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Pirelli: Tire demand is down globally

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Pirelli & Cie SpA is on record as predicting tire demand will be down in 2008. Its nine-month financial results seem to back that up.

Bloomberg News reported that Pirelli Chairman Marco Tronchetti Provera said global demand for replacement tires will fall 4% this year. "I don't think demand has bottomed out yet," he was quoted as saying at the recent Foreign Press Association news conference in Milan, Italy.

Because of decreased demand, Pirelli expects its consolidated earnings before interest and taxes (EBIT) also will be lower than it was in 2007. And that's even before announced restructuring charges.

For the first nine months of 2008, Pirelli recorded EBIT before restructuring charges of 241.6 million euros, down 18.7% from the same period last year. Its nine-month net revenues (3.9 billion euros) were flat compared to 2007, while its net income (a net loss of 36.3 million euros) was well below nine-month earnings last year (a net gain of 243.3 million euros).

Pirelli's tire business unit recorded revenues of 3.2 billion euros (up 3.1%) and EBIT before restructuring charges of 231.8 million euros (down 19%). The replacement channel, which determines most of Pirelli's tire sales, was down in units, penalized by the reduction in demand, especially in Western markets. Original equipment unit demand also was down.

The board of directors said the corporation's results "were affected by the consequences of the international financial crisis in both of the main industries of reference, automotive and real estate, and in the level of consumer demand, especially in Europe and North America."

In order to set the stage for future growth, Pirelli already has begun a series of actions for restructuring "and further focusing on growth and competitiveness of the two main businesses." The restructuring charges are part of Pirelli’s new three-year plan, which the board will present to the financial community on Feb. 11, 2009.

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