Pirelli's Russian venture takes shape

Pirelli's Russian venture takes shape
26 July 2011

Moscow -- Pirelli, Russian Technologies and Sibur Holding have agreed on the split of tyre-manufacturing assets within the joint venture being formed by Pirelli and Russian Technologies. Pirelli is to takeover the old Kirov tyre plant.

The Kirov plant has a nominal production capacity of more than 7 million pieces in the Car and Light Truck sectors, as well as a commitment to transfer further assets that should bring the JV’s production to 11 million pieces by 2014. The transfer of all these assets will take place in exchange for a total consideration of 222 million euros, divided on a pro-quota basis between the partners.

Pirelli said Pirelli brand products can reach 50 percent of installed capacity (approximately 11 million pieces total) and the JV’s product of reference will be winter tyres for the replacement market, in particular the “studdable” line to meet the needs of the Russian and CIS markets. The JV’s market share will be approximately 20 percent.

The joint venture’s sales are expected to be around 300 million euros in 2012, growing to over 500 million euros in 2014. This will also be the result of investments of 200 million euros, over the 3-year period 2012-2014, in plant upgrade and to increase production capacity. Once the start-up phase is over, profitability is expected to be double-digit beginning from 2013. The joint venture will be consolidated by Pirelli at the moment of acquisition, also in light of the terms of the management agreement.

This joint venture will be the primary vehicle for the management of assets which are convertible to Pirelli standards in the Car and Light Truck sectors in Russia, in line with the terms of the memorandum of understanding (MOU) signed on November 26th, 2010.