After more than tripling operating profit at its core tire business during the 2008-2012 time period, Pirelli’s profits probably were flat in 2013. This year’s result falls short of the financial goal set by the company in 2012 and reflects volume and pricing issues in Europe and a slower than expected expansion of operations in Russia — including the refurbishing of its existing plant facilities. In response to these realities, Pirelli introduced a new mid-term plan covering 2013-2016. Among the financial targets in the new plan are an approximate 15% operating margin in 2016 vs. an estimated 13% in 2013, with the improvement driven by healthy premium tire volume growth and the resulting positive impact on mix and margin. We believe that the new plan, while less ambitious than the previous plan, is credible.
Source: Sequoia Fund's 2013 Annual Report - Management's Discussion of Fund Performance
