31
July
2003
|
00:00
Europe/Amsterdam

Preliminary first half financial results

Meeting of Board of Directors of Pirelli SpA

PRELIMINARY RESULTS AS OF 30 JUNE 2003 EXAMINED

  • EBIT EXCEEDED THE VALUE OF THAT FOR THE WHOLE OF 2002 AND ROS ROSE TO 3.9% DESPITE CONTINUING DIFFICULTIES IN THE TELECOMMUNICATIONS AND ENERGY COMPONENTS MARKETS
     
  • REVENUES: 3,022 MILLION EUROS, COMPARED TO 3,352 MILLION EUROS IN THE FIRST HALF OF 2002; NET OF EXCHANGE RATE EFFECTS, METAL PRICES AND CHANGES IN THE CONSOLIDATION AREA, GROWTH OF 3.3% WAS RECORDED
     
  • EBITDA: 287 MILLION EUROS, COMPARED WITH 278 MILLION EUROS FIRST HALF 2002
     
  • OPERATING INCOME: 131 MILLION EUROS, INCLUDING THE ATTRIBUTION OF THE MERGER SURPLUS (APPROXIMATELY 13 MILLION EUROS) +41% COMPARED TO 30 JUNE 2002
     
  • NET DEBT: 1,540 MILLION EUROS, COMPARED TO 1,469 AT THE END OF 2002 AND DOWN COMPARED TO 31 MARCH 2003
     

    FOR 2003 THE FORECAST IS CONFIRMED OF GROWTH IN OPERATING INCOME IN THE TYRE AND ENERGY CABLES AND SYSTEMS SECTORS AND OF ACHIEVING BREAKEVEN FROM OPERATIONS IN THE TELECOMMUNICATIONS CABLES AND SYSTEMS SECTOR DURING THE LAST QUARTER.


Milan, 31 July 2003 The Board of Directors of Pirelli SpA met today and examined the preliminary, unaudited results from operations for the half year ended on 30 June 2003.

Following figures do not include eventual accounting effects of merger of Pirelli Spa into Pirelli & C., which will be effective next 4 August with retroactive accounting from 1 January 2003.

Pirelli Spa Group performance in first half 2003
The performance of the Groups businesses in the first half of 2003 saw an increase in operating income, albeit against a background that was still negatively influenced by the trend in demand in telecommunications infrastructure where volumes remain low and with further price reduction pressures. In the Energy sector there persists the stagnation in investment by utilities, especially in Europe in the Low and Medium Voltage segments, and pressure on prices on the general market. The tyre sector continues to record increasingly good results.

In the first six months of 2003 Group sales totalled approximately 3,022 million Euros, down by 9.8%. On a constant basis (net of exchange rate effects, metal prices and changes in the consolidation area), sales increased by 3.3% largely because of the growth in the tyre sector.

EBITDA in first half 2003 totalled approximately 287 million Euros, compared to 278 million Euros of first half 2002.

Operating income (EBIT) of these businesses in the first half was approximately 118 million Euros, surpassing the value recorded in the whole of 2002; the ROS (return on sales) rose to 3.9% from 2.8% in the first half of 2002, whose EBIT was 93 million Euros.

The improvement in operating income confirmed the continuing growth in profitability underway in the Tyre sector (+14.4%) and the positive effects of the actions undertaken to regain efficiency that were timely launched by the Group management in the Energy Cables and Systems and Telecommunications Cables and Systems Sectors and which both continue to be affected by the poor economic situation of the market. In particular the value of the gross efficiency gains achieved in the first half of 2003 exceeded 100 million Euros. These measures also enabled the negative impact of exchange rates, assessed at over 20 million Euros, to be absorbed.

Free cash flow was positive at 89 million Euros compared to 59 million at June last year, and reached 2.9% of Group turnover, up compared to the 1.8% achieved in the first half of 2002.


Industrial sectors performance

Tyres Sector
In first half 2003, sales were 1,509 million Euros, up 1.4% when compared to 1,488 million Euros in first half 2002. Growth, net of exchange rates effect, was positive by an extent of 14.4% (8% attributable to volumes and 6.4% to prices/mix).

EBIT in first half totalled 127 million Euros, against 111 million Euros is first half 2002, while ROS was 8.4% (7.5% at June 30th 2002). Business volumes and efficiency measures positively impacted on this figure and offset an increase in unit costs and the negative exchange rates effect (approximately 20 million Euros).

Energy Cables and Systems
In first half 2003, sales were 1,312 million Euros, down 18.7% when compared to 1,614 million Euros in first half 2002. On a homogenous basis, the difference is negative by an extent of 4.3% (3.2% attributable to volumes and 1.1% to prices/mix variation).

EBIT was 26 million Euros, in line with first half 2002, and was negatively impacted by exchange rates effect for 5 million Euros, while efficiency measures more than offset fall in demand. ROS grew to 2% from 1.6% same period last year.

Telecom Cables and Systems
In first half 2003, sales were 228 million Euros, down 19.5% when compared to 284 million Euros in first half 2002. Net of exchange rates effect, fall is 13.2% and is fully attributable to prices/mix.

EBIT was negative by 28 million Euros against a negative figure of 20 million Euros same period last year. In particular, drop was registered in first quarter only, while EBIT improved in second quarter, following the trend which should see the sector breaking even in last quarter 2003.

In line with forecasts revealed in the Three Year Plan, at 30 June 2003 net debt totalled approximately 1,540 million Euros compared to 1,469 million Euros at the end of 2002, and down compared to 1,646 at 31 March this year.

The Groups major commitment to technological research and innovation, despite the poor economic situation, was also confirmed in the first half of 2003 with research and development investments of approximately 104 million Euros or 3.4% of sales, in keeping with the previous year.

Group headcount at 30 June 2003 was 34,827, compared to 36,079 at the end of 2002 and compared to 38,043 at the end of June 2002.


Outlook for 2003
In a market situation still marked by uncertainty, the results achieved in the first half allow the present confirmation of the objective for the year of an increase in operating income for the Tyre and Energy Cables and Systems sectors and an improvement in operating income in the Telecom Cables and Systems sector, where the achievement of break-even is forecast during the final quarter.

 


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