Pirelli 1H earnings down, but growing in 2Q

Announcing its results for the first half of 2013, Pirelli has shown a year on year 6.1 per cent reduction in earnings before interest and taxes compared with the first half of 2012. This occurred in spite of a second quarter in which the manufacturer saw signs of improvement, with revenues climbing 8.8 per cent on 2Q 2012 following a 1.3 per cent YoY reduction in the first three months of the year. However, net profit for the quarter was also some way off that of the 94.9 million euro achieved in 2012, at 78 million euro.

Pirelli said its results confirmed the weakness of the European economy, though premium volume growth – in which Pirelli is overwhelmingly active – has continued with the support of the “positive performance” of the South American and Chinese markets, in which the industrial segment also proved strong. Pirelli said it saw a five per cent contraction in European tyre market demand both in the original equipment and replacement channels, though this was the result of a particularly weak first quarter – in 2Q 2013 a recovery in demand resulted in a three per cent YoY increase in the consumer segment replacement channel.

Improvement over first quarter

Generally, the second quarter results show an improvement on the first quarter for Pirelli. Profitability was at 12.6 per cent compared with 11.7 per cent in the preceding three months, as a result of better volume performance (+8.8 per cent after +3.9 per cent) and price/mix improvement (+5.1 per cent in the second quarter compared with zero impact in the preceding quarter), Pirelli said. 

The fall in the cost of raw materials and efficiency measures contributed to balancing increased production costs, costs in support of future growth, including industrial costs for the Mexico and Russia start-ups and commercial and marketing costs, as well as higher amortizations linked to the peak in investments of the last two years. Pirelli claimed the greater impact of consolidation exchange rates – an impact of around 19 million euro – had the greatest influence on the reduced operating result for the quarter YoY.