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February 28, 2019 01:00 AM

Pirelli operating income up on increased 'high value' product sales

Tire Business Report
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    MILAN—Pirelli C. & S.p.A. reported higher fiscal 2018 operating earnings and sales, led by strong "high value" product sales during the year.

    Adjusted pre-tax operating income rose 8.2 percent to $1.18 billion, before start-up costs related to a variety of new initiatives, on 2.9 percent lower sales of $6.13 billion, yielding a slightly higher operating ratio of 19.2 percent.

    The high value segment—comprising larger rim-diameter tires, "prestige" and "specialty" tires, and premium motorcycle tires—registered growth in all regions, with sales up 10 percent over 2017 and accounting for nearly 64 percent of Pirelli's total sales, up from 57.5 percent.

    The annual revenue fell despite a favorable price/mix factor of nearly 7 percent, Pirelli said, as unit volumes were off by 3.1 percent and unfavorable exchange rates had a negative impact of nearly 6 percent. The company noted that the volume decline comprised a 14 percent drop in "standard" tires versus an 11 percent increase in higher-value products

    For fiscal 2019, Pirelli said it expects continued improvements in profitability and revenue growth of 4 to 6 percent on the positive effects of the continuing shift to higher value-added products.

    Pirelli's sales in North America rose 2.1 percent to $1.18 billion, as the company registered market-share gains in the performance and all-season replacement market segments. Pirelli said revenue would have been up 7.6 percent without the negative currency exchange impact.

    Pirelli's Latin American business, by contrast, fell 24.4 percent to $816 million on 14.8 percent lower volumes and the negative effects of currency exchange rate changes.

    Among the initiatives grouped under start-up costs are cyber activities in the premium and prestige OE sectors, expansion of the firm's Velo business unit, the conversion of Aeolus-brand production to Pirelli-brand production at the firm's Jiaozuo, China, factory, and increased digital transformation projects.

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