Against the back of the Ukraine/Russia conflict, Italian tyre maker Pirelli has reassured it is taking steps to offset higher costs as well as the impact of the crisis, and had a contingency plan ready were the situation to worsen.
Pirelli says Russia accounts for 10% of its global tyres output, and that it had analysed the potential impact on local operations linked to import and export to and from Russia of raw materials and finished goods.
Milan-based Pirelli runs the Kirov and Voronezh plants in Russia, with its business in the country accounting for about 3-4% of the overall turnover.
Just like its compatriots, Pirelli is wrestling with rising costs for raw materials, energy, labour and logistics. Due to this it has trimmed the top of its operating profit margin outlook for 2022.
“Pirelli will respond to a challenging 2022 by strengthening the levers already foreseen in the industrial plan,” it said.
The group said it would take “an even more selective approach … in original equipment” and focus “on bigger rims sizes and specialties, particularly electric”.
The manufacturer of tyres lifted its revenue outlook for 2022 to between around EUR5.6-5.7 billion from a previous range of between EUR5.1-5.3 billion.
However, it said its adjusted operating profit margin would be between around 16% and 16.5%.
That compares with between around 16% and 17%, previously.
Pirelli forecast a net cash generation before dividends of between around EUR450-480 million.
“Assuming that the cost of oil and energy will remain at current levels from March 2022 to the end of the year … it is estimated that the guidance for profitability and cash generation will be positioned in the lower part of the range,” it said.
That would entail an adjusted operating profit of around EUR890 million and cash generation before dividends of around EUR450 million, it said.
The company posted a 2021 operating profit of EUR815.8 million, up 62.8% compared with 2020.