MILAN — Pirelli & C. S.p.A. reported 8.6% higher operating income for the quarter ended March 31 on 11.7% higher sales as growing demand for larger-rim diameter tires helped generate higher revenue despite lower unit sales.
Pirelli linked the higher revenues to a 15% improvement in price/mix, which more than offset a 3% decline in unit volumes due to weaker demand.
Supported by higher sales and efficiencies, the earnings gains offset higher raw-materials costs, inflation and exchange rates, Pirelli said.
Operating income rose to $266.2 million on revenue of $1.82 billion, yielding a 14.6% operating ratio, down slightly from 2022. Net earnings rose 4.7% to $124.6 million.
During the quarter, Pirelli noted a 5% increase in sales of larger rim-sized tires with "solid replacement demand" and a strong OE focus on 19-inch and larger rim-diameter tires.
At the same time, Pirelli said revenue generated by "standard" tires fell by four percentage points to 36% of total production.
In terms of capacity utilization, the tire maker said it registered a 90% run-rate "discounting China and Russia lower production levels." Utilization rates for higher-value-added, larger rim-diameter tires reached 96%, according to Pirelli.
In Russia, Pirelli has suspended investments but said it operates "in compliance with international sanctions." Russia accounted for 3.5% of revenue during the quarter and about 8% of production.
For the full-year outlook, Pirelli confirmed its previous forecast, with sales set to remain fairly flat, coming in somewhere between $7 billion and $7.5 billion. The operating earnings margin is projected to come in slightly lower than last year's 14.8%.
While the company remains optimistic it can hit its expected full-year targets, it did note that the next nine months will remain "volatile" as recessions loom and inflationary pressures are expected to continue for the foreseeable future.
Pirelli did not provide a regional breakdown of its sales, but did publish its take on market developments by region.
In North America, Pirelli's view is that OE passenger/light truck tire demand was up 8% in the quarter over the same period in 2022, while replacement market demand was down 8%, yielding a 5% overall drop in shipments.
