Pirelli First Half Earnings Down, Apollo Plans Increased Investment in High Potential Markets

Italian tyre conglomerate Pirelli Tyres announced the financial results for the first half of the year 2013. The company has recorded a YOY 6.1% decrease in the earnings before interest and tax as compared to 2012.

Indian tyres major Apollo Tyres, which recently acquired Cooper Tires and Rubber, has announced increased investments in areas where it anticipates growth.

Pirelli Earnings Growing in 2013 2nd Quarter

Pirelli confirmed that second quarter of 2013 has been positive with revenues showing an 8.8% hike over the figures of 2nd quarter 2012. However the net profit for the quarter – 78 million euro- is lower than the profit Pirelli earned during the second quarter in 2012, which stood at 94.9 million euro.

Pirelli attributes the poor results to the weakness of the European economy. The company also experienced a shrinking of demand by 5% in the European tyre market for both OE tyres as well as replacement cheap tyres in the first quarter. The demand crept up in the second quarter, and increased by 3% YOY as compared to second quarter of 2012.

Pirelli also confirmed that the premium segment in which it is active received positive support from markets in China and South America, resulting in volume growth.

Results are an Improvement Over First Quarter

In general Pirelli’s results are better in the 2nd quarter as compared to the first. This year has been no different. As compared to the 11.7% profitability in the first 3 months of 2013, profitability in the 2nd quarter rose to 12.6%. A better volume performance and a price/mix improvement contributed to this, Pirelli said.

Pirelli added that the company has been able to support industrial costs for start ups in Russia and Mexico and investment in future on account of the falling raw material prices. Increase in production efficiencies has also balanced the increased costs of production.

Apollo to Focus on Serbia, China and Mexico

Besides Pirelli, China and Mexico will receive attention from Apollo Tyres too. Mr. Neeraj Kanwar, Vice Chairman and MD Apollo Tyres identified these two markets along with Serbia as having high potential for growth. “Plants in these high potential areas will receive the benefits of investment first”, he said.

The Trayal factory in Krusevac Serbia, which Cooper took over in early 2012 had a capacity of 1 million. Immediate investment will up the capacity to 2.5 million and eventually the plan is to make it a 5-6 million capacity plant.

Right now, there is a cloud over Apollo’s plans in China due to the strike action opposing Apollo’s take over of the Cooper Chenshan factory. Mr. Kanwar confirmed that both this factory and the second one in China- the Cooper Kunshun plant are important for the company’s regional plans.

The company wants to produce nearer to where it sells. So the major manufacturing hubs for the company will be China, India, Europe and America, which will cater respectively to the China & Southeast Asia, India & West Asia, Europe and American markets respectively.