Premium segment drives Pirelli profits up

Milan, Italy – Pirelli revenues for the first three quarters of 2016 rose to €4.5 billion, posting an organic growth of 6.6%, driven by price rises in emerging markets and increased sales in replacement channels.

Price-mix improved 5.5% for the period as Pirelli also changed geographical and product mix, the Italian tire-maker announced 18 Nov.

Earnings (EBITDA before restructuring and other non-recurring charges) rose 1% to €872.1 million compared to the same period in 2015. Adjusted EBIT amounted to €655.0 million, up from €638.2 million in 2015.

Pirelli attributed the improved profitability to “internal levers”, such as work on the price mix, and the tackling of “the contraction of certain markets, principally in the Industrial business.”

Pirelli’s passenger car tire segment posted an 8.2% organic growth in terms of revenue over the first nine months, with a 10% gain in third quarter alone.

This, said the tire-maker, was due to the performance of the “premium segment” and the expansion of sales in mature markets. Pirelli’s Industrial business showed an organic growth of 0.3% over the first nine months, suffering from the weakness of the tire market in South America and other emerging markets.

“Premium” segment registered a 14.2% rise in volumes, which according to Pirelli outpaced the expansion of the premium market at 9.0% in the first three quarters. Revenues of this segment rose by 11.7% to €2.44 billion, contributing to 64.6% of Pirelli’s total passenger car revenues.

In geographical terms, Pirelli’s profitability improved in Europe and NAFTA due to strong growth in the “premium” segment. Asia Pacific, however, remained the most profitable area, with an EBIT margin of more than 20%.