Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Pirelli & C SpA (PLLIF, Financial) reported a 4.6% organic growth in the first half of 2024, driven by a solid commercial performance.
- The company achieved an adjusted EBIT of EUR 539 million, marking a 4% increase from the previous year, with a profitability improvement of 0.5 percentage points.
- Pirelli's high-value segment showed resilience, growing by 7% and outperforming the standard segment.
- The company made significant strides in sustainability, reducing CO2 emissions by 18% and water withdrawal by 15% compared to the first half of 2023.
- Pirelli's liquidity margin is strong, covering financial debt maturities until Q1 2027, with a pro forma basis extending to Q1 2028.
Negative Points
- Pirelli faces geopolitical uncertainties and potential international trade tensions, which could impact future performance.
- The company reported a negative net financial position of approximately EUR 2.98 billion, despite reducing it compared to June 2023.
- Exchange rates negatively impacted sales by 4.3% in the first half of 2024, with continued volatility expected.
- The standard segment is declining, with Pirelli's volumes for cars 17 inches and below decreasing by 8%, compared to a 1% market decline.
- Raw material costs are expected to have a slight negative impact for the full year, with potential increases in natural rubber and oil derivatives prices.
Q & A Highlights
Q: The new margin guidance implies slightly lower margins in the second half compared to the first half. What factors are contributing to this?
A: Marco Tronchetti Provera, Executive Vice Chairman of the Board, explained that the raw material trend is expected to be negative in the second half due to commodities like natural rubber and oil derivatives. Additionally, there are anticipated negative impacts from foreign exchange rates.
Q: With factory saturation at 88%, is there a need for action, or does this provide room for growth in high-value segments?
A: Andrea Casaluci, CEO, stated that Pirelli continues to grow its high-value capacity to capture growth opportunities. The current capacity allows flexibility to produce standard products while maintaining high saturation and readiness for high-value growth.
Q: How is the Chinese market expected to perform in the second half, particularly in the replacement market?
A: Marco Tronchetti Provera noted that while the original equipment market in China may slow due to less favorable comparisons, the high-value market remains positive. Pirelli aims to gain market share through its pull-through strategy and expanded distribution network.
Q: Can you elaborate on the price mix performance and expectations for the rest of the year?
A: Andrea Casaluci highlighted that the second quarter's strong performance was driven by product mix improvements and a reduction in standard products, particularly in South America. The positive product mix is expected to continue, but regional mix benefits may not be as strong in the second half.
Q: What is the outlook for high-value original equipment (OE) growth in the second half?
A: Andrea Casaluci expects high-value OE growth to outperform the market, driven by technological advancements and partnerships with premium car makers. The strategy focuses on innovation and meeting regional consumer needs, particularly in North America.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
