MILAN—Pirelli & C. S.p.A. reported COVID pandemic-related double-digit drops in sales and earnings in the quarter ended March 31 as the company's production underwent "significant discontinuities" during the period.
Pre-tax operating earnings (adjusted EBITDA) fell 22.6 percent to $269.5 million, Pirelli said, while revenue dropped 20 percent to $1.16 billion due to weak demand for both OE and replacement tires.
Net income fell 62 percent to $42.4 million.
Sales in the "high value" segment fared slightly better, down 18.2 percent to $808.2 million due to a general fall in demand and Pirelli's exposure in Asia Pacific, where revenue plunged nearly 35 percent in the quarter, the company said.
North America fared the best of Pirelli's regional segments, falling 14.3 percent to $255 million, Pirelli said.
In volume terms, unit sales fell 17.2 percent in the quarter, reflecting a 20.2 percent decline in the standard segment and a 14.2 percent drop in high value tires.
To limit the effect of the production suspensions and weak demand, Pirelli launched a COVID-19 cost-cutting plan in April, in addition to its two-year industrial plan introduced in February.
The COVID-19 action plan targets short-term savings of $132.5 million for the year, according to the tire maker. Reduced discretionary costs, revised marketing and communication activities, renegotiated contacts with suppliers and prioritized research and development investments will help achieve this goal.
The savings, Pirelli noted, will enable it to offset costs stemming from the production slowdown, estimated at nearly $100 million in 2020.
During the quarter, Pirelli said it achieved $36.5 million in savings from the two programs—split roughly 45/55 between the two-year competitiveness plan and the COVID action plan.
Regarding the remainder of fiscal 2020, Pirelli said it's sticking with forecasts issued in early April, when it said estimated demand for passenger tires will decline 19 percent during 2020 versus 2019. It expects GDP to fall as much as 2.8 percent as a result of the COVID-19 pandemic.