Pirelli Releases 9-Month Figures, Considering Tyre Buyback

At the Board of Directors’ meeting at Pirelli & C. SpA on November 9 a mandate was given by the chairman to “begin contacts with speed” to evaluate the possible repurchase of the 38.9 per cent share in Pirelli Tyre currently owned by a consortium of banks, the company reported in a press release. This is the share sold by Pirelli in July 2006 to the bank-controlled company, Speed, for 740 million euros, and the repurchase would be a move towards the company’s new focus upon core businesses following the 3.3 billion euro cash sale of its Olimpia unit.

Nine-month results for the company as of September 30 were also released, and Pirelli claims these reflect the positive performance of its tyre and real estate businesses, which in the first nine months of the year were said to have “continued in the direction of further international expansion.” In the January – September period net profits returned to the black and were recorded as 243.3 million euros, a marked contrast to last year’s nine-month loss of 1.41 billion euros, which occurred largely due to the effect of the writedown of the stake in Olimpia. Group sales for the period were 5.23 billion euros, 44.4 per cent higher than last year’s 3.62 billion euros. Excluding DGAG, nine-month sales were 3.95 billion euros. EBIT, including income from equity participations, rose by 13.4 per cent net of extraordinary components, including the capital gain from the sale of 38.9 per cent of Pirelli Tyre, which characterised the previous period.

Pirelli Tyre achieved sales of 3.19 billion euros during the nine-months to September 30, 2007, an increase of 6.7 per cent, while operating income from ordinary business amounted to 286.6 million euros. These improved revenues are said to be the result of greater volumes and a focus on product mix, which more than compensated the negative exchange rate effect arising from the strengthening of the euro. The division recorded an EBIT of 286.2 million euros, an increase of 5.5 per cent, and net profit up 4.2 per cent to 160 million euros.

The division’s net financial position in the first nine months was 687 million euros in the red, an improvement over the -695.5 million euros as of 30 June 2007 and the -783.3 million euros as of 30 September 2006. At the close of the most recent period Pirelli Tyre had 27,138 people in its employ, of which 14 per cent are temporary workers, compared with 25,169 (of which 13 per cent were temporary) on 31 December 2006. This staff increase can be attributed to the growth of businesses in South America and especially in the new industrial facilities in Romania and China.

In the Consumer tyre business the first nine months showed overall growth in terms of both sales and profitability compared with the same period in 2006, thanks to greater volumes and to a better price/mix component. In particular, revenues amounted to 2.21 billion euros, an increase of 6.8 per cent, while operating income from ordinary business amounted to 201.8 million euros, a rise of 6.9 per cent, with a ROS of 9.1 per cent. In the car/light truck segment, Pirelli grew at double-digit rates in North America despite static demand for replacement tyres and falling demand in original equipment, and further benefited from an increase in demand in South America, driven by original equipment sales. In Europe volume growth was also realised in the original equipment segment. The Motorcycle segment grew in all world markets, with both the Pirelli and Metzeler brands further strengthening their respective market shares.

In the Industrial business, the first nine months closed with revenues of 980 million euros, up 6.6 per cent. Operating income for ordinary business was 84.4 million euros, slightly higher than the figure in the first nine months of 2006 despite an increase in cost factors, including natural rubber and of energy. The ROS was 8.6 per cent. In the industrial vehicle tyres segment, Pirelli registered sales growth in China and in its areas of reference (the Mediterranean and South America), while in steelcord the company had an increase in volume compared with the same period of the previous year, due to a continuous increase in manufacturing capacity in low cost countries.