Pirelli tyre volumes down, revenue & income up in H1 2023

In spite of weaker volumes (-2.1%) in the first half of the year, thanks to improved price/mix Pirelli & C. S.p.A. grew its revenues 7.5 per cent year-on-year, to 3,437.5 million euros. Organic revenue growth was 10.4 per cent (-2.9% being the impact of exchange rates as well as hyperinflation in Argentina and Turkey). Price/mix increased 12.5 per cent in the first half of 2023, supported by price increases to counter the growing inflation of production factors.

Adjusted Ebitda in the first half of 2023 was 739.1 million euros, an increase of 6.3 per cent compared with the same period of 2022. Adjusted Ebit in H1 2023 was 517.4 million euros, a year-on-year improvement of 35.8 million euros, with an adjusted Ebit margin of 15.1 per cent, which was stable compared with H1 2022. Price/mix and efficiencies more than offset the negativity of external factors such as raw material costs and inflation.

Net financial charges in H1 2023 were 106.9 million euros, compared with 89.6 million in H1 2022. The cost of debt, calculated as the average of the last 12 months, grew to 4.46 per cent.

Pretax profit in the first half of 2023 was 339.3 million euros, with taxation of 96.7 million, equal to a tax rate of 28.5 per cent. H1 2023 net profit amounted to 242.6 million euros, a year-on-year increase of 4.1 per cent.

Q2 2023

In the second quarter of 2023, revenues totalled 1,737.8 million euros, an increase of 3.7 per cent compared with Q2 2022.

Adjusted EBIT was 269.3 million euros in Q2 2023, a year-on-year increase of 6.4 per cent. During the quarter the margin improved 0.4 percentage points year-on-year to 15.5 per cent.

Targets for 2023

For full-year 2023, Pirelli expects the following:
Revenues between approximately 6.5 and 6.7 billion euros (previous estimate ~6.6 and ~6.8 billion), with:
• Volumes estimated to be approximately one to two per cent lower (from previous indication of stable to ~+1%).
• price/mix improving to approximately seven to eight per cent (previous indication ~+4.5% / ~+5.5%)
• forex impact between approximately six to seven per cent (previous indication~-4.5% / ~-3.5%)

Adjusted Ebit margin upwardly revised to between approximately 14.5 per cent and less than 15 per cent and (previous estimate >14% and ~14.5%) thanks to the support of price/mix which more than offset the impact of inflation and forex.

Net cash generation before dividends confirmed at between approximately 440 and 470 million euro, thanks to the operating performance and efficient management of working capital. This target includes an amount relative to the acquisition of Hevea-Tec.

Investments confirmed at around 400 million euro (~6% of revenues).

Net financial position confirmed at approximately -2.35 billion euro (with an NFP/Adjusted Ebitda ratio between ~1.65 /~1.7 times).

Activities in Russia

Pirelli still produces tyres in Russia. The company states that it operates in Russia “respecting international sanctions” and has suspended investment in its factories there except for those “required for the safety of operations.” In the first half of 2023, Russia accounted for about four of group sales, which appears to be a higher proportion than in 2021.