Pirelli says it grew its revenues by 7% in 2016, aided by better sales mix across its product range.
Revenues in the year amounted to EUR6,058.4m (US$6,465.9m), with organic growth of 7% at the annual level (on a like-for-like basis and net of forex effects, which were negative 5.4%) and of 8.7% in the fourth quarter. The revenue trend benefited from strong growth – both in the Consumer and Industrial businesses – of the price/mix component (+5.0%) in particular thanks to improvement in the sales mix, as well as price increases in emerging markets.
Volumes’ performance was positive (+2.1% in 2016, +5.1% in the fourth quarter) thanks to the Consumer business (+3.5% during the year, +4.8% in the fourth quarter). The performance of Industrial volumes, negative at the annual level (-3.8%) as a result of the weakness of the South American market, registered growth in the fourth quarter of 6.5% thanks to the business’s recovery in the region, above all in the Replacement channel.
Premium saw improvement with volume growth of 14.2%, above the Premium market’s global trend (+9.4%). The segment posted organic growth of 12.3% to EUR3,244.6m, accounting for a total of 64% of Consumer revenues, up from 61.5% in 2015 on a like-for-like basis.
The Adjusted Ebit (operating result before non-recurring and restructuring charges and amortisation of intangible assets identified in the context of PPA) was EUR896.6m (EUR860.5m in 2015 on a like-for-like basis), with an Adjusted Ebit margin growing to 14.8% compared with 14.4% in 2015 on a like-for-like basis. The improvement can be attributed to internal levers such as volumes’ growth, price/mix and efficiencies achieved to contrast forex volatility, increased raw material costs and inflation in emerging markets. Efficiencies totalled 90.5m, bringing the total of efficiencies achieved since 2014 to EUR277.3m, equal to 79% of the 4-year 2014-2017 target of EUR350m.
The operating result (Ebit) was EUR724.2m (compared with EUR786.1m in 2015 on a like-for-like basis) and mainly reflects EUR66.6m in non-recurring and restructuring charges linked to rationalisation processes and costs related to reorganisation activities of the Industrial segment and EUR105.8m relative to amortisations for intangible assets resulting from the acquisition of Pirelli assets by Marco Polo.
The total net result was EUR147.6m compared with EUR(-)383.5m in 2015. This figure included a loss of EUR559.5m for the de-consolidation of Venezuela and a negative impact of EUR14.6m deriving from the operational activities disposed of. The result from equity investments was negative EUR20m (EUR(-)41.4m in the same period of 2015).
The net cash flow from operations shows a net improvement, passing from EUR701.4m in 2015 to EUR882.7m in 2016, thanks to the management of working capital, and after having sustained investments of EUR372.2m (EUR391.4m in 2015), mainly earmarked for increases of Premium capacity in Europe, Nafta and China, as well as improvements in the mix.
The total net cash flow – before dividends and the effects deriving from the merger with Marco Polo Industrial Holding and from the re-organisation of the industrial activities – was positive for EUR383.1m (EUR192.1m in 2015) and include approximately EUR200m of inflows deriving from the sale of some shareholdings (mainly the disposal of the investment held by Eurostazioni S,p.A. in Grandi Stazioni Retail) and real estate assets.
The net financial position on 31 December 2016 was negative EUR4,912.8m, an improvement of EUR418.2m compared with EUR5,331.0m at the end of 2015. The positive performance stems mainly from the high level of cash generation, as well as an inflow of EUR266m deriving from the entry, with a stake of 38%, of the Chinese fund Cinda into the capital of Pirelli Industrial in the context of the reorganisation project of the industrial business.
Investments in Research & Development totalled EUR228.1m, equal to about 4% of total sales, of which EUR191.0m for activities linked to Premium products (about 6% of the segment’s sales).
At the geographic level, Apac registered, together with Nafta, the highest profitability of all the macro-areas, remaining at the twenties level. Revenue performance improved (organic growth +12.1% in 2016 and +25.4% in the fourth quarter) which include the sales of Jiaozou Aeolus Tyre from 1 October 2016. On a like-for-like basis, growth was 9% at the annual level and 17.9% in the fourth quarter, thanks to the positive performance of the Consumer business and the strengthening of the Original Equipment channel thanks to new homologations with European and local brands.
Nafta posted an Ebit margin at the twenties level, in line with 2015, with organic revenue growth of 12.0% in 2016 (+18.6% in the fourth quarter) thanks to the good performance of Premium and Super Premium.
Profitability in Europe improved to mid-teens level thanks to the 10.0% Premium revenue growth, supported by the good performance of sales both in the Original Equipment and Replacement channels. Organic revenues grew by 5.1%.
Meai registered stable profitability at the high-teens level, with organic revenues growth of 7.2%.
The reduction of profitability in South America (mid-single-digit) was mainly due to the performance of the Industrial business which discounted the market’s weakness, while profitability in the Consumer segment was confirmed at the high single-digit level. During the year, revenues at the organic level registered progress of 6.0% (-6.6% including forex effect of -12.6%). There was a marked improvement in performance in the fourth quarter with revenues growing 12%, in particular in the industrial business, with a volume increase above the market’s.
Forex volatility and the weakness of the market had a negative impact on the results in Russia (revenues down 1.0% net of forex) with profitability at break-even level, an improvement compared with the first nine months of 2016 thanks to a marked recovery in the fourth quarter (organic revenue growth of 9.6%, underpinned above all by the good performance of price/mix and a forex effect of +6.5%.
