Pirelli to invest $2.7Bil on premium products, marketing

Article by Christian A., on November 7, 2010

In an effort to boost margins, Pirelli & C SpA will invest 1.9 billion euros ($2.7 billion) over the next five years on premium products and on marketing.

In the 2011-2013 industrial plan of Pirelli (Europe's third-largest tire company), it will target an earnings before interest and tax (EBIT) margin of 10.5% to 11.5%, up from the 7.5% predicted in 2010, and above analyst expectations for 8.2% to 9.4%.

Chairman Marco Tronchetti Provera said that the company will be able to reach this result (EBIT margin) primarily by focusing further on the premium segment, which is expanding quicker than the market, and on the replacement segment.

Pirelli aims to develop in Asia-Pacific, consolidate in Latin America, and enter new opportunities in mature markets in its preferred product niches. Pirelli said that it will set up a new plant in Mexico to serve the North America free trade area (NAFTA). For this endeavor, Pirelli has an initial investment of $210 million.

Analysts anticipated investment over the three-year industrial plan of 830 million to 1.05 billion euros. For this three-year plan, annual revenues are targeted to increase by 8% a year. [via autonews - sub. required]

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