October 29, 2019 / 5:59 PM / 15 days ago

Pirelli cuts guidance, delays business plan in worsening scenario

MILAN (Reuters) - Italian tyre-maker Pirelli (PIRC.MI) on Tuesday cut its guidance on operating profit margin and cash flow, and said it would delay the presentation of its new business plan as it needed to work out stronger measures in a worsening market scenario.

FILE PHOTO: A Pirelli tyre is seen before a ceremony at the Milan Stock Exchange, in Milan, Italy, October 4, 2017. REUTERS/Massimo Pinca

Adding to a string of auto parts suppliers hit by prolonged industry weakness, Pirelli said it forecast a full-year margin on its adjusted earnings before interest and taxes (EBIT) between 17% and 17.5% versus an already lowered previous target of 18-19%.

Pirelli, which makes tyres for Formula One racing teams and premium automakers such as BMW (BMWG.DE) and Audi, said in a statement it cut its guidance after facing greater fixed costs as it lowered production to reduce inventories.

In nine-month results, Pirelli said adjusted EBIT slightly fell to 685 million euros, in line with a market consensus provided by the company. That equates to a margin of 17.0%.

The company said it expected a full-year cash flow before dividends between 330 and 350 million euros, against a previous forecast between 350 and 380 million euros.

Pirelli said it would present its industrial plan to 2022, previously scheduled for Dec. 11, in the first quarter of next year as it needed to take further initiatives in a context which Pirelli described as “more challenging compared with the forecasts of recent months”.

Chief Executive Marco Tronchetti Porvera told analysts the move followed an “effective” deterioration of market conditions.

“In this context, to protect our profitability we have to act deeper to reduce the cost of our products,” he said.

Last week German auto supplier Continental (CONG.DE) said slower automobile production growth over the next five years had forced it to book a 2.5 billion euro impairment. France’s Michelin (MICP.PA), though maintaining its full-year profit guidance, cut its forecast again for the global tyre market.

At the same time Pirelli said its 2019 revenue would grow by 2.5% to 5.3 billion euros, higher than a previous guidance between 1.5% and 2.5% this year.

Reporting by Giulio Piovaccari; editing by Grant McCool and David Evans

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