May 7, 2014 / 8:06 PM / in 4 years

UPDATE 1-Pirelli to reach 2014 targets, despite weaker Russia

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By Francesca Landini

MILAN, May 7 (Reuters) - Italian tyre maker Pirelli will reach its full-year targets, despite a weaker-than-expected outlook for the Russian market, Chairman and CEO Marco Tronchetti Provera said on Wednesday.

The world’s fifth-largest tyre maker earlier on Wednesday reported a 12.6 percent increase in first-quarter operating profit.

The company said it could reach sales of 6.2 billion euros ($8.63 billion) and operating profit, before restructuring costs, of around 900 million euros this year, thanks to a rosier picture in Europe.

A better European car market will counteract a worse outlook for the Russian market, Pirelli’s CEO said. The Ukraine crisis and a recession in Russia have cast doubts on the company’s plans to expand in that market.

“We expect a better environment in Europe to compensate for a slightly worse outlook in Russia and Latin America,” CEO Marco Tronchetti Provera said during a conference call on first quarter results.

The Italian company, which makes tyres for motorcycles, cars, and Formula 1 race cars, said operating profit rose to 201 million euros ($280 million) in the first quarter, due to its focus on more expensive products.

Pirelli has boosted margins in the face of declining European car sales by focusing since 2010 on more expensive tyres for brands such as Mercedes, Audi and BMW - luxury carmakers that have weathered the downturn better than their mainstream rivals.

In the first quarter sales declined to 1.473 billion euros from 1.515 billion euros one year ago, missing an analyst consensus of 1.498 billion euros due to currency swings which had a negative impact of almost 11 percent.

Pirelli struck a deal with Rosneft in March that made the Russian oil major the group’s single largest shareholder, gaining in exchange the chance to exploit the Russian company’s big gas station network to sell tyres.

Tronchetti Provera said on Monday Western sanctions on Russia following its annexation of Ukraine’s Crimea would have no impact on a deal. ($1 = 0.7183 Euros) (Editing by Keiron Henderson)

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