22
March
2005
|
00:00
Europe/Amsterdam

Board of Directors approves 2004 results

BOARD OF DIRECTORS OF PIRELLI & C. SPA APPROVES RESULTS FOR YEAR ENDED 31 DECEMBER 2004 :
IN 2004 GROUP POSTED A STRONG GROWTH OF NET PROFIT: 274 MILLION EUROS (4 MILLION EUROS IN 2003)

SIGNIFICANT IMPROVEMENT IN PROFITABILITY OF ALL GROUP'S ACTIVITIES

PARENT COMPANY PIRELLI & C. SPA NET PROFIT: 150 MILLION EUROS (138 MILLION EUROS IN 2003)

RECOMMENDED DIVIDEND 0.0210 EUROS PER ORDINARY SHARE AND 0.0314 EUROS PER SAVINGS SHARE: OVERALL DIVIDEND PAYOUT INCREASED. NUMBER OF CIRCULATING SHARES GREW (+56%) AFTER THE CAPITAL INCREASE COMPLETED IN MARCH 2005

FOR 2005, GROUP EXPECTS A FURTHER IMPROVEMENT OF PROFITABILITY IN ALL ACTIVITY SECTORS

PIRELLI & C. SPA GROUP:

 

  • SALES: 7,114 MILLION EUROS, COMPARED TO 6,671 MILLION EUROS OF 2003 (+6.6%); ON A LIKE FOR LIKE BASIS, A GROWTH OF 3.2% WAS POSTED

  •  
  • EBITDA: +15.4% TO 725 MILLION EUROS, FROM 628 MILLION EUROS OF 2003
  • OPERATING INCOME (EBIT): 380 MILLION EUROS, A STRONG GROWTH (+42%) COMPARED TO 268 MILLION EUROS IN 2003
  • OPERATING INCOME INCLUDING INCOME FROM EQUITY PARTICIPATIONS DOUBLES: POSITIVE FOR 456 MILLION EUROS (217 MILLION EUROS IN 2003)
  • PIRELLI & C. ATTRIBUTABLE NET PROFIT: 217 MILLION EUROS, AGAINST A LOSS OF 39 MILLION EUROS IN 2003
  • NET DEBT: 1,469 MILLION EUROS, IMPROVED VERSUS 1,745 MILLION EUROS AT END 2003

 


INDUSTRIAL ACTIVITIES:

 

 

 

  • SALES: 6,573 MILLION EUROS, COMPARED TO 6,034 MILLION EUROS IN 2003 (+8.9%); ON A LIKE FOR LIKE BASIS, NET OF EXCHANGE RATES, METAL PRICES AND CHANGES IN THE SCOPE OF CONSOLIDATION, THIS RESULT REPRESENTS A 5.1% GROWTH
  • OPERATING INCOME AT 380 MILLION EUROS, POSTING A 43.9% GROWTH; ROS RAISES TO 5.8% FROM 4.4%
  • NET PROFIT: 229 MILLION EUROS (112 MILLION IN 2003)
  • TYRES: SALES AT 3,255 MILLION EUROS (+11.5% ON A LIKE FOR LIKE BASIS), ROS AT 8.5% FROM 7.4%
  • ENERGY CABLES AND SYSTEMS: REVENUES AT 2,888 MILLION (+9.5% WHEN COMPARED TO 2003, UNCHANGED ON A LIKE FOR LIKE BASIS), ROS GROWS TO 4.1% FROM 3.1%
  • TELECOM CABLES AND SYSTEMS: CABLES AND FIBERS IN OPERATING BREAK-EVEN; BROADBAND SOLUTIONS ACTIVITIES STRONGLY GROWING, WITH SALES OF MORE THAN 60 MILLION EUROS (+133%); OVERALL, OPERATING INCOME SIGNIFICANTLY IMPROVED, THOUGH STILL NEGATIVE (-15 MILLION EUROS COMPARED TO -39 MILLION EUROS IN 2003)

 


REAL ESTATE ACTIVITIES:

 

 

 

 

  • OPERATING INCOME INCLUDING INCOME FROM EQUITY PARTICIPATIONS: 157.5 MILLION EUROS, +23%
  • CONSOLIDATED NET PROFIT: 128 MILLION EUROS COMPARED TO 102 MILLION EUROS IN 2003, +25%

 


OLIMPIA:

 

 

 

  • NET PROFIT: 16 MILLION EUROS

BOARD OF DIRECTORS RENEWAL TO APPLY THE VOTING LIST: MINORITY SHAREHOLDERS WILL BE ABLE TO APPOINT ONE FIFTH OF BOARD MEMBERS
Milan, 22 March 2005 - The Board of Directors of Pirelli & C. SpA today met and approved the company's consolidated financial statements for the year ended 31 December 2004 .

During 2004, the Pirelli & C. SpA Group posted a significant improvement of all the economic indicators in all its Activity Sectors, through the actions of focalization on higher value-added segments: the year therefore ended with a strong growth of Group's net profit , which amounted to 274 million Euros compared to 4 million Euros in 2003.

In the Industrial Activities , 2004 showed the doubling of net profit, thanks to very good performances of all activity sectors. In particular, 2004 showed a further growth of the Tyres Sector in terms profitability, which reached the highest levels in its market; in the Energy Cables and Systems Sector all the financial indicators improved and the international leadership both in terms of technology and market was confirmed; in the Telecom Cables and Systems Sector, the Cables and Fibers business reached the break-even, while the new broadband access and photonics activities of Pirelli Broadband Solutions more than doubled revenues to more than 60 million euros, through innovations jointly developed with Pirelli Labs.

In 2004, the Real Estate Activities posted a strong growth of the most significant economic indicators. The Pirelli RE Group's new areas of business took off rapidly in 2004: fund management, which included the placement of four seeded real estate funds and the acquisition of a contract to co-manage a portfolio of properties owned by FIP (the Public Property Fund); the acquisition and management of Non-performing loans ; and Pirelli RE Franchising, which in little more than a year has become Italy's third largest estate distribution network.

The Group Pirelli & C. Spa

In 2004, the consolidated sales of Pirelli & C. SpA Group amounted to 7,114 million Euros, raising by 6.6% against 6,671 million of 2003. On a like for like basis - net of exchange rates, metal prices and changes in the scope of consolidation - growth was at 3.2% .

EBITDA grew by more than 15% , from 628 million Euros to 725 million Euros. The ratio EBITDA/Revenues therefore grew to 10.2% from 9.4%, improving in all Group's activity sectors.

The consolidated operating income (EBIT) amounted to 380 million Euros, with a 42% growth when compared to 268 million Euros of 2003. It is worth reminding that 2003 benefited from the settlement with Ciena for the use of patents for 10 million Euros.

Consolidated ROS (Return on Sales) was 5.3% , further growing when compared to 4.0% in 2003.

The result from equity participations is positive for 76 million Euros against -51 million of 2003 and it is related to the valuation of companies by the shareholders' equity method. In particular, it includes the Olimpia SpA effect which was positive for 5 million Euros (-100 million Euros in 2003) while results from equity participations of the real estate sector (Pirelli RE Group) were positive for 97 million Euros (67 million Euros in 2003).

Financial charges were negative by 108 million Euros , improved when compared to 134 million of 2003, mainly due to lower debt.

Extraordinary items were positive for 20 million Euros , compared to - 9 million Euros of 2003.

Net profit at 31 December 2004 was positive for 274 million Euros (after fiscal charges for 92 million Euros) against 4 million in 2003.

The Pirelli & C. SpA attributable net profit was 217 million Euros, against -39 million Euros at 31 December 2003 .

Shareholders' equity was 4,088 million Euros , compared to 3,678 million Euros at end 2003. The Pirelli & C. SpA attributable Shareholders' equity was 3,736 million Euros (1.08 euros per share), against 3,429 million Euros (0.99 Euros per share) in 2003 . It is worth reminding that during 2004 Warrants Pirelli & C. 2003-2006 were exercised for an amount of approximately 175 million Euros.

The net financial position at 31 December 2004 was negative for 1,469 million Euros, improving from -1.745 million Euros at end 2003 considering the effects connected with dividends distribution (132 million Euros), the exercise of Pirelli call option on more than 47 million Telecom Italia shares (110 million Euros), the subscription of Eurostazioni SpA's capital increase (33 million Euros) and the acquisition of RCSMediaGroup shares (33 million Euros). Those effects were balanced by the cash generation coming from the ordinary activities for approximately 230 million euros and incomes deriving from Deutsche Bank's placement of Pirelli & C. Real Estate share (93 million Euros), the sale of industrial non-strategic assets (approximately 90 million Euros) and the subscription of Warrants Pirelli & C. 2003-2006 (approximately 175 million Euros).

Group's employees at 31 December 2004 were 37,154 ( of which 3,513 with temporary contracts), compared to 36,337 at end 2003 (of which 2,417 with temporary contract).

The industrial operations of the Group

In 2004 sales amounted to 6,573 million Euros , with a 8.9% increase. On a like for like basis (net of the effects of exchange rates, metal prices and changes in the scope of consolidation), revenues grew by 5.1%.

EBITDA was 662 million Euros (with a 10.1% ratio on sales) compared to 567 million Euros in 2003 (9.4% on sales).

Operating income (EBIT) amounted to 380 million Euros, a strong growth ( +43.9% ) compared to 264 million in 2003; ROS grew to 5.8% from 4.4% in 2003.

Fourth quarter operating income was 91 million Euros against 70 million Euros of the same period in 2003.

Net profit of industrial operations at 31 December 2004 was 229 million Euros, more than doubling the 112 million Euros of 2003 .

Pirelli Group's strong commitment to R& D and technologic innovation was confirmed also in 2004, with investments of 198 million Euros, corresponding to approximately 3% of Industrial Activities sales , substantially in line with the previous year. Thanks to continuous investments, Pirelli is today one of the leading Italian and European innovating companies, as witnessed by more than 5,000 patents still "alive".

Group's employees in the Industrial Operations at 31 December 2004 were by 33,956 (of which 3,368 employees with temporary contracts), against 33,401 at end 2003 (of which 2,253 employees with temporary contracts).

Industrial Sectors Operations

Tyres Sector
Sales amounted to 3,255 million Euros with a 11.5% increase on comparable basis, as a result of approximately 8% increase in volumes and for the remaining to price/mix, confirming the focus on high performance market segments.

EBITDA reached 454 million Euros, with a 13.9% ratio on revenues (399 million Euros in 2003, 13.4% on revenues).

Operating income was 276 million Euros with a 8,5% ROS (7.4% in 2003), growing more than 25% comparing with 220 million Euros in 2003.

Net profit stood at 169 million Euros (after financial costs of 33 million Euros, fiscal charges for 73 millions and extraordinary costs for 1 million Euro), compared to 129 million Euros in 2003.

Net financial position at 31 December 2003 was negative for 215 million Euros, significantly improving from 317 million in 2003.

At 31 December 2004 the number of employees was 21,513, including 2,576 employees with temporary contracts.

In particular, 2004 was the best of the last ten in terms of profitability, also through new products of the Planet Zero line for the Consumer market supporting the Pirelli brand, even more complete and reference in the market for performances, quality and length. In the Industrial market, Original Equipment showed positive results; in the Replacement segment, the best results were obtained in South America , Asia and Africa .

In line with the plan to expand its tyre operations in China announced in November 2004, Pirelli has started in March 2005 exclusive negotiations with RoadOne Tyre Co. Ltd, an important private rubber industry and a market leader in conveyor belts manufacturing, to set up a J.V. within the present year.

The new J.V., to be based in Shandong Province , will manufacture large size all-steel radial truck tyres for the domestic and other export markets in South East Asia .

In this way Pirelli confirms its strategy in the Chinese market, the world's fastest growing for road transportation, with a total production in 2004 of close to 100 million sets of radial tyres, representing approximately 50% of the overall tyre output in China , with a 33% increase over the previous year.

The negotiations with RoadOne Tyre have been started after that some of the conditions stated in the relevant Letter of Intents signed with Aeolus Tyre in 2004 could not be met.

Energy Cables and Systems Sector
Sales were 2,888 million Euros , posting a 9.5% growth comparing 2003; on a like for like basis, net of the effects of exchange rates, metal prices and changes in the scope of consolidation, this figure was substantially in line with 2003.

EBITDA stood at 199 million Euros, corresponding to a 6.9% ratio on sales (169 million Euros in 2003, 6.4% on revenues).

EBIT was 119 million Euros, posting a 43% growth from 83 million of 2003 with a ROS growing to 4.1% from 3.1%.

Net profit was 78 million Euros (after financial charges of 29 million Euros and fiscal charges for 12 million Euros), doubling the 39 million Euros of 2003.

The net financial position at 31 December 2004 is negative for 183 million Euros , improving from 354 million Euros negative in 2003.

Employee number at 31 December 2004 was 10,385 , including 666 employees with temporary contracts.

In particular, 2004 showed a significant improvement of Sector's products, even because Pirelli was awarded contracts to realize all the most important submarine links and through the growth of the Industrial Markets business unit; profitability of the General Market business unit also grew, through the focalization on higher value added products.

Telecom Cables and Systems Sector
Sales were 430 million Euros , substantially in line with 427 million Euros in 2003. On a like for like basis, there was a 0.3% reduction, due to price pressures just partially balanced by volume growth.

EBITDA stood at 9 million Euros (negative for 1 million Euros in 2003), of which 21 million Euros related to the Cables and Fibers operations.

EBIT was negative for 15 million Euros (-6 million Euros related to the submarine activities subject of the agreement with Alcatel and -10 million Euros to the start-up of the activities in broadband and in second generation photonics), improving compared to -39 million Euros in 2003. In 2004 therefore the Cables and Fibers operations have reached the operating break-even, especially through the efficiencies undertaken by the management.

Net profit was negative for 18 million Euros (after financial costs of 17 million, fiscal gains for 3 million Euros and extraordinary gains for 11 million Euros), compared to a loss of 56 million Euros in 2003.

The net financial position at 31 December 2004 was negative for 301 million Euros, in line with 302 million Euros in 2003.

Employees at 31 December 2004 were 2,058 , including 126 employees with temporary contracts.

In particular, a strong pressure on prices of cables and fibers was balanced by a slight improvement in volumes, especially in North America and through the return to investments by some big operators. Europe showed instead a recovery in demand of copper cables for ADSL.

The Group's Real Estate Activities
It is worth to remind that Pirelli RE is a management company which manages special pur pose vehicles and funds owner of real estate and non performing loans portfolios, investing through minority stakes (asset management and fund management activity) and providing these and other clients with a range of real estate specialist services (service provider activity). Consequently, the aggregate production value net of acquisitions and EBIT including income from equity participations (pro-quota) are the most significant indicators of the business volume managed by the Group and results at operational level, respectively.

The aggregate production value of 2004, net of acquisition, was 1,973.2 million Euros , with a growth of 29% compared to 1,525.5 million Euros in 2003. EBIT including income from equity participations (pro-quota) was 157.5 million Euros , compared to 128 million Euros of 2003, with a 23% growth.

Net profit was 128 million Euros , compared with 102 million Euros in 2003, with a growth of more than 25% .

For further information on Real Estate Activities, please refer to the press release issued by Pirelli RE last 18 March 2005 .

Pirelli & C. Ambiente
The result of the company at 31 December 2004 was negative for 2.2 million Euros against -2,1 millions in 2003.

Olimpia
In 2004 Olimpia further improved its economic and financial structure and, after the 2004 merger of Telecom Italia and Olivetti, benefited of a cash flow for dividends, reaching financial equilibrium. Company's net result at 31 December 2004 is therefore positive for 16 million Euros (-330 million Euros in 2003).

Forecasts for the 2005 fiscal year
The actions of focalization on more value-added segments are continuing in 2005. For industrial activities is consequently forecasted a further increase in profitability in the three sectors in which the Group operates, excluding extraordinary events currently not forecastable. During the year is also forecasted the completion of the valorization project related to the Energy and Telecom Cables and Systems Sectors with the contribution of institutional investors.

In the Tyres Sector , in a growing market, Pirelli expects to further improve its results through a continuous focus on high-performance segments, the prosecution of product delocalization and the growth in the American market.

In the Energy Cables and Systems Sector , while waiting a recovery in investments in infrastructures for energy transmission, Pirelli aims at increasing profitability through the focalization on higher margins products.

In the Telecom Cables and Systems Sector , in a market still competitive in prices, Pirelli aims at improving the 2004 result, especially through the already mentioned recovery of the North-American market.

As regards the Real Estate Sector, having achieved a 54% increase in operating profit including income from equity participations in the two-year period 2003-2004, the Group expects to see growth in 2005 in line with the average annual growth target announced in the three-year plan (2003-2005).

Pirelli Broadband Solutions should grow on its trend in sales of broadband access products. As the second generation photonics - still in start-up - is concerned, R& D activities for innovative products, which should be marketed in 2005, will go on.

Olimpia , following the operations undertaken in 2004 and 2005, should post a growing result .

Consequently, the Pirelli & C. SpA Group expects for 2005 a further growth in profitability of all activity sectors.

Parent Company financial statements
The Parent Company Pirelli & C. SpA closed with a net profit of 150 million Euros in 2004, against a 138 million Euros profit in 2003.



The Company's Board of Directors will recommend the distribution of a dividend of 0.0210 Euros per ordinary share and 0.0314 Euros for savings share to Ordinary Shareholders' Meeting . Dividends will be paid to approximately 5,178 million ordinary shares - approximately 3,324 million last year - including approximately 1,518 million shares coming from the capital increase approved by Extraordinary Shareholders' Meeting of January 21 and completed on March 11, and to approximately 135 million saving shares. Dividend payout , 113 million Euros, therefore has grown by 4%.

The Board of Director has decided to call the Ordinary Shareholders' Meeting for the approval of 2004 Financial Statements for 27 April (on first call) and 28 April (on second call); dividend payment is scheduled on 26 May 2005 (detachment of coupon on 23 May 2005 ). The Shareholders' Meeting shall also vote the renewal of delegation to buy its treasury shares in compliance with the overall possession limit of 10% of the share capital and the appointment of the auditor for the 2005-2007 three year period.


Directors decided to resign before the natural expiration of their charge in April 2006 merely in order to have list voting for Board Members' appointment (introduced last year) immediately applied in next General Shareholders' Meeting. Board will be in charge until then. List voting will allow minority shareholders to appoint one fifth of Board Members.

Transition to IAS
In view of the adoption of international financial reporting standards (IAS/IFRS) as of the 2005 financial year, the Pirelli Group, in line with the other companies of the Pirelli Group, is completing the transition process that will enable it to prepare its report for the first quarter of 2005 in accordance with the new standards.

The impact on the consolidated financial statements of the Pirelli Group will be published and announced at the time of the approval of the above quarterly report.

Conference call
Financial Statements for 2004 will be presented today at 5:30pm ( 3:30pm GMT ), during a conference call chaired by Marco Tronchetti Provera, Chairman of Pirelli & C. SpA.

Journalists could hear the conference call - without the opportunity of asking questions - dialing the number +39 06 33485042 .
Presentation will be also available in audio streaming - in real time - on the site www.pirelli.com , in the Investor Relations section, where slides will be downloadable.


Download the press release (PDF File, 93Kb)

Summaries of the financial statements for the period ending 31 December 2004; pro-forma consolidated representation of Pirelli & C. S.p.A's balance sheet and income statement at 31/12/2004 assuming full consolidation of Olimpia S.p.A. and the shareholders' equity method valuation of the Telecom Italia S.p.A. equity stake. (PDF File, 21Kb)