The Board of Directors of Pirelli has approved the group results as at March 31, 2017.
Revenues amounted to 1.339,3 million euros, with a growth of 13,4% compared to 1.180,9 million in the corresponding period of 2016 which was once again driven by the focus on the Premium segment and its positive performance. Organic growth was 8,4% and excludes the impact of exchange rates (+4%) and the consolidation of Jiaozou Aeolus Car (+1%), whose conversion into the Pirelli brand has already begun in the last quarter 2016 in order to accelerate development in China, an area that will be the engine of worldwide growth in the Premium segment.
The revenue trend benefited from the strong growth in the price/mix component (+5,5%, at the highest level among competitors) due in particular to the improvement in the sales mix, thanks to the success of high-end products, and to increases price in emerging markets.
Premium revenues grew by 16% to 907,4 million euro, compared to 782,2 million in the corresponding period of 2016. The incidence of Premium on total revenues increased further, reaching 67,8% of the total compared to 66,2% registered in the first quarter of 2016.
The volumes of the Premium segment recorded a significant growth of 15,3% - which involved all the Regions reaching levels above the market trend (+11%) - which supported the trend in overall volumes, which increased in the period by 2,9%. The progressive reduction of exposure to less profitable segments, particularly in Russia and Latam, led, conversely, to a 9,1% drop in non-Premium volumes.
Ebitda before charges non-recurring and restructuring loans amounted to 31 million euro at 2017 March 270,3, up 3,4% compared to the 261,5 million euro of the corresponding period of 2016.
The Adjusted Ebit (operating result before non-recurring expenses, restructuring and amortization of intangible assets identified in the PPA) amounted to 205 million euros, up by 1,4 million euros compared to 203,6 million in the corresponding period of 2016. L The use of internal levers such as price/mix, volumes and efficiencies has made it possible to offset the increase in the cost of raw materials, cost inflation (particularly in emerging markets), higher depreciation and other costs linked to the development of the business.
The Adjusted Ebit margin it was 15,3% compared to 17,2% as at 31 March 2016 and mainly reflects new programs which will express value in the medium term, in addition to the effect of the increase in raw materials. In particular:
– the aforementioned consolidation of Jiaozou Aeolus Car's activities in China;
– the strengthening of the premium positioning along the entire value chain;
– acceleration of the reduction of exposure in less profitable segments;
– the launch of new activities that intercept new needs of the end customer such as connectivity and the return to the bike business through the Velo project;
– 'one off' costs of separation from the Industrial sector;
– the time gap between the increase in prices on all products – starting from 1 April 2017 – compared to the increase in the price of raw materials.
The operating result (Ebit) amounted to 168,7 million (166,1 million euro in the corresponding previous period) and reflects non-recurring and restructuring charges of 10,1 million euro due to rationalization processes, costs relating to segment reorganization Industrial and 26,2 million euros relating to the amortization of intangible assets identified in the PPA and deriving from the purchase of Pirelli assets by Marco Polo.
The result from investments is negative for 3,1 million euros (-42,5 million as at 31 March 2016) and mainly refers to the pro-rata result of the Indonesian joint venture PT Evoluzione Tyres.
The net result of continuing assets as at 31 March 2017 amounted to 49,5 million euros compared to a loss of 30,4 million euros in the first quarter of 2016. The result reflects, in addition to the improvement in the operating result and the result from , also lower net financial expenses of 56,7 million euros (equal to 77,0 million euros in the first quarter of 2017 compared to 133,7 million euros in the first quarter of 2016, which was also impacted by 25,4 million euros linked upon the extinction of the US Private Placement bond loan). The reduction in financial expenses is mainly attributable to the decrease in the cost of debt (5,42% in the first quarter of 2017 against 5,98% in the first three months of 2016).
The net flow of operation management as at 31 March 2017 it was negative by 720,0 million euro (-592,3 million in the corresponding period of 2016). The figure reflects, among other things, the growth in investments – to 98,3 million euros from 70 million euros as at 31 March 2016 – mainly intended for the increase in Premium capacity in Europe and in the NAFTA area and the constant improvement of the mix.
Cash flow before dividends and extraordinary operations was negative by 881,7 million euros compared to a negative value of 838,3 million euros in 2016. Total cash flow was negative by 612,4 million euros ( negative for 779,0 million euros in 2016), and includes the positive effect of 269,3 million euros deriving from the finalization of the industrial reorganisation.
The net financial position as at 31 March 2017 it was negative by 5.525,2 million euros (-4.912,8 million euros as at 31 December 2016).
Geographically, theAPAC has recorded, together with the Naphtha, the highest profitability among all macro-areas, remaining at twenties levels. Revenues in the Apac area, mainly thanks to the performance of Premium, increased by 26,6% compared to the corresponding period of 2016. Excluding the positive effects of exchange rates (+0,7%) and the change in the scope deriving from the consolidation of Aeolus Car (+3,2%) the organic growth of revenues was equal to +22,7%. Nafta recorded an Ebit margin at twenties levels, with revenues growing by 16,5% (+13,7% excluding the positive effect of exchange rates) thanks to the good performance of Premium and SuperPremium. Europe recorded profitability at mid-teens levels, with revenues growing by 7,8% (+8,9% excluding the negative effect of exchange rates), supported by the positive performance of Premium. Meai recorded profitability at mid-teens levels, with overall revenues up 2,4%.
Profitability is decreasing South America (Ebit margin mid single-digit) mainly due to a reduction in sales in the Argentine market and the continuous improvement and conversion actions of the mix. During the quarter, revenues grew by 18,8% (-3,2% at organic level excluding exchange rates and the change in scope).
This trend reflects the continuation of the focus on the mix, with the progressive reduction of sales in the non-premium segment, the destination of part of the production for export to North America in consideration of the growing demand for Premium Pirelli products and the contraction of the car market in Argentina. There Russia recorded an increase in profitability (EBIT margin high single digit compared to a negative margin in the first quarter of 2016). Overall revenues grew by 14,3%: excluding the positive impact of exchange rates, revenues fell by 16,9%. This dynamic reflects the strategy of focusing on the most profitable segments, with the progressive reduction of the production and sales of non-Pirelli branded products.
