Pirelli & C. SpA, Europe’s third-largest tiremaker, aims to widen its profit margin by investing 1.9 billion euros ($2.7 billion) to build plants in emerging markets including Mexico and Russia.
Pirelli’s earnings before interest, taxes and restructuring costs will climb to as much as 11.5 percent of revenue in 2013, from about 8.5 percent this year, the company said in a statement today.
“Company indications for 2013 are surprisingly high,” Giuseppe Puglisi, an analyst at Intermonte, wrote in a note to clients. “Management has proven in the past that it is able to achieve its targets,” and Pirelli “still has room to rise,” said Puglisi, who has an “outperform” rating on the stock.
The company yesterday reported a nine-month net loss of 87 million euros compared with an 18.2 million-euro profit a year earlier. Charges linked to last month’s spinoff of the real- estate unit, now called Prelios SpA, weighed on results, Milan- based Pirelli said. The company completed the spinoff last month and sold Pirelli Broadband Solutions to concentrate on tires.
“We rationalized the company, we are going to enter new markets, enhance our value,” Chairman Marco Tronchetti Provera said today at a presentation to analysts in Milan. “There’s no room for major mergers in the market. We’re targeting factories, not companies.”
Pirelli plans to invest $210 million in the next two years for a new plant in Mexico. About two-thirds of profitability will come from Latin America and other new markets in 2015, the company said today. Pirelli forecast revenue will grow an average 8 percent annually in the next three years, climbing to 6.05 billion euros from 4.8 billion euros in 2010.
Pirelli is the second-best performer on Italy’s benchmark FTSE MIB this year, rising 43 percent while the index has fallen 7.5 percent. The shares gained as much as 4.2 percent to 6.36 euros in Milan, and traded at 6.21 euros, up 1.8 percent, at 12:44 p.m. local time, giving the company a market value of 3.03 billion euros.
Pirelli in June was named the official tire supplier for the FIA Formula One World Championship for the next three years. Tronchetti Provera said in a July 1 interview that the deal, in which Pirelli will supply all 12 F1 teams, will boost the company’s premium-tire business, which includes models for BMW and Ferrari cars.