Pirelli braced for headwinds around costs for raw materials, labour

Milan – Pirelli & C. SpA expects the cost of raw materials to increase significantly in the second half of the year – an assessment based on recent spikes in commodity prices.

Conversely, Pirelli reported a €29-million positive impact from raw materials cost for the first quarter of 2024, largely linked to year-on-year declines in crude oil and butadiene price.

The lower commodity impact, Bocchio said, is due to increasing natural rubber and butadiene prices observed over recent months, as well as a negative currency impact.

With commodities being “at the level that we are seeing nowadays”, Bocchio said Pirelli expects a negative impact from raw materials cost in the second six months of the year.

The Pirelli CFO went on to note that there is typically a delay of between three-to-four months’ before commodity price rises impact cost-of-goods sold.

Reviewing cost-inflation in the first quarter of 2024, Bocchio said Pirelli incurred a €29 million negative impact compared to the same period of  last year.

The main drives included logistics- and labour-inflation, the latter of which Bocchio described as “the most important headwind.”

“This is the trend that, for the time being, we foresee even for the next quarters of the year,” said the Pirelli executive.

While the impact is expected to stay 'roughly aligned' with that in the first quarter, Bocchio said Pirelli expects to offset the negative impact through its efficiency programme.

“We confirm the target of generating efficiencies for about €140 million for the full year... [which] should be sufficient to compensate at least the impact from the inflation,” he said.

To further address the issue, the Pirelli CFO said the company had recently renegotiated its labour and logistics contracts, particularly in Europe.