MILAN—Pirelli & C. S.p.A. has disclosed its intention to reduce costs and contain investment under a 2020-22 industrial plan, to be presented in the first quarter next year.
In addition to a continuing focus on the high-value segment, the plans will "bring significant reinforcement to the competitiveness of (the) business model," Pirelli said in its third quarter financial report.
Measures to improve competitiveness will include a "significant reduction of the cost-base and break-even point" from the start 2020, according to the statement.
Noting an increasingly challenging and evolving trading environment, Pirelli said it would contain investments, particularly those aimed at increasing production capacity.
The tire maker anticipates demand for high value tires in the OE segment to grow, but at a lower rate than in the past.
The replacement channel, it noted, remains resilient, helped by the continued growth of the world car parc, particularly in the premium and prestige segments.
Without going into further details, Pirelli added that it would adopt a "selective approach" to high-value growth as part of the new plan. In addition, the company said it would consolidate its "technology and innovation leadership" toward improving its offerings for future mobility.
Pirelli went on to emphasize its commitment to increasing the environmental efficiency of its products in all phases of their lifecycle. This, it said, included tapping into renewable raw materials, bringing about energy-consumption savings and offering ultra-low rolling-resistance tires.
Pirelli disclosed its 2020-22 intentions in its third quarter earnings report, which showed a 7.6 percent year-on-year increase in pre-tax operating earnings (adjusted EBITDA) for the nine-month period on 2.8 percent higher sales.
The Italian firm linked the gains to a 5.4 percent improvement in price/mix, which contributed $135 million to earnings, helping offset negative impacts of $76 million in in materials costs and $60.5 million in reduced sales volumes.
EBITDA was $1.12 billion on $4.49 billion in sales, for a 25 percent earnings ratio.
Pirelli noted that the first nine months of 2019 were marked by weakness in the car market, which also continued into the third quarter "beyond expectations."
The slowdown of the car market impacted tire demand, with a decline of 6.3 percent in OE in the first nine months of the year, the Italian tire maker said.