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PIRELLI & C. SPA BOARD APPROVES RESULTS FOR 6 MONTHS ENDED 30 JUNE 2014

GROWTH OF MAIN ECONOMIC INDICATORS

FIRST HALF NET PROFIT +28.5% TO 192.1 MILLION EURO

RESULTS DRIVEN BY STRENGTHENING OF PREMIUM (VOLUMES +21.6%), POSITIVE DEMAND DYNAMICS IN EUROPE AND APAC AND BY FURTHER PRICE/MIX IMPROVEMENT (+5.3%)

PREMIUM REVENUES GROW TO 56.2% OF CONSUMER SALES

(50.5% IN FIRST HALF 2013)

EFFICIENCIES OF 48.9 MILLION EURO, EQUAL TO 54% OF FULL-YEAR TARGET

PROFITABILITY (EBIT MARGIN BEFORE RESTRUCTURING CHARGES) GROWS TO 14.7% FROM 12.5% IN FIRST HALF 2013

SIGNIFICANT IMPROVEMENT OF PROFITABILITY IN RUSSIA (EBIT MARGIN HIGH-SINGLE-DIGIT)

SECOND QUARTER CASH GENERATION BEFORE DIVIDENDS OF 187.1 MILLION EURO

(104.3 IN SECOND QUARTER 2013)

PIRELLI CONSOLIDATED RESULTS

  • EBIT: +12.6% AT 426.2 MILLION EURO (378.5 MILLION EURO ON 30 JUNE 2013)
  • EBIT MARGIN BEFORE RESTRUCTURING CHARGES AT 14.7% (12.5% ON 30 JUNE 2013), EBIT MARGIN AT 14.3% (12.2% ON 30 JUNE 2013)
  • NET PROFIT: +28.5% AT 192.1 MILLION EURO (149.5 MILLION EURO ON 30 JUNE 2013)
  • TOTAL VOLUMES +1.8%, WITH PREMIUM VOLUMES GROWING 21.6%
  • REVENUES: 2,986.9 MILLION EURO, WITH ORGANIC GROWTH OF 6.7%;
    -3.3% COMPARED WITH 3,090 MILLION EURO ON 30 JUNE 2013 INCLUDING
    FOREX EFFECT (-10.0%);
  • PREMIUM REVENUES: 1,285.1 MILLION EURO, WITH ORGANIC GROWTH OF 16.6%;
    +12.7% INCLUDING FOREX EFFECT (-3.9%)
  • NET FINANCIAL POSITION NEGATIVE 1,935.2 MILLION EURO (1,965.6 MILLION EURO ON 31 MARCH 2014 AND 1,322.4 MILLION EURO ON 31 DECEMBER 2013)
  • TYRE ACTIVITIES

  • EBIT: +11.1% TO 434.0 MILLION EURO (390.6 MILLION EURO ON 30 JUNE 2013)
  • EBIT MARGIN BEFORE RESTRUCTURING CHARGES AT 15.0% (12.9% ON 30 JUNE 2013), EBIT MARGIN AT 14.6% (12.7% ON 30 JUNE 2013)
  • CONSUMER BUSINESS EBIT MARGIN AT 14.9% (12.4% ON 30 JUNE 2013)
  • INDUSTRIAL BUSINESS EBIT MARGIN AT 13.6% (13.5% ON 30 JUNE 2013)
  • REVENUES: 2,980.8 MILLION EURO, WITH ORGANIC GROWTH OF 7.1%;
    - 3.0% COMPARED WTH 3,072.9 MILLION EURO ON 30 JUNE 2013 INCLUDING
    FOREX EFFECT (-10.1%)
  • ***

    MAURIZIO BOIOCCHI NOMINATED GENERAL MANAGER TECHNOLOGY

    ***

    2014 TARGETS

  • ALL TARGETS CONFIRMED

As an effect of the underwriting of the agreement for the disposal of 100% of the steelcord activities, this business was classified as a “discontinued operation” and the reclassified result in the financial statements under the heading “results for discontinued operative activities”. The economic indicators relative to the first half of 2014 thus refer to functioning activities and the comparative data for 30 June 2013 have been restated.

The first half in summary

Milan, 5 August 2014 – The Board of Directors of Pirelli & C. SpA today reviewed and approved results for the six months ended 30 June 2014.

The results for the first half of 2014 show growth in the main economic indicators thanks to the strengthening of the Premium segment, continuing price/mix improvement and the implementation of the efficiency plan.

In the first half Premium volumes grew by 21.6% (+20.9% in the second quarter), evidence of this segment’s positive demand dynamic, with consequent increases in market share in all geographic areas.

In the first six month of 2014 the price/mix component registered growth of 5.3% (+6% in the second quarter), as a result of improved product mixes in all business segments and price increases in emerging markets to offset forex volatility.

In the meantime, the efficiencies plan has continued, delivering benefits in the half of 48.9 million euro, 54% of the full-year target, the first results of the 350 million euro, 4-year plan (2014-2017) announced in November 2013.

The strategic focus on value and the results of the efficiencies plan contributed to improve profitability: +12.6% Ebit growth, reaching 426.2 million euro in the first half (full-year 2014 target ~850 million euro) and profitability (Ebit margin) at 14.3%, + 2.1 percentage points higher compared with the same period of 2013.

Consolidated revenues registered first half organic growth of 6.7% to 2,986.9 million euro, in particular thanks to the above mentioned improvement in the price/mix component, +5.3% (full-year target +4%/+5%). Including the forex impact – negative 10.0% and linked to the continuing appreciation of the euro and the volatility of other currencies – revenues registered a decline of 3.3%.

Total volume growth was 1.8%, as a result of the 5.1% increase of the Consumer business and the 7.4% decline of the Industrial business. The dynamic of the Industrial volumes discounts the very high rate of growth recorded in emerging markets in the first half of 2013 (+16.1%, +22% in the second quarter), the contraction of the Original Equipment market in South America and the progressive reduction of Pirelli’s exposure to the conventional tyre business in that geographic area.

Consumer revenues, totaling 2,288.3 million euro, registered organic growth of 10.3% (+1.5% net of forex impacts) supported by volumes’ growth (+5.1%) and improved price/mix (+5.2%). Ebit was 340.1 million euro, an increase of 21.4% with profitability (Ebit margin) at 14.9%, 2.5 percentage points higher than the first half of 2013.

The profitability of the Industrial business remained stable, with an Ebit margin of 13.6% despite the decline in volumes (-7.4%) and the great forex impact (-13.8% on revenues) which were offset the progressive improvement of the price/mix component (+5.9% in the half, +6.5% in the second quarter) and the lower impact of raw material costs. First half Industrial revenues totaled 692.5 million euro (organic variation -1.5%, including forex impact -15.3%).

At the geographic level, the positive business performances in Europe and the Asia Pacific region were notable, with revenues’ growth of approximately 10% and profitability (Ebit margin) above the group’s average (mid-teen for Europe, circa 20% for Apac). In South America, despite slowdowns in the Industrial market and Car Original Equipment, mid-teen profitability was confirmed thanks to price increases to offset forex volatility, mix improvement (product and channel) and the contribution from efficiencies. In Russia, in particular, the turnaround process continued, with an increase of market share – thanks to a broadening of the product range and greater territorial coverage – and positive high-single-digit profitability.  The results in the Nafta and MEAI areas also improved.

The solid operations’ performance and careful management of working capital resulted in positive second quarter cash generation of 187.1 million euro before dividends (104.3 million euro in the second quarter of 2013), with a fall in net debt on 30 June 2014 to 1,935.2 million euro from 1,965.6 million euro on 31 March 2014, notwithstanding dividend payments of 156.7 million euro.

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1 news Tuesday, August 5th, 2014