Pirelli reports earnings growth as currency impacts sales

Milan, Italy — Pirelli has reported higher first-quarter profitability despite lower revenues, as higher volumes and efficiency gains helped offset currency headwinds and rising market uncertainty.

Group revenue for the three months ended 31 March fell 1.2% year-on-year to €1.74 billion, despite a 3.5% year-on-year growth in organic sales.

The sales decline was mainly driven by a 4.5% negative currency impact tied to volatility in emerging market currencies and weakness in the US dollar, Pirelli said.

Volumes increased 1.5% during the quarter, supported by continued expansion in the ‘high value’ segment, which accounted for 82% of total revenues, up from 81% a year earlier.

The company said total car and moto volumes rose 4%, with market share gains recorded in both replacement and OE channels.

OE growth was particularly strong, supported by “the strengthening of strategic partnerships with the main producers of four and two-wheel vehicles in North America and APAC.”

At the same time, Pirelli continued to reduce exposure to lower-margin standard products.

Volumes in the standard segment were down 5.3% year-on-year, particularly in South America, as part of Pirelli’s strategy to focus on “more profitable products and channels.”

The group’s price/mix improved 2% year-on-year, mainly due to “improved product mix,” driven by premium and larger-rim tires.

Adjusted EBIT edged down 0.9% to €277.4 million, while the adjusted EBIT margin improved to 16% from 15.9% in the first quarter of 2025.

According to Pirelli, profitability was supported by positive price/mix effects worth €21.4 million, lower raw material costs of €15.5 million and efficiencies totalling €43.3 million.

These benefits helped offset negative currency effects of €40.1 million, inflation-related cost increases of €28.2 million, as well as higher amortisation and other costs, including tariff-related impacts.

Adjusted earnings (EBITDA) rose 1.4% year-on-year to €404.4 million, while net profit increased 23.3% to €156.8 million, helped by lower financial charges.

Pirelli also reported a sharp increase in income from equity holdings, which rose to €28 million from €5.8 million a year earlier.

The tire maker linked the gains mainly to the 'revaluation' of its stake in Chinese joint venture Xushen Tyre following its consolidation earlier this year.

On the product side, the company secured 116 new homologations during the quarter, 90% of which involved rim sizes of 19 inches and above.

Of that amount, 65% related to electric vehicle models, including BEV and plug-in hybrid platforms.

Looking ahead, Pirelli warned that the Middle East conflict was creating additional pressure on global growth, inflation and input costs.

“The Middle East crisis is weighing on global growth, inflation and the price of raw materials,” the group said, adding that the economic backdrop had deteriorated compared with assumptions made earlier this year.

Pirelli revised its outlook for the global car tire market and now expects demand to range between a 2% decline and flat growth in 2026, compared with previous expectations of between a 1% decline and 1% growth.

The tire maker noted that the downgrade mainly reflected worsening conditions in the standard segment, while expectations for the “more resilient” high value market remain unchanged.

Pirelli said it expected high value demand to growth “mid-single-digit” in 2026, driven by replacement, particularly in Europe.

As for the Middle East conflict, Pirelli said it had implemented mitigation measures to offset the impact of the conflict.

These included price increases from the second quarter, additional cost controls, revised logistics flows and temporary increases in inventories of critical raw materials.

Assuming commodity, energy and transport costs ease in the second half of the year, Pirelli said it estimated the conflict will have a gross negative impact of around €100 million on 2026 adjusted EBIT.

Mitigation actions, it added, are expected to offset €80 million of that amount, resulting in a projected net impact of around €20 million on full-year adjusted EBIT.

Pirelli updated its 2026 guidance to reflect the changing market environment, forecasting revenues of between €6.75 billion and €6.95 billion, slightly up from its earlier forecast of €6.70 billion and €6.90 billion.

The increase, said Pirelli, is supported by stronger expected price/mix performance.

The group maintained its adjusted EBIT margin target of around 16% and investment guidance of around €450 million.