Pirelli & Cie SpA recorded gains in sales and net profits in 2023 despite tire volumes which were 1.8% lower than the previous year.
For the year, Pirelli achieved sales of $7.33 billion, up from $7.30 billion in 2022. Net income totaled $547.2 million, up more than 13% from $481 million in the prior year.
Pirelli said it recorded an 8.6% increase from price/mix in 2023, which was “supported by the price increases to counter the rising inflation of input factors and the improvement of product mix.” For Pirelli, that improvement of product mix is tied to an ongoing effort to focus on larger, high value tires — those designed for 18-inch wheels and larger.
In 2023, Pirelli said those high value tires accounted for 75% of its total sales — up from 71% the year prior. (The tiremaker is also working to align its production capacity with its high value tire goals, seeking to have 95% of capacity dedicated to those high value products.)
Tire volumes were down in each of the first three quarters of 2023, but then turned positive (up 2.1%) in the fourth quarter. Even with that late-year turnaround, the company said the overall lower volumes reflected its focus on those larger, more expensive tires.
And while Pirelli said it matched the 5% growth of the tire market in that 18-inch and larger business in 2023, it also said it outpaced the replacement tire market in the category in 2023, with a gain of 4%, as compared to the overall market gain of 3%. Pirelli said it is “consolidating our positioning in major (high value) markets, seizing replacement growth opportunities while maintaining a solid price discipline.”
In the original equipment market, Pirelli’s strategy revolves around not just larger sized tires, but also fitments for electric vehicles.
Throughout 2023 the company released four global tire lines to focus on EVs, SUVs and racing fitments, plus two all-season products specific to the North American market.
2024-2025 targets
As part of its long range planning, Pirelli looks to increase sales to $7.2 billion-$7.5 billion in 2024, and then to $7.5 billion to-$7.7 billion in 2025. By 2025, it expects high value tires to represent about 78% of total sales.
The company expects 2024 tire volumes to increase in the range of 1.5% to 2.5%, with mid- to single-digit growth in the high value segment. With that focus, Pirelli expects to continually lower its exposure to the smaller, “standard” tire market.
The company expects price-mix to be up 2% in 2024, and slightly better in 2025.
Ongoing negotiations
Pirelli noted that negotiations “are ongoing” related to possible revisions to the terms and conditions of two existing licenses: one with Aeolus Tire Co. Ltd., and the other with Prometeon Tyre Group S.r.l. Among the issues on the table are “the remodulation of royalties due and terms for the concession of usage rights for Pirelli technology” by those companies in the industrial segment. Pirelli said the discussions are part of “broader negotiations which also contemplate the renegotiation of additional agreements” with Aeolus and Prometeon originally signed related to separating the industrial business in 2016-2017.
