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PIRELLI & C. SPA BOARD APPROVES RESULTS FOR 9 MONTHS ENDED 30 SEPT. 2014

GROWTH OF MAIN ECONOMIC INDICATORS THANKS TO:

FURTHER STRENGTHENING OF PREMIUM (VOLUMES +20.1%) IN ALL MARKETS; IMPROVED PRICE/MIX (+4.7%); EFFICIENCIES OF 71.0 MILLION EURO (ABOUT 80% OF THE FULL-YEAR TARGET)

PIRELLI CONSOLIDATED RESULTS

  • EBIT: +8.9% TO 629.7 MILLION EURO (578.2 MILLION EURO ON 30 SEPT. 2013)
  • EBIT MARGIN BEFORE RESTRUCTURING COSTS AT 14.3% (12.9% ON 30 SEPT. 2013), EBIT MARGIN AFTER CHARGES AT 13.9% (12.6% ON 30 SEPT. 2013)
  • NET PROFIT: +16.2% TO 300 MILLION EURO (258.1 MILLION ON 30 SEPT. 2013)
  • REVENUES: 4,528.7 MILLION EURO, WITH ORGANIC GROWTH OF 6.5%;
    -1.3% COMPARED WITH 4,586.4 MILLION ON 30 SEPT. 2013 INCLUDING FOREX EFFECT (-7.8%);
  • THIRD QUARTER REVENUES GREW 6% AT THE ORGANIC LEVEL (+3% INCLUDING FOREX EFFECT)
  • NET FINANCIAL POSITION NEGATIVE 2,003.9 MILLION EURO (1,935.2 MILLION ON 30 JUNE 2014 AND 1,322.4 MILLION ON 31 DECEMBER 2013)
  • TYRE ACTIVITIES

  • EBIT: +7.4% AT 640.3 MILLION EURO (596.3 MILLION EURO ON 30 SEPT. 2013)
  • EBIT MARGIN BEFORE RESTRUCTURING CHARGES AT 14.6% (13.4% ON 30 SEPT. 2013), EBIT MARGIN AFTER CHARGES AT 14.2% (13.1% ON 30 SEPT. 2013)
  • TOTAL VOLUMES +2.2%, CONSUMER VOLUMES +5.2% AND PREMIUM VOLUMES +20.1%
  • PREMIUM REVENUES: 1,933.9 MILLION EURO, WITH ORGANIC GROWTH OF 15.1%;
    +12.2% INCLUDING FOREX EFFECT (-2.9%)
  • REVENUES: 4,520.0 MILLION EURO, WITH ORGANIC GROWTH OF 6.9%;
    - 0.9% COMPARED WITH 4,562.3 MILLION ON 30 SEPT. 2013 INCLUDING FOREX EFFECT (-7.8%)
  • CONSUMER EBIT MARGIN BEFORE RESTRUCTURING CHARGES AT 14.9% (13.0% ON 30 SEPT. 2013); EBIT MARGIN AFTER CHARGES AT 14.5% (12.8% ON 30 SEPT 2013)
  • INDUSTRIAL EBIT MARGIN BEFORE RESTRUCTURING CHARGES AT 13.4% (14.4% ON 30 SEPT. 2013); EBIT MARGIN AFTER CHARGES AT 12.9% (13.9% ON 30 SEPT. 2013). YEAR-ON-YEAR INDUSTRIAL PROFITABILITY TREND REFLECTS 6.2% FALL IN VOLUMES MAINLY IN EMERGING MARKETS
  • TARGETS

  • 2014 TARGETS CONFIRMED IN TERMS OF:
    EBIT AFTER RESTRUCTURING CHARGES (850 MILLION EURO), NET FINANCIAL POSITION (~-1.2 BILLION EURO), CASH GENERATION BEFORE DIVIDENDS (>250 MILLION EURO) AND INVESTMENTS (<400 MILLION EURO)

  • EXPECTED REVENUES BETWEEN >6.1 BILLION EURO AND <6.2 BILLION EURO (PREVIOUS ESTIMATE ~6.2 BILLION EURO): TOTAL VOLUMES >+2.5% (PREVIOUS ESTIMATE >+4.5%), WITH PREMIUM VOLUMES’ GROWTH CONFIRMED AT 16%;
    PRICE/MIX CONFIRMED BETWEEN +4.5% AND +5.5%;
    MINOR FOREX IMPACT (~-7%/~-7.5% COMPARED WITH ~-8.5%/~-9.5%)

As a result of the underwriting of the agreement for the disposal of 100% of the steelcord activities, this business has been classified as a “discontinued operation” and the result reclassified in the accounts under the heading “result of the disposed operating activities”. The economic indicators relative to 30 September 2014 refer therefore to the activities in function and the comparative data on 30 September 2013 have been the object of “restatement”.

The Board of Directors of Pirelli & C. SpA, today reviewed and approved the intermediate results for operations for the nine months ended 30 September 2014 which show growth in the principle economic indicators. The performance in the first nine months was characterized in particular by:
- strong growth in the premium segment, with volumes surpassing expectations to rise +20.1% and a consequent strengthening of Pirelli’s positioning in all geographic areas. . Premium segment sales account for about 56% of net sales in the Consumer Business (51% in the first nine months of 2013);
- the improvement in price/mix to +4.7% (+4%/+5% is the target set for 2014) due to the performance of the premium segment, the product mix in the Industrial Business and price increases in emerging countries;
- volumes’ growth (+2,2%) supported by the Consumer business, which saw volumes’ growth increasing by 5.2%, with an acceleration in the third quarter (+5.3% compared with +4.3% in the second quarter);
- sales to 30 September grew by 6.5% excluding forex impact, (-1.3% the overall variation) and saw progressive improvement in the third quarter (+6% organic growth, +3% excluding forex effects)
- the accomplishment of internal efficiency gains totaling euro 71.0 million, approximately 80% of the annual target of euro 90 million (350 million, four-year cost-efficiency programme 2014-2017);
- the pronounced improvement in profitability, with EBIT growing by 8.9% to 629.7 million euro and profitability (EBIT margin) reaching 13.9%, +1.3 percentage points more than in the first nine months of 2013;
- the positive performance of the business in Europe, Asia Pacific and NAFTA, with overall net sales growing faster than the Group average, and the improvement in operating income (EBIT) that attenuates the effects of the current slowdown in the South American market;
- the turnaround of the business in Russia, characterized by a decisive improvement in product mix and positive high single digit EBIT margin,
- net profit of euro 300.0 million, up 16.2%;

Consolidated results

At the consolidated level, revenues (of which tyre activities account for 99.8%) on 30 September 2014 amounted to 4, 528.7 million euro, with organic growth of 6.5% compared with the corresponding period of 2013. Including the negative forex impact of 7.8%, stemming mainly from the volatility of emerging country currencies, revenues declined by 1.3% compared with 4,586.4 million euro in the first nine months of 2013. The third quarter saw a progressive improvement in the revenues’ trend, of 1,541.8 million euro (1,496.4 million euro in the same period of 2013), which registered organic growth of +6% (+3% including the forex effect).

The gross operating margin (EBITDA) before restructuring charges was 867.7 million euro, an increase of 7.5% compared with 806.8 million euro in the same period of 2013. In the third quarter the gross operating margin was 284.9 million euro, an increase of 2.7% compared with 277.5 million euro in the same period of 2013.

The operating result (Ebit) before restructuring charges was 647.8 million euro, an increase of 9.2% compared with 593.4 million euro in the same period of 2013, with an Ebit margin before charges of 14.3% compared with 12.9% on September 30, 2013.

The operating result (Ebit) was 629.7 million euro, an increase of 8.9% compared with 578.2 million euro in the same period of 2013. The 51.5 million euro increase in Ebit compared with the first nine months of 2013 was due for 44 million euro to the positive performance of the tyre activities and for the remaining 7.5 million euro to the improved results of other areas. The Ebit margin grew over the first nine months of 2014 to 13.9% compared with 12.6% recorded in the same period of 2013, a testament to the efficacy of the value creation strategy. In the third quarter, Ebit was 203.5 million euro, an increase of 1.9% compared with 199.7 million euro in the third quarter of 2013, with an Ebit margin of 13.2% (13.3% in the third quarter of 2013).

The result from shareholdings on 30 September 2014 was negative 32.3 million euro (-22.9 million euro in the same period of 2013) and mainly refers to – for 21.4 million euro – the effects deriving from the consolidation using the net equity method of the affiliate Prelios (fourth quarter of 2013 and first half of 2014) and to the write-down of the stake in Alitalia of 11.2 million euro, which happened in the second quarter of 2014.

Total net profit which includes activities being disposed of (steelcord business) stood at 300.0 million euro, with an increase of 16.2% compared with 258.1 million euro in the same period of 2013. The net profit of activities in function was 297.4 million euro, an increase of 15.7% compared with 257.0 million in the same period of 2013. In the third quarter the net profit was 105.3 million euro, compared with 107.5 million euro in the same period of 2013.

The net profit attributable to Pirelli & C. Spa, including the results of “discontinued operations”, amounted to 290.5 million euro, an increase of 10.8% compared with 262.1 million euro in the same period of 2013.

Consolidated net assets on 30 September 2014 stood at 2,493.2 million euro compared with 2,436.6 million euro on 31 December 2013. Consolidated net assets attributable to Pirelli & C. SpA amounted to 2,413.9 million euro, compared with 2,376.1 million euro on 31 December 2013.

The consolidated net financial position was negative 2,003.9 million euro (the figure includes 37.9 million euro relative to ”discontinued operations” of the steelcord activities), with limited growth compared to 1,935.2 million euro on 30 June 2014 (1,322.4 million at the end of 2013), with slight absorption of cash in the third quarter, in line with the business seasonality.

The net cash flow generated by operations’ management in the first nine months of 2014 was negative 141.2 million euro (-65.9 million euro in the same period of 2013), essentially due to the usual seasonality of working capital, and after investments of 244.7 million euro (238.3 million euro in the first nine months of 2013) mainly destined to the increase of Premium capacity in Europe, Nafta and China and to mix improvement. The total cash flow post dividends was negative 681.5 million euro (-765.7 million euro in the first nine months of 2013)in line with the seasonality of the activities which foresees strong cash generation in the last quarter of the year, connected to stock reduction and receipts from seasonal markets and from the Winter sales in Europe and Russia. Approximately 45 million euro are relative to the impact on the net financial position of forex variations, especially in relation to the position in Venezuela. Working capital management was positive in the third quarter for 28.8 million euro (+49.4 million in the third quarter of 2013).

Group employees on 30 September 2014 totaled 39,491 (38,133 on 30 September 2013). The increase is the result of the acquisition of the Brazilian distribution chain Abouchar, and sales’ staff additions and increased Premium capacity in Mexico, China and Romania.

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PIRELLI BEST COMPANY IN THE “CLIMATE DISCLOSURE LEADERSHIP INDEX ITALY 2014“

LEADER FOR THE COMPLETENESS OF ITS STRATEGY IN THE FIGHT AGAINST CLIMATE CHANGE AND TRANSPARENCY IN COMMUNICATION

Pirelli has been recognized as leader on the “Climate Disclosure Leadership Index Italy 2014” (CDLI), an index which evaluates the completeness of a company’s strategy against climate change and the transparency of its communication to stakeholders. Pirelli scored 99/100.

The result was announced today in Milan during the presentation of the CDP Italy 100 Climate Change Report 2014, prepared by SDA-Bocconi with the support of IMQ, and focused on the ways in which the 100 biggest listed Italian companies face and manage climate change.

Pirelli’s commitment to investors and stakeholders in the challenging area of climate change can be seen in its integration of environmental sustainability targets – both for products and processes – into the Group’s Industrial Plan. Pirelli has set itself the goal of reducing rolling resistance by 40% for its car tyres, by 20% in the truck segment and by 10% in motorcycles by 2020 compared with 2007. By the same deadline, 2020, Pirelli plans to reduce specific CO2 emissions by 15% and the specific consumption of energy in its factories by 18% compared with 2009.

Pirelli’s main global commitments in the area of Climate Change includes CDP Supply Chain,  a programme which in 2014 involved over 120 strategic suppliers in the quantification of benefits in financial, reputational and risk management terms stemming from the correct management of its CO2 emissions.

Pirelli has further underwritten, in the context of the Prince of Wales’s Corporate Leaders Group, the “Trillion Tonne Communiqué”, a programme-document for the reduction of global emissions with the aim of keeping the earth’s temperature rise within a 2° C limit. Pirelli also subscribed to “Road to Paris 2015”, an international initiative which aims to promote the cooperation between the public and private sectors in order to find shared solutions and policies to deal with climate change. The initiative resulted in Pirelli’s signing of the international agreement on climate change (“Paris Declaration”) which will be underwritten during the next worldwide meeting of the UNFCCC which will take place in the French capital in 2015.

About CDP

CDP is an international, not-for-profit organization providing the only global system for companies and cities to measure, disclose, manage and share vital environmental information.  CDP works with market forces, including 767 institutional investors with assets of US$92 trillion, to motivate companies to disclose their impacts on the environment and natural resources and take action to reduce them.  CDP now holds the largest collection globally of primary climate change, water and forest risk commodities information and puts these insights at the heart of strategic business, investment and policy decisions.  For more information www.cdp.net

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PIRELLI WINS THE 2014 TOP OF MIND AWARD FOR THE 6TH YEAR IN A ROW

Brazil: Pirelli wins the “Top of Mind” award organised by the Datafolha Institute of São Paulo

Top of Mind, the market research study conducted by the Brazilian Datafolha Institute, has come to its 24th edition; between 27th and 30th July 2014, a group of 204 interviewers was deployed in more than 170 Brazilian towns to find 5,694 male and female consumers (with an average age of 39.5 years) to ask them the big question: What is the first brand that comes to your mind?

For the 6th consecutive year, Pirelli was the most mentioned brand by 59% of Brazilian men (Top Masculino category) and, for the 12th consecutive year it has gained the leadership as the most mentioned brand in the tyre category (46% of respondents). According to Paolo Dal Pino, Chairman of Pirelli South America, this brand awareness is linked to “its presence in Formula 1, the sponsorship of the restoration of the Christ the Redeemer of Corcovado, its strong presence in OE and Brazilian motorsports, as well as the strength of its sales network”.

The award ceremony was held on 27th October in São Paulo, with more than 1,500 attendees, including the management of the companies and agencies that represent the most mentioned brands by Brazilians.



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