Pirelli Announces Improved Figures and New Investments

Pirelli has released results for the first three quarters of 2004 showing a 262 million euro increase in group net income year-on-year. The results also show that its net financial position is -1.9 billion euros. At the same time Pirelli gave details of a Chinese joint venture, a Romanian steel cord plant and three new MIRS plants, together worth 400 million euros.

In announcing its results the company reported that first half consolidate revenues are up 7.7 per cent rising from 4.9 billion to 5.3 billion euros, compared with the same period last year. The company’s year-on-year operating income also rose at rate of knots, going up 42 per cent from 197 million euros to 279 million.

However, in spite of all these impressive figures, Pirelli still reports a net financial position that is negative by more than 1.9 billion euros. This is actually worse than compared with the company’s position at the end of 2003 (-1.745 billion euros). On the other hand, the company points out that this is an improvement compared with end of the last quarter (-2.047 billion euros). Pirelli says that this position is in line with its financial targets.

In the company’s tyres sector, sales amounted to 2.448 billion euros, compared to 2.25 billion in the first nine months, an 11 per cent increase. Pirelli attributes this to the combination of increased volumes (+8.4 per cent) and better prices and product mix (+2.6 per cent). The sector’s EBITDA stood at 351 million euros (14.3 per cent of sales), up 13 per cent compared with the 311 million euros (13.8 per cent of sales) generated in first nine months of 2003.

400 million euros of investments

Confirming its Chinese expansion plans, Pirelli announced that it has signed a memorandum of understanding regarding the start of a joint venture in Henan province, China. The venture will produce all steel radial truck tyres, and could produce a large quantity of tyres. The company envisages that it will install production capacity equal to 33 per cent of its current worldwide truck production capacity. In addition the company said it plans to build a plant for the manufacture of car tyres and a steel cord production facility. The company expects to invest 150 million euros in the joint venture between 2005 and 2007.

Furthermore the company announced that it would build three new MIRS plants in Germany, the United States and the United Kingdom. According to Pirelli these will become operational during the first half of 2005.

In Romania, the said that it has decided to support the previously mentioned steel cord production plant in Slatina, with another manufacturing base for high performance tyres. Pirelli said this move is designed to serve the growing demand from East European markets, with an investment of 110 million euros in the next three years.

With regards to its South American operations, the company elaborated on its plans. According to Pirelli, following the recent expansion of its Bahia plant, it envisages that it will also construct a new all steel radial truck tyre facility on the Gravatai site. The company plans to invest over 80 million euros in this expansion.