August 5, 2013 / 7:48 PM / in 4 years

UPDATE 1-Pirelli has no plans to leave Egypt

* Egypt is good base for exports - company head

* Emerging markets to offset weak Russia, Europe

* New EBIT guidance at bottom end of previous range (Releads, adds management comment)

MILAN, Aug 5 (Reuters) - Italy’s Pirelli has no plans to leave Egypt, despite the turmoil in the country, as the world’s fifth-largest tyremaker is looking to emerging markets to offset weakness in Russia and Europe.

“We don’t have any reason to leave the Egyptian market because also it’s a good basis for exports,” Pirelli chairman and CEO Marco Tronchetti Provera said in a conference call on second-quarter results.

Pirelli generates almost 60 percent of its sales in emerging economies and has been able to generate cost efficiencies by building low-cost manufacturing sites in these countries. The group has been in Egypt since 1999.

“We build factories not for the next months but for the next decades,” Tronchetti Provera said.

But Russia will be a drag on growth this year because of a slowdown in economic activity in the country that had depressed demand and led to higher costs due to underused production facilities.

“The Russia scenario is worsening,” the Pirelli chief said. The company has two factories in the country which started production in the last year.

Pirelli - whose tyres equip motorcycles, cars, and Formula 1 racers - said business in Europe remained weak because of the continued crisis but added the second quarter had shown some signs of recovery.

Chief Commercial Officer Andrea Pirondini said he was more optimistic on Europe than he had been three months earlier and pointed to good news from recent German car sales.

“Some fundamentals are going in the right direction,” he said.

On Friday a rise in premium car sales helped Germany’s auto market, the largest in Europe, to grow slightly in July in a fresh sign the worst may be behind the industry.

Pirelli’s operating profit in the second quarter grew 4.2 percent on the year to 200.9 million euros ($266 million), boosted by business in the higher-margin premium segment in Latin America, Asia and Africa.

Pirelli is shifting its focus to the more profitable premium sector where it counts on being a global leader in 2015.

The premium segment will see annual growth of 13 percent this year, driving a 5.5-6.5 percent growth in overall volumes.

For the full year, the group said it expected operating profit to be around 810 million euros, at the bottom end of a previous target range of 810-850 million euros, citing the higher costs in Russia as a factor. ($1 = 0.7553 euros) (Reporting by Stephen Jewkes; Editing by Anthony Barker)

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