Apples to apples, Pirelli increases first-half revenues by 30.3%

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Pirelli & Cie SpA posted preliminary consolidated revenues of nearly 3.2 billion euros for the second quarter ended June 30, 2007. That compares to sales of $2.4 billion euros during the same period in 2006.

The 30.3% comparative euro increase in sales was due mainly to the contribution from the group's tire and real estate businesses.

(Based on the exchange rate for June 29, 2007, the Pirelli group's first-half revenues were $4.3 billion.)

Consolidated operating income totaled 214 million euros, which was flat compared to the first half of 2006.

Segment results

Here are Pirelli's preliminary results by segment for the first half of 2007.

Pirelli Tyre. First-half revenues totaled 2.1 billion euros, an increase of 6.6% compared to the first half of 2006. The consumer tire business accounted for 1.5 billion euros (up 6.4%).

Overall operating income amounted to 206 million euros, an increase of 6%. The consumer tire business recorded operating income of 149 million euros, up 8.5% compared with the first half of 2006.

Pirelli RE. A management company that manages funds and companies which own real estate and non-performing loans, Pirelli RE

posted consolidated revenues of 943 million euros. Net of the component relating to DGAG deconsolidation, revenues amounted to 435.4 million euros.

Pirelli RE completed its purchase of Deutsche Grundvermogen AG (DGAG), a German real estate company, in the first quarter.

Pirelli Broadband Solutions. Revenues totaled 56 million euros, down from 73 million euros during the same period in 2006. The variation was due to "a change in the product mix in the broadband access business and to a shifting of orders to the second half of the year in the world photonics market." The segment posted an operating loss of 6.9 million euros.

Pirelli Ambiente. While first-half revenues totaled 35 million euros, the segment experienced an operating loss of 3 million euros. Operating income was affected by start-up costs associated with the new businesses of manufacturing and sales of particulate filters.

(On July 3, Pirelli Ambiente and Global Cleantech Capital, a private equity fund specialized in clean energy investments, signed an agreement to set up Solar Utility SpA, a 50-50 joint venture in the photovoltaic energy sector.)

Financial position

Pirelli & Cie SpA's net financial position (defined as its gross financial debt less cash, cash equivalents and other interest-earning financial receivables) as of June 30, 2007, was negative 2.9 billion euros. That includes the temporary impact of 979 million euros on the net financial position of Pirelli RE deriving from the DGAG transaction. (Pirelli says the impact will fall to about 90 million euros by the end of 2007, at the conclusion of the deconsolidation process.)

Compared to the company's position at the end of the first quarter of 2007, Pirelli improved its net financial position by 3.4%.

Prospects for the current year

"The strategy of focusing on segments of greater added value and the good performance of the main businesses in the first half allow the Pirelli & Cie SpA Group to confirm for the full year 2007 further improvement of results, assuming no external elements of an extraordinary nature unpredictable as of today," says the company.

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