Pirelli & Cie SpA recorded net sales of more than 2.9 billion euros for the first six months of 2016, down from 3 billion euros from the same period a year ago. Net income was 8.1 million euros, down from 196.5 million euros in 2015.
The company said the drop in net income reflects “beyond the negative results from equity investments, the increase of net financial charges of 167.4 million euros, mainly due to bank debt consequent to the merger of Pirelli with Marco Polo Industrial Holding, as well as the ahead of schedule repayment of the U.S. private placement bond loan of $150 million.” (Marco Polo Industrial Holding is a company created to facilitate the merger of Pirelli and China National Chemical Corp., which was effective June 1, 2016.)
Based on the average exchange rate on June 30, 2016, Pirelli recorded net sales of $3.3 million and net income of $9 million. Its income-to-sales ratio was 2.7%.
Results from 2015, for the purposes of comparison, are adjusted to exclude Pirelli’s Venezuelan operations, which were deconsolidated at the end of 2015.
The company said sales were helped by “great improvement” in price/mix, up 6% due to price increases in emerging markets, higher sales in the replacement channel, and different geographic and product mixes.
Consumer business grew 7.4% in large part due to the premium segment and mature markets, while the industrial segment was affected by weakness in South America and other emerging markets.
Overall volumes were unchanged compared to the first half of 2015, while premium tires increased 13.4%, offsetting the 7.3% drop in industrial tires.
Regionally, Asia Pacific recorded the highest profitability, “reaching the twenties level,” and was stable compared to the prior year. “The strategic focus on high-end cars has allowed the group to more than compensate for the negative impact of the devaluation of the yuan and fall in market prices,” the company said in its earnings report.
In the NAFTA region, premium revenues grew 9.2%. For sales, NAFTA represents 15% of Pirelli’s overall tire sales for the first half of 2016, behind Europe (39%) and South America (22%).
In Pirelli’s consumer business, premium tires remain the driver of growth. Revenues grew by 8.1% to 1.6 million euros compared to the first half of 2015, and volumes grew 13.4% in that same period. Premium tires now account for 65.1% of the revenue from consumer tires, up from 61.5% for the first half of 2015.
An update on the merger
“In the context of the already announced process of merging the industrial segment assets held by Pirelli, China National Tire & Rubber (CNRC), and Aeolus, Pirelli and Aeolus approved the transfer by Pirelli Tyre to Aeolus of 10% of Pirelli Industrial, and the transfer to Pirelli Tyre of 80% of the car activities of Aeolus, together with the merger into Aeolus of two assets held by CNRC and the formalization of a license contract between Pirelli Tyre and Aeolus for the technology of the industrial segment. The closing of the operation is expected in the coming months, once, among other things, the necessary government authorizations have been obtained.”
For more recent news about Pirelli, read: Pirelli Opens Prestige Retail Tire Store in Los Angeles