Pirelli upgrades earnings forecast after solid start

MILAN, Italy—Pirelli & C. S.p.A. has reported a 6.4-percent year-on-year rise in pre-tax second quarter earnings, to $292 million, on sales up 3.7 percent at $1.8 billion.

Excluding a negative currency effect, the sales increase equated to 9.1 percent, said Pirelli, which linked the earnings gains to "price increases and improved mix."

First-half revenues came in 7.5-percent higher year-on-year at $3.7 billion, or 10.4-percent higher excluding currency factors.

Adjusted EBIT for the first six months was $561 million, an increase of 7.4 percent compared with the same period in 2022.

Pirelli's July 27 financial statement went on to highlight a strengthening of its position in high-value tires, including 5.7-percent growth in 18-inch-plus car tire volumes—outpacing the market by around 1 percent.

The Italian group was also buoyed by an improvement in price-mix as well as efficiencies, which more than offset negative raw materials, inflation and forex effects.

Based on its first half showing—particularly on price-mix—Pirelli upgraded its full-year forecast for adjusted EBIT margin to between around 14.5 percent and 15 percent, from around 14-14.5 percent previously.

Revenues, however, are projected to come in slightly lower than previously forecast, around $7 billion to $7.3 billion.

The downgrade, from the previous forecast of between around $7.2 billion and $7.4 billion, was linked to volumes and forex developments.

Volumes are estimated to decline by between around 2 percent and 1 percent, compared to Pirelli's previous indication of stable to around plus 1 percent.

Amid a "volatile" market outlook, Pirelli foresees "mild economic growth due to uncertainty regarding Europe, penalized by monetary tightening, and China, which is experiencing a slower than expected recovery."

Given the weaker-than-expected market performance in the second quarter, it forecast global car tire demand to dip by around 2 percent, compared with a previously estimated "flat" market.

On the other hand, demand for high-value tires is expected to grow by 3 percent year-on-year, according to the Milan-based group.

This, forecast Pirelli, will include growth of around 5 percent in 18-inch-plus original equipment tire volumes—below the 7-percent growth previously indicated due to lower demand in China.

Meanwhile, less-than-18-inch replacement tire volumes are expected to grow by around 2 percent, compared to a previous indication of plus 3 percent.

The revision reflected "a more cautious view regarding demand in Europe—seen recovering in the second half of the year following the weak trend of the first half and in China."