Increased Turnover and Profits For Pirelli Tire as Parent Makes Loss

Pirelli & C. SpA’s Pirelli Tire division achieved sales growth exceeding 10 per cent in the first nine months of 2006 and increased results from operations compared to the previous year. This performance was obtained despite the significant rise in raw material costs, which penalised the entire sector. Revenues were 2,990.6 million euros, up by 10.5 per cent compared to 2,706.9 million in the same period of 2005 (+7.3 per cent net of exchange rates).

EBITDA totalled 418.1 million euros (+1.4 per cent compared to the first nine months of 2006 and 14 per cent of sales), after non-recurring costs of about 7 million euros incurred for the planned flotation. The operating income amounted to 271.4 million euros (return on sales [ROS] of 9.1 per cent). Net income was 153.6 million euros (after financial charges of 42 million euros and tax charges of 75.8 million euros), compared to 165.1 million euros (after financial charges of 30.1 million euros and tax charges of 75.9 million euros) in the first nine months of 2005.

In the Consumer business, the first nine months of 2006 showed growth both in terms of revenues (+9 per cent) and operating income (+14 per cent) with respect to the previous year. In detail, the revenues amounted to 2,072 million euros and the operating income from ordinary operations was 193.9 million euros. The third quarter revenues amounted to 669 million euros, up by 6 per cent with respect to the same period of 2005, thanks to higher volumes and a significant improvement in the price/mix component. The operating income from ordinary operations of 53.2 million euros (8 per cent of sales), also registered an increase with respect to the previous year (+5 per cent), thanks to the positive contribution of the commercial variables and efficiencies, which more than compensated the higher raw materials cost.

Consumer demand in the Car segment was reportedly positive in Europe, in particular in the segments in which Pirelli Tire is traditionally a leader (High Performance and Ultra-High Performance), as well as Winter, where Pirelli continues to grow in the more sporting applications with the Sottozero, Snowsport, Snowcontrol and Scorpion ICE & Snow range.

Demand in the South American market was stable overall. Pirelli Tire’s selective growth in North America continues, notwithstanding negative demand, supported by new products such as the SUV Scorpion ATR tyre. The improvement continues in the profitability of the Motorcycle segment, where the volume and mix more than compensated for the trend in raw material costs.

The Industrial business revenues at 30 September of 919 million euros, show a growth of 13 per cent with respect to the previous year. Market demand was positive in Europe overall, while a reduction occurred in South America. Growth in steel cord volumes continued in the third quarter. The operating income, which was down, was 84.9 million euros. The third quarter ended with revenues of 303 million euros, up by 8 per cent with respect to the same period of 2005. The operating income from ordinary operations was 24.5 million euros, down compared to the third quarter of 2005 due to the peak reached by natural rubber, the main cost item of the business’ raw materials. The ROS was 8.1 per cent.