Pirelli & C. 1H 2006 preliminary results
GROWTH IN ALL KEY ECONOMIC INDICATORS
PIRELLI & C. SPA GROUP
REVENUES: 2,445 MILLION EUROS, AN INCREASE OF 7.2% FROM 2,281 MILLION IN FIRST HALF 2005 (+3.4% NET OF EXCHANGE RATES)
OPERATING INCOME: 216 MILLION EUROS (+6.7%); ROS AT 8.8%
NET DEBT: 1,575 MILLION EUROS, COMPARED WITH 1,495 MILLION ON 31 MARCH 2006. THE VARIATION DUE MAINLY TO DIVIDEND DISTRIBUTION
REVENUES: 2,018 MILLION EUROS, AN INCREASE OF 12.4% FROM 1,796 MILLION IN FIRST HALF 2005 (+7.4% NET OF EXCHANGE RATES)
- OPERATING INCOME FROM ORDINARY OPERATIONS: 201 MILLION EUROS (+7.5%); ROS AT 10%. OPERATING INCOME AFTER COSTS OF IPO PROJECT: 195 MILLION EUROS (+4.1%); ROS AT 9.6%
- REVENUES: 2,018 MILLION EUROS, AN INCREASE OF 12.4% FROM 1,796 MILLION IN FIRST HALF 2005 (+7.4% NET OF EXCHANGE RATES)
EBIT INCLUDING INCOME FROM EQUITY PARTICIPATIONS: 92 MILLION EUROS (+15% FROM FIRST HALF 2005)
PIRELLI BROADBAND SOLUTIONS
REVENUES: 73 MILLION EUROS, AN INCREASE OF 13.8% FROM 64 MILLION IN FIRST HALF 2005
OPERATING INCOME: BREAK-EVEN
REVENUES: 39 MILLION EUROS, AN INCREASE OF 36.5% FROM 29 MILLION ON 30 JUNE 2005
- CHAIRMAN AND CHIEF EXECUTIVE GIVEN MANDATE TO DEFINE THE PRIVATE PLACEMENT OF 39% OF PIRELLI TYRE FOR A CONSIDERATION OF 740 MILLION EUROS
Milan, 27 July 2006 - The Board of Directors of Pirelli & C. SpA met today and examined the preliminary and non-audited results for operations in the six months ended 30 June 2006.
The Pirelli & C. SpA Group
In the first half of 2006, the Pirelli & C. SpA Group posted growth in the key economic indicators compared with the same period a year earlier due to its focus on high margin businesses.
In industrial activities, Pirelli Tyre ended the first half with growth in results, reaching revenues of over two billion euros with increases in both the Consumer and Industrial businesses. In real estate activities, Pirelli RE posted a 15% increase in EBIT including income from equity participations. As for the start-ups, Pirelli Broadband Solutions, active in broadband technologies, achieved a revenue increase of close to 14% and an operating income close to break-even. Pirelli Ambiente, active in technologies for sustainable development, continued its trend of sales increases.
At the consolidated level, Group revenues on 30 June 2006 amounted to 2,445 million euros, an increase of 7.2% compared with 2,281 million euros in first half 2005. Net of exchange rates, revenues rose by 3.4%.
The consolidated EBITDA totalled 324 million euros (13.3% of sales), an increase of 5.8% from first half 2005. Excluding non-recurring costs sustained for the planned flotation of Pirelli Tyre SpA (approximately 12 million euros), consolidated EBITDA amounted to 336 million euros (13.8% of sales), with an increase of approximately 10% from first half 2005.
The consolidated operating income (EBIT) was 216 million euros, with an increase of 6.7% from 202 million on 30 June 2005 and with growth in all sectors of activity. Return on Sales (ROS) at the consolidated level was 8.8%. Excluding non-recurring costs sustained for the planned flotation of Pirelli Tyre SpA (approximately 12 million euros), the consolidated operating income was 228 million euros ( +12.9% compared with 2005) with a ROS of 9.3% (8.9% in June 2005).
Group net debt on 30 June 2006 amounted to 1,575 million euros, compared with 1,495 million euros on 31 March 2006. The variation was mainly due to dividend payments of approximately 150 million euros, partially compensated by an inflow of 27 million euros deriving from the exercising of the Pirelli & C. 2003-2006 warrant and net cash flow generated from operations.
Pirelli Tyre revenues on 30 June 2006 were 2,018 million euros, with an increase of 12.4% from 1,796 million in first half 2005 ( + 7.4% net of exchange rates) due mainly to volume growth and the focus on the product mix. The Consumer business generated revenues of 1,403 million euros, an increase of 11% compared with first half 2005; the Industrial business registered revenues of 615 million euros, an increase of 16% compared with the same period a year earlier.
EBITDA was 293 million euros ( +4.6% compared with first half 2005 and equal to 14.5% of sales), including non-recurring costs of 6 million euros linked to the planned flotation. EBITDA from ordinary operations amounted to 299 million euros (14.8% of sales), with an increase of 7% compared with 280 million euros in first half 2005.
The operating income amounted to 195 million euros ( +4.1% compared with first half 2005 and ROS was 9.6% ), including non-recurring costs of approximately 6 million euros linked to the planned flotation. The operating income from ordinary operations was 201 million euros, an increase of 7.5% from 187 million euros on 30 June 2005, with a ROS of 10% (10.4% in first half 2005). The reduction in the profitability percentage was mainly due to an increase in raw material costs and the start-up effect of the new factory in China .
Pirelli RE is a management company, which manages funds and 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 companies and to other customers, either directly or via its franchise network. In analysing the following results, which have been presented and prepared under IFRS, it should be noted that operating profit including income from equity participations is the most appropriate measure of the Group's operating performance.
The operating profit including income from equity participations amounted to 92 million euros, with an increase of 15% compared with 80.3 million euros in first half 2005.
For further information on the performance of the real estate activities, consult the press release distributed on 26 July by Pirelli & C. Real Estate.
Pirelli Broadband Solutions
Revenues on 30 June 2006 amounted to 73 million euros, with an increase of 13.8% from 64 million euros in first half 2005, also linked to the marketing of new second generation photonics products.
The Company's EBITDA has reached substantial break-even ( negative 0.1 million euro), and has improved from -2.3 million in first half 2005.
The operating income, positive for access activities, was however impacted by the start-up phase for second generation photonics products and was overall negative for 0.6 million euros, an improvement compared with -2.6 million euros in the same period of 2005.
Pirelli Ambiente, the Company born to strengthen the Group's presence in the environmental and sustainable development sectors, generated on 30 June 2006 revenues for 39 million euros (+36.5% from 29 million euros in the same period of 2005), confirming the efficacy of the technologies developed by the Company.
The Company's EBITDA was positive for 1.9 million euros compared with a negative 1 million euro in first half 2005, thanks to the agreement signed with British company ReEnergy for the development and marketing of fuels derived from waste (Cdr-P) in the United Kingdom.
The operating income on 30 June 2006 was 1.5 million euros compared with -1.8 million euros in the same period of 2005.
Outlook for full-year 2006
The results for the first half allow the confirmation for full-year 2006 of forecasts of an improvement in operating results compared with 2005, barring external factors of an extraordinary nature which today cannot be foreseen and, relative to Pirelli RE, the eventual impact of the conversion into law of decree DL n.223/06, approved by the Senate and awaiting approval in the Lower House.
Relevant events after 30 June 2006
On 12 July 2006, Pirelli & C. S.p.A, Edizione Finance International S.A and Edizione Holding S.p.A finalized the acquisition of all of the shares owned by Hopa S.p.A in Olimpia S.p.A (equal to 16% of capital), as foreseen in the agreement announced on 4 July last. Simultaneously, Hopa S.p.A finalized the acquisition of all of the shares owned by Olimpia S.p.A in Holinvest S.p.A (equal to 19.999% of capital). Further, a two-year pre-emption pact was signed in favour of Olimpia regarding 320,253,610 Telecom Italia S.p.A ordinary shares held by Holinvest (equal to 65% of all the shares it owns).
Pirelli Tyre: private placement
The Board of Directors examined an operation with number of primary Italian and international financial institutions (Banca Intesa, Banca Leonardo Group, Capitalia, One Equity Partners - JP Morgan, Lehman Brothers and Mediobanca) which entails the disposal of a minority stake in the capital of Pirelli Tyre SpA aimed at subsequent Initial Public Offering.
The operation, for which the definition of organizational structures and other aspects are still underway, entails the disposal of 39% of the capital of Pirelli Tyre SpA for a consideration of 740 million euros - which corresponds to an equity value for the entire Company of approximately 1.9 billion euros - with the simultaneous underwriting of agreements between seller and buyer aimed at ensuring the latter obtain representation in Company organs, as well as regulating the mode of transfer of the stake up to the subsequent IPO.
The Board of Directors approved the operation mandating the Chairman and Chief Executive to define the relative agreements - as well as the main one regarding the disposal - in their respective details, confirming a similar decision by Pirelli Tyre Holding N.V, the Company which holds 100% of Pirelli Tyre SpA.
The specific contents of the agreements will be quickly announced to the market at the moment of their definition.
Pirelli & C. SpA financial statements for the six months period ended on 30 June 2006 will be examined by the Board of Directors on 12 September 2006.