MILAN, Italy — Pirelli & C. S.p.A. reported COVID pandemic-related double-digit drops in sales and earnings in the quarter ended March 31 as the company's production underwent "significant discontinuities" during the period.
Pre-tax operating earnings (adjusted EBITDA) fell 22.6% to $269.5 million, Pirelli said, while revenue dropped 20% to $1.16 billion due to weak demand for both OE and replacement tires. Net income fell 62% to $42.4 million.
Sales in the "high value" segment fared slightly better, down "just" 18.2% to $808.2 million due to a general fall in demand and Pirelli's exposure in Asia Pacific, where revenue plunged nearly 35% in the quarter, the company said.
North America fared the best of Pirelli's regional segments, falling 14.3% to $255 million, Pirelli said.
In volume terms, unit sales fell 17.2% in the quarter, reflecting a 20.2% decline in the standard segment and a 14.2% drop in high value tires.
To limit the effect of the production suspensions and weak demand, Pirelli said it launched a COVID-19 cost-cutting plan in April, in addition to its two-year industrial program introduced in February.
The COVID-19 action plan, Pirelli said, targets short-term saving of $132.5 million for the year through reduced discretionary costs, revised marketing and communication activities, renegotiated contacts with suppliers and prioritized research and development investments.
The savings, Pirelli noted, will enable it to offset costs stemming from the production slowdown, estimated at nearly $100 million in 2020.
During the quarter, Pirelli said it achieved $36.5 million in savings from the two program — split roughly 45/55 between the two-year competitiveness plan and the COVID action plan.
Regarding the remainder of fiscal 2020, Pirelli said it's sticking with forecasts issued in early April, when it said estimated demand for passenger tires will decline 19% during 2020 versus 2019, as global GDP could fall as much as 2.8% as a result of the COVID-19 pandemic.