Pirelli & C. S.p.A. reported double-digit increases in operating and net profits in the first half of fiscal 2014 on the strength of above-average growth in premium tyre sales and the positive effects of efficiency measures Pirelli is implementing.
Operating income jumped 12.6 percent to $584.6 million and net income was up 28.5 percent to $263.5 million. Sales revenue fell 3.3 percent to $4.1 billion, with foreign-exchange losses accounting for the decline, Pirelli said.
Revenue from the sale of premium products leaped 56.2 percent in the peiord to $1.76 billion, or 43 percent of overall sales. By contrast, revenue from Pirelli’s commercial tyre business fell, both in real terms and including the foreign-exchange loss.
Consumer tyre volumes rose 5.1 percent and commercial tyre volumes fell 7.4 percent, yielding an overall 1.8-percent volume growth, Pirelli said.
The efficiencies plan yielded economic benefits of $67 million in the period, Pirelli said.
Positive business performances in Europe and the Asia Pacific region were “notable, with revenue growth of about 10 percent and profitability (EBIT margin) above the group’s average (mid-teens for Europe, circa 20 percent for Asia-Pacific).
In South America—despite “slowdowns in the industrial market and car original equipment—mid-teen profitability was confirmed thanks to price increases to offset (foreign exchange) volatility, mix improvement (product and channel) and the contribution from efficiencies,” the company said.
In Russia the turnaround process continued, with an increase of market share—due to a broadening of the product range and greater territorial coverage—and “positive high-single-digit profitability.”
The results in North America and Middle East/Africa/ India areas also improved.
For the full year, Pirelli confirmed its previously released targets of a pre-tax earnings ratio of nearly 14 percent, sales growth of about 1 percent and cash generation of nearly $350 million.
The company raised its revenue target slightly for the consumer tyre business and lowered it for the commercial segment, citing the strong growth in premium product demand on the consumer side and an anticipated lower volume demand in Latin America for truck and agricultural tyres.