12
September
2005
|
00:00
Europe/Amsterdam

Board of Directors approves financial statements at 30 June 2005

With the application of IAS/IFRS accounting standards, the Energy and Telecom Cables and Systems activities of the Pirelli & C. SpA Group, whose sale was completed on 28 July 2005, have been treated as discontinued operations (activities that have been sold or are in the process of being sold) and are not therefore consolidated as operational components (Revenues, Ebitda, Ebit), but contribute solely to the net result after tax for the first six months of the year. For the purposes of homogeneous presentation, 2004 data have been treated in the same way

PIRELLI & C. SPA BOARD OF DIRECTORS APPROVES FINANCIAL STATEMENTS FOR FIRST HALF ENDED 30 JUNE 2005:

 

 

  • GROUP NET PROFIT DOUBLES: 210 MILLION EUROS COMPARED TO 104 MILLION EUROS IN FIRST SIX MONHTS 2004
     
  • OLIMPIA: PRO-QUOTA RESULT ON GROUP CONSOLIDATED STATEMENTS GROWS STRONGLY TO 86 MILLION EUROS (8 MILLION EUROS AT 30 JUNE 2004)

 

 

  • FOR FULL YEAR 2005 GROUP CONFIRMS EXPECTATIONS OF SIGNIFICANT IMPROVEMENT IN RESULTS

 

 

  • GROUP REVENUES: 2,281 MILLION EUROS COMPARED TO 2,016 MILLION EURO IN FIRST HALF 2004, +13.1% (+10.6% ON LIKE-FOR-LIKE BASIS)

  •  
  • OPERATING INCOME (EBIT): +33% TO 202 MILLION EUROS, ROS AT 8.9% COMPARED TO 7.5% IN FIRST HALF 2004

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  • TYRES: REVENUES 1,796 MILLION EUROS, AN INCREASE OF 8.3% COMPARED TO FIRST HALF 2004 (+7.1% ON LIKE-FOR-LIKE BASIS). OPERATING PROFIT UP 21% TO 187 MILLION EUROS, ROS AT 10.4%

  •  
  • PIRELLI BROADBAND SOLUTIONS: FIRST HALF 2005 REVENUES (64 MILLION EURO) EQUAL TO 2004 FULL YEAR REVENUES

  •  
  • PIRELLI RE: OPERATING PROFIT INCLUDING INCOME FROM EQUITY PARTICIPATIONS TO 80.3 MILLION EUROS (+38%). CONSOLIDATED NET PROFIT AT 59.8 MILLION EUROS (+25%)

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  • NET FINANCIAL POSITION: NET DEBT IS 2,338 MILLION EUROS, DECREASES TO 1,140 MILLION EUROS INCLUDING THE POSITIVE EFFECT OF THE CABLES AND SYSTEMS ACTIVITIES' DISPOSAL (APPROX. 1.2 BILLION EUROS).

    THE VARIATION FROM THE FIRST QUARTER 2005 (AT 31 MARCH 2005 NET FINANCIAL POSITION WAS -2,120 MILLION EUROS) IS MAINLY DUE TO DIVIDEND PAYMENTS OF APPROX. 145 MILLION EURO AND THE ACQUISITION OF TELECOM ITALIA SHARES FOR APPROX. 100 MILLION EUROS

 


Milan, 12 September 2005 - The Board of Directors of Pirelli & C. SpA today met and examined the company's consolidated financial statements for the first half ended 30 June 2005.

Pirelli & C. SpA Group
Over the first six months of 2005 the Pirelli & C. SpA Group saw a significant improvement in all economic indicators : in particular, a further increase in profitability , validating Pirelli's strategy of focusing on a selected number of high margins businesses and aimed at the top-of-range market segment. Regarding the industrial activities of the Group, the first half was characterized by the excellent performance of Pirelli Tyres , which recorded a further increase in profitability compared with the preceding quarters. The start-up company Pirelli Broadband Solutions also grew with sales in the first half of 2005 equalling those achieved in the whole of 2004. In the real estate sector, Pirelli RE confirms the trend of growing results.

At the consolidated level, revenues in the first six months of 2005 amounted to 2,281 million euros, an increase of 13.1% compared with 2,016 million euros for the same period in 2004 and with increases in all sectors of activity. On like-for-like basis, revenues rose 10.6%.

EBITDA stood at 306 million euros (13.4% on sales), growing compared to 252 million euros of first half 2004 (12.5% on sales).


The consolidated operating profit (EBIT) amounted to 202 million euros, with an increase of 33% compared with 152 million euros in the first half of 2004. ROS - Return on Sales at the consolidated level was 8.9% , a further increase from 7.5% in 2004.

The result from equity participations , which includes the evaluation by shareholders' equity method of investments, is positive by 112 million euros, compared to 33 million of the first half 2004. In particular, the Olimpia impact in the first half of 2004 was positive for 86 million euros (compared to 8 million euros in the same period of 2004), due to both Telecom Italia's improved results and the increase in the stake held compared to last year. It should be noted that Olimpia financial statements, received in Group's consolidated statements, is drawn up in accordance with IAS/IFRS accounting standards and includes, a valuation of the Telecom Italia SpA stake which uses the shareholders' equity method. They also include the results of real estate activities ( Pirelli RE Group), positive for 44 million euros (40 million in the first half 2004) and a write down of shareholdings of 17 million euros.

Financial charges at 30 June 2005 were negative by 66 million euros, compared to 35 of the same period of 2004.

Net profit at 30 June 2005, a positive 210 million euros, represents a twofold increase from the 104 million euros registered in the first six months of 2004. Net profit for the activities included in the new perimeter of the Group, without considering the contribution of Cables and Systems Activities (discontinued operations) in the first half, stood at 177 million euros, strongly growing compared to 91 million of the same period of 2004 with the same perimeter.

The Pirelli & C. SpA attributable net profit at 30 June 2005 was positive by 179 million euros, compared to 85 million euros in 2004.

Shareholders' equity was 5,458 million euros , compared to 3,894 million euros at year-end 2004. The Pirelli & C. SpA attributable shareholders' equity at 30 June 2005 was 5,098 million euros (0.96 euros per share) compared with 3,555 million at year-end 2004 (1.03 euros per share).

The Group's net financial position on 30 June 2005 was passive for 2,338 million euros (of which approximately 715 million euros connected with the Cables and Systems activities sold). Including the positive effect of the Cables and Systems activities' disposal (approximately 1.2 billion euros ), net financial position decreases to approximately 1,140 million euros. The variation from the first quarter (at 31 March 2005 net financial position was -2,120 million euros) is mainly due to effects linked to dividend distribution (approximately 145 million euros) and the acquisition of 38.7 million Telecom Italia shares (approximately 100 million euros). The variation from negative 1,601 million euros at the end of 2004 was, in part, also a consequence of routine seasonal factors and of the negative balance between the subscription of Olimpia S.p.A's capital increase for 1,344 million euros and the company's own capital increase of 1,062 million euros approved on 21 January 2005.

The priority commitment made by the Group to research and technological innovation , despite a negative economic situation, was confirmed again in the first half of 2005, with research and development investments , relative to activities included in the new perimeter, of 82 million euros, equal to 3.6% of sales .

Group employees at 30 June 2005, regarding the new perimeter, stood at 26,050 compared with 24,790 on 31 December 2004.
Pirelli Tyres

Sales in the first half of 2005 amounted to 1,796 million euros, an increase of 8.3% compared with 1,659 million euros in the first half of 2004 ( +7.1% on a like-for-like basis).

EBITDA was 280 million euros (15.6% on sales), with a 15.2% growth compared to 243 million at 30 June 2004.

The operating profit was 187 million euros with a ROS of 10.4% , an increase of 21% from 154 million euro in the first half of 2004.

Net financial position at 30 June 2005 was negative by 350 million euros compared to 214 million at year-end 2004, with a negative variation mainly due to dividend payments to parent company Pirelli & C. SpA for 120 million euros. Net financial position at 30 June 2004 was negative by 375 million euros.

Employee number at 30 June 2005 stood at 22,824 , including 3,406 temporary workers (at 31 December 2004 employees were 21,513, of which 2,576 temporary workers).

The growth in volumes and the continual focus on product mix contributed to the positive performance, despite the further price increase in raw materials and a non-brilliant demand. The Consumer business (Car and Moto) saw positive volumes and sales performances due to higher sales especially in North America , in Premium products like PZero Rosso, PZero Nero, Scorpion Zero in all areas and to new homologations from the world's leading automotive makers. The Industrial business registered an increase mainly in original equipment.

Further, in the first half of 2005, Pirelli Tyres confirmed its technological leadership with the presentation of innovative pressure checking and tyre management systems, and new devices applied to the tyre/rim group which interact with car's dynamic check system.
Pirelli Broadband Solutions

Sales in the first six months of 2005 totalled 64 million euros, more than double compared with the 28 million euros of the first half of 2004 and consisted of broadband access products.

EBITDA was negative 2 million euros, an improvement compared with negative 4 million in the first half of 2004.

The company's operating profit, while positive in regard to broadband access activities, was also impacted by the start-up of second generation photonics products and was in total negative for 3 million euro, improving compared with negative 4 million in the first six months of 2004.
The net financial position was passive 3 million euros, an improvement from -22 million in the first half 2004.

At end June 2005 the number of employees was 112 compared with a headcount of 79 at 31 December 2004.

The positive sales performance was led by ADSL access products, which show good growth potential. In the first half 2005, the company consolidated its leadership in Italy , with the acquisition of new clients, in particular through the launch of new VOIP services based on Pirelli solutions.

In second generation photonics, the first half 2005 saw the introduction to market of DTL (Dynamically Tunable Laser), a cutting edge product in the sector. The semester ended with the development of CWDM (Coarse Wavelength Division Multiplexing) solutions and the company has made numerous contacts worldwide in pursuit of partnership agreements which will allow sales for these products by end 2005.
Pirelli RE

It should be noted that Pirelli RE is a management company , which manages funds and special purpose companies that own properties and non-performing loans, and in which it holds minority interests (the fund and asset management businesses). It also provides a full range of property services to the above vehicles and to other customers (the property services business), either directly or via its franchise network of estate agents. Aggregate revenues (which according to IAS/IFRS accounting standards substantially equate with the previously used aggregate value of production net of acquisitions) and operating profit including income from equity participations are, therefore, the most appropriate measure of the Group's turnover and operating performance.

The operating profit including income from equity participations amounted to 80.3 million euros, compared with 58.2 million euros in the same period of 2004, an increase of 38% .

In the first half 2005, net profit rose to 59.8 million euros, an increase of 25% compared with first half 2004.

Results were led by the significant increase of fees in the Fund and Asset Management activities and the improvement of profitability in the Service Provider activity; in the first half 2005, continued the expansion of the Franchising activity, reaching 700 affiliates, in line with targets.

For additional information on the performance of real estate activities refer to Pirelli & C. Real Estate press release issued on 9 September.

Pirelli Ambiente

Pirelli & C. Ambiente Holding, the new company created at the beginning of 2005 to strengthen Group's presence in the environment and sustainable development sector, posted sales for approximately 30 million euros in the first half 2005. During the semester, the company pursued the development of its activity in the field of renewable energy sources, in the production and sale of low environmental impact fuel Gecam Il Gasolio Bianco and is in the process of start, with good feedback from the market, the marketing of antiparticulate filters to reduce emissions of diesel engines, which is expected to be realized in the second half 2005.

Outlook for 2005 fiscal year

The results obtained in the first half of the year allow to confirm Group expectations of a significant improvement in results for full year 2005, excluding unforeseeable external factors of an extraordinary nature.

In particular, in industrial activities, Pirelli Tyres , despite further cost pressures from primary materials and taking the business' seasonality, is expected to maintain its improved trend compared with the previous year.

Pirelli Broadband Solutions is expected to maintain a significant market share for broadband access products, assuming a continual demand for VOIP solutions, and to make its first sales linked to second generation photonics products.
Based on the results achieved in the first half of the year and the information available , Pirelli RE expects growth in operating profit including income from equity participations in 2005 to be in line with the guidance previously given to the market.



Key events which occurred after 30 June 2005

On 22 July 2005, Pirelli and Continental inaugurated in Slatina a plant for the production of of steel cord for the company Cord Romania , a joint-venture 80% held by Pirelli and 20% by Continental created October last.

On 28 July, Pirelli & C. SpA and Goldman Sachs Capital Partners finalized their agreement, under the conditions announced on 1 June, for the acquisition by Goldman Sachs Capital Partners of Pirelli's Cables and Systems for Energy and Telecommunications activities. The closing of the transaction was finalized after having obtained the approval from the competent authorities.

On 29 July 2005 and following approval by the competent authorities, Pirelli and Roadone Tyre Co. Ltd. Finalized their joint venture agreement, announced on 16 June 2005. The joint-venture aims to produce radial tyres for trucks in the Shandong province. The company will serve the Chinese market and South East Asian markets.

In accordance with Consob recommendations, the independent auditor PricewaterhouseCoopers completed its audited report on IFRS reconciliation tables, releasing its conformity judgment without remarks.


Conference Call

The results relative to operations in the first half of 2005 will be presented at a conference call at 4:00 p.m GMT with the participation of Pirelli & C. SpA Chairman Marco Tronchetti Provera.

Journalists will be able to follow the conference call, without the possibility of asking questions, by dialing +39 06 33485042.
The presentation will also be available via audio streaming in real time at www.pirelli.com , in the Investor Relations section, from which slides can be downloaded.Summaries of the financial statements for the period ending 30 June 2005; pro-forma consolidated balance sheet and statement of income for Pirelli & C. S.p.A at 30 June 2005, assuming full consolidation of Olimpia S.p.A. and valuation of the investment in Telecom Italia S.p.A. according to the equity method. Summarized data for the Pirelli & C. SpA Group's balance sheet to 30 June 2005, including also "discontinued operations".

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