Pirelli posts higher earnings despite automotive slowdown

Milan, Italy – Pirelli & C. SpA has reported 7.6% year-on-year increase in earnings (adjusted EBITDA) to €1.0 billion, on 2.8% higher sales of €4.0 billion in the first nine months of the year.

The Italian firm linked the gains to a 5.4% improvement in price/mix, which contributed €120 million to earnings, helping offset a negative 67.6-million rise in materials costs and €53.9 million volumes-decline.

The price/mix improvement was mainly due to the growing weight of high-end products and an improved product and channel mix, the Italian tire maker said 29 Oct.

In its statement, Pirelli noted that the first nine months of 2019 were marked by weakness in the car market, which also continued into the third quarter “beyond expectations”.

The slowdown of the car market impacted tire demand, with a decline of 6.3% in OE in the first nine months of the year, the Italian tire maker added.

According to Pirelli, the market developments had a negative effect on prices as many operators diverted production to the replacement channel that had been originally planned for OE.

In this context, Pirelli said its continued strategic focus on high value products, which are less exposed to competitive pressure paid off.

During the period, the tire maker also implemented its cost-reduction plan, which resulted in €40 million saving, helping to offset pressure on prices and costs of transition to high-value tires.

Pirelli’s high-value tires segment registered a 7.5% growth in revenue over the nine-month period to €2.7 billion, representing 64.5% of the company’s total sales.

Sales of standard tires, fell 5.7% to €1.3 billion for the same period.

Total volumes registered a decline of 3.1% due to a 12.2% fall in standard volumes and despite a 6% increase in high-value volumes.

In terms of regions, Europe, Middle East and Africa (EMEA) was the only area where Pirelli posted negative sales developments.

With sales of €1.75 billion, EMEA remained Pirelli’s biggest sales region, but shrank 2% year-on-year.

South America saw the biggest sales improvement, with a 7.2% rise in year-on-year sales, at €508 million.