Dragged down by its investment in troubled Telecom Italia, Pirelli SpA reported a net loss of $2 billion for the third quarter of 2006, compared to a net profit of $135 million just a year ago.
The loss was forced by write-downs totaling $2.7 billion from the losses from Telecom Italia. A net gain of $531 million from the sale of a 39 percent share of its tire unit to a group of banks countered a portion of the quarterly loss.
Pirelli wrote down the value of its Telecom Italia stake, which it controls through holding company Olimpia SpA, after a drop in the phone company’s shares.
“The deterioration in the recoverable value of the equity investment, which took place during 2006, is due to the negative stock market performance of the Telecom Italia shares, inferior to both European sector indexes and the expectations of Pirelli management, and the analysts’ reduction of the target price,” Pirelli said in a statement.