Q1 puts Pirelli on track for 2011 sales of “above 5.85 billion euros”

Results for the first three months of the current financial year show Pirelli & C. SpA revenues increasing 23.4 per cent year-on-year to 1,401 million euros and a 43.3 per cent growth in the company’s gross operating result (EBITDA) to 203.4 million euros. The operating result (EBIT) before restructuring charges was 146.5 million euros, compared with 90.2 million euros in the first quarter of 2010, while EBIT after restructuring charges was 143.3 million euros, a year-on-year increase of 63.6 per cent. EBIT margin increased from 7.7 per cent in the first quarter of 2010 to 10.2 per cent.

For Pirelli Tyre, which accounts for 99.8 per cent of all Pirelli group sales, the quarter saw a 24.7 per cent year-on-year increase in sales to 1,384.5 million euros and further gains in profitability, which reached a record level of 11.0 per cent, calculated as the operating result (EBIT) over sales; this result is, notes Pirelli, a “marked improvement” compared with 8.6 per cent in the first quarter of 2010 and 9.8 per cent in the fourth quarter.  In the context of a market that grew overall, these results are credited to increasing proportions of premium products within Pirelli’s sales mix, the ability to leverage prices to offset increases in raw material costs and continuous improvements in efficiency.

In the Consumer tyre business, which includes passenger car, light truck and moto tyres, revenues grew 25.9 per cent to 983.3 million euros; 9.0 per cent of this increase came through volume, while price/mix contributed 14.6 per cent and 2.3 per cent occurred due to exchange rate effects. The segment’s operating result before restructuring charges was 119.7 million euros compared with 69.5 million euros in the same period of 2010, with a margin on revenues of 12.2 per cent, up from 8.9 per cent in the first quarter a year earlier. The increase from the first quarter of 2010, at the market level, involved all geographic regions of reference. In particular, in the original equipment channel, Europe grew at a rate of seven per cent, the NAFTA area at 16 per cent and Mercosur at eight per cent. In the replacement channel, Europe and NAFTA grew eight per cent and seven per cent respectively, while Mercosur eased by two per cent, with the decline mostly occurring at the beginning of the quarter.

Industrial business (tyres for industrial vehicles and steelcord) revenues totalled 401.2 million euros during the quarter, an increase of 21.9 per cent compared with the 329.1 million euros earned in the first quarter of 2010. In organic terms, the variation was a positive 18.3 per cent, with a 19.0 per cent increase in the price/mix component and a 0.7 per cent decrease in terms of volumes. Volume performance in the first quarter is said to have been impacted by the geopolitical crisis in Egypt, which resulted in a slowing of production and sales, both in the domestic market and abroad. This phenomenon was most strongly witnessed in February. Since this time the situation has gradually normalised with Pirelli’s plant in Alessandria returning to operation and exports. The segment’s operating result before restructuring charges was 35.9 million euros, an increase from 28.6 million euros in the first quarter of 2010 and representing an 8.9 per cent margin on revenues, up from 8.7 per cent in the first 3 months of 2010.

Events of note for the tyre maker during the quarter were its debut as exclusive Formula One tyre supplier plus the start of work on its new factory in Mexico, which will exclusively produce premium tyres and is being erected in line with Pirelli’s 2011-2013 Industrial Plan and the desire to increase production capacity within the NAFTA region. In regards to new products, the quarter saw the launch of the “Cinturato P1”, a ‘green performance’ tyre for small and medium-sized cars.

In accordance with the strategic guidelines already set out in Pirelli’s 2011-2013 Industrial Plan and in a context of persisting positive demand, during the remainder of 2011 Pirelli expects to increase its focus on the production of premium products and expansion of production capacity, predominantly in countries of rapid economic development. The group’s 2011 sales target, to which Pirelli Tyre will contribute 99 per cent, has been raised from “above 5.55 billion euros” to “above 5.85 billion euros” with an increase of the volumes component estimated at over 6 per cent and the price/mix component at around 15 per cent (estimated at approximately +12 per cent on 8 March). The profitability target (EBIT after restructuring charges/sales) is confirmed as increasing compared with 2010 and in line with the Industrial Plan (8.5-9.5 per cent for the group and 9-10 per cent for Pirelli Tyre), thanks to improvement in the production mix and the continuation of Pirelli’s cost efficiency plan. Investment during the year is expected to exceed 500 million euros, while the company’s estimated net financial position is confirmed at approximately negative 700 million euros.