Pirelli Tyre 1H Results Show Declining Net Revenue

The Board of Directors of Pirelli & C. SpA, have released the company’s interim financial statements for the half-year ended 30 June 2008. These results show Group revenues of 2.6843 billion euros, an increase of 2.7 per cent compared with the first half of 2007. The company’s EBIT before restructuring charges of 21.2 million euros were taken into account was 211.5 million euros, a decrease of 4.4 per cent compared with 221.3 million euros as of 30 June 2007. The company’s net result was 9.5 million euros lower than the 198.3 million euros recorded in 2007, and in the most recent half year it recorded a net financial position of negative 823 million euros.

Revenue at Pirelli Tyre, at 2.1663 billion euros, increased 3 per cent at constant exchange rates. Net of the exchange rate, revenues increased 0.7 per cent over the same period a year earlier. EBIT before restructuring charges was 191 million euros, compared with 206.3 million euros in the first half of 2007.

EBITDA before restructuring charges amounted to 286.5 million euros (13.2 per cent of revenues), down 5 per cent compared with 301.7 million euros in the first half of 2007. EBIT before restructuring charges amounted to 191 million euros (8.8 per cent of revenues), compared with 206.3 million euros in the first half of 2007. The decline in operating results compared with the same period of 2007, says Pirelli, was linked to an unfavourable automotive market scenario, as well as a significant increase in the cost of raw materials and energy and lower sales volumes in replacement channels, in Europe and North America, despite the positive contribution of the price/mix factor and greater volumes in original equipment, especially in Latin America. Restructuring, already underway in Europe, has brought charges of 5 million euros in the first half. Taking into consideration restructuring charges, EBIT amounted to 186 million euros.

Net income as of 30 June 2008 amounted to 101.7 million euros, compared with a result of 117.4 million euros in the first half of 2007. The tyre division’s net financial position was negative for 773.4 million euros, an improvement over the figure as of 31 March 2008 (negative for 843.8 million euros). According to Pirelli, the variation compared with a negative position of 559.6 million euros as of 31 December 2007 is essentially due to distribution of dividends for 89.9 million euros and to the seasonal cycle of working capital.

The company believes that, in its tyre business, price increases, focalisation on product mix, and actions for continuous cost efficiency were able to only partially offset a decrease in demand in certain key markets, especially Western Europe and the United States, and the increase of raw materials costs, which rose about 10 per cent in the half.

In the Consumer business (Car/Light Truck and Motorcycle tyres), revenues as of 30 June 2008 amounted to 1,494.3 million euros, a 3.1 per cent increase at constant exchange rates. EBIT before restructuring charges amounted to 126.8 million euros, down by 22.3 million euros compared with the same period of 2007 due to four factors: a negative trend in volumes, an unfavourable mix of sales channels, not completely recovering production factors cost increases and start-up costs for the car tyre factories in China and Romania.

In the Industrial business (tyres for Industrial Vehicles and Steelcord), revenues in the first half amounted to 672 million euros, with an increase of 2.5 per cent at constant exchange rates compared to the first half of 2007. EBIT, which stood at 64.2 million euros, rose by 7 million euros compared with the same period of the previous year.

Pirelli Tyre forecasts for the second half EBIT before restructuring charges substantially in line with the same period of 2007, barring further deterioration of markets of reference. Pirelli RE expects it will be possible – as a result of restructuring actions, and if some negotiations currently underway are finalised – to confirm for 2008 EBIT including results from equity participations before restructuring charges in line with 2007.