Pirelli Parent Posts 3Q Loss

Pirelli & C. SpA, the parent company of the tyre manufacturer, reported a loss in its third quarter after writing down the value of its investment in Telecom Italia SpA, Italy’s largest phone company. The net loss, excluding some items, was 1.6 billion euros ($2 billion), compared with net income of 105.8 million euros ($135 million) a year earlier.

The company had write downs of 2.1 billion euros ($2.7 billion) related to Telecom Italia and a capital gain of 416 million euros ($531 million) from selling a stake in Pirelli Tyre. Pirelli & C. wrote down the value of its Telecom Italia stake, which it controls through holding company Olimpia SpA, after a drop in the phone company’s shares.

Pirelli & C., led by Chairman Marco Tronchetti Provera, increased its stake in Olimpia last month, when it bought 9.6 per cent of the holding company from UniCredit SpA and Banca Intesa SpA for 1.17 billion euros ($1.49 billion). Pirelli & C. owns 80 percent of Olimpia, which in turn controls 18 percent of Telecom Italia.

Last month Pirelli & C., Mediobanca SpA, Assicurazioni Generali SpA and the Benettons agreed to combine their stakes in the phone company, becoming its biggest investor group with a 23 per cent stake, “to ensure continuity and stability.”

Pirelli & C. agreed in August to sell 39 per cent of its tyre unit, which generates more than 80 per cent of total sales, to a group of banks, including Lehman Brothers Holdings Inc., after cancelling an initial public offering in June.

Pirelli Tyre said last month it spent almost 170 million euros ($217 million) building a second Romanian plant to make sport-utility vehicle tyres. The company said it will export more than 90 per cent of production from the plant, which is expected to produce two million tyres next year.