Despite Reduced Sales, Pirelli Tyre Records Stronger Profit in 2009

Financial statements approved by the Pirelli & C. SpA Board of Directors on March 10 show Pirelli Tyre to have attained revenues of 3,992.9 million euros during 2009, a 2.6 per cent reduction on a year earlier. Despite this slight annual decrease, sales in the fourth quarter leapt 18.7 per cent – an organic growth of 13. 9 per cent – to 1,034.3 million euros EBITDA before restructuring charges amounted to 538 million euros, up 21.9 per cent compared with 2008, or 13.5 per cent of sales, compared with 10.8 per cent of sales a year earlier. In the fourth quarter, EBITDA before restructuring charges stood at 155.2 million euros compared with 62.9 million euros in the corresponding period of 2008, with the sales margin rising to 15 per cent from 7.2 per cent in the same period of 2008. EBIT before restructuring charges was 345.5 million euros, or 8.7 per cent of sales (6.1 per cent in 2008) representing an increase of 37.8 per cent compared with 250.7 million euros in the previous year. In the fourth quarter, EBIT before restructuring charges amounted to 104.7 million euros (10.1 per cent of sales) compared with 18.9 million euros (2.2 per cent of sales) in the corresponding period of 2008.

Pirelli says the strong improvement in 2009 results compared with the previous year is due to price/mix variation, efficiencies realised – despite an operating scenario characterised by periods of overcapacity. Furthermore, the positive performance of industrial factors, in particular falling raw materials costs during the year, had an overall positive impact (net of exchange rate effects) of 98.7 million euros. These factors, notes Pirelli, more than compensated the negative aspects deriving from lower sales volumes.

Net profit as of 31 December 2009 amounted to 146.6 million euros, compared with 25.6 million euros at the end of 2008. In the fourth quarter, net profit stood at 55.7 million euros compared with a loss of 82.7 million euros in the previous year’s fourth quarter. The net financial position as of 31 December 2009 was negative for 1,027.3 million euros, compared with 1,298.6 million euros as of 30 September 2009. The improvement was due in particular to the continuing efficiency in working capital management, which allowed for positive operating cashflow of 561.5 million euros (compared with a negative figure of 18.1 million euros in 2008), and careful selection of investment activities in a year partly characterised by low use of manufacturing capacity.

Net investments amounted to 217 million euros during the year (285 million euros in 2008) and were mainly focused on increasing manufacturing capacity in emerging markets offering greater growth rates and lower industrial costs, in development of innovative processes, in launching new “Green Performance” products, and in the area of workers’ health and safety, as well as environmental factory management. Research and development spending stood at 133 million euros, or 3.3 per cent of sales, down from 145 million euros or 3.5 per cent in 2008.

Consumer tyre revenues amounted overall to 2,827.8 million euros in 2009, up 0.9 per cent compared with 2008. Net of exchange rate effects, organic growth of consumer revenues was 1.2 per cent. EBITDA before restructuring charges amounted to 379.7 million euros, up 34.7 per cent compared with the previous year, or 13.4 per cent of sales. In the Industrial business (tyres for industrial vehicles and steelcord), 2009 revenues amounted overall to 1,165.1 million euros, compared with 1,298.7 million euros in 2008. Sales volumes showed a 12.6 per cent decline compared with the previous year, narrowing to an organic decline of 7.6 per cent thanks to the positive impact (+5 per cent) of price/mix. EBITDA before restructuring charges amounted to 158.3 million euros, practically in line with 2008 (159.3 million euros), while EBIT before restructuring charges was 111.8 million euros, aligned with  2008 in absolute value (111.6 million euros), but representing an improvement to from 8.6 per cent to 9.6 per cent in terms of profitability.

As of 31 December 2009 Pirelli Tyre has 27,481 employees, compared with 28,601 at the end of 2008.