Tyre Business to be 95% of Pirelli Revenues Following Real Estate Spin-Off
Deutsche Bank Equity Research analysts report Pirelli’s intention to purely concentrate on the company’s tyre business following the spin-off of its real estate assets by mid-2010. Once this has taken place, tyres will represent 95 per cent of Pirelli’s revenues, the report adds. Management at the Italian manufacturer is said view the coming year with confidence, a positive view driven mostly by a recovery of volumes in replacement markets. It believes the entire seven per cent decline experienced in the passenger car tyre market and half the truck tyre market’s 14 per cent drop can be recovered during 2010. This positive effect, comments the bank’s analysts, should more than offset a small increase in raw material expenses, as the tyre industry is expected to remain “disciplined” in passing on raw material price increases to consumers.
Overall, says Deutsche Bank, 2010 should be another year of double-digit EBIT increase for Pirelli. Furthermore, the simplification of the company’s structure and its even greater emphasis on the tyre business should reduce the holding discount it still has today.