24
March
2004
|
00:00
Europe/Amsterdam

Pirelli & C. 2003 results

Board Of Directors Of Pirelli & C. Spa Approves Results For Year Ended 31 December 2003 :
Pirelli & C. Spa Group Back To Net Profit

  • Recommended Dividend 0.031 Euros Per Ordinary Share And 0.0414 Euros Per Savings Share
  • Profitabilty Of Industrial Activities Grew More Than 60%
  • Operating Free Cash Flow Positive By More Than 460 Million Euros; In Last Two Years The Figure Tops 1 Billion Euros
  • Strong Growth Of Real Estate Activities
  • Corporate Governance Strengthened: Indipendent Board Members Will Have A More Important Role Thanks To The Adoption Of List Voting
  • Minorities Will Determine One Fifth Of Board Members

  •  

    For 2004, Group Expects A Significant Improvement Of Results In All Activity Sectors, Both At Operating And Net Level

    Consolidated Results
  • Revenues: 6,671 Million Euros, Compared To 6,718 Million Euros (-0.7%); At Comparable Conditions, A Growth Of 7% Was Posted
  •  
  • Ebitda: 628 Million Euros, +20% Against 523 Million Euros In 2002
  •  
  • Operating Income (Ebit): 268 Million Euros, More Than Doubled When Compared To 118 Million Euros In 2002
  •  
  • Operating Income Including Income From Equity Participations: Strongly Grows And Is Positive By 217 Million Euros, Against A Loss Of 57 Million In 2002
  •  
  • Net Profit: 4 Million Euros, Strongly Growing When Compared To Net Loss Of 405 Million In 2002
  •  
  • Pirelli & C. Spa Share Of The Net Result Was Negative By 39 Million Euros: Net Of The Olimpia Effect, A Net Profit Of 61 Million Was Posted
  •  
  • Olimpia To Reach Financial And Economic Stabilization In 2004
  • Net Debt: 1,745 Million Euros, Reduced By More Than 300 Million When Compared To 2,050 Million At End 2002

  • Industrial Activities
  • Revenues: 6,034 Million Euros Compared To 6,346 Million Euros (-4.9%); Net Of Exchange Rates, Metal Prices And Changes In The Scope Of Consolidation , This Result Represents A 3% Increase Year Over Year
  •  
  • Operating Income: 264 Million Euros, Up 63%, With Ros Rising To 4.4% From 2.6%
  •  
  • Net Profit: 112 Million Euros
  • Tyres: Ebit 220 Million Euros (+15%) With Ros At 7.4%
  •  
  • Energy Cables And Systems: Ebit 83 Million Euros (+51%) With Ros Growing To 3.1% From 1.8%
  •  
  • Telecom Cables And Systems: Ebit Strongly Improved (-39 Million Euros Against -84 Million Euros In 2002)


  • Real Estate Operations
  • Operating Income Including Income From Equity Participations: 128.1 Million Euros, +25% Year Over Year
  •  
  • Assets Under Management: 10,474 Million At Market Value, Attributable Share 28%
  •  
  • Consolidated Net Income: 102.1 Million, +24% (82.6 Million From Real Estate Activities In 2002)

Milan, 24 March 2004 - The Board of Directors of Pirelli & C. SpA today met and approved the company's consolidated financial statements for the year ended 31 December 2003. The Pirelli & C. Board of Directors shall also apply to the Extraordinary Shareholders' Meeting for approving an important variation to Group's Corporate Governance: the adoption of list voting for Board Members appointment, reserving to minorities one fifth of Board Members.

In 2003 Pirelli substantially completed a wide process aimed at simplifying and financially strengthening the company structure as well as at significantly aligning production capacity of industrial activities to dramatically changed market conditions in both Energy and Telecom Cables and Systems sectors.

Efficiency actions undertaken have already shown their significant results in 2003 performance of these sectors. Tyres Sector confirmed its strong growth - both in profitability and market shares - and set new challenging targets for the expansion in very important and potentially high-growth markets, like the US and China.

Real Estate activities showed strong growth in results, reaching the highest targets set out for the first year of the three-year plan 2003-2005.

Investments in Research and Development activities - substantially unchanged - delivered first important results : products fully developed by Pirelli Labs and business unit Pirelli Telecom Systems were launched, validated by international companies like British Telecom, FastWeb, Telecom Italia and Alcatel.

Rationalization and reduction actions completed in 2003, with gains worth approx. 170 million Euros (370 million Euros in the two-year timeframe), will allow Pirelli to catch any market opportunity in Cables and Systems sectors, as well as reaching new important targets in profitability, market share and new products, thus confirming the leadership in new technologies and innovation.

The following figures include the accounting effects of the merger of Pirelli SpA and Pirelli & C. Luxembourg into Pirelli & C. Spa, which were retroactively accounted for starting January 1 st 2003 and were approx. 29 million Euros.

The Group Pirelli & C. Spa

In 2003 the consolidated revenues of Pirelli & C. Spa Group amounted to approx. 6,671 million Euros , substantially in line with 2002 figure of 6,718 million. On the same perimeter base - net of the effects of exchange rates (-5.9%), metal prices in the Energy Cables and Systems business (-0.3%) and changes in the scope of consolidation (-1.5% due to the sale on enameled wires completed in January 2003) - revenues grew by 7%, with a significant growth of Tyres and Real Estate Sectors.

EBITDA grew by more than 20% and stood at 628 million Euros (523 million Euros in 2002). The ratio EBITDA/Revenues therefore grew from 7.8% to 9.4% , increasing in all activity Sectors.

Operating income (EBIT) amounted to 268 million Euros and more than doubled 2002 figure of 118 million Euros. Consolidated ROS - Return on Sales was 4% , strongly growing when compared to the 1.8% figure of 2002.

The result from investment holdings is negative by 51 million Euros against -175 million Euros in 2002 and it relates to the valuation by the net asset method of the investment in Olimpia - negative by 100 million Euros (-150 million Euros in 2002) - while results of real estate companies (Pirelli & C. Real Estate Group) were positive by 67 million Euros (60 million Euros in 2002). It should be mentioned that Olimpia results do not yet benefit from any dividend, which will be accounted for cash when received.

Financial charges at 31 December 2003 were negative by 134 million Euros , improved when compared to -178 million Euros of 2002, mainly due to lower debt.

E xtraordinary items were negative by 9 million Euros, with a significant growth compared to -83 million Euros of 2002, which included restructuring costs.

Net profit at 31 December 2003 was 4 million Euros (after fiscal charges for 70 million Euros), against a net loss of 405 million Euros in 2002. Net of the Olimpia effect, net profit was 104 million Euros.

The Pirelli & C. SpA attributable net result was negative by 39 million Euros (net of the Olimpia effect, a net profit of 61 million was posted), compared to a net loss of 58 million Euros at 31 December 2002.

Shareholders' equity was 3,678 million euros, compared with 4,626 million euros at year-end 2002, due to merger effects. The Pirelli & C. SpA share of the Shareholders' equity was 3,429 million Euros (0.99 Euros per share) against 1,933 million Euros (2.96 per share) in 2002.

The net financial position at December 31, 2003 is negative by 1,745 million Euros, down more than 300 million Euros when compared to the figure of 2,050 Euros at December 31, 2002 . A positive net cash flow deriving from operating activities for approx. 239 million Euros contributed to the figure. The improvement also reflects the net effects of the share capital increase undertaken by Pirelli & C. SpA quantified at 649 million Euros, the subscription of the Olimpia capital increase quantified at 388 million Euros and dividend payout for 64 million Euros. The figure also includes non recurrent events: the accounting as debt of the put option exercised by Cisco Systems for Submarine Telecom Systems (January 2004) for 61 million Euros and a net balance acquisitions/sale of participations for 48 million Euros.

Groups' employees at 31 December 2003 were 36,337 , compared to 37,350 at year-end 2002. Pirelli & C. maintained training and valorization activities of its human resources, thus confirming the excellence of its employees all over the world. Pirelli today has a high skilled managerial team, with international experiences and able to capitalize on synergies among different business activities.

The industrial operations of the Group

The trend in the industrial activities of the Group shows a net profit and a strong increase in operating income , even though in a context still influenced by slow economic frameset. Demand for telecommunications infrastructure showed still low sales volumes, with further price-reductions. Investments of utilities companies in the Energy sector are still stagnant especially in Europe in the low and medium voltage segments, and prices are under pressure in the general market.

Net profit and increase in operating income reflects positive effects of efficiency measures launched in a timely way by the Group management and focused in the Energy and Telecom Cables and Systems Sectors, with gross efficiency gains in 2003 for more than 170 million Euros, which should be added to 199 million Euros in 2002. In particular, net profit of Energy Cables and Systems Sector stood at 39 million Euros - compared to a net loss of 120 million in 2002 - while EBIT posted a growth of 51% . Tyres Sector confirmed the growth in profitability, which rose by 15% , while net profit grew by 65% to 129 million Euros.

In 2003 the Industrial Activities sales revenues reached 6,034 million Euros , down 4.9% when compared to 2002. On the same perimeter base (net of the effects of exchange rates, metal prices and changes in the scope of consolidation) revenues actually grew by 3% .

EBITDA grew by more than 13% and stood at 567 million Euros , with a ratio on revenues of 9.4% (7.9% in 2002).

Operating income (Ebit) was 264 million Euros , growing by 63% when compared to 2002. Return On Sale rose to 4.4% against 2.6% in 2002. Net of the merger surplus effect, EBIT stood at approx. 240 million Euros and ROS at 4%. In 2002 EBIT was 162 million Euros. EBIT in fourth quarter of 2003 was 70 million Euros, compared to 35 million in the same period of 2002.

Net profit of industrial operations at 31 December 2003 stood at 112 million Euros, against a net loss of 305 million Euros in 2002.

Free cash flow in 2003 was positive by 464 million Euros - in 2002 it was positive by 538 million Euros - thanks to a good management of investments and of net working capital, whose turnover is bettering for the second year in a row in all the three sectors.

Pirelli's commitment to R& D was confirmed also in 2003: investments were 204 million Euros, 3.4% of revenues, in line with previous year. Thanks to the investments carried on in the least years, Pirelli is today one of the leading Italian and European innovating companies, as witnessed by more than 400 patents filed in the last two years.

Group Headcount in the industrial operations of the Group at December 31, 2003 was 33,401 , against 35,247 at the end of 2002.

Industrial sector operations

Tyres Sector

Sales amounted to 2,970 million Euros , a year-on-year increase of 11 .6%: of this percentage, 7.5% refers to increased volumes and the remaining to prices/mix, thus confirming the focus on high performance market segments.

Operating income was 220 million Euros, with a ROS of 7.4%, an improvement of 15% compared to 191 million Euros in 2002.

Net profit stood at 129 million Euros (after financial costs of 45 million Euros, fiscal charges for 45 million Euros and extraordinary costs for 1 million Euros), compared to 78 million Euros at year-end 2002.

The net financial position at 31 December 2003 was negative to the extent of 317 million Euros against 492 million Euros at the end of 2002.

Employee numbers at 31 December 2003 stood at 20,437, including 1,705 temporary workers.

Energy Cables and Systems Sector

Sales totaled 2,637 million Euros , down 4.4 % on an equal perimeter basis (with prices/mix slightly better than volumes).

Operating income was 83 million E uros , compared to the figure of 55 million Euros posted in 2002, with ROS growing to 3.1% with respect to 1.8% recorded in 2002. Gains deriving from efficiency and rationalization measures undertaken in the last two years offset reductions due to slowing markets.

Net profit stood at 39 million Euros (after financial costs of 23 million Euros, fiscal charges for 16 million Euros and extraordinary costs for 5 million Euros), compared to 120 million Euros at year-end 2002.

The net financial position at 31 December 2003 was negative to the extent of 354 million Euros against 373 million Euros at the end of 2002.

Employee numbers at 31 December 2003 stood at 10,746 , including 502 temporary workers, down 1,700 units year over year.

Telecom Cables and Systems Sector

The decrease in sales revenues on an equal perimeter basis was 3.2% , taking into account the already mentioned pressure on prices/mix (-21.5%) and with an increase of volumes substantially deriving from the accounting of a Submarine contract. Revenues were, therefore, 427 million Euros.

Operating income was negative for 39 million Euros, up when compared to the loss of 84 million Euros in 2002.

A Net loss of 56 million Euros (after financial costs of 20 million Euros, fiscal charges for 1 million Euros and extraordinary gains for 4 million Euros), was posted compared to 263 million Euros at year-end 2002.

The net financial position at 31 December 2003 was negative to the extent of 302 million Euros against 431 million Euros at the end of 2002.

Employee numbers at 31 December 2003 stood at 2,218 , including 46 temporary workers.
The Group's Real Estate operations
It is worth recalling that Pirelli RE is a management company which manages special purpose 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 full 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 (the total of sales and the change in inventories, which includes minority equity investments under management) net of acquisitions, totalled approximately 1,525 million Euros, with growth of 18% compared to the figure of 1,297.3 million Euros in 2002.

EBIT including pro-quota income from equity participations totalled 128.1 million Euros, as compared with 102.2 million Euro in 2002, representing growth of 25% .

As regards of main activities of Real Estate operations, Asset Management activities (not including areas) recorded an aggregate production value , net of acquisitions, equal to 1,147.5 million Euros, as compared with 1,020 million Euros in 2002, representing growth of 12% . The exploitation of assets under management generated sales of 2,037.7 million Euros at market value (as against a book value of 1,602.6 million ) and the book value of acquisitions was 1,587.4 million Euros.

Assets under management stood at 10,474 million Euros at market value (against 9,756 million Euros on December 31 st , 2002 ). The share attributable to Pirelli RE was 2,922 million Euros , equal to 28% of the total.

Service Provider activities, fully consolidated, recorded a consolidated production value of approximately 322 million Euros, as compared with 199.8 million over the same period of the previous year, with an increase of 61% . EBIT from these activities was 50.6 million Euros, with growth of 75% when compared to 2002.

The consolidated net profit was 102.1 million Euros, as compared with 82 .6 million Euros attributable to real estate activities in 2002, with growth of 24%.

For further information of Real Estate activities, please refer to the press release issued by Pirelli & C. Real Estate on 22 March 2004 .

Pirelli & C. Ambiente

Pirelli & C. Ambiente is the Group company operating in the field of the recovery of energy and materials. Its business purpose is to transform waste into alternative quality fuel for use in existing, non-dedicated, industrial plant such as cement works and power stations.

In 2003, a net loss of 2.1 million Euros was posted, compared to a 1.7 million Euros at year-end 2002.

Olimpia
In 2003 the financial structure of Olimpia was strengthened: as already mentioned, Pirelli contribution was 388 million Euros. Starting from 2004 - following the already announced financial statements of Telecom Italia and the recommendation of dividends - Olimpia would reach financial and economic stabilization.


Forecasts for the 2004 fiscal year

Rationalization measures undertaken in the last two years will allow Pirelli fully benefiting of any market upturn. In particular for industrial activities, a further increase in results is expected in all the three activity sectors.

In Tyres Sector , in a growing market, Pirelli expects to further improve its results, thanks to a further focus on high performance segments, to production delocalization and to growth in American market.

In Energy Cables and Systems Sector, waiting for a partial market upturn, Pirelli aims at consolidating its operating income growth through a focus on higher margins products.

In Telecom Cables and Systems Sector , in a still stagnating market, Pirelli aims at reaching operating break even, thank mainly to its new products for broadband access.

As regards the Real Estate sector, on the basis of data currently available it is reasonable to expect a growth in EBIT including pro-quota income from equity participations i n line with the targets of the 3-years business plan (2003-2005).
Results will also benefit of improved Olimpia financial statements, which, thanks to operations carried out in 2003, should reach financial and economic stabilization.

Overall, Pirelli & C. Spa expects for 2004 a significant improvement in results in all its activity sectors, both at operating and net level .

Parent company financial statements

The 2003 accounts of Parent company Pirelli & C. SpA closed with a net profit of 138 million Euros - including the accounting effects of the merger of Pirelli SpA and Pirelli & C. Luxembourg into Pirelli & C. Spa - compared to a net profit of 60 million Euros at year-end 2002 .

The company's Board of Directors shall recommend the distribution of a dividend of 0.031 euros per ordinary share and 0.0414 euros per savings share to the Ordinary and Extraordinary Shareholders' Meeting, convened for 10 May on first call and 11 May on second call. Dividend pay out is scheduled from 27 May 2004 (detachment of coupon on 24 May 2004 ).

The Ordinary Shareholders Meeting will be called upon to pass resolution on the proposal for the adoption of a Regulatory Code . The Extraordinary Meeting will be called upon to approve proposals for statutory modifications in compliance with the new legislation as set down in the Company Law Reform Act. Among the most remarkable modifications, there will be a motion for the introduction of list voting for the appointment of the Board of Directors, with the goal of involving all the shareholders in Company's corporate life and in its decision making process. This operation is aimed at ensuring that - if Shareholders would present at least two lists - one fifth of Board members would be appointed by the so-called minorities. Furthermore, the proposal for calling the Board of Directors on demand from one fifth of Board members will be submitted to the Meeting.

A motion for the attribution to the Board of Directors of the right to increase the company share capital and to issue convertible bonds as ordinary shares, as stipulated by Articles 2443 and 2420, paragraph 3 of the Civil Code, will be also submitted to the Meeting.
Conference call

Financial statements for 2003 will be presented on 24 March 2004 at 4:30pm ( 15:30 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 +39 06 33485042 .

Presentation will be also available in audio streaming - in real time - on www.pirelli.com, in the Investor Relations section, where slides will be downloadable.

Summaries of the financial statements for the period ending December 31, 2003

Pro-forma consolidated representation of Pirelli & C. S.p.A.'s balance sheet and income statement at 31/12/2003 assuming full consolidation of Olimpia S.p.A. and the shareholders' equity method valuation of the Telecom Italia S.p.A. equity stake.

Download the Press Release (English version, PDF, 86Kb)