Pirelli to focus on new materials, connectivity for future M&A strategy

MILAN (Reuters) -Italy's Pirelli sees M&A opportunities in new materials and connectivity, its CEO said on Wednesday as the company updated its business plan to 2025, focused on an effort to strengthen its leadership in high-value tyres.

Chief Executive Andrea Casaluci told analysts Pirelli could accelerate its M&A strategy in the future.

"The most important opportunities that we see in front of us are in the field of materials, and that has to do with sustainability," he said.

"This is opening up opportunities to increase the percentage of biobased and recycled materials, not only natural rubber".

Casaluci, who took the job last summer after years as general manager, said Pirelli was also interested in creating "an ecosystem of alliances and opportunities to enlarge our knowledge mainly in the side of digital and algorithms".

He said Pirelli could potentially consider alliances, joint ventures as well as acquisitions in some cases.

"We are in a phase of evaluating all the opportunities," he said. Pirelli sees value in tyres that are equipped to provide data on performance.

LIMITED GROWTH

Pirelli said it saw revenue growth hardly exceeding 5% by next year, in a volatile environment of geopolitical tensions, slower growth and weaker demand due to inflation and high interest rates.

The company -- the sole supplier for Formula One cars --guided for revenues of between 6.8 and 7 billion euros next year, versus 6.65 billion euros ($7.23 billion) in 2023. The margin on adjusted operating profit (EBIT) is forecast to rise to around 16% in 2025, from 15.1% last year.

Pirelli shares were down 3.4% by 1540 GMT, the worst performers among Italy's blue chips.

Pirelli in recent years successfully expanded its position in North America, its largest market for high-value tyres, and to Asia, Casaluci said, add it progressively moving away from its traditional image of supplier for European car brands.

Founded in 1872, Pirelli is one of Italy's most storied companies but China's Sinochem is now its largest shareholder.

It specialises in high-end tyres for luxury and premium carmakers, including Ferrari, Porsche, Mercedes and Dodge and pure EV players such as Tesla, China's BYD or Polestar.

"Competition in the high value (segment) is of course is high, which is in a way confirming that our strategy and our business model is the right one," Casaluci said.

The company closed last year with a 2.5% operating profit rise to 1.002 billion euros, helped by pricing power and product mix, which offset effects of higher inflation and raw material costs. ($1 = 0.9197 euros)

(Reporting by Giulio Piovaccari, editing by Cristina Carlevaro/Keith Weir)