Pirelli doubles year-on-year net profit
Positive tyre sector demand was seen in Pirelli & C. Spa’s results for the six months ending June 30, 2011. A full 99 per cent of the Italian manufacturer’s group sales are made in the tyre sector and the company reports that results from the first half of the year “demonstrate continuous growth and improvement of all economic indicators.” In particular, a more than doubling of group net profits is attributed to ongoing efficiency programmes and, more significantly, the effectiveness of price mix actions that have seen sales increasingly concentrated in the premium segment, enabling raw material costs to be offset.
At the consolidated level, the Pirelli Group closed the first half with revenues of 2,789.3 million euros, an increase of 17.7 per cent compared with the same period of 2010, and an operating result (EBIT) after restructuring costs of 290.1million euros, an increase 51.2 per cent year-on-year. Profitability – expressed as the operating result over sales – reached 10.4 per cent, with an improvement of over two percentage points from 8.1 per cent in the first half of 2010.
The second quarter, in particular, saw revenues increase 12.5 per cent to 1,388.4 million euros and EBIT improve by 40.7 per cent to 146.8 million euros, with profitability of 10.6 per cent, as opposed to 8.5 per cent in the same period of 2010.
Consolidated net profit for the six-month period was 158.8 million euros, more than double the 77 million posted in the first half 2010 on a matching perimeter (before discontinued operations): In the first six months of last year, the net result was negative 175.6 million euros because of the 252.6 million euro impact of discontinued operations linked to the operation of assignment of Prelios shares (formerly Pirelli RE). The net result attributable to Pirelli & C. Spa on 30 June 2011 was 161.7 million euros compared with negative 165.5 million euros in first half of 2010.
Consolidated net assets on 30 June 2011 stood at 2,047.2 million euros compared with 2,028 million euros at the end of 2010. Consolidated net assets attributable to Pirelli & C. SpA amounted to 2,013.6 million euros (4.126 euros per share) compared with 1,990.8 million euros at the end of 2010 (4.080 euro per share) and 2,004.9 million euros at the end of first-half 2010.
The group net financial position on 30 June 2011 was minus 778.9 million euros compared with minus 712.8 million euros on 31 March 2011 (-455.6 million at end of December 2010). In the second quarter, dividends of 82.8 million euros were paid (81.1 million euros by the parent company) and investments of 137.2 million were made (85.2 million in the same period of 2010).
Pirelli Tyre
Revenues for Pirelli Tyre on 30 June 2011 amounted to 2,760.9 million euros, an increase of 18.7 per cent compared with the same period in 2010. On a like-for-like basis, growth in the first half was 19.4 per cent, with a positive contribution from the volume component (+3.5%), and the price/mix component (+15.9%) against a negative impact of 0.7 per cent attributable to exchange rates. The gross operating margin (EBITA) before restructuring charges was 427.9 million euros, an increase of 32.1 per cent compared with the first half of 2010, growing as a percentage of sales to from 13.9 per cent in June 2010 to 15.5 per cent.
The operating result after restructuring charges amounted to 312.5 million euros in the first half (320.2 million euros before restructuring costs), an increase of 43.8 per cent compared with first half 2010 results, growing as a percentage of sales to 11.3 per cent compared with 9.3 per cent a year earlier. Pirelli states that this improved result was achieved thanks to the positive impact of commercial variables, in particular price/mix, and the continual optimisation of efficiency of the industrial activities, which saw, among other things, an increase in production capacity. These elements more than offset the negative impact of increased raw material costs, which were approximately 212 million euros in the half and 130 million euros solely in the second quarter.
Net profit for Pirelli Tyre on 30 June 2011 totalled 162.8 million euros (after financial charges of 47.7 million euros and tax charges of 102.0 million euros), a year-on-year increase of 47.5 per cent.
In the second quarter, sales totalled 1,376.4 million euros, an increase of 13.3 per cent compared with the second quarter of 2010. The period saw an organic increase of 17.0 per cent, volumes increasing 1.2 per cent and the price/mix component rising 15.8 per cent against a negative exchange rate effect of 3.7 per cent. EBITDA before restructuring charges amount to 218.4 million euros, with a growth of 23.0 per cent compared with 177.5 million euros in the second quarter 2010. The operating result after restructuring charges came to 160.1 million euros (164.6 million euros before restructuring charges), with a growth of 31.4 per cent; as a percentage of sales it increased from 10 per cent in the second quarter of 2010 to 11.6 per cent.
Revenues for Pirelli’s Consumer (car and moto tyres) in the first half were 1,942.2 million euros, an increase of 20.1 per cent from the first half of 2010, to which sales volume increases contributed 5.7 per cent and the price/mix component 15.4 per cent (minus a 1.0% exchange rate effect). The operating result was 241.1 million euros, an increase of 63.7 per cent from a year earlier and equal to 12.4 per cent of revenues (9.1% in the same period of 2010). In the second quarter, Consumer revenues amounted to 958.9 million euros with an organic growth of 18.8 per cent (14.7% net of exchange rate effects). Pirelli says the 16.2 per cent increase in the price/mix component particularly reflects its determined focus on sales in the premium segment (an increase of 30% in the quarter) and the effectiveness of price increases, while the dynamics of the volume component (+2.6%) is said to have been linked, among other things, to the dedication of some production to winter products in preparation for expected strong demand in the second half. These dynamics resulted in a marked improvement in profitability both in comparison with the same period a year earlier and the first quarter of 2011; the operating result amounts to 124.3 million euros (80.3 million euros in the same period of 2010 and 116.8 million in first quarter of 2011), equal to 13 per cent of revenues (9.6% in the second quarter of 2010 and 11.9% in the first quarter of 2011).
In the Industrial (industrial vehicle tyres and steelcord) business. Total revenues were 818.7 million euros, a year-on-year increase of 15.5 per cent from 708.6 million euros. Operating result totalled 71.4 million euros (70 million in the first half of 2010), equal to 8.7 per cent of sales (9.9% in first half of 2010). In the second quarter, in particular, sales rose 10 per cent to 417.5 million euros, with an operating result of 35.8 million euros (41.5 million in the same 2010 period) and equal to 8.6 per cent of sales, down from 10.9 per cent in the second quarter of 2010.
Pirelli says this result was affected by a combination of lower sales volumes – linked to a slowdown of activity in Egypt and other North African countries as a consequence of the geopolitical crisis along with a decrease in sales in the conventional segment in Mercosur – and the increasing cost of natural rubber, which has had a greater impact on this business and reached an annual cost peak during this quarter.
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