Pirelli raises sales target as pricing power offsets inflation

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MILAN (Reuters) – Strong pricing power and cost savings will help Pirelli weather the economic woes, the Italian manufacturer said on Thursday as it beat second-quarter operating profit expectations and lifted its revenue forecast for the full year.

The sole supplier of Formula 1 tires, said its adjusted profit before interest and tax (EBIT) rose 21% in the April-June period to 253 million euros ($258 million), exceeding a consensus of analysts provided by the company of 238 million euros.

Higher raw material costs of 116 million euros weighed on the result as well as an 88 million euro increase in production costs, the company said.

Managing Director Marco Tronchetti Provera told analysts that Pirelli’s business model, which focuses on high-value tyres, and its ability to react quickly to critical issues “makes us confident that we can handle any scenario. Harder and harder”.

He added that, looking ahead, there were no signs of weakening demand at this time.

The tire maker has forecast sales of between 6.2 and 6.3 billion euros in 2022, compared to a previous forecast of between 5.9 and 6.0 billion euros.

It also raised its full-year free cash flow forecast, while reiterating a full-year adjusted EBIT margin forecast of around 15%.

Pirelli said its first-half sales in Russia were around 3% of its global sales, broadly unchanged from 2021.

Earlier this year, the company announced that it was relocating its export-oriented Russian production to other countries, while leaving its two factories in the country to serve the local market only.

Sanctions against Russia, banning the export of certain raw materials to the country and goods produced in Russia to the European Union, came into force on July 10, he said.

Pirelli estimates the costs associated with the announced relocation of its export-oriented Russian production to be between 30 and 35 million euros, Tronchetti said, adding that he was confident they would be fully absorbed by the end of the year. end of the year thanks to better commercial performance in other areas.

(Reporting by Giulio Piovaccari; editing by Agnieszka Flak and Susan Fenton)

Copyright 2022 Thomson Reuters.

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