Pirelli Quarter Results Show Net Income Rise

Pirelli & C. Spa reports that its Pirelli Tyre operation “substantially held its position in an unfavourable quarter for the world car market” during the first quarter of the 2008 financial year. Results for the quarter ended March 31, 2008 also reflected the company’s decision to further focus upon core businesses, including the repurchase of the 38.9 per cent share in Pirelli Tyre held by shareholders in Speed SpA since August 2006.

Group revenues for the quarter amounted to 1.31 billion euros, up 2.1 per cent on the first quarter of 2007, at constant exchange rates and net of the effect of sales relating to deconsolidation of the real estate assets of DGAG. Taking into account the effect of DGAG, sales as of 31 March 2007 amounted to 1.81 billion euros. EBIT, at 114.6 million euros, was substantially in line with the figure in the first quarter of 2007 (117.5 million euros), net of the result linked to the temporary consolidation of DGAG that had characterised the previous year period. Taking into account the effect of DGAG, EBIT as of 31 March 2007 amounted to 129.5 million euros.

Total consolidated net income amounted to 62.4 million euros, up 10.8 per cent compared with 56.3 million euros in the first quarter of 2007. Consolidated net profit attributable to Pirelli & C. SpA amounted to 33.8 million euros, up 39.7 per cent compared with 24.2 million euros in the first quarter of 2007.

Revenues for Pirelli Tyre as of 31 March 2008 amounted to 1.077 billion euros, with growth on a like-for-like basis of 3.2 per cent compared with the first quarter of 2007. Net of the exchange rate effect (negative for 1.6 per cent), growth in revenues was 1.6 per cent. This increase in sales, despite a particularly unfavourable market for replacement tyres in Europe and North America, was mainly linked to Pirelli’s focus on high value added segments (product mix) and the price component.

EBITDA for Pirelli Tyre amounted to 148.5 million euros (13.8 per cent of sales), more or less in line with the 150.9 million euros of the first quarter of 2007. EBIT amounted to 100.3 million euros, slightly down from 103.7 million euros in the first quarter of 2007, with a ROS of 9.3 per cent. Net income as of 31 March 2008 amounted to 57.7 million euros, essentially in line with the figure for the first quarter of 2007 (58.1 million euros).

The tyre division’s net financial position was 843.8 million euros in the red and compares with negative net financial positions of 734.7 million euros and 559.6 million euros, respectively as of 31 March and 31 December 2007. The change with respect to last December’s figure was, said Pirelli, mainly linked to seasonal factors for working capital and to distribution of dividends of 90 million euros.

Revenues for the Consumer tyre business (car, light truck and motorcycle) as of March 31 amounted to 748.3 million euros while operating income was equal to 70.3 million euros, down by 7.3 million euros compared with the same period in 2007. In the Car/Light Truck segment, the first quarter was characterised by growth in sales in the original equipment channel, while in the replacement channel, in a falling market both in Europe and in North America, the company reports it intentionally placed a focus on price/mix rather than targeting volumes. In Latin America a double-digit increase in sales occurred mainly due to the strong OE market.

In the Industrial tyre business, revenues in the first quarter amounted to 328.6 million euros. Operating income, which amounted to 30 million euros, was up 3.9 million euros compared with the previous year period. Strong growth of sales in Latin America and in emerging markets are said to have more than compensated for the negative situation in mature markets and allowed for improvement in profitability of more than one percentage point compared with the first quarter of 2007. Sales in the Steelcord segment were essentially stable compared with the same period in the previous year.

Pirelli’s tyre operation employed 27,334 people as of March 31, 2008 (of which 2,841 are temporary employees), compared with 27,224 at the end of 2007.