Italy's Pirelli ups FY guidance after Q2 EBIT beats estimates

Reuters
·2 min read
FILE PHOTO: A tyre is pictured in a tyre specialist center in Turin

MILAN (Reuters) - Italian tyremaker Pirelli said on Thursday it would manage to offset increasing pressures from raw material costs in the second half, as it raised its full-year forecasts after posting higher-than-expected operating profits in the second quarter.

Pirelli, the sole supplier of Formula One tyres, said it saw an overall impact this year from higher raw materials prices, which have been affecting manufacturers worldwide, worth 3% of its revenue.

"For the second half, we are expecting a much higher headwind because we see costs rising month after month," Pirelli's chief planning and control officer, Fabio Bocchio, told analysts.

But the price mix would allow the company "to fully compensate" the expected impact from raw materials, he said, as well as from foreign exchange in the second part of this year.

In the April-June period Pirelli's adjusted operating earnings (EBIT) rose to 208.6 million euros ($247 million) from a loss of 74.4 million euros a year earlier, topping a company-provided analyst consensus of earnings of 186 million euros.

An increase in raw material costs has weighed on Pirelli's quarterly operating profit for 28 million euros.

But the Milan-based company said better volumes, price mix and efficiencies more than offset a negative impact from external forces such as raw material price increases, inflation, and exchange rates so far this year.

Pirelli, which also manufactures tyres for high-end carmakers such as BMW and Audi, now sees 2021 revenue at 5.0 billion-5.1 billion euros, up from a previous forecast of 4.7 billion-4.8 billion. The margin on adjusted EBIT is now forecast at 15.0-15.5% from a previous 14-15%.

It also raised its forecast for its full-year net cash flow to 360 million-390 million euros from 300 million-340 million euros previously.

"We think that we will be able to stay in the higher part of our range," Bocchio said.

(Reporting by Giulio Piovaccari; Editing by Chris Reese and Leslie Adler)

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