(Updates with comments on tyre expansion, real estate ops)
MILAN (Thomson Financial) - Pirelli & C SpA said its EBIT profit fell to
114.6 million euros, from 129.5 million a year earlier, depressed by weaker tyre
and real estate operations, but coming in more or less in line with
expectations.
Net profit was 33.8 million euros, against 24.2 million in first quarter
2007, EBITDA 168.0 million, against 181.6 million, and sales 1.314 billion, down
from 1.811 billion, the company said.
"For 2008, Pirelli confirms the forecasts for a result in line with the
previous year, excluding costs of restructuring real estate activities and any
unforeseeable external events," it said.
"In particular as announced in March, Pirelli Tyre results are expected to
rise slightly from 2007," it said.
In the tyre sector, first-quarter net profit was 57.7 million euros, against
58.1 million in first quarter 2007, EBIT 100.3 million, from 103.7 million, and
sales 1.077 billion, up 1.6 percent, it said.
Analysts were expecting group net profit of 14 million to 47 million euros,
EBIT of 99 million to 110 million, EBITDA of 153 million to 162 million and
sales 1.288 billion to 1.320 billion.
For tyre operations, analysts were expecting EBIT of 95 million to 103
million euros, and sales of 1.045 billion to 1.074 billion.
In further details, Pirelli said net profit includes financial costs of 4.3
million euros, down from 46.4 million a year earlier.
In the tyre sector, sales were up 3.2 percent on a like-for-like basis,
including the impact of currencies, it said.
"The increases in sales, despite unfavourable replacement tyre markets in
Europe and North America, is mainly due to focusing on high value-added segments
and focusing on prices," it said.
Broadband/photonic EBIT loss was 3.5 million euros, narrowing slightly from
loss of 3.8 million year earlier, it said, adding these losses are due to
research and start-up costs.
During a conference call, chairman Marco Tronchetti Provera said the net
result includes a 37 million euros write-down on its Telecom Italia SpA stake.
On tyre activities, he said the company intends to enter the Russian market
with a production plant, adding it already sells 1 mln tyres there.
"By the end of 2009, we will be in Russia directly producing our own tyres,"
Tronchetti said.
Tyre chief Francesco Gori said Pirelli is currently penalised by 21 percent
Russian import duties on sales to the country.
Tronchetti said Pirelli is looking at possible India tyre production.
In China, Pirelli said it sees production rising to 4 million tyres in 2009
from 2 million in 2088, while Tronchetti said the production is "very
profitable" including via export sales of consumer tyres.
Gori said Pirelli is offsetting higher raw material costs by cost-cutting
efforts and by setting higher selling prices, though the latter strategy faces
competitors "being aggressive", he said.
March demand was "negative", while April saw "a better trend", he said.
Some United States competitors have increased prices recently and have to do
so to meet their financial forecasts, he said.
Tronchetti said he is "confident" Pirelli can meet its full year tyre
forecast because emerging country growth will offset weak European volumes.
Pirelli does not see "interesting" acquisitions in the tyre sector and the
company prefers to invest in its own technology and factories, he said.
Investment in organic expansion will see production grow 10 percent in the
next year, he said.
On the real estate sector, quoted unit Pirelli & C Real Estate SpA sees 25
million euros of full-year restructuring charges, after 2.3 million in the first
quarter, a company official said.
This restructuring should lead to cost savings of 25-30 million euros from
the start of 2009 and 40 million from 2010, he said.
nigel.tutt@thomsonreuters.com
nt/ejp/nt/ejp/nt/rw
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