MILAN, Italy (Aug. 8, 2008) — Pirelli S.p.A. reported a slight drop in pre-tax operating income for the first half as sales improved slightly and the company took steps to strengthen its competitiveness.
Pirelli blamed higher raw materials costs, lower demand in certain markets and a slowdown in its real estate business for a 4.4-percent drop in consolidated operating income to $334.1 million. The net result was a loss of $15 million, largely related to a $250 million writedown of Pirelli's stake in Telecom Italia.
Sales revenue rose an adjusted 2.7 percent to $4.24 billion, reflecting the deconsolidation of real estate subsidiary DGAG.
Pirelli Tyre S.p.A., which accounts for nearly 81 percent of Pirelli S.p.A.'s revenue, reported a 5-percent drop in pre-tax operating income to $52.6 million with sales rising 3 percent to $3.42 billion. Net income fell 13.3 percent to $160 million.
Pirelli attributed the earnings drop to an unfavorable automotive market scenario along with a significant increase in the cost of raw materials and energy and lower sales volumes in replacement channels. On the positive side, sales revenue grew because of a better price/mix and higher original equipment volumes, especially in Latin America, which accounts for about a quarter of Pirelli Tyre's sales.
Pirelli did not comment specifically on North America.
Pirelli anticipates reporting earnings in the second half on par with those recorded last year, “barring further deterioration of markets of reference.”
The company also is counting on ongoing restructuring actions to allow it to “present a more efficient structure and manufacturing base, for the benefit of future years.”
Pirelli also revealed it now has regained 100-percent control of Pirelli Tyre S.p.A. following the July 9 acquisition of the last 19.2-percent stake from the banking consortium that had held nearly 39 percent of the tire company's shares.