MILAN, Italy—Pirelli & C. S.p.A. suffered drops in operating and net income for the first quarter as the company blamed negative currency exchange rate effects and increased finance charges.
Operating earnings fell 8.5 percent to $237.5 million, while net income was off 41.7 percent to $95.2 million. Sales fell 1.3 percent to $2.03 billion.
Pirelli chalked up most of the earnings malaise to shrinking demand in Europe, where the replacement market fell 11 percent. By contrast, Pirelli described the performance of the South American and Chinese markets as positive.
In the premium segment, where Pirelli has put much of its effort in recent years, sales were off in Europe but up in North America and markets in emerging nations. Overall, revenue from the sale of premium products was off 2.8 percent.
Sales revenue in North America was roughly $223 million, Pirelli said.
Pirelli also attributed its earnings drops to the negative effects of falling selling prices and a worsening product mix (original equipment made up a greater percentage of business, for example), while lower costs linked to raw materials helped assuage the decline.
Despite the lower earnings and sales recorded in the first quarter, Pirelli management still feels the company can reach the financial goals set forth in March: consolidated sales of $8 billion to $8.5 billion; unit sales volume growth of 3 to 4 percent (including growth in the premium segment of 13 to 14 percent); consolidated pre-tax operating income/sales ratio of about 12 to 13 percent.
Pirelli is committing $528 million to capital investments this year.