Board of Pirelli & C. S.p.a. approves results for the 9 months to 30 September 2016

-       Growth in the principal economic indicators following an acceleration during Q3 2016 -       Premium segment stronger with volume up 14.2% (+15.9% in Q3) and revenues representing 64.6% of total Consumer business -       Improved overall price/mix effect: +5.5% linked to higher prices and a better sales mix -       Steady in improvement in overall volume, up by 1.2% (+3.7% in Q3) -       Efficiencies worth 68.1 million euro. Already achieved 73% of the 2014-2017 target of 350 million euro -       Profitability improved, with Adjusted EBIT of 14.4% (14.1% in the same period of 2015, on a like-for-like basis) -       Adjusted ebit margin Consumer business reaches 16.4% (15.7% in the same period of 2015, on a like-for-like basis) -       Industrial business affected by persistent weakness in South America- Profitability improvements in Europe and NAFTA.  Apac remains the most profitable area

***

As an effect of the acquisition by Marco Polo Industrial Holding S.p.A. of Pirelli and the subsequent merger for incorporation of Marco Polo Industrial Holding S.p.A. into Pirelli, following the Purchase Price Allocation (PPA) conducted on the basis of that which is established by the relevant accounting principles, greater amortizations have been booked on the income statement mainly linked to intangible assets identified in the context of that operation. The heading “Ebit adjusted” in the income statement excludes – beyond non-recurring and restructuring charges – also the amortizations related to intangible assets identified in the PPA.

***

Meeting today, the Board of Directors of Pirelli & C. S.p.A. examined and approved the results of the Group for the period ended 30 September 2016. Supported also  by the acceleration during the third quarter, the results for the first nine months of 2016 highlight broad improvements in the principal economic indicators. These are discussed below: -       Revenues of 4,533.1 million euro, following organic growth of 6.6% (like-for-like basis, after excluding an adverse 6.7% forex effect) due to a marked improvement in the price mix (+5.5%) as a result of price rises in emerging markets, increased sales in the Replacement channel and a different geographical and product mix. This organic increase in revenues was founded on the progress of the Consumer business (organic growth of 8.2% over the first nine months, +10% in Q3 alone), due to the performance of the Premium segment and the expansion of sales in mature markets, Apac and MEAI, while the Industrial business (organic growth of 0.3% over the first nine months, +0.1% in Q3) continues to suffer from the weakness of the tyre market in South America and other emerging markets; -       Higher volumes (+1.2% in the first nine months of 2016, +3.7% in Q3), due to strong progress by the Consumer business (+3.1% in the first nine months, +5.5% in Q3) as a result of sustained growth in mature markets and the sales’ recovery in emerging markets. Volumes in the Industrial business (-6.2% in the first nine months, -3.8% in Q3) reflect the noted weakness of the truck and agro markets, especially in South America; -       Further growth in the Premium segment, where the 14.2% rise in volumes (+15.9% in Q3) outpaced the expansion of the entire Premium market (+9.0% in the first nine months and in the third quarter). The organic revenues of this segment rose by 11.7% to 2,443.1 million euro, contributing 64.6% of total Consumer revenues compared with 62.2% in the same period of 2015, on a like-for-like basis; -       Improved profitability due to internal levers, such as work on the price mix, and to the efficiencies achieved in order to tackle forex volatility and the contraction of certain markets, principally on the Industrial business. In particular, the EBITDA margin before restructuring and other non-recurring charges has risen to 19.2%, compared with 19.0% in the same period of 2015 on a like-for-like basis. EBITDA before restructuring and other non-recurring charges amounted to 872.1 million euro (861.9 million euro in the same period of 2015 on a like-for-like basis).  The Adjusted EBIT margin (operating profit before restructuring and other non-recurring charges and the amortisation of certain intangible assets identified in PPA) has risen to 14.4%, compared with 14.1% in the first nine months of 2015 on a like-for-like basis. Adjusted EBIT amounted to 655.0 million euro (638.2 million euro in the first nine months of 2015 on a like-for-like basis); -       Efficiency improvements contributed 68.1 million euro. The efficiencies achieved since the start of 2014 total 254.9 million euro, representing 73% of the 2014-2017 four-year target of 350 million euro; -       In geographical terms, profitability has improved in Europe and NAFTA due to strong growth in the Premium segment. Apac remains the most profitable area, with an EBIT margin of more than 20%.

***

The adverse results from equity investments, -52.7 million euro (-6.2 million euro in the same period of 2015), principally reflect the write-downs and impairment adjustments recorded in relation to Fenice S.r.l. and Prelios S.p.a. In addition to the loss from equity investments, total net income of 22.7 million euro (276.6 million euro in the same period of 2015) reflects the rise in net financial charges by 202.9 million euro due, in the main, to the bank loans arranged in connection with the merger of Pirelli and Marco Polo Industrial Holding S.p.A., as well as to the early repayment of the US Private Placement bond of 150 million dollars. The net cash flow from operations was much improved, from -225.7 million euro in the first nine months of 2015 to -32.5 million euro in the first nine months of 2016, thanks to the management of working capital. Capital investment totalled 238.4 million euro (261.8 million euro in the first nine months of 2015), mainly to increase Premium capacity in Europe, NAFTA and China, as well as to improve the production mix. Total net cash flow – before dividends and the effects of the merger with Marco Polo Industrial Holding - improved to -507.1 million euro, compared with -572.0 million euro in the first nine months of 2015. The net financial position was negative 5,972.4 million euro after the effects of the merger of Pirelli and Marco Polo Industrial Holding, which became effective on 1 June 2016 with retroactive accounting and fiscal effects from 1 January 2016. Excluding the effects of the merger, the net financial position as of 31 December 2015 was 1,199.1 million euro (5,331 million euro inclusive of the data for Marco Polo Industrial Holding). The usual performance of working capital, with inflows from the sale of winter products in Europe and Russia in the fourth quarter which coincide with the sell-out activities in the same markets will lead – together with the finalization of some disposals of financial and real estate holdings - to a natural improvement of the net financial position in the coming months. The total number of employees as of 30 September 2016 was 36,763 (36,753 persons at the end of December 2015). PDF Version (172 KB)