Consumer Segment

The following table illustrates the results for 2011 as compared with the corresponding periods of 2010:

(in millions of euro)
  Q1 Q2 Q3 Q4 TOTAL
  2011 2010 2011 2010 2011 2010 2011 2010 2011 2010
Net sales 983.3 780.9 958.9 835.8 1,024.3 847.1 959.0 836.5 3,925.5 3,300.3
D yoy 25.9% 16.5% 14.7% 19.1% 20.9% 15.1% 14.6% 16.2% 18.9% 16.7%
Gross operating profit before restructuring expenses 160.6 106.0 169.7 122.4 172.2 118.9 166.9 141.1 669.4 488.4
% of net sales 16.3% 13.6% 17.7% 14.6% 16.8% 14.0% 17.4% 16.9% 17.1% 14.8%
Operating income before restructuring expenses 119.7 69.5 128.6 84.7 131.1 80.5 127.1 99.9 506.5 334.6
% of net sales 12.2% 8.9% 13.4% 10.1% 12.8% 9.5% 13.3% 11.9% 12.9% 10.1%
Operating income 116.8 67.0 124.3 80.3 129.0 77.2 120.5 92.5 490.6 317.0
% of net sales 11.9% 8.6% 13.0% 9.6% 12.6% 9.1% 12.6% 11.1% 12.5% 9.6%

 

The following table shows the detailed breakdown of market performance:

  Q1 Q2 CUMULATIVE
AT JUNE
Q3 CUMULATIVE
AT SEPTEMBER
Q4 ANNUAL
TOTAL
EUROPE *       
Original Equipment +7% +0% +5% +3% +4% +1% +3%
Replacement +7% +1% +4% +6% +5% -4% +3%
 
NAFTA       
Original Equipment +15% +2% +9% +8% +8% +14% +10%
Replacement +7% -5% +1% -2% +0% -4% -1%
 
SOUTH AMERICA        
Original Equipment +8% +7% +8% +3% +6% -8% +2%
Replacement -2% -1% -2% +3% +0% +3% +1%
* excluding Russia

 

In 2011 net sales were euro 3,925.5 million, up 18.9% versus 2010. Excluding the translation effect, the change on a comparable consolidation basis was a positive 20.3% due to the 3.0% increase in volumes and the 17.3% increase in the price/mix ratio.

(milioni di euro)
  Q1 Q2 Q3 Q4 TOTAL
  2011 2010 2011 2010 2011 2010 2011 2010 2011 2010
Volume 9.0% 14.9% 2.6% 6.2% 4.3% 0.8% -3.3% 4.2% 3.0% 6.4%
of which Premium 25.2%   21.7%   17.5%   8.3%   18.2%  
Price/Mix 14.6% 1.2% 16.2% 8.7% 18.4% 10.7% 19.7% 9.3% 17.3% 7.6%
Change on a like-for-like basis 23.6% 16.1% 18.8% 14.9% 22.7% 11.5% 16.4% 13.5% 20.3% 14.0%
Translation effect 2.3% 0.4% -4.1% 4.2% -1.8% 3.6% -1.8% 2.7% -1.4% 2.7%
Total change 25.9% 16.5% 14.7% 19.1% 20.9% 15.1% 14.6% 16.2% 18.9% 16.7%

 

Gross operating profit before restructuring expenses was euro 669.4 million, or 17.1% of sales (+37% versus 2010), while operating income before restructuring expenses reached euro 506.5 million, with a ratio of 12.9% to sales, as compared with euro 334.6 million in 2010 (10.1% of sales). Operating income totalled Euro 490.6 million (with ROS of 12.5%), up 55% versus 2010, when it totalled Euro 317.0 million (with ROS of 9.6%).

In 2011 Pirelli supplied tyres to all 12 teams competing in Formula 1 races worldwide. A total of 24,000 PZero F1 tyres were used during the racing season, all of which were made at the Izmit, Turkey plant, with the exception of compounds produced in Italy at the new Settimo Torinese industrial site. This plant uses cutting-edge technology and sophisticated production machinery.

Ever since this supply contract was officially announced, the dedicated Pirelli team has worked on a tight schedule with the team and drivers to satisfy as best as possible the requirement of a highly reliable and safe product subject to variable rates of wear and tear, in view of assuring the best possible spectator experience during competition.

The results have been an unqualified success. The 2011 season has even been defined in the international media as one of the most sensational in the recent history of F1.

Spectators also shared their appreciation for such exciting races. The 2011 racing season had a global audience for the 19 grand prix races of over 1.6 billion viewers, which when translated in terms of exposure meant over euro 300 million in value enhancement for the Pirelli brand. Finally, F1 has represented an exclusive marketing and communication platform through which the Company has been able to engage all of its principal stakeholders worldwide.

The top single-seater racing championship has also made it possible to develop new research and development models that have been immediately applied to the design and production of highway tyres.

The technologies used for the design and production of compounds used in highway tyres have also benefited from major transfers from the know-how accumulated through work on Formula 1.

For example, this approach led to the creation of PZero Silver, the first road use tyre derived from F1 technology, with it being given its first public presentation at the Monza Grand Prix. It will be produced exclusively at the new Settimo Torinese industrial site.

So, this project has made a major contribution to reinforcing the brand especially in the premium segment, which most characterises the exclusive line-up of products offered by Pirelli and on which the Company is placing its hopes to achieve top world leadership in 2015.

 

Car Business

In 2011, the original equipment market showed a positive performance overall: in Europe +3%, in NAFTA +10%, in South America +2%, and in China +2%.

Most replacement markets also showed positive results (Europe +3%, South America +1%, China +12%), with the exception of NAFTA (-1%).

In 2011 net sales by Pirelli, which totalled euro 3,513 million with an EBIT margin of 11.9%, were generated 74.5% by the replacement market and 25.5% by original equipment. Overall, 50% of net sales were originated by premium products, which generated 80% of operating income.

Business results were driven by the excellent performance of winter products in Europe, where our products are increasingly appreciated (from the most classic products like Snowcontrol and Sottozero to Scorpion winter tyres for SUV), the acceleration given to the high-end product range both in South America and in Asia-Pacific, the locomotive effect of price increases applied in all geographical areas and the solid market share enjoyed by the Company in the premium original equipment segment.

In 2011 the business realised positive developments in both channels. In the original equipment channel, it progressively focused its market shares on premium customers, with whom we continue to grow in all geographical areas worldwide. During the year, premium segment sales increased by 25% against a 13% decrease in the standard segment. In the replacement channel, the Group is focused on the premium strategy, by exploiting the positive return on image from F1. Indeed, its market share in the premium segment volume has grown 28% worldwide.

Motorcycle Business

In 2011 the original equipment channel contracted in Europe, although at different rates in the various segments, while it expanded significantly in South America. The replacement channel generally performed well in the various geographical regions. In 2011, Pirelli made 77% of its sales in the replacement channel and 23% in the original equipment channel. In 2011 net sales by Pirelli totalled euro 412 million, with an EBIT margin of 17.7%. In 2011 Pirelli renewed its road use product line with the new Diablo Rosso II, which uses technology derived from the world Superbike championship series, and its off-road line with the introduction of two new products: the Scorpion 554 Mid Hard and the new Scorpion Extra X. The Metzeler brand rounded out the range of products offered with the Sportec M5 Interact (Supersport segment) and the Roadtec Z8 Interact (SportTouring segment). Major accomplishments were also achieved in sports competition in 2011: many prestigious racing championships chose Pirelli as their sole tyre supplier, including World Superbike, British Superbike (BSB), Canadian Superbike, and Brazilian Superbike. Pirelli also came in first in most national races, including the Le Mans 24-hour Superbike class race, the Montmelò 24-hour Superbike class race, the CIV Superbike and Supersport class races. In off-road competition, Pirelli further distinguished itself by winning the 56th World MX championship by coming first in the MX1 and MX2 classes, and the World Rally Championship. Metzeler won the World Enduro Championship in the E3 class. Pirelli received repeated important recognition by being approved as original equipment supplier for, among others, the Ducati Panigale 1199 with the new Diablo Supercorsa and the MV Agusta F3 with the Diablo Rosso Corsa. Metzeler was approved as original equipment supplier for the Husqvarna Nuda 900 with Sportec M5 Interact and for the Honda Crosstourer 1200 with Roadtec Z8 Interact.

Geographical Areas

Europe

The region’s macroeconomic situation was not favourable, but factors such as focus on the premium segment (where demand expanded at the brisk rate of +12%), the existence of a winter range of products that were extremely well received by the market, and product approvals received from many premium European carmakers, Pirelli managed to increase its sales volumes and achieve double-digit profitability.

Nafta

Total volume on the consumer tyre market for the replacement channel slipped slightly, but the premium segment grew more than 10%, while the original equipment channel expanded by 10% after several years of contraction.

Pirelli managed to improve its market share by exploiting its heavy focus on the premium segment and the positive stimulus given by approval as original equipment supplier.

South America

South America remains an important geographical area, both for production and sales, where Pirelli is leader in spite of pressure on the lowest segment by brands imported from low-cost countries. In the car business, reinforcement of the Company’s leadership has been accomplished with development plans in the premium segment and leadership in product approvals and supplies to all local carmakers.

In the motorcycle business, Pirelli’s consolidated historic leadership will allow it to be privileged partner of several European motorcycle makers that are beginning to produce locally to meet the growing demand for high-powered motorcycles throughout the region.

Apac

Pirelli began making investments in high-end radial tyre production capacity in China. Its goal has been to have a local producer in a geographical region enjoying strong expansion and offer a radial product to mature markets as well. In the car business, notwithstanding the problems encountered in several markets due to macroeconomic problems (slowdown of growth in China during H2 2011 and natural disasters in Japan), Pirelli still managed to grow (with net sales up by 30%) by focusing on the premium segment, making investments in the retail channel, and developing the original equipment channel with premium producers in China by using its own transplants.