Segment information

7. Segment information

For the Pirelli & C. Group, the business segment constitutes the primary segment whereas the geographical segment represents the secondary segment.

Primary reporting format – business segment

At December 31, 2007, continuing operations of the Group are divided into four main business segments:

  • Tyre
  • Real Estate
  • Broadband
  • Other businesses

In line with the procedures followed by the Group in monitoring the businesses managed at December 31, 2007, it should be pointed out that the Environment business, which at December 31, 2006 was a reportable segment, has been aggregated in the “Other businesses” sector; the comparative information at December 31, 2006 has been reclassified accordingly.

The remaining part comprises financial companies (including the Parent) and other service companies. None of these constitutes a reportable segment.

Finally, it should also be pointed out that as a result of its sale in 2007, Olimpia S.p.A. at December 31, 2007 no longer constitutes a business segment. However, the results by sector include the economic effects of Olimpia, classified in the income statement under “income (loss) from discontinued operations”.

Segment results for the year ending December 31, 2007 are as follows:

(in thousands of Euros)

 

Tyre

Real Estate

Broadband

Other BU

Olimpia

Other

TOTAL 12/31/2007

Sales to third parties

4,160,899

2,139,409

117,080

68,410

-

18,739

6,504,537

Sales to the Group

819

9,236

-

3,028

-

(13,083)

-

Total Sales

4,161,718

2,148,645

117,080

71,438

-

5,656

6,504,537

Amortization of

tangible/intangible assets

(190,465)

(11,434)

(2,392)

(883)

-

(8,870)

(214,044)

Depreciation of
tangible/intangible assets

(811)

(3,823)

-

-

-

-

(4,634)

Operating Profit (loss)

358,090

50,393

(13,531)

(8,497)

-

(19,565)

366,890

Share of earnings (losses) of companies accounted for by the equity method

159

117,042

-

-

-

1,407

118,608

Financial income (expenses)

(75,755)

Dividends

34,459

Gains (losses) from changes in fair value of financial assets

(20,179)

Income before income taxes

424,023

Income taxes

(133,503)

Income from continuing operations

290,520

Income (loss) from
discontinued operations

-

-

-

-

(53,805)

86,875

33,070

Income for the year

323,590

Segment results for the year ending December 31, 2006 were as follows:

(in thousands of Euros)

Tyre

Real Estate

Broadband

Other BU

Olimpia

Other

TOTAL 12/31/2006

Sales to third parties

3,947,159

691,161

129,434

66,261

-

7,209

4,841,224

Sales to the Group

2,343

10,803

-

2,706

-

(15,852)

-

Total Sales

3,949,502

701,964

129,434

68,967

-

(8,643)

4,841,224

Amortization of
tangible/intangible assets

(191,309)

(9,371)

(1,323)

(704)

-

(9,984)

(212,691)

Depreciation of
tangible/intangible assets

(1,145)

-

-

-

-

(1,492)

(2,637)

Operating Profit (loss)

342,344

103,718

(267)

(224)

-

(44,185)

401,386

Share of earnings (losses) of companies accounted for by the equity method

179

101,570

-

-

-

2,209

103,958

Financial income (expenses)

533,816

Dividends

65,857

Gains (losses) from changes in fair value of financial assets

(55,956)

Income before income taxes

1,049,061

Income taxes

(127,848)

Income from continuing operations

921,213

Loss from discontinued operations

-

-

-

-

(1,940,039)

(30,000)

(1,970,039)

Loss for the year

(1,048,826)

The method of measuring sales among sectors is the same as that applied for sales to third parties.

Segment assets, liabilities and capital expenditures at December 31, 2007 are as follows:

(in thousands of Euros)

 

Tyre

Real Estate

Broadband

Other BU

Altro

TOTAL

12/31/2007

Segment assets

3,256,011

905,832

55,803

43,520

107,839

4,369,005

Investments in associates and joint ventures

718

480,341

-

2,410

50,725

534,194

Total allocated assets

3,256,729

1,386,173

55,803

45,930

158,564

4,903,199

Unallocated assets

4,050,041

Total assets

8,953,240

Segment liabilities

1,564,238

518,999

61,686

24,152

213,613

2,382,688

Unallocated liabilities

2,766,481

Total liabilities

5,149,169

Capital expenditures - property, plant and equipment

262,378

6,469

4,093

9,709

4,060

286,709

Capital expenditures - intangible assets

7,089

168,093

308

980

1,966

178,436

Segment assets, liabilities and capital expenditures at December 31, 2006 were as follows:

(in thousands of Euros)

Tyre

Real Estate

Broadband

Other BU

Olimpia

Altro

TOTAL

12/31/2006

Segment assets

3,066,993

891,517

44,985

32,477

-

56,278

4,092,250

Investments in associates and joint ventures

1,010

285,781

-

660

3,487,855

50,622

3,825,928

Total allocated assets

3,068,003

1,177,298

44,985

33,137

3,487,855

106,900

7,918,178

Unallocated assets

2,309,320

Total assets

10,227,498

Segment liabilities

1,484,001

453,061

55,459

17,029

-

345,031

2,354,581

Unallocated liabilities

3,186,360

Total liabilities

5,540,941

Capital expenditures - property, plant and equipment

224,200

12,458

6,942

1,015

-

10,841

255,456

Capital expenditures - intangible assets

4,133

47,045

95

400

-

3,211

54,884

Segment assets mainly consist of property, plant and equipment, intangible assets, assets under finance leases, inventories, trade receivables and other receivables and exclude financial receivables, other financial assets, securities held for trading and current and deferred tax assets.

Segment liabilities mainly include trade payables and other payables, advances from customers, provisions for other liabilities and charges and employee benefit obligations and exclude financial payables and current and deferred tax liabilities.

Capital expenditures mainly refer to the purchase of plant and machinery.

Secondary reporting format – geographical segment

Sales by geographical area, allocated on the basis of the country in which the customer resides, are as follows:

(in millions of Euros)

2007

2006

Europe:

- Italy

1,258.3

19.35%

1,331.9

27.51%

- Other European countries *

3,077.9

47.32%

1,586.9

32.78%

North America

329.5

5.07%

318.8

6.59%

Central and South America

1,187.7

18.26%

1,029.3

21.26%

Oceania, Africa and Asia

651.1

10.00%

574.3

11.86%

6,504.5

100.00%

4,841.2

100.00%

* In 2007, this line includes the effect of the deconsolidation of DGAG activities for an amount of Euros 1,295.6 million.

Assets by geographical area, allocated on the basis of the country in which the assets are located, are as follows:

(in thousands of Euros)

12/31/2007

12/31/2006

Europe

- Italy

2,253,776

5,467,598

- Other European countries

1,216,412

1,237,908

North America

124,665

132,492

Central and South America

816,790

771,140

Oceania, Africa and Asia

491,556

309,040

Total allocated assets

4,903,198

7,918,178

Unallocated assets

4,050,041

2,309,320

8,953,231

10,227,498

Capital expenditures by geographical area, allocated on the basis of the country in which the assets are located, are as follows:

(in thousands of Euros)

12/31/2007

12/31/2006

Europe

- Italy

148,333

45,599

- Other European countries

208,543

149,344

North America

2,746

2,228

Central and South America

40,607

81,636

Oceania, Africa and Asia

64,916

31,533

465,145

310,340