Pirelli Tyre net profits fall 87 percent

ERJ staff report (DS)

Milan, Italy -- Pirelli Tyre recorded a positive net profit in for the 12 months ended December 2008, of euro 25.6 million, down from euro 210.5 million a year earlier on slightly lower sales. The tyre unit recorded sales of Euro 4100.2 million, down by 1.5 percent on the previous year.

Pirelli said volumes were down 6 percent, but higher prices and a better product mix more than offset the lower volumes. Profitability, however, suffered due to significantly lower volumes in the final quarter and increased raw material costs, combined with higher finance costs.

Restructuring actions begun in Europe in order to effectively confront this scenario and strengthen the competitive footprint brought about charges of 100 million euros in 2008, of which 68 million euros in the last quarter of the year.

In the Consumer business (Car/Light Truck and Motorcycle Tyres), revenues stood at 2,801 million euros overall, - 2.1% compared with 2007 due to the negative performance of volumes (-5.8% mainly in Europe and in North America. In this context Pirelli Tyre focused on higher product segments with a consequent positive variation of price/mix (+6.5% at annual level), which compensated for the negative trend in volumes. Net of exchange rate effects, organic growth of Consumer revenue stood at +0.7%. Operating income from ordinary operations was 139 million euros compared with 253 million euros in 2007, affected by the above-mentioned decline in volumes and the strong increase in raw materials costs.

In the Industrial business (Tyres for Industrial Vehicles and Steelcord) revenues were 1,299 million euros overall, in line with 2007 (1,300 million euros). The decline in volumes was greater in the Industrial segment (-6.6% compared with 2007) in consideration of the highly cyclical nature of the business (greater correlation with macroeconomic trends and with those of certain specific sectors, such as public works, large construction projects, etc.); this performance was more than compensated by the positive variation in price/mix (+9.1% compared with 2007) with consequent revenue growth in organic terms (net of exchange rate effects) of 2.5%. Operating income from ordinary operations amounted to 112 million euros, slightly higher than the 106 million euros in 2007 thanks to the positive strategic positioning of Pirelli Tyre with 87% of overall production in low cost areas and 75% of sales in emerging markets.

Net investments amounted to 285 million euros (262 million euros in 2007) and, coherently with the Group's strategy and market demand, were utilized for developing innovative processes, increasing production in China and Romania, and developing new "green performance" products.

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Press release from Pirelli