Pirelli Releases 2006 Results

On the evening of March 12 Pirelli & C. Spa disclosed their 2006 full year results, and while the figures reflected well on Pirelli Tyre, the parent company’s stake in Telecom Italia made a sizeable loss for the group as a whole inevitable.

Across the entire group a net loss of 1048.8 million euros was sustained, contrasting starkly with last year’s 398.9 million euro profit. This reversal of fortune can primarily be attributed to the Pirelli’s 80 per cent stake in holding company Olimpia, who in turn owns 18 per cent of Telecom Italia. Since the acquisition of Telecom Italia in 2001 shares in the telecoms group have had half of their value wiped from them. At present Pirelli is reportedly considering placing its entire Telecom Italia interest on the market.

Results for Pirelli Tyre were, however, more positive. Net sales, at 3,950 million euros, showed an improvement of 8.7 per cent on last year’s figures. On a comparative basis, net of exchange rates, this amount adjusted to 7 per cent. Consumer sales showed their greatest improvement in the area of winter tyres and motorcycle tyres, and overall sales growth in the North and South American markets reached double figures. Industrial sales, up 9.5 per cent, benefited significantly from the company’s new Chinese operations.

EBITDA came out at 533.7 million euros, 13.5 per cent of total sales and up 3 per cent on 2005. Up too was operating income, a 4.1 per cent improvement on 2005 at 342.3 million euros. Pirelli point out that the positive impacts leading to sales growth – product mix, improved efficiency and favourable exchange rates – more than compensated for the increased cost of raw materials during 2006 and the start-up effect of the company’s new truck factory in China.

For 2006 Pirelli Tyre’s bottom line – net profit – stood at 199.3 million euros. This amount shows little change from 2005, when profit came to 198.5 million.

As expected, Pirelli did not distribute a dividend on its 2006 results. During the coming year Pirelli anticipates above market average sales growth for Pirelli Tyre, thanks to the company’s focus upon premium consumer products stabilising raw material prices. An improvement in results across all of the Pirelli & C. SpA Group is also expected, however the company states this with the caveat that unforeseen circumstances may alter this positive scenario.