Currency impact hits Pirelli sales, earnings still up

Milan – Pirelli & C. SpA has seen first-quarter sales hit by an exchange rate impact of -7.3%, although profitability increased.

Sales fell 2.2% to €1.31 billion for the three months to the end of March, largely due to the strength on the euro against the dollar.

A 7.2% improvement in price/mix and 13.4% growth in ‘high-value’ product sales were not enough to offset the currency effects.

Volumes in total fell 1.5%, including a 10.6% decline in standard tires and 12.8% rise in high value segment.

This trend, said the Milan-based tire-maker, reflected lower demand for standard tires in mature markets including Europe, NAFTA and APEC.

Despite the decline in sales, Pirelli reported improvement in profitability for the first quarter of the year.

Earnings (adjusted EBITDA after start-up costs) rose 5.8% to €298 million for the quarter.

The ‘start-up costs’, according to Pirelli, were related to new programmes, such as the consolidation of Jiaozou Aeolus Car and the launch of new activities such as Cyber and Velo.

The costs totalled €11 million.

Among the achievements of the quarter, said Pirelli, was the expansion of “high value” production capacity, mainly in Europe and NAFTA as well as the extension of the distribution network coverage in Europe, NAFTA, APAC and LatAm.

Additionally, said the company, plans for digital transformation and the reconversion of Aelous brand production to the Pirelli brand in the Jiaozuo Aeolus Car plant were ongoing.

At the geographic level, at €577.5 million, Europe recorded 1.3% growth despite exchange rate impacts and new IFRS15 accounting standards.

The increase was underpinned by the performance of “high value” products, with organic growth of 11.8%.

NAFTA, however, saw sales down 2.9% at €243.5 million due largely to a 12.9% negative currency impact.

APAC registered the highest level of profitability among all the regions. Sales in the region grew 5.8% to €197.3, thanks to the performance of ‘high value’, which increased by 12.9% compared with the first quarter of 2017.