Loss And Layoffs For Pirelli
Pirelli has revealed its third quarter figures, which show bigger-than-expected losses, due to what the company described as “the unprecedented crisis in the telecoms equipment market”. The 3Q net loss of 325 million Euros includes a figure for restructuring of 260 million Euros and compares with a net profit of 15 m Euros in 3Q last year. Turnover for 3Q was down 16.
6 per cent to 1.46 billion. Chairman Marco Tronchetti Provera revealed that Pirelli would accelerate its rationalisation/restructuring program in order to reduce costs.
Six of the group’s 80 factories will close and 2,400 staff, or 6 per cent of the total workforce, will be laid off. Three of the factories to be closed make telecommunications cables and the other three make energy cables, although exactly which plants will shut was not revealed. Group sales for the first nine months of the year were down 11 per cent, at 4.
81 billion Euros. One bright spot in the figures was the performance of the Tyre Division, with 3Q sales of 667 million Euros; 1.7 per cent up on last year’s figure of 656 million Euros.
3Q operating income was 39 m Euros (3Q 2001: 33 m). Looking at the nine-month performance, Tyre Division sales were up 1 per cent, at 2.155 bn Euros.
Increased shares of both replacement and OE markets meant that car and light truck tyre volumes were 2 per cent higher than last year, with the high performance sector performing particularly well. Truck tyre volumes rose by 6 per cent worldwide, with good sales outside Europe (notably Latin America) making up for lower sales in Europe. Moto sales were 9 per cent ahead of last year, and outperformed the replacement markets in Europe and North America.
Outlook By acting now and bringing forward the rationalisation program, Pirelli is hoping to reduce its costs to more manageable proportions, with the benefit showing up in the balance sheet over the next 18 months. Mr. Tronchetti Provera said that the fourth quarter of the year is showing “signs of improvement” and he went on: “We will see an improvement in profitability in 2003 as a result of our restructuring plan, but I don’t think we’ll see much improvement in demand for telecommunications cables or a recovery in the economy.
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