In This Article:
(Bloomberg) -- Pirelli & C. SpA expects to stick with its debt reduction targets for this year, notwithstanding looming US tariffs that threaten the Italian tire manufacturer’s North American business, according to people familiar with the matter.
Most Read from Bloomberg
-
New York’s First ‘Passive House’ School Is a Model of Downtown Density
-
Historic London Elevator Faces Last Stop in Labour’s Housing Push
The company, which earns about 25% of its revenue in North America, makes most of its tires for the US market in Mexico, Europe, and Brazil.
Pirelli shares fell on Monday along with other European auto suppliers, after US President Donald Trump announced 25% tariffs on products from Mexico and Canada, and said the European Union is next in line.
Trump delayed a decision on Mexican tariffs for a month on Monday, raising hopes they can be avoided. In the meantime, Pirelli is considering raising prices to offset most of the US duties, the people said, asking not to be identified discussing private considerations. The weakening of the Mexican peso and the euro, its main production currencies, will also help to protect the company’s bottom line, they said.
Pirelli has plants in Georgia and Mexico, and Chief Executive Officer Andrea Casaluci said in November he plans to increase local production.
The company has been reducing debt, with a goal of lowering its leverage ratio to 1 times annual earnings before interest, taxes, depreciation and amortization. The firm is also expected to confirm its €550 million ($565 million) cash-flow target for this year, the people added. Pirelli is set to report full 2024 results later this month.
Pirelli makes tires for high-end brands including Ferrari NV, McLaren Automotive Ltd. and Bentley Motors Ltd., as well as for automakers with higher US volumes like Ford Motor Co. and Honda Motor Co.
A representative for Pirelli declined to comment. Shares in Pirelli, which was founded in 1872, lost 3.4% in Milan on Monday, after falling as much as 5.9% earlier.
In November, Casaluci affirmed that North America remains “at the core of our growth strategy for the coming years,” as the company seeks to expand in the high-value market.
For the first nine months of 2024, Pirelli generated about €1.3 billion ($1.33 billion) in revenue in North America, according to the company’s latest financial report.
--With assistance from Antonio Vanuzzo and Alberto Brambilla.