Earnings up, but Pirelli lowers sales forecast on S America slump

Milan, Italy – Decline in South America has prompted Pirelli C. & SpA to revise down its full-year revenue projections to €5.2 billion – compared with a prior estimate of €5.4 billion.

For the nine months to end of September, the Italian tiremaker posted a year-on-year 2.8% drop in net sales to €3.92 billion, mainly due to the 11.2% reduction of volumes in the standard tire segment.

Earnings (adjusted EBITDA before start-up costs) for the nine-month period rose 8.2% to €936.3 million, said a Pirelli financial release issued 14 Nov

Pirelli linked the earnings gain to better price/mix, efficiencies and actions on costs. These factors offset increased raw materials costs, cost-inflation, currency effects and a dip in volumes.

In Latin America, however, there was an 11% decline in replacement tire sales in the third quarter, including a 17% drop during the three months in Brazil alone, said Pirelli.

Over the nine months, sales in Latin America fell by 26.8% to €499 million amid weak demand and “deteriorating” market conditions.

Pirelli added that it had “promptly reacted” to the decline in Latin America, by introducing a “short-term crash programme" of €50 million.

High-value sales

On a more positive note, the Milan-based tiremaker raised its projections for growth in the ‘high-value’ tire segment to 64% of group revenues, compared to 60% announced previously.

By the yearend, the company expects to increase its high-value production volume by 13% and reduce exposure to the standard segment by 12%.

Total volumes for the year, however, are estimated to fall 2% compared to 2017, due to weakened market conditions in South America.

Projections for adjusted EBIT before start-up costs remained at "above €1 billion" for the year.