and technological leadership”.
It will be the 20th Pirelli tyre factory in the world. Pirelli announced the construction of its new Mexican factory at Guanajuato on Friday 5 November. The plant, which will be built in the town of Silao about 400 kilometres from Mexico City, will produce high and ultra-high performance tyres for cars and light trucks.
“We are proud to become members of the Silao community, in Guanajuato”, said Guillermo Kelly. “This new facility is important because it complements our production capability in the Latin America area. The new factory location is also crucial as it will allow us to better serve both our Mexican customers as well as Nafta markets such us the U.S. and Canada. Additionally, the plant will feature the latest technology developed by Pirelli, including Runflats”
For the third consecutive time, Pirelli has been rewarded by the readers of SportAuto, the authoritative German magazine for motoring enthusiasts. Replying to a survey conducted by SportAuto among its readers, Pirelli was especially liked in the ‘sportsmanship’ category as a result of the number of points it scored in the ‘stability when cornering’ ‘safety at high speed’ and ‘excellent braking performance’ areas. Pirelli also won the ‘emotionality’ class due to the readers’ appreciation of our tyres in the ‘I like the brand’ and ‘sport look’ sectors.