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Pirelli Continues Its Focus on High Value Tires

Posted on May 28, 2019

Pirelli & Cie SpA is concentrating heavily on the "high value" or premium tire segment, and it appears to be helping its bottom line.

The company posted net income of 101.4 million euros on net sales of 1.3 billion euros for the first quarter ended March 31, 2019. That compares to income of 89 million euros on sales of 1.3 billion euros for the same period in fiscal 2018.

Based on the exchange rate on March 31, 2019, Pirelli recorded net income of $90.3 million on net sales of more than $1.1 billion for the first quarter of 2019. It's income-to-sales ratio was 7.7%.

Pirelli says its results for the first quarter of 2019 "confirmed the resilience of the business model focused on the high value segment, in a market environment characterized by a slowdown in the demand for tires -- particularly on the original equipment channel -- and by increased cost of production factors." ("High value" is also often referred to as "high value added," or HVA.)

The company's sales volumes for high value car tires, defined as sizes 18 inches and above, grew by 6.7% compared to the 5.2% growth of the market. High value revenues grew by 7.3% and represented approximately 68.1% of Pirelli's total sales.

In the high value replacement channel in particularl, Pirelli says it recorded growth of 12.1% in volume sales compared to 10.5% for the market.

In contrast, Pirelli's overall volumes in the standard segment (characterized by 17-inch and lower rim diameters) decreased 16.6%. Combining overall results, Pirelli's volumes were down 6.5%.

In North America, which represents 20.5% of Pirelli's sales, the company recorded an organic growth in revenues of 2.8% (before exchange rate effect and high inflation accounting in Argentina) driven by the high value replacement segment. Total sales were $240.3 million.

Related Topics: consumer tires, HVA, light truck tires, passenger tires, Pirelli financials

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