The FTSE4Good Semi-Annual September 2014 Review conducted by FTSE has reconfirmed Pirelli in the share indices for responsible investment of the London Stock ExchangeFTSE4Good – Automobile & Parts – with a top ESG rating of 100 points out of 100 for the third year in a row.
The FTSE4Good Series is designed to help investors integrate environmental, social and governance (ESG) factors into their investments.
The indices identify companies that better manage ESG risks and are used as a basis for tracker funds, structured products and as a performance benchmark.
The ESG Ratings are used by investors who wish to incorporate ESG factors into their investment decision making processes, or as a framework for corporate engagement and stewardship.
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.
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.
