Ladies and gentlemen, welcome to Pirelli's conference call, in which Pirelli's top management will present the company's nine months, 2023 financial results. A live webcast of the event and the presentation slides are available in the Investor Relations section of the Pirelli website. I remind you that the Q&A session will follow after the presentation. Now, I would like to introduce Mr. Marco Tronchetti Provera. Please go ahead, sir.
Good evening, ladies and gentlemen. The first nine months of 2023 were marked by highly volatile macroeconomic scenario, with demand slowdown, high inflation, and a gradual increase of interest rates. In spite of these headwinds, Pirelli's results in the first nine months confirmed the strength of our business model. A Price Mix among the best in the industry, improving profitability, thanks to internal levers, and improving cash generation in the third quarter, thanks to an efficient management of the working capital. These results lead us to confirm our guidance on the top level of the range of both profitability and cash flow. High Value remains our core segment, in which we also aim to strengthen our presence in new areas, such as Saudi Arabia, through our partnership with Public Investment Fund.
Finally, we consider it appropriate to postpone the industrial plan presentation to March 2024, with the full year 2023 results, given the uncertainties linked to the international environment. On October 26th, we signed a joint venture agreement with Public Investment Fund in Riyadh to establish a new plant in Saudi Arabia. Thanks to this partnership, Pirelli shall reinforce its position in a strongly growing market, creating both a domestic and regional champion. Saudi Arabia will become an important global production hub in automotive industry, with focus on electric vehicles. Public Investment Fund is leading the change to the development of production capacity, infrastructure, and supply chains, a remarkable investment in future mobility, such as electric vehicles. Electric vehicles car market is expected to grow at a compound annual growth rate of 30% over the next 10 years.
In 2032, 40% of new cars will be electric, compared to the current 6%. At the same time, the high-value tire market will double by 2032, from 3.3 million in 2023 to 6.6 million in 2032. The plant is expected to have production capacity of 3.5 million car tires, of which one-third high-value under Pirelli brand through an offtake agreement. Two-thirds, high-quality products under the local joint venture brand. Pirelli will offer technical support and expertise to design, develop, and manage the plant. The total expected investment for the plant will be around $550 million, and the joint venture will benefit from the government tax and investment incentives.
For Pirelli, the maximum cash out will be approximately $56 million, with a neutral impact on our 2025 deleverage target. And now I leave the floor to Mr. Casaluci. Please.
Thank you, Mr. Tronchetti. The results of the first nine months of 2023 confirm the resilience of our business model. A 7.4% top line organic growth, supported by the strong increase of the price mix. A 15.2% profitability at the upper end of the target range. A net income of EUR 411 million, with a +14% growth due to the improved operating performance, as well as benefits from the patent box, which will be further explained by Mr. Bocchio. The continuation of the deleverage process, with a reduction of debts by approximately EUR 250 million, compared with the same period in 2022. In terms of sustainability, the results of the first nine months are remarkable.
In July, we launched the new Pirelli P Zero E, the perfect fit for premium and prestige electric vehicles. The new P Zero is a mix between technology and sustainability, with unprecedented results in the UHP tire market. It is the first tire on the market with a triple A class in the European labeling, rolling resistance, wet braking, and noise. Tire wear was reduced by 42% compared with the previous generation, thanks to virtualization and new materials. It has more than 55% bio-based and recycled components, as certified by third parties. To enhance the transparency towards consumers, we have introduced a new logo, which identifies tires with at least 50% of bio-based and recycled materials, as certified by Bureau Veritas. The renewal of the Formula One agreement focuses on sustainability, which is core to our partnership.
From 2024, all Formula One tires will have the FSC certification, Forest Stewardship Council... as it is already happening for some of our consumer products. Finally, our progress towards decarbonization is above our expectations. Therefore, Pirelli will define a new short- and long-term science-based target, in line with our net zero commitment. Our extensive effort to this transition is addressed to the whole value chain, including Scope Three emissions. In this regard, we have organized events for our European dealers to discuss in detail low carbon products and technologies, while our high emission suppliers were involved in defining challenging decarbonization targets in line with Pirelli's strategy. The result of the first nine months reflected the implementation of the key strategic programs.
On the commercial side, we keep on consolidating our leadership in High Value, while the exposure to Standard was further reduced, now at 37% of the car volumes. On the innovation program, our partnership with OEMs has resulted in around 260 new technical homologations, mainly in 19 inches and above, and EVs, consolidated our positioning on electric vehicles with a portfolio of around 470 homologations. On the competitiveness program, we reached 65% of our yearly efficiency target, in line with our project development timeline. On the operational side, the level of saturation of our plants is approximately 90%, around 95% in High Value.
In both the first nine months and the third quarter, we have kept a value-oriented commercial strategy, with a higher selectivity in the standard segment and in the original equipment channel of the high-value segment. In replacement, 18 inches and above, +2% in first nine months and in third quarter, growth was mainly driven by the new product lines, while keeping a sound price discipline. We have consolidated our positioning in this segment. Our market share in the third quarter is in line with the third quarter, 2022, and the highest since 2019. In original equipment, 18 inches and above, our performance is marked by a growing selectivity with a focus on 19 inches and above, where EVs account for over 26% of OE volumes, +7 percentage points versus the first nine months of 2022.
The trend of third quarter, -1% versus a flat market, further discounts an unfavorable comparison base in China, where last year we overperformed during post-COVID market rebound. Let us now address product innovation in the two high-growth segment: electric vehicle and SUV. Our leadership in the electric vehicle premium and prestige segments was further confirmed at the Munich Motor Show, where Pirelli was on 25% of the electric vehicles and on 30% of the plug-in hybrids. Furthermore, Pirelli was fitted the only hydrogen car on the show. In the SUV segment, we launched the new Scorpion MS, an all-season original equipment product, mainly for electric vehicles, starting from Maserati Grecale Folgore. The new Scorpion meets consumers' needs and is characterized by high comfort, mileage, and safety on wet surfaces.
Our strong commitment to innovation and technology was acknowledged by FIA, which confirmed Pirelli as the exclusive tire supplier in Formula One until 2027, with the option of extending the term by one more year. At the end of this agreement, Pirelli will be involved in the most important car racing competition for 18 consecutive years. Formula One is a source of continued innovation. It is an open-air laboratory where we test new product solutions and innovate processes and technologies. Among the novelties in the Formula One renewal, our strong commitment to sustainability. From 2024, all of our tires will be FSC certified. This ensures full traceability of raw materials coming from forests, preservation of biological diversity in plantations, and benefits to local communities and workers.
Finally, Formula One offers a growing global media exposure, especially in the United States, the country with the highest number of races, representing a strategic market for Pirelli. Let us now move to the competitiveness program. In the first nine months, we achieved gross efficiencies of approximately EUR 61 million, equal to 65% of the objective for the full year and in line with the expected development of the projects. In detail, the greater benefits come from the product cost project. We keep on adopting an approach to modular design and design to cost, to decrease the complexity of the structure and the weight of tires.
The manufacturing project is going to generate, as expected, the strongest efficiencies in the last part of the year, with the implementation of both projects to improve the manufacturing processes, which, thanks to the Industrial IoT, will have particular benefits on predictive maintenance and of energy consumption reduction projects. On SG&A, we are progressing with the optimization process of logistics and supply chain. And finally, the organization project goes on with process digitization and staff upskilling. I now leave the floor to Mr. Bocchio for the analysis of the results.
Thank you, Mr. Casaluci, and good evening, all. Let's analyze now our performance in detail. The revenues of the first nine months recorded a 2.5% growth, +7.4% net of the strong forex volatility. The volume trend, -3% at group level in the first nine months, and -4.6% in the third quarter, reflects the general weakness of car market demand, -1%, in the first nine months and in the third quarter, and in the two-wheel business, and the greater selectivity of Pirelli in car standard tires and high-value original equipment, especially in the third quarter. Significant improvement in price mix, +10.4% in the first nine months, and +6.8% in the third quarter, which we expect to be among the best in our industry.
The price mix was supported by a solid price discipline and a continued improvement of the product mix. forex impact was negative, -4.9% in nine months, with a worsening trend in the third quarter, equal to -8.4%, following the devaluation of the dollar, renminbi, and other currencies of emerging countries against the euro. In the first nine months of 2023, the Adjusted EBIT reached EUR 783 million, +4% year-on-year, and a 15.2% margin, a slight improvement versus the same period of 2022.
The price mix of EUR 449 million and the structural efficiencies of EUR 61 million covered 1.4 times the impact of the negative external scenario: the increase in raw material cost for EUR 77 million, including the related forex impact, the inflation of input costs for EUR 180 million related to energy, labor, and transportation, and the negative impact of exchange rates for EUR 115 million, due to the revaluation of the Mexican peso, about +12% against the euro, with a direct impact on costs because Mexico is our production hub for North America, and the devaluation of the dollar, renminbi, and other South American currencies in the third quarter.
Our internal levers also covered the impact of volumes, negative for EUR 65 million, as well as the increase in D&A for EUR 26 million and other costs for EUR 19 million. In the third quarter, profitability improved with a margin of 15.4%. It was 14.8% in the third quarter of 2022, due to the strong contribution of the price mix, plus EUR 104 million, and efficiencies, plus EUR 31 million, that more than compensated for inflation, negative EUR 49 million, and forex for EUR 63 million. The negative impact of volumes for EUR 36 million was partially offset by raw materials, plus EUR 22 million. Let's now review the dynamics of the net income, which increased 14% year-on-year.
The trend reflects the already mentioned improvement of the operating performance, which more than offset the increase in net financial charges linked to a rise in interest rates in the Eurozone. Lower non-recurring and restructuring costs, as well as improved results from equity investment. Finally, the reduction in taxes, triggered by the signature of the Italian Patent Box Agreement last August, with the tax rate at 22%, substantially in line with our expectation for the full year 2023. The adjusted net income amounts to EUR 453 million. In the first nine months of 2023, the net cash flow was -EUR 368 million, in line with the business seasonality.
When we excluded the EUR 67 million long-term incentives paid in quarter two, the cash flow before dividends shows a EUR 20 million improvement compared with the first nine months of 2022. The change in the net operating cash flow mainly reflects: an improvement in operating performance, CapEx, mainly located to high-value activities, and working capital trend, including long-term incentives. Let's discuss the dynamics of the working capital. It should be highlighted that inventories were carefully managed and its incidence on sales decreased to 20.4%, thanks to the normalization of raw material stock from the second half of 2022. On the contrary, the other components of the working capital reflected the usual business seasonality, namely an increase in trade receivables, with a weight of around 16% on revenues, and the reduction of trade payables with an incidence of 22% on revenues.
In the third quarter, the net cash flow before dividends was positive for EUR 167 million, improving compared with EUR 141 million in the same period of 2022, due to an optimized inventory management, as already pointed out. The net financial position at the end of September amounts to approximately EUR 3.1 billion, essentially in line with that of last June, as a result of the already mentioned cash generation in the third quarter and the payment of dividends. Gross debt is approximately EUR 4.3 billion, decreasing compared with the EUR 4.6 billion of June. Financial assets are approximately EUR 1.2 billion.
In the third quarter of the year, we repaid in advance a EUR 600 million bilateral loan maturing in February 2024, using part of the available cash and the EUR 300 million bilateral ESG loan underwritten in June and maturing in February 2026. At the end of September, ESG financing covered approximately 67% of the overall debt, up from 58% in June. The liquidity margin stands at EUR 1.9 billion, and allows the repayment of debts with maturity until the end of 2025. Finally, exposure to interest rates is perfectly balanced between fixed and floating. The cost of debt is 4.75%, 30 basis points more than in the first half of the year, penalized by the restrictive monetary policy adopted in the Eurozone. I now return the floor to Mr. Casaluci.
Thank you, Mr. Bocchio. Let us now discuss the market outlook for 2023. The macroeconomic picture remains volatile, with a contained economic growth, and even across the measured regions. Slight improvement in the United States, stabilization signs in China after months of uncertainty, basically unchanged estimates for Europe, penalized by the monetary crunch. We expect a -1% drop of demand for car tires, with a slight improvement compared with our July guidance, was -2%. High Value confirms as the most resilient segment, with a growth rate now expected at +4%, supported by a trend improvement in the replacement channel, +3% versus a +2% on July guidance in North America and China. Whereas a mid-single-digit growth is confirmed in the original equipment, 18 inches and above. Expectations remain unchanged for the Standard segment at -3%.
We confirm our strategy, aiming at consolidating our leadership in High Value and namely in 19 inches and above, the segment with the fastest growth in the specialties and electric vehicles. In the 18 inches and above, we expect our growth to be in line with the market, however, with an outperformance in the Replacement channel. Due to a stronger reduction of our exposure to the Standard segment, -8% compared with the -6% in the previous guidance, we estimate volumes to decrease by 2% in the bottom range of our July guidance. Based on the results achieved in the first nine months of 2023 and the scenario described, we confirm our guidance.
Revenues are estimated to be at approximately EUR 6.6 billion, with volume expected to decrease slightly at around -2% in the low range, as discussed in the previous slide. Price Mix improving to approximately 8% at the top of the range as a result of a solid price discipline and continuous improvement of the product mix. Finally, a negative impact of exchange rates of approximately -6% due to a high volatility of the measured currencies against the euro. The Adjusted EBIT margin is expected to be around 15% due to a greater contribution from the Price Mix. The absolute value of the Adjusted EBIT, implicit in the guidance, improved: about EUR 985 million, compared with a mid-range of about EUR 970 million in the previous guidance.
Total CapEx of approximately EUR 400 million are confirmed, which account for around 6% of revenues and are to be devoted to technological upgrades of plants, mix improvement, and High Value capacity increase in Romania and North America, where plant expansion is to be completed in 2025. Net cash generation before dividends is estimated to improve between approximately EUR 450 million and EUR 470 million, due to a better operating performance and an efficient management of the working capital. This target includes the cash out of Hevea-Tec acquisition in Brazil. The net financial position is expected to improve to approximately -EUR 2.33 billion, with a leverage between around 1.6 and 1.665 times the adjusted EBITDA, in line with the deleverage process outlined in the 2021/2025 industrial plan.
I now leave the floor to Mr. Tronchetti for the final remarks.
Thanks, Mr. Casaluci. In conclusion, tire industry has shown its resilience in 2023, despite the challenging external environment, characterized by high inflation in the first half of the year, a general slowdown in demand, and an exchange rate volatility in the second half. Pirelli responded by maintaining pricing discipline, improving the mix, and deploying efficiency programs, with profitability and cash generation expected to be among the best in the industry in 2023. Looking ahead to 2024, High Value, our target segment, remains more resilient with an expected mid-single-digit growth. However, the deterioration of the geopolitical scenario and the volatility of the macroeconomic context may impact the automotive sector. Hence, in order to have a clearer view of the external scenario, Pirelli has decided to postpone the presentation of the industrial plan to March 2024.
This ends our presentation, and we may open the Q&A session.
Excuse me, this is the conference operator, operator. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. To remove your question, please press star and two. The first question comes from Giulio Pescatore of BNP Paribas Exane.
Hi, everybody. Thanks for taking my question. The first one on mix. If we, if we look at the cars produced in the last two years, the mix of cars has been extremely rich, and that should obviously lead to some tailwind for the replacement cycle in the coming years. But you said you have 95% capacity utilization in High Value. I know there are some plants ramping up, but, is there a chance that you don't have enough capacity to take advantage of this potential tailwind coming up? And then the second question on your underperformance on OE, or your decision to deprioritize the OE in the 18 inch segment. Can you maybe explain a bit more why or what's behind this decision? Are you seeing maybe, Is this segment maybe not High Value anymore?
You don't see it as core to your strategy. Just your thinking behind this strategic move. Then the third question on the guidance. I guess you were expecting this. The current guidance of 15% margin implies 100 basis points decline sequentially in Q4 compared to Q3. I just struggle to see how we can reconcile that, so maybe you can help us a bit on trying to bridge this, you know, a 100 basis points decline in margin sequentially. Thank you.
Okay, thank you for your questions. In terms of capacity, is not correct, your, your assumption. We have a 55 million capacity in the High Value today, and we are working to improve, as I mentioned in the presentation, in the coming two years, the capacity, mainly Europe and North America. But staying for a while on the actual capacity, out of the 55 million, we have a saturation of around 95%. It means that we have a non-used capacity of around 4 million, plus we use 11 million of the High Value capacity to produce Standard tires. And this is the way we assure a spare capacity on the High Value to catch any opportunity we may find in the market that we do consider profitable and in line with our target of the plan.
This allow me to answer to the second question. The selectivity of the original equipment is mainly based by the expectation on the integrated profitability for the coming years of each new business. Integrated profitability means profitability coming from the original equipment itself and the aftermarket, demand related to the original equipment. That's the reason why we decided years ago to enlarge our original equipment customer base, growing in North America and growing in Asia, and targeting mainly the electric vehicle and the 19 inches and above segment, all the specialties. Every time there is a high level of technology that allow us to maximize the pull-through effect in the after-sales.
We learned a lot in the last decade on how to understand the future profitability and the future demand of our original equipment business, and this is allowing us to be more selective and targeting what we do consider fitting with our strategy. So for this reason, we are reducing exposure in Europe in some synergy car makers, and we are growing in electric vehicle, 19 inches and above tires, and Asian and North American players, mainly. Of course, prestige and the high end of the premium will remain our core target. On the last question, to be honest, I don't see, I don't see a reduction on the profitability, but I leave the word to Mr. Bocchio. Thank you.
Yeah, I will take, I will take this question. On the full year, actually, we are improving our profitability on the upper side of the range. So previous profitability was between 14.5% and 15%, and now we are targeting around 15% on the full year. This, as is implicit in the quarter four profitability, is including a profitability that will be in quarter four similar to what we experienced last year. So that means around 14%. In Q4, the positive impact of the raw material year-on-year will offset the inflation of other input costs. We fully confirm the efficiencies for the full year, and so even the efficiency program, the efficiency impact in quarter four.
Forex, on the other side, is expected to have a negative impact due to the devaluation of the dollar, the renminbi, and the expected volatility still on the emerging market currencies. You have to consider even that the lower profitability of quarter four, compared to previous quarter of the year, is related to the seasonality of the business. In fact, the net sales in Q4 represents less than 25%, of the full year. It will be around 22%. Thus, with the higher incidence of the fixed cost, partially offset by the improving trend of raw material commodities and by our efficiencies program.
Okay, very clear. Can I maybe just quiz one last one? Can you give us an indication of pricing and mix, the split between pricing and mix in Q3? That would be very helpful. Thank you.
Yes, the last quarter, we expect around 2%, 1.5%-2% of price mix. That will be basically all mix, because the price performance now is due to the comparison versus last year, is landing at a more or less flat price point, with a slightly positive replacement, and with a slightly negative original equipment due to the cost matrix, and the impact of raw material for the first half of 2023. Thank you.
Thank you very much.
The next question is from Monica Bosio of Intesa Sanpaolo.
Good evening. Can you hear me?
Yes, we do.
Yeah, good evening. I have some questions. The first one is that on the replacement, it seems that things are a bit better now. But, I'm wondering if you are seeing on the market any signs of down trading in the replacement? And, if yes, where do you see this down trading is concentrated at? My second question is on the price mix drop-through over the year, if you confirm a 40% drop-through on EBIT. And, another question is on the shares of the revenues that the company is going to generate with the EV tires for this year, and if you may ask, what is an expected progression over the medium long term? And the very last is on China.
Pirelli has a very high exposure in China, where the replacement cycle in the EV will start earlier. And I was wondering if you can give us a rough indication of what is the share of your revenues generated in China with the Chinese local clients. Thank you very much.
Yes.
One general answer, and then Mr. Casaluci. In China, China represents in our numbers, in terms of turnover, around 15%. That is the number. And when you ask about Chinese producer, we... In China, we supply both European and Chinese, and we are growing with the new Chinese electric vehicles producer, high value, and we are leaders. This is the general picture. Now I give the floor to Mr. Casaluci.
Thank you, Mr. Tronchetti. I will answer to the first three question. The last one already answered by Mr. Tronchetti. The trade down. The trade down is a, an effect that we see, of course, but only in the standard, in the standard range. I give you a couple of numbers just to fix the effect of the trade down. For example, in Europe, this is one of the most exposed region to this effect. The weight of the Tier One brands, so the most important brands, not the one that are generating the trade down in Europe, in the 16 inches and below, today is around 40%. In 2019, was 50%, and this is for the 16 inches and below.
On the 17, the weight of the Tier One is 60%. In 2019, was 70%. So this is something affecting the Standard. If we move to the High Value, which is our target segment, and for a while we fix on the 19 inches and above, the weight of the Tier One players is 80%, more or less stable compared to 2019. If we move now to OEM tires, which is the core of our segment, the weight of the Tier One player is more than 95%, stable compared to 2019. So the trade down is something that is affecting the Standard segment, not our target segment.
If I may, if you look forward with the electric vehicles, the phenomenon of Tier One in the high-end market share will be more evident as prevailing in numbers that are between 90 and 100%. So the High Value electric, it's really something in which the Tier One are playing the game and within which Pirelli is the leader.
The next question is from Michael Jacks. Oh, apologies.
Sorry, still miss one question. Yeah, two questions.
Sorry, go on.
Yes. One was the price mix drop-through, that is, around 85% in 2023. 85% being the vast majority of the price mix input coming from price. While 60% is price and 40% is mix. Sorry, 60% mix and 40% in, in...
Okay.
Okay.
Thank you.
So the drop-through of the mix. Sorry, the drop-through of the mix is around 60%. The drop-through of the price, of course, is 100%. Considering that the vast majority of the price mix in 2023 is coming from price, we assume that the drop-through in 2023 is around 80%. If we move on the question on the electric vehicle, the on total revenues in 2023 is a bit less than 10%, and this percentage on EV is mainly related to the original equipment, because the demand on replacement is still quite low, while we do expect an increase starting from 2024 and 2025. Thank you.
Thank you very much. Thank you, very clear. The next question, sir, is from Michael Jacks of Bank of America.
Hi, good evening. Thanks for taking my questions. The first one is on pricing. It would still appear that your peers are remaining disciplined on price for the time being, but with raw material tailwinds now being realized, do you think that any of them might use the opportunity to take share, since we've seen some of them are now running plants at a suboptimal capacity? That's my first question. Second one, on the joint venture with PIF, could you give us a sense for the expected earnings impact for Pirelli during the ramp-up phase and the level of ultimate profitability you expect to achieve later on from the investment? Finally, just quickly on tax rate, it was quite low at around 10%. Can you just give us a sense for where that might end up for the full year? Thank you.
Thank you. I will answer to the question on price, and then I will leave to Mr. Bocchio for the second question. You are fully right. The GV will represent for Pirelli an opportunity to grow in the High Value in the area of the Gulf countries that are basically fast-growing market for the High Value. The GV has a target to reach 3.5 million tires and within 2030, out of which 1.1 million will be at Pirelli brand and 100% High Value. This will allow us to catch as much as possible all the opportunity to grow in market share in these countries, mainly targeting the electric vehicle markets. Thank you.
I will take the question about the tax rate. Actually, the tax rate that you were mentioning of 10% is related to the third quarter, specifically, where we booked the positive impact related to the Italian agreement called Patent Box. Year to date, September, the tax rate has been of about 22%, and as I was mentioning previously, 22% of tax rate is what we are expecting even for the full year of 2023.
The next question is from Akshat Kacker of JP Morgan.
Thank you. Akshat from JP Morgan. Three questions from my side as well, please. The first one, coming back to Standard tires. So when I look at your revenues in Q3, revenues fell by approximately 21% and volumes were down 10%. I know there's a negative FX impact, but price mix also should be negative here. Could we just get some more details there? Because you suddenly decided to cut your exposure to Standard much more than what you previously forecasted. And if you could also talk about a new landing point for Standard tires, if you already have that in mind.
The second question is on high value OE volumes. Could we just get some more guidance in terms of how you're thinking about high value OE, especially going into Q4? And if you already have something in mind for 2024, please. And the last one is on FX. I think your guidance on revenues implies a worse FX impact in Q4 versus Q3, which is not how current spot rates look like. So what drives this please, and also the continuous high drop-throughs, how should we think about that going forward? Thank you.
Thank you. We'll start with the first question on the standard. The standard, in the third quarter, we reduced our exposure to standard quite significantly. You're right. This is mainly driven by two regions. The first one is South America. In South America, that represents more than 35% of our total sales in the standard segment, so it is the most important region for us in standard segment. We are facing a slowdown of the demand and on the market, so the situation of the slowdown is quite evident in South America, both in Argentina and Brazil, and we decided to reduce our sales even more than the market. The market was down 4%-5%, and we, as Pirelli, were down 15%.
This is due again to the effect I mentioned before of the trade down, that in South America in 2023 is quite evident because the percentage of the important brands increased, and today it counts for around 50% of the total market. The second region is Europe, where again, the market was down 4%-5%, and we decided to accelerate the exit from the standard, basically for the trade down effect. And we were down again, also in Europe, 12%-13% in the third quarter. So is a decision that we took. I, I'm not able today to tell you the landing point in terms of volume of the standard. This will be communicated in the next industrial plan.
Anyhow, every time that there is a non-profitable segment inside the standard, our target is to exit from this segment. While in the original equipment, the high value, our target is to increase in the 19 inches and above exposure and in the electric vehicle. Out of the 300 homologation that we target for 2023, 50%, more or less, will be related to electric vehicle, and more than 90% to 19 inches and above projects. I leave the floor to Fabio Bocchio for the last question. Thank you.
Yeah, I'll take the question on the forex. You are right, in quarter three, the forex accounted for an impact on the top line, negative by 8.4%, which was driven by the devaluation of dollar, which in the quarter was about -8%. The devaluation of the Chinese renminbi, which in the quarter was devaluing about 12%, and even considering the devaluation of the Russian ruble, which in quarter three was about 42%. On top of this, there is the volatility of Latin American currencies and the impact of countries with high inflation. On the EBIT, on the other side, obviously, the impact is related to the consolidation effect from the translation of the local statutory EBIT in euro.
Beside the movement of the currencies I just mentioned, we have a negative impact on the EBIT due to the revaluation of the Mexican peso. Revaluation, which was in quarter three, about 10%. The drop-through obviously is changing year-over-year, depending on the mix of the currencies. So for the full year 2022, you may remember that the drop-through was about 11%, while in the past few quarters, we already had a drop-through that was about 40%, and we are expecting this drop-through value even for the full year of 2023.
Understood. Thank you. One quick follow-up, a different question on debt refinancing. I see there is a good amount of bonds and loans that are due to be refinanced over 2024 and 2025. Can you just explain your strategy here, please? Thank you.
Mr. Tronchetti?
Yes, good evening. As we did for 2023, we will have in 2024 an amount of refinancing, which is more or less in line with what we have did this year. We have already refinanced most of the maturities for 2024, and hence, we will start to refinance the maturity of 2025. So no major activities during the next few months, but we will start during 2024 to do something for the 2025 maturities.
By increase in interest costs, or how do you think about interest costs as a result of that refinancing?
It seems that the answer was clear. So 2024 is already covered. In 2025, we will see between bonds of different kind, which will be more convenient. It's something that is under analysis, and the decision will be taken in 2024. So we, we have time to take a decision, and as you know, the market is volatile, and it's better to, to wait to take a decision. So we have different options, obviously.
Understood. Thank you so much.
Thank you.
The next question is from Gianluca Bertuzzo of Intermonte.
Hi, everybody, and thank you for taking my question. I note that you improved the outlook for the global tire market, thanks to better replacement demand for high-value tires. But can you help us understand why your volume guidance is seen at the low end of the range? And second, still on the outlook for the global tire market, can you share your views about 2024? Do you expect a growing market, stable, declining? Thank you.
Okay, thank you for the question. You are right, we have improved our outlook of 1 percentage point on the total market. This is mainly driven by the High Value, where Pirelli targeted to overperform the market. While the reduction on the or let me say, not really a reduction, but the target on the low part of our guidance in terms of volume is mainly driven by the exit from the Standard that we accelerated, mainly in the third quarter, so it's something already realized. And also to the priority on the price discipline, because we want to maintain as much as possible the price discipline, both in our performance and in the market behavior. Okay, the outlook of the market for next year is something we are evaluating.
We are trying to collect all the possible information because, as you see, there is a lot of volatility in the market. What I can tell you is that our outlook today is for a global market moving around from 1%-2% of growth for 2024, with a High Value market confirming its resilience. Today, we do expect around mid-single digits, sorry, mid-single digit, for 5%-6% of growth in the High Value. That's the first estimation, but we still have some weeks to finalize all our outlook for 2024. Thank you.
Thank you very much.
The next question comes from Ross MacDonald of Morgan Stanley.
Hi there. Good evening, Ross MacDonald, Morgan Stanley. Just two questions from my side. Firstly, on the, the Saudi deal with PIF, just curious if you view this type of deal as, as specific to the Saudi market, or are you seeing any other countries or regions that could be good, good candidates for this type of JV expansion, for Pirelli? And then my second question on the global market outlook, received an email today from the US, Tire Manufacturers Association, suggesting that US replacement demand is, is 20% higher in October. Would you be able to comment on whether you're seeing, you know, that level of, of volume improvement in the US on the replacement side, for Pirelli? Thank you.
So first, for the first part, for the PIF, what we have in our agreement is related only on, obviously, the factory in the kingdom, and so there are no other ongoing projects. We have agreements to develop in the kingdom to have sources of materials, to have relation with universities, so that there is a lot we can do because they are investing a lot also in the chemicals. I think it's an interesting partnership also on that side, but in terms of industrial partnership, is located there, and there are no other agreements on any other country. Mr. Casaluci, please, for the other question.
Yes, thank you. Well, no, our first estimation, our first figures that we are receiving from North America on the October months is a positive month, has been a positive month. High single-digit growth between 7% and 8%, not, not 20%, the replacement. While the original equipment a bit affected by the last part of the strikes, anyhow, is a positive market and where we are overperforming in the High Value. Thank you.
The next question is from Edoardo Spina of HSBC.
Good evening. I have two questions on pricing. Firstly, if you can give us a bit more indication about how pricing has developed and is gonna develop in different regions, and if the currency is having an impact on your pricing strategy in different regions. And secondly, if you can give us a bit more details, maybe data, about how pricing is working in between the Standard segment and the High Value, in an effort to understand how come you have such a strong pricing and also your peers maintain such a strong pricing against raw materials? Thank you very much.
Okay, the price environment, as far as the High Value is concerned, is quite disciplined. In the last part of 2023, we don't see major changes. It's a, let me say, flat environment in terms of price. We don't see the opportunity to announce further price increase with this environment, but we don't see major pressure on prices, so it's a flattish environment in the High Value. In the Standard, we see some first pressure here and there, and of course, the price increase of Standard is also linked to the high inflation economies and the volatility of the exchange rate. So it depends region by region. All in all, 2023 has been a positive trend.
Out of the 10.4% of price mix performance of the first nine months, as I mentioned before, 60%, so around 6.2, 6.3, is related to price. And this has been positive both in the high-value economies affected by inflations like Europe and North America, and in the standard economy like South America, where the high inflation and the volatility of the exchange rate supported an even higher price increase. While in China, there's been positive, but less compared to Europe and North America, because the inflation in China has been less evident than in other high-value economies. Thank you.
Thanks.
Mr. Andrea Casaluci , there are no questions registered at this time, sir.
Thank you, this ends our presentation. I thank all of you for the attendance of our meeting, and I wish you a very good evening. Bye-bye.
Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephones.