The Pirelli Board of Directors approved the group's results as of March 31, 2017.
Revenues Revenues totaled €1.339,3 million, up 13,4% from €1.180,9 million in the corresponding period of 2016, once again driven by the focus on the Premium segment and its positive performance. Organic growth was 8,4%, excluding the impact of exchange rates (+4%) and the consolidation of Jiaozou Aeolus Car (+1%), the conversion of which to the Pirelli brand began in the last quarter of 2016 to accelerate development in China, an area that will be the engine of global growth in the Premium segment.
The revenue trend benefited from strong growth in the price/mix component (+5,5%, the highest level among competitors) due in particular to the improvement in the sales mix, thanks to the success of high-end products, and price increases in emerging markets.
Premium Revenues grew by 16% to 907,4 million euros, 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% recorded in the first quarter of 2016.
Premium segment volumes recorded significant growth of 15,3%—across all regions, exceeding the market trend (+11%)—which supported overall volumes, which increased by 2,9% over the period. The progressive reduction in exposure to less profitable segments, particularly in Russia and Latin America, led, conversely, to a 9,1% decline in non-premium volumes.
EBITDA before charges Non-recurring and restructuring expenses amounted to 270,3 million euros at 31 March 2017, up 3,4% compared to 261,5 million euros in the corresponding period of 2016.
Adjusted EBIT (operating profit before non-recurring and restructuring expenses and amortization of intangible assets identified during the PPA) amounted to €205 million, up €1,4 million compared to €203,6 million in the corresponding period of 2016. The use of internal levers such as price/mix, volumes, and efficiencies allowed the company to offset the increase in raw material costs, cost inflation (particularly in emerging markets), higher depreciation and amortization, and other costs related to business development.
Adjusted EBIT margin It was 15,3% compared to 17,2% at March 31, 2016, and primarily reflects new programs that will deliver value in the medium term, as well as the effect of rising commodity prices. Specifically:
– the aforementioned consolidation of Jiaozou Aeolus Car’s activities in China;
– strengthening premium positioning along the entire value chain;
– the acceleration of the reduction of exposure in less profitable segments;
– the launch of new activities that meet new end-customer needs, such as connectivity and a return to the bicycle business through the Velo project;
– one-off costs of separation from Industrial;
– 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.
Operating profit (EBIT) It amounted to 168,7 million euros (166,1 million euros in the corresponding previous period) and reflects non-recurring and restructuring charges of 10,1 million euros due to rationalization processes, costs relating to the reorganization activities of the Industrial segment and 26,2 million euros relating to the amortization of intangible assets identified during the PPA and deriving from the purchase of Pirelli assets by Marco Polo.
The result from investments is negative by 3,1 million euros (-42,5 million at 31 March 2016) and mainly refers to the pro rata result of the Indonesian joint venture PT Evoluzione Tyres.
The net result Net income from continuing operations as of March 31, 2017, amounted to €49,5 million, compared to a loss of €30,4 million in the first quarter of 2016. This result reflects, in addition to the improvement in operating income and income from equity investments, also lower net financial expenses of €56,7 million (€77,0 million in the first quarter of 2017, compared to €133,7 million in the first quarter of 2016, which also included €25,4 million related to the repayment of the US Private Placement bond). The reduction in financial expenses is mainly attributable to the decrease in the cost of debt (5,42% in the first quarter of 2017, compared to 5,98% in the first three months of 2016).
The net flow of the operation management As of March 31, 2017, net income was negative by €720,0 million (-€592,3 million in the corresponding period of 2016). This figure reflects, among other things, the increase in investments—to €98,3 million from €70 million at March 31, 2016—primarily aimed at increasing premium capacity in Europe and the NAFTA region and at continuously improving the mix.
Cash flow before dividends and extraordinary transactions was negative by €881,7 million compared to a negative value of €838,3 million in 2016. Total cash flow was negative by €612,4 million (negative by €779,0 million in 2016), and includes the positive effect of €269,3 million resulting from the finalization of the industrial reorganization.
The net financial position as of March 31, 2017, it was negative by 5.525,2 million euros (-4.912,8 million euros as of December 31, 2016).
Geographically, theAPAC he recorded, together with the Naphtha, the highest profitability among all macro-regions, remaining in the mid-twenties. Revenues in the APAC region, driven primarily by the performance of the Premium segment, increased by 26,6% compared to the same period in 2016. Excluding positive exchange rate effects (+0,7%) and the change in scope resulting from the consolidation of Aeolus Car (+3,2%), organic revenue growth was +22,7%. NAFTA recorded an EBIT margin in the mid-twenties, with revenue growth of 16,5% (+13,7% excluding the positive exchange rate effect) thanks to the strong performance of the Premium and SuperPremium segments. Europe recorded profitability in the mid-teens, with revenues up 7,8% (+8,9% excluding the negative exchange rate effect), supported by the positive performance of the Premium segment. MEAI recorded profitability in the mid-teens, with overall revenues growing by 2,4%.
Profitability is decreasing in South America (mid-single-digit EBIT margin) primarily due to lower sales in the Argentine market and ongoing mix improvement and conversion efforts. Revenues grew 18,8% during the quarter (-3,2% organically excluding exchange rates and changes in scope).
This trend reflects the continued focus on 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 Pirelli's premium products and the contraction of the car market in Argentina. Russia recorded profitability growth (high single-digit EBIT margin compared to a negative margin in the first quarter of 2016). Total revenues grew by 14,3%; excluding the positive impact of exchange rates, revenues fell by 16,9%. This trend reflects the strategy of focusing on the most profitable segments, with the progressive reduction of production and sales of non-Pirelli branded products.
