MILAN, Italy — Pirelli & C. S.p.A. reported double-digit growth in sales and earnings for the quarter ended March 31, but the Italian tire maker has downgraded its earnings outlook for the fiscal year due to rising inflation and raw material costs,
Pirelli's first-quarter operating income rose 34.4% to $256.7 million on 22.2% higher sales of $1.71 billion, yielding a slightly higher operating ratio of 15%. Net income more than doubled to $123.3 million.
Pirelli attributed the earnings improvement to the positive impact of the price/mix component and operating efficiencies, which more than offset the strong impact of raw materials prices and inflation.
For the full fiscal year, however, Pirelli said it anticipates the negative effects of increasing inflation and raw material costs will more than offset the price/mix and efficiencies. Also impacting the bottom line will be the impact of Russia's war with Ukraine and the related international sanctions as well as a drop in demand in China fueled by the resurgence in COVID-19.
As a result, Pirelli said it expects to report an adjusted pre-tax operating (EBIT) margin for the full year of 15%, down from the earlier forecast of 16%-16.5%,
For the fiscal 2022 quarter, Pirelli attributed the revenue gain entirely to the price/mix component as unit volumes fell 1.4% from the corresponding 2021 quarter. The decline, however, was split: sales of "standard" passenger and motorcycle tires fell 9.7% but sales of higher value-added tires rose 5.8%.
Replacement market sales of larger rim-diameter passenger tires (18 inches and larger) grew 16% in the quarter, Pirelli said, while sales of 17-inch and smaller tires declined by 6%.
Business in North and South America grew 33.2% and 35%, respectively to $390 million and $206 million. Collectively, the Americas region represents 35% of Pirelli's global sales.
For the full fiscal year, Pirelli said it expects volume sales to grow by 0.5% to 1.5%, down from earlier indications of 1.5% to 2.5%. Further price increases and a "more favorable" mix are expected to offset the anticipated decline in volumes.
