Russia 'a drag on Pirelli profitability'

Milan, Italy – Pirelli management has reported a deterioration in the business performance of its operations in Russia last year – a trend that is likely to worsen in 2023.

Pirelli operates two light vehicle tire plants in Russia: a 6-million units/year facility in Kirov and 2.3-million units/year facility at Voronezh.

The country accounted for 4% of group sales and 11% of total capacity in 2022, according to Pirelli's preliminary 2022 financial statement, issued 22 Feb.

“This year, there will be the full-year impact of the Russian situation,” Marco Tronchetti Provera – executive vice chairman and CEO, explained during a 2022 results call.

In first-half 2022, Pirelli had “export coming [from Russia] to Europe, convenient and profitable. In the second [half] that wasn't there obviously,” the Pirelli boss commented.

For his part, Andrea Casaluci, general manager operations, noted reduced plant utilisation at Pirelli’s operations in Russia, adding that “the environment is not stabilised at all.”

With 70% to 75% ‘saturation’, the Russian manufacturing operations have a negative impact on the numbers recorded for Pirelli’s efficiency plans, said Casaluci.

Pirelli, he continued, is targeting “basically 100% of the production [is] for a domestic Russian market, which under strong pressure, because it's a shrinking market.

"We stay there to keep the operation running, protecting our people and our assets and nothing more than that.”

Pirelli has previously stated a target of reaching a double-digit earnings (EBIT) margin in the standard tires segment.

But this target has been delayed by the Russian effect, "because we run with not saturated plants that generate inefficiencies, 100% linked to the standard [tire market],” said Casaluci.

Asked about the outlook for the profitability of Pirelli’s Russian operations in 2023, the general manager operations commented: “It's in between 2% and 3% of our total EBIT result. So, it's a positive, but very, very limited.”