In the red: Venezuela, restructuring hurts Pirelli’s 2015 results

Although Pirelli’s revenues grew 4.8 per cent in 2015 and were above the year’s target of €6.25 billion, problems in Venezuela and other issues took their toll on the company’s bottom line.

The tyre maker’s revenue for the 2015 financial year amounted to €6.31 billion. Price increases, higher replacement market sales and product mix more than compensated for the 1.6 per cent decline in volumes, a reduction that mainly came from emerging markets and the company’s industrial business. Premium segment performance exceeded all forecasts, with a 12.7 per cent increase in volumes (target “equal to or above” +10 per cent) and grew as a percentage of consumer business revenues from 55 per cent at the end of 2014 to 60 per cent.

Sales of tyres amounted to €6.30 billion in 2015, a total growth of 4.9 per cent and organic growth of 5.5 per cent. The consumer tyre business grew by 9.5 per cent while the industrial business shrank by 10.3 per cent, impacted by a significant slowdown in the South American market and negative exchange rates of 7.7 per cent. The 1.6 per cent drop in volumes reflects a 0.3 per cent increase in the consumer business and 7.9 per cent decline in the industrial business. Mature markets grew 5.7 per cent while emerging markets declined 4.8 per cent.

Ebitda before non-recurring and restructuring charges rose 6.4 per cent to €1.24 billion, while Ebit before non-recurring restructuring charges grew by 5.7 per cent to €918.5 million, with a margin of 14.6 per cent (14.4 per cent in 2014). The APAC region grew the most both in terms of revenue and profitability (revenues up 26.4 per cent and Ebit margin above 20 per cent), followed by NAFTA (revenues up 21.7 per cent, Ebit in the low twenties).

Economic problems in Venezuela led Pirelli – as many companies have – to deconsolidate its local business there. The deconsolidation of Pirelli de Venezuela has negatively impacted Pirelli’s 2015 results to the tune of €559.5 million, of which €277.7 million is related to the Venezuelan company’s positive net financial position. As a consequence of the deconsolidation, the group’s results will no longer include the Venezuelan unit’s results, and therefore will no longer bear the impact of the recurring devaluations seen in recent years.

The net result for Pirelli’s going concerns on 31 December 2015 was minus €368.9 million (+ €315.2 million in 2014). In addition to the Venezuelan business’s deconsolidation, this result takes into account a non-recurring fiscal impact of €107.6 million linked to the devaluation of active deferred taxation by the Parent Group as a consequence of Pirelli’s new financial structure after its merger with Marco Polo Industrial Holding. The total net result, including the net result for activities disposed of, was minus €383.5 million (+ €332.8 million euro for 2014). Net of the abovementioned non-recurring factors, the company’s adjusted net income was €298.2 million.

Further details about Pirelli’s 2015 results can be found in the company profiles and reports section on Tyrepress.com