Meeting of the Board of Directors of Pirelli &
PRELIMINARY FINANCIAL STATEMENTS FOR YEAR ENDED DECEMBER 31st
- COMPANY STRUCTURE SIMPLIFICATION ACHIEVED
- THE BULK OF INDUSTRIAL TURNAROUND IS OVER
LOWER NET DEBT AND HIGHER PROFITABILTY OF INDUSTRIAL
- STRONG GROWTH OF REAL ESTATE ACTIVITIES
THANKS TO ACTIONS PUT IN
PLACE , THE GROUP IS READY TO CATCH ANY
PIRELLI & C. SPA
REVENUES: 6,679 MILLION EUROS, COMPARED TO 6,718
MILLION EUROS (-0.6%); AT COMPARABLE CONDITIONS, A GROWTH OF 7.2%
OPERATING INCOME (EBIT): 266 MILLION EUROS, MORE THAN
DOUBLED WHEN COMPARED TO 118 MILLION EUROS IN 2002
NET DEBT: 1,755 MILLION EUROS, REDUCED BY APPROX. 300
MILLION WHEN COMPARED TO 2,050 MILLION AT END 2002
REVENUES: 6,030 MILLION EUROS COMPARED TO 6,346 MILLION
EUROS (-5%); NET OF EXCHANGE RATES, METAL PRICES AND CHANGES IN THE
SCOPE OF CONSOLIDATION , THIS RESULT REPRESENTS A 2.9% INCREASE
YEAR OVER YEAR
OPERATING INCOME: 264 MILLION EUROS, UP 63%, WITH ROS
RISING TO 4.4% FROM 2.6%
TYRES: REVENUES UP 11.4% AT COMPARABLE CONDITIONS WITH
ROS AT 7.4% FROM 6.7%
ENERGY CABLES AND SYSTEMS: ROS GREW TO 3.1% FROM
TELECOM CABLES AND SYSTEMS: EBIT STRONGLY IMPROVED, BUT
FREE CASH FLOW POSITIVE BY APPROX. 450 MILLION EUROS;
IN LAST TWO YEARS THE FIGURE IS CLOSE TO 1 BILLION
REAL ESTATE OPERATIONS
OPERATING INCOME INCLUDING INCOME FROM EQUITY
PARTICIPATIONS: 128 MILLION EUROS, +25% YEAR OVER
ASSET MANAGEMENT: SALES WORTH APPROX.2,040 MILLION
EUROS (BOOK VALUE OF 1,600 MILLION) AND ACQUISITIONS WORTH APPROX.
1,590 MILLION EUROS OF THE PORTFOLIO UNDER MANAGEMENT
SERVICES: PRODUCTION VALUE OF APPROX. 322 MILLION
EUROS, + 61% YEAR OVER YEAR
CARLO SECCHI APPOINTED TO THE BOARD OF
Milan, February 19, 2004 – The Board of Directors of
Pirelli & C. SpA today met and examined the preliminary and
unaudited Pirelli & C. SpA consolidated financial statements
for the year ended 31 December 2003 .
In 2003 Pirelli substantially completed a wide
process aimed at simplifying and
financially strengthening the company structure as
well as at significantly adapting 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, whose profitability stood at top levels
of reference markets. 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 measures
completed in 2003, with gains worth approx. 170
million Euros, 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. 6,679 million
Euros , substantially in line with 2002 figure of 6,718
million. On the same perimeter base (net of the effects of exchange
rates, metal prices and changes in the scope of consolidation)
revenues grew by 7.2%.
Operating income (EBIT) amounted to 266
million Euros and more than doubled 2002
figure of 118 million Euros.
The net financial position at December 31, 2003
is negative by approx. 1,755 million Euros, down
approx. 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 260 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 approx. 50 million
The industrial operations of the Group
The trend in the industrial activities of the
Group shows 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
The 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, EBIT of Energy Cables and Systems
Sector posted a growth of 51% .
Tyres Sector confirmed the growth in
profitability, which rose by 15% .
In 2003 the Group sales
revenues reached 6,030 million
Euros , down 5% 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 2.9% .
EBITDA grew 14% and stood at approx.
570 million Euros , with a ratio on revenues of
9.5% (7.9% in 2002).
Operating income (Ebit) was approx. 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. 238 million Euros and ROS at 4%. In
2002 EBIT was 162 million Euros.
EBIT in fourth quarter of 2003 was approx. 70
million Euros, compared to 35 million in the same period
Free cash flow in 2003 was positive by approx.
450 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.
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
Sales of Tyres Sector amounted to 2,965
million Euros , a year-on-year increase of 11
.4%: of this percentage, 7% refers to increased volumes
and the remaining to prices/mix, thus confirming the focus on high
performance market segments. Operating income was
approx. 220 million Euros, with
a ROS of 7.4%, an improvement of
15% compared to 191 million Euros in 2002.
Sales in Energy Cables and Systems Sector
totaled approx. 2,640 million Euros
, down 4.3 % on an equal
perimeter basis (with prices/mix slightly better than volumes).
Operating income was approx. 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.
I n Telecom Cables and Systems Sector the
decrease in sales revenues on an equal perimeter basis was
3.6% , taking into account the already mentioned
pressure on prices/mix (-18%) and with an increase of volumes
substantially deriving from the accounting of a Submarine contract.
Revenues were, therefore, approx. 425 million
Euros. O perating income was negative for
39 million Euros, up when
compared to the loss of 84 million Euros in 2002.
The Group’s Real Estate operations
Before a detailed examination of the figures, it is worth
recalling that Pirelli RE is a management company that invests in
real estate portfolios (and manages non-performing loans) mainly
through significant minority stakes (asset management and fund
management) providing these and other clients with a wide range of
real estate services (service provider activities). 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,
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
EBIT including pro-quota income from equity
participations totalled approximately 128
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 approximately 1,147 million
Euros, as compared with 1,020 million Euros in 2002, representing
growth of 12% . The exploitation of assets under
management generated sales of approximately
2,040 million Euros at market value (as against a
book value of 1,600 million ) and the book value
of acquisitions was approximately 1,590
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 approximately
51 million Euros, with growth of
75% when compared to 2002.
For further information of Real Estate activities, please refer
to the press release issued by Pirelli & C. Real Estate on
February 12, 2004 .
In 2003 the financial structure of Olimpia was strengthened: as
already mentioned, Pirelli contribution was 388 million Euros.
Starting from 2004 and following the merger of Telecom Italia and
Olivetti, Olimpia will benefit from any dividend accounted for cash
when received, thus reaching financial stabilization. Olimpia
results are not included into preliminary Pirelli financial
statements and will be, as usual, disclosed when annual report
project will be published.
The Board of Directors appointed Director Carlo Secchi, Chancellor
of Bocconi University; he was also appointed to the Audit Committee
for Internal Control and Corporate Governance.