HALF-YEARLY REPORT AT JUNE

Transcription

1 HALF-YEARLY REPORT AT JUNE Centrale del Latte di Torino & C. S.p.A. Via Filadelfia Turin - Italy Tel Fax Paid-up share capital 20,600,000 euros Turin Company Register no. 631/77 VAT no. IT Centrale del Latte di Torino & C. S.p.A. Consolidated half-yearly report at June

2 CONTENTS COMPANY OFFICERS Page 2 - Company officers REPORT ON OPERATIONS Page 3 - The Group at June Page 5 - Group operating results Page 22 - Group balance sheet and financial situation Page 30 - Information on companies included in the consolidation area Page 34 - Parent Company operating results Page 42 - Parent Company balance sheet and financial situation Page 50 - Group strategy Page 50 - Significant events after the close of the half-year CONSOLIDATED FINANCIAL STATEMENTS Page 51 - Financial statements - balance sheet Page 54 - Financial statements - memorandum accounts Page 56 - Financial statements - income statement NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Page 58 - Notes to the financial statements PARENT COMPANY FINANCIAL STATEMENTS Page 87 - Parent Company financial statements - balance sheet Page 89 - Parent Company financial statements - memorandum accounts Page 90 - Parent Company financial statements - income statement NOTES TO PARENT COMPANY FINANCIAL STATEMENTS Page 92 - Notes to financial statements Centrale del Latte di Torino & C. S.p.A. Consolidated half-yearly report at June

3 BOARD OF DIRECTORS Luigi LUZZATI Chairman Antonio FORCHINO Vice Chairman Riccardo POZZOLI Executive Vice Chairman Managing Director Aroldo LUZZATI Managing Director Adele ARTOM Director Alessandro MARINA (*) Director Ermanno RESTANO (*) Director Alberto TAZZETTI Director Germano TURINETTO (*) Director (*) Members of the Internal Audit Committee Alessandro RAYNERI Chairman Giovanni D'AMELIO Auditor Vittoria ROSSOTTO Auditor BOARD OF STATUTORY AUDITORS PricewaterhouseCoopers S.p.A. INDEPENDENT AUDITORS Centrale del Latte di Torino & C. S.p.A. Consolidated half-yearly report at June

4 THE GROUP AT JUNE During the first half of the year Centrale del Latte di Torino & C. completed the acquisition of Centrale Latte Vicenza S.p.A. The privatisation of the Vicenza-based company by the municipality of Vicenza began back in 2000 with a public tender that was awarded to the Granarolo Group but which was subsequently blocked by the Antitrust Authority. A second tender was opened but to no avail as all offers were below the requested minimum price; finally the transaction was completed by private agreement. Centrale del Latte di Torino & C. S.p.A. participated as leader of a group that also included Centrale del Latte di Brescia S.p.A. and Granarolo S.p.A.. The operation was completed on April with the signature of a contract to purchase 100% of the capital stock, an operation achieved by setting up CLAV Industria S.p.A. with a capital stock of 16.5 million euros, controlled 82% by CLAV Finanziaria S.p.A. (in which Centrale del Latte di Torino & C. S.p.A. and Centrale del Latte di Brescia each held 50%) and with the remaining 18% of the stock held by Granarolo S.p.A.. The total acquisition cost of million euros was partially financed on a medium-term basis by Banca CRT and as regards Centrale del Latte di Torino & C. S.p.A. required a direct investment of 6.75 million euros. On June Centrale del Latte di Torino & C. S.p.A agreed the acquisition of the 50% in CLAV Finanziaria S.p.A. held by Centrale del Latte di Brescia, an operation that was finalised during September. The cost of this investment was 6.75 million euros, totally covered by bank funds available to Centrale del Latte di Torino & C. S.p.A.. The next step planned is to merge CLAV Industria S.p.A. and CLAV, forming a new company to be known as Centrale del Latte di Vicenza S.p.A.. In the light of the above, and in order to better represent the Group financial situation, all tables have been prepared to provide separate comparative data for the consolidated Parent Company and Centro Latte Rapallo S.p.A. subsidiary results and, successively, the situation including costs and revenues deriving from a pro-rata consolidation of the 50% shareholding in Centrale Latte Vicenza S.p.A. (hereinafter referred to as CLAV). In addition, pro-forma reports and tables have been prepared as at June showing the situation considering the 100% ownership of CLAV. Centrale del Latte di Torino & C. S.p.A. Consolidated half-yearly report at June

5 The Group at September Centrale del Latte di Torino & C. S.p.A. Consolidated half-yearly report at June

6 Group operating results Introduction This quarterly report has been prepared in accordance with Article 81 of Consob resolution no S dated May , supplemented by resolution no of April The consolidation area includes the situation at June as regards the Parent Company, Centrale del Latte di Torino & C. S.p.A. (hereinafter CLTO), and its subsidiary company, Centro Latte Rapallo S.p.A. (hereinafter CLR). Following the conclusion of the financial transaction described above, the financial statements of CLAV Finanziaria S.p.A. have been consolidated on a pro-rata (50%) basis. The latter include half-yearly results of CLAV Industria S.p.A., which in turn include the accounts of CLAV. As for the financial statements of CLAV Finanziaria S.p.A., CLAV Industria S.p.A. and CLAV, it was impossible to provide comparable accounts for the previous operating year. In fact, the former two companies did not exist at the time (they were set up in January 2002), while in the case of CLAV, drafting the period report a posteriori would not have ensured sufficient and fair information. Accordingly the results for the first half of the previous year relate solely to the consolidated financial statements of Centrale del Latte di Torino & C. S.p.A. and Centro Latte Rapallo S.p.A., which was the Company's only subsidiary at that time. As for the financial statements of CLAV, they have been prepared in accordance with the accounting principles applied by the Parent Company and have been verified by AGN Serca of Brescia, the independent auditors appointed to perform annual and half-yearly audits. The consolidation difference arising from the difference between the interest in CLAV recorded in the assets of CLAV Industria S.p.A. and the shareholders' equity of the former municipally-owned company, amounting to million euros, has been allocated for million euros to a plot of land belonging to CLAV and for million euros to trademarks owned by the same company. The value of these two new assets in the balance sheet has been confirmed by expert reports and, as regards the trademarks, the depreciation period has been established as 20 years. By the same reasoning the loss arising from the above-mentioned merger between CLAV Industria S.p.A. and CLAV will also be set off against the two assets mentioned previously. The process of consolidation between the holding company, CLAV Finanziaria S.p.A., and the consolidated accounts of CLAV Industria S.p.A. has generated a consolidation reserve of million euros, of which 50%, i.e. 844,000 euros, appears in the consolidated accounts of Centrale del Latte di Torino & C. S.p.A. Centrale del Latte di Torino & C. S.p.A. Consolidated half-yearly report at June

7 Operating results With the inclusion of CLAV in the Group net revenues reached million euros, gross operating margin (EBITDA) amounted to million euros, an increase of 13.4%, while operating income (EBIT) was 672 thousand euros. The latter figure was negatively affected by an increase in amortisation as a result of the Parent Company's new investments and amortisation arising from the allocation of the consolidation difference in the consolidated balance sheet of CLAV Industria S.p.A., which in total amount to 182 thousand euros. The net result before taxes was 754 thousand euros, after considering extraordinary expenses due to reclassification of balance sheet items in the 2001 financial statements of CLAV for a net value of 488 thousand euros. To provide a clearer overview of the Group's operating and, subsequently, financial results and enable these to be compared with the half-yearly situation for 2001, the tables report consolidated results for CLTO and CLR separately, which are then integrated with the figures concerning CLAV. Pro-forma accounting information and tables have also been prepared that show the results at June based on a 100% ownership of CLAV, namely, after acquisition of the remaining 50% of the latter from CLAV Finanziaria S.p.A. Centrale del Latte di Torino & C. S.p.A. Consolidated half-yearly report at June

8 Reclassified consolidated income statement Jun Jun Dec Value of production Revenues from sales and services 40,111, % 31,330, % 62,711, % Change in inventories (154,097) -0.4% (50,363) -0.2% 86, % Other income and revenues 316, % 198, % 434, % Value of production 40,273, % 31,478, % 63,232, % Costs of production Services (9,386,444) -23.3% (6,671,010) -21.2% (14,223,199) -22.5% Raw materials (23,027,759) -57.2% (17,916,508) -56.9% (36,783,470) -58.2% Other operating costs (335,153) -0.8% (571,634) -1.8% (769,638) -1.2% Added value 7,523, % 6,319, % 11,455, % Personnel costs (4,089,507) -10.2% (3,291,033) -10.5% (6,384,557) -10.1% Gross operating margin 3,434, % 3,028, % 5,071, % Writedown of accounts receivable (101,275) -0.3% (55,785) -0.2% (86,376) -0.1% Depreciation and amortisation of fixed assets (2,634,389) -6.5% (1,982,187) -6.3% (4,367,822) -6.9% Provisions for contingencies (26,504) -0.1% - 0.0% - 0.0% Operating income 672, % 990, % 617, % Interest and financial income 342, % 417, % 730, % Financial charges (416,117) -1.0% (337,954) -1.1% (993,532) -1.6% Extraordinary income 963, % 8, % 142, % Extraordinary expense (866,205) -2.2% (142,425) -0.5% (688,327) -1.1% Income (loss) before taxes 695, % 936, % (192,256) -0.3% Prepaid (deferred) taxes (16,000) 0.0% (66,102) 0.0% (23,403) 0.0% Net total income (loss) 679, % 870, % (215,659) -0.3% Minority interest income (loss) (74,473) -0.2% - 0.0% - 0.0% Net income (loss) for year 754, % 870, % (215,659) -0.3% Centrale del Latte di Torino & C. S.p.A. Consolidated half-yearly report at June

9 Pro-forma reclassified consolidated income statement Pro-forma income statement Jun Jun Dec Value of production Revenues from sales and services 46,834, % 31,330, % 62,711, % Change in inventories (233,715) -0.5% (50,363) -0.2% 86, % Other income and revenues 322, % 198, % 434, % Value of production 46,923, % 31,478, % 63,232, % Costs of production Services (10,985,038) -23.4% (6,671,010) -21.2% (14,223,199) -22.5% Raw materials (27,132,672) -57.8% (17,916,508) -56.9% (36,783,470) -58.2% Other operating costs (355,693) -0.8% (571,634) -1.8% (769,638) -1.2% Added value 8,450, % 6,319, % 11,455, % Personnel costs (4,704,483) -10.0% (3,291,033) -10.5% (6,384,557) -10.1% Gross operating margin 3,745, % 3,028, % 5,071, % Writedown of accounts receivable (111,475) -0.3% (55,785) -0.2% (86,376) -0.1% Depreciation and amortisation of fixed assets (3,155,898) -6.7% (1,982,187) -6.3% (4,367,822) -6.9% Provisions for contingencies (28,007) -0.1% - 0.0% - 0.0% Operating income 450, % 990, % 617, % Interest and financial income 370, % 417, % 730, % Financial charges (467,180) -1.0% (337,954) -1.1% (993,532) -1.6% Extraordinary income 1,037, % 8, % 142, % Extraordinary expense (1,110,379) -2.4% (142,425) -0.5% (688,327) -1.1% Income (loss) before taxes 280, % 936, % (192,256) -0.3% Prepaid (deferred) taxes (16,000) 0.0% (66,102) 0.0% (23,403) 0.0% Net total income (loss) 264, % 870, % (215,659) -0.3% Minority interest income (loss) (148,947) -0.3% - 0.0% - 0.0% Net income (loss) for year 413, % 870, % (215,659) -0.3% Centrale del Latte di Torino & C. S.p.A. Consolidated half-yearly report at June

10 The Group's net revenues totalling million euros include the revenues of CLAV (on a 50% basis). To provide a clearer understanding of trends for revenues in the half-year the consolidated figures first show only CLTO and CLR, with the CLAV revenues indicated separately. Sales revenues Total Jun Jun Change Values consolidated Change % CLAV (*) Jun % Fresh milk 16,922, % 16,648, % 1.6% 1,865,295 18,788, % 12.9% UHT milk 7,023, % 6,648, % 5.6% 2,133,748 9,157, % 37.7% Yoghurt 905, % 903, % 0.2% 1,450,802 2,356, % 160.8% Bulk milk and cream 965, % 1,055, % -8.6% 152,842 1,118, % 5.9% Fior di Bio line 424, % 0.0% 100% 0 424, % 100% Other packaged products 7,146, % 6,074, % 17.6% 1,120,947 8,267, % 36.1% Total 33,387, % 31,330, % 6.6% 6,723,634 40,111, % 28.0% concerning Centrale del Latte Vicenza S.p.A. Fresh milk. As regards the fresh milk segment for CLTO and CLR, there was an increase in revenues of 1.6% whereas volumes essentially remained stable. With the inclusion of CLAV in the Group the revenue increase rose to 12.9%, while the incidence of fresh milk on total turnover dropped from 53.1% to 46.8%. UHT milk. Consolidated sales of long shelf-life milk for CLTO and CLR showed an increase of 5.6%, a confirmation of the UHT Piemonte and Tigullio brands' excellent positioning in the market. With the acquisition of CLAV the revenue increase rose to 37.7%, while the incidence of this segment on total turnover reached 22.8%. Yoghurt. Consolidated sales for CLTO and CLR confirm what has been said previously as regards the yoghurt market in Piedmont and Liguria. The excellent sales performance of CLAV has meant that the segment now accounts for 5.9% of total turnover that augurs well for future growth, also by using synergies that can be derived from the two production sites in Carmagnola (Turin) and Vicenza. Fior di Bio. The new biological agriculture product line recorded a turnover of 424 thousand euros in the first half of With the recent addition of four new yoghurt specialities produced by a Carmagnola plant recently certified by AIAB Piemonte a certifying body for biological products - the range now includes 15 articles, all of them well received by consumers. Centrale del Latte di Torino & C. S.p.A. Consolidated half-yearly report at June

11 The widening of the product range and the support afforded by well thought-out advertising and marketing campaigns have resulted in encouraging signs of growth and have provided access to specialist stores, including a biological products supermarket, the largest in Italy, recently opened in Turin. The acquisition of Centrale Latte Vicenza S.p.A. will enable expansion of sales of the biological product range to Veneto using the existing distribution network which, in the meantime, will be reorganised and strengthened. Bulk milk and cream. This revenue segment (highlighted to provide a better analysis of other product segments) was substantially stable and only represented a minimum, residual part of Group sales. Other packaged products. The Group strategy to strengthen this high-margin product range, part of the fresh and ultra-fresh category, continued and the increase in terms of consolidated CLTO and CLR turnover was 17.6%. CLAV, which had already started to diversify previously, contributed to improve this increase to 20.6%, bringing the incidence of this segment on total turnover to 36.1%. The following table shows the pro-forma values for turnover: Jun Jun Change Values % CLAV (*) Total Consolid.td pro-forma Change Jun % Fresh milk 16,922, % 16,648, % 1.6% 3,730,591 20,653, % 24.1% UHT milk 7,023, % 6,648, % 5.6% 4,267,496 11,290, % 69.8% Yoghurt 905, % 903, % 0.2% 2,901,604 3,806, % 321.4% Bulk milk and cream 965, % 1,055, % -8.6% 305,683 1,271, % 20.4% Fior di Bio line 424, % - 0.0% , % - Other packaged products 7,146, % 6,074, % 17.6% 2,241,894 9,388, % 54.5% Total 33,387, % 31,330, % 6.6% 13,447,268 46,834, % 49.5% Centrale del Latte di Torino & C. S.p.A. Consolidated half-yearly report at June

12 Geographical breakdown The geographical breakdown of turnover is indicated in the table below: Piedmont Liguria Veneto Other Total Fresh milk 10,943,182 5,979,660 1,865,295-18,788,137 UHT milk 6,388, ,263 2,133,748-9,157,165 Yoghurt 792, ,057 1,450,802-2,356,040 Bulk milk and cream 98,260 57, , ,572 1,118,222 Fior di Bio line 232, , ,098 Other packaged products 3,234,136 3,912,281 1,120,947-8,267,364 Total 21,688,615 10,889,205 6,723, ,572 40,111,027 And this is the geographical breakdown on a pro-forma basis: Pro-forma geographical breakdown Piedmont Liguria Veneto Other Total Fresh milk 10,943,182 5,979,660 3,730,591-20,653,433 UHT milk 6,388, ,263 4,267,496-11,290,913 Yoghurt 792, ,057 2,901,604-3,806,842 Bulk milk and cream 98,260 57, , ,572 1,271,063 Fior di Bio line 232, , ,098 Other packaged products 3,234,136 3,912,281 2,241,894-9,388,312 Total 21,688,615 10,889,205 13,447, ,572 46,834,660 Other revenues The table below gives a breakdown of other revenues by type: Change Values Total Change Jun Jun CLAV consolidated Jun (*) Rents received 47,764 44,987 2,778 3,083 50,847 5,860 Sale of recycled material 36,663 56,810 (20,147) 1,832 38,496 (18,315) Contributions from suppliers 82,444 79,534 2,910-82,444 2,910 Revenues from compensation 19,048 16,527 2,521-19,048 2,521 Capital gains from disposals 48,670 48,670-48,670 48,670 Revenue grants 70, ,797-70,538 69,797 Insurance compensation ,427 5,427 5,427 Other Total 305, , ,528 11, , ,635 (*) values net of I.co Centrale del Latte di Torino & C. S.p.A. Consolidated half-yearly report at June

13 Below is the pro-forma version of the table: Change Values Consolidated Change Jun Jun CLAV pro-forma Jun (*) Rents received 47,764 44,987 2,778 6,165 53,930 8,943 Sale of recycled material 36,663 56,810 (20,147) 3,665 40,328 (16,482) Contributions from suppliers 82,444 79,534 2,910-82,444 2,910 Revenues from compensation 19,048 16,527 2,521-14,423 2,521 Capital gains from disposals 48,670-48,670-48,670 48,670 Revenue grants 70, ,797-70,538 69,797 Insurance compensation ,854 10,854 10,854 Other ,530 1,530 1,530 Total 305, , ,528 22, , ,742 (*) Values net of I.co Operating costs The following table summarises operating costs by type for the period ended June : Jun Jun Change Values Consolid.td Change Jun. 30 absolute % CLAV 2002 absolute % (*) Raw. ancillary, consumable materials and goods 18,922,846 17,916,508 1,006, % 4,104,913 23,027,759 5,111, % % of net revenues 56.7% 57.2% 61.1% 57.4% Services 7,714,794 6,601,706 1,113, % 1,542,393 9,257,186 2,655, % % of net revenues 23.1% 21.1% 22.9% 23.1% Rental and leasing costs 73,056 69,304 3, % 60, ,882 64, % % of net revenues 0.2% 0.2% 0.9% 0.3% Personnel expenses 3,474,531 3,291, , % 614,976 4,089, , % % of net revenues 10.4% 10.5% 9.1% 10.2% Amortisation of intangible f/assets 732, ,147 (111,271) -13.2% 259, , , % % of net revenues 2.2% 2.7% 3.9% 2.5% Depreciation of tangible f/assets 1,380,004 1,138, , % 261,845 1,641, , % % of net revenues 4.1% 3.6% 3.9% 4.1% Provision for doubtful accounts 91,075 55,785 35, % 10, ,275 45, % % of net revenues 0.3% 0.2% 0.2% 0.3% Provisions for contingencies 25,000-25, % 1,504 26,504 26, % % of net revenues 0.1% 0.0% 0.0% 0.1% Sundry operating costs. 314, ,634 (257,021) -45.0% 20, ,153 (236,481) -41.4% % of net revenues 0.9% 1.8% 0.3% 0.8% Total operating costs 32,728,795 30,488,157 2,240, % 6,876,859 39,601,031 9,112, % % of net revenues 98.0% 97.3% 102.3% 98.7% (*) Values net of I.co Centrale del Latte di Torino & C. S.p.A. Consolidated half-yearly report at June

14 As regards the figures for CLTO and CLR, the incidence of operating costs on net revenues showed a slight increase as a result of the increment in absolute terms. Raw, ancillary and consumable costs decreased in terms of their incidence on turnover, whereas increases in absolute terms were the result of higher production volumes. Considering total consolidated figures including CLAV, the weight of these costs grew as a result of the costs of CLAV itself. The objective is to reduce this incidence to that found in other Group companies as soon as possible. Below is the pro-forma version of this table: Jun Consolid.td Jun Change Values pro-forma Change Jun. 30 absolute % CLAV 2002 absolute % (*) Raw, ancillary, consumable materials and goods 18,922,846 17,916,508 1,006, % 8,209,827 27,132,672 9,216, % % of net revenues 56.7% 57.2% 61.1% 57.9% Services 7,714,794 6,601,706 1,113, % 3,084,786 10,790,331 4,188, % % of net revenues 23.1% 21.1% 22.9% 23.0% Rental and leasing costs 73,056 69,304 3, % 121, , , % % of net revenues 0.2% 0.2% 0.9% 0.4% Personnel expenses 3,474,531 3,291, , % 1,229,952 4,704,483 1,413, % % of net revenues 10.4% 10.5% 9.1% 10.0% Amortisation of intangible f/assets 732, ,147 (111,271) 13.2% 519,328 1,252, , % % of net revenues 2.2% 2.7% 3.9% 2.7% Depreciation of tangible f/assets 1,380,004 1,138, , % 523,690 1,903, , % % of net revenues 4.1% 3.6% 3.9% 4.1% Provision for doubtful accounts 91,075 55,785 35, % 20, ,474 55, % % of net revenues 0.3% 0.2% 0.2% 0.2% Provisions for contingencies 25, % 25, % 3,007 28,007 28, % % of net revenues 0.1% 0.0% 0.0% 0.1% Sundry operating costs. 314, ,634 (257,021) -45.0% 41, ,693 (215,941) -37.8% % of net revenues 0.9% 1.8% 0.3% 0.8% Total operating costs 32,728,795 30,488,157 2,240, % 13,753,718 46,473,266 15,985, % % of net revenues 98.0% 97.3% 102.3% 99.2% (*) Values net of I.co The incidence on net sales of raw materials, products for resale and packaging, ancillary and consumable materials remained stable, while the absolute increases can be attributed to higher production volumes. In line Centrale del Latte di Torino & C. S.p.A. Consolidated half-yearly report at June

15 with the Group diversification strategy there was an increase in purchases of products for resale, which now represent 24.5% of total purchases. Growing rationalisation of supplies of raw materials by the Piedmont and Liguria companies led to a further reduction in their incidence on net sales. In the near future these integration and rationalisation activities will also be extended to the new CLAV subsidiary, a move that cannot fail to benefit the latter in terms of cost reductions. The following table summarises the main cost items: Jun Jun Change Values Consolid.td Change Jun. 30 absolute % CLAV 2002 absolute % (*) Milk 10,638,129 10,385, , % 2,205,546 12,843,675 2,457, % % of net revenues 31.9% 33.1% 32.8% 32.0% Other raw materials 172, ,203 56, % 245, , , % % of net revenues 0.5% 0.4% 3.6% 1.0% Products for resale 4,749,670 4,336, , % 890,467 5,640,136 1,303, % % of net revenues 14.2% 13.8% 13.2% 14.1% Fior di Bio products 315, , % - 315, % % of net revenues 0.9% 0.0% 0.0% 0.8% Packaging material 2,524,491 2,568,340 (43,849) -1.7% 694,468 3,218, , % % of net revenues 7.6% 8.2% 10.3% 8.0% Ancillary and consumable materials 523, ,743 13, % 69, ,561 82, % % of net revenues 1.6% 1.6% 1.0% 1.5% Total 18,922,847 17,916,508 1,006, % 4,104,913 23,027,760 5,111, % % of net revenues 56.7% 57.2% 61.1% 57.4% (*) Values net of I.co Below is the pro-forma version of the table: Consolid.td Jun Jun Change Values pro-forma Jun. 30 absolute % CLAV 2002 absolute % (*) Milk 10,638,129 10,385, , % 4,411,092 15,049,221 4,663, % % of net revenues 31.9% 33.1% 32.8% 32.1% Other raw materials 172, ,203 56, % 490, , , % % of net revenues 0.5% 0.4% 3.6% 1.4% Products for resale 4,749,670 4,336, , % 1,780,933 6,530,603 2,194, % % of net revenues 14.2% 13.8% 13.2% 13.9% Fior di Bio products 315, , % - 315, , % % of net revenues 0.9% 0.0% 0.0% 0.7% Packaging material 2,524,491 2,568,340 (43,849) -1.7% 1,388,937 3,913,428 1,345, % % of net revenues 7.6% 8.2% 10.3% 8.4% Ancillary and consumable materials 523, ,743 13, % 138, , , % % of net revenues 1.6% 1.6% 1.0% 1.4% Total 18,922,847 17,916,508 1,006, % 8,209,828 27,132,674 9,216, % % of net revenues 56.7% 57.2% 61.1% 57.9% (*) Values net of I.co Centrale del Latte di Torino & C. S.p.A. Consolidated half-yearly report at June

16 Service costs. The following table gives a brief overview of some of the major service cost items and changes compared with the first half of Increases in service costs can mainly be attributed to increments in costs strictly related to Group production and sales activities. In particular, there was an increase in advertising expense and sale and distribution costs to support the launch of new products and the Fior di Bio line for CLTO and CLR, but also costs sustained for all Group companies to maintain and expand market share for the brands and products. This activity has commenced and will continue over the near future for the Vicenza-based company, CLAV. Full integration of CLAV is nearing completion and will enable the Group to obtain further economies of scale. The table below briefly illustrates some of the major components of service costs: Jun Jun Change Values Consolid.td Change Jun. 30 absolute % CLAV 2002 absolute % (*) Transport of milk purchases 314, ,039 (581) -0.2% 114, , , % % of net revenues 0.9% 1.0% 1.1% 1.0% Product distribution services 2,953,542 2,644, , % 506,804 3,460, , % % of net revenues 8.8% 8.4% 7.5% 8.6% Electricity and power 242, ,482 (7,586) -3.0% 105, ,877 98, % % of net revenues 0.7% 0.8% 1.6% 0.9% Natural gas 158, ,256 9, % 37, ,050 46, % % of net revenues 0.5% 0.5% 0.6% 0.5% Studies, analyses and consultancy 167, ,410 29, % 99, , , % % of net revenues 0.5% 0.4% 1.5% 0.7% Advertising-sponsorship 2,390,531 1,607, , % 462,325 2,852,856 1,245, % % of net revenues 7.2% 5.1% 6.9% 7.1% Total services 6,227,976 5,104,660 1,123, % 1,327,088 7,555,064 2,450, % % of net revenues 18.7% 16.3% 19.7% 18.8% (*) Values net of I.co Centrale del Latte di Torino & C. S.p.A. Consolidated half-yearly report at June

17 And this is the pro-forma version of the table: Jun Consolid.td Jun Change Values pro-forma Change Jun. 30 absolute % CLAV 2002 absolute % (*) Transport of milk purchases 314, ,039 (581) -0.2% 229, , , % % of net revenues 0.9% 1.0% 1.7% 1.2% Product distribution services 2,953,542 2,644, , % 1,013,608 3,967,150 1,322, % % of net revenues 8.8% 8.4% 7.5% 8.5% Electricity and power 242, ,482 (7,586) -3.0% 211, , , % % of net revenues 0.7% 0.8% 1.6% 1.0% Natural gas 158, ,256 9, % 74, ,423 84, % % of net revenues 0.5% 0.5% 0.6% 0.5% Studies, analyses and consultancy 167, ,410 29, % 199, , , % % of net revenues 0.5% 0.4% 1.5% 0.8% Advertising-sponsorship 2,390,531 1,607, , % 924,650 3,315,181 1,707, % % of net revenues 7.2% 5.1% 6.9% 7.1% Total services 6,227,976 5,104,660 1,123, % 2,654,177 8,882,153 3,777, % % of net revenues 18.7% 16.3% 19.7% 18.9% (*) Values net of I.co Personnel expenses Compared with the first half of 2001 personnel expenses for the Turin and Rapallo plants rose by 183 thousand euros or 5.6%. It should be noted that compared with the first half of the prior year there was the addition of an executive responsible for management of the Fior di Bio line for the entire Group. The workforce at June numbered 214 people, with the following breakdown. Executives 11 Managers 8 White-collar 88 Blue-collar 107 Centrale del Latte di Torino & C. S.p.A. Consolidated half-yearly report at June

18 Jun Jun Change Values Consolid.td Change Jun. 30 absolute % CLAV 2002 absolute % Direct personnel 910, , , % 194,470 1,105, , % % of net revenues 2.7% 2.2% 2.9% 2.8% Indirect personnel 1,254,344 1,528,363 (274,019) -17.9% 188,658 1,443,002 (85,361) -5.6% % of net revenues 3.8% 4.9% 2.8% 3.6% Marketing personnel 767, , , % 130, , , % % of net revenues 2.3% 1.4% 1.9% 2.2% Administrative personnel 541, ,607 (68,677) -11.2% 101, ,032 32, % % of net revenues 1.6% 1.9% 1.5% 1.6% Total 3,474,531 3,291, , % 614,976 4,089, , % % of net revenues 10.4% 10.5% 9.1% 10.2% The pro-forma version of this table is given below: Jun Consolid.td Jun Change Values pro-forma Change absolute % CLAV Jun absolute % Direct personnel 910, , , % 388,940 1,299, , % % of net revenues 2.7% 2.2% 2.9% 2.8% Indirect personnel 1,254,344 1,528,363 (274,019) -17.9% 377,316 1,631, , % % of net revenues 3.8% 4.9% 2.8% 3.6% Marketing personnel 767, , , % 261,493 1,029, , % % of net revenues 2.3% 1.4% 1.9% 2.2% Administrative personnel 541, ,607 (68,677) -11.2% 202, , , % % of net revenues 1.6% 1.9% 1.5% 1.6% Total 3,474,531 3,291, , % 1,229,952 4,704,483 1,413, % % of net revenues 10.4% 10.5% 9.1% 10.0% Centrale del Latte di Torino & C. S.p.A. Consolidated half-yearly report at June

19 Amortisation of intangible fixed assets With the entry of CLAV as part of the Group, amortisation of intangible fixed assets showed an increment of 148 thousand euros compared with the first half of Amortisation for set-up and expansion costs refer to registration and other taxes paid in the year relative to the increase in capital following listing of the Parent Company's shares on the Italian Stock Exchange. Amortisation of works performed in relation to third-party areas concern costs sustained to extend parking space in an area owned by the Holding Company, Finanziaria Centrale del Latte di Torino S.p.A., adjacent to the Turin plant. The Parent Company signed a normal rental contract for this space, referred to in the section Operations with related parties. Amortisation recorded by the Vicenza-based company concerns pre-existing intangible fixed assets and adjustments as a result of consolidation operations mentioned in the introduction. INTANGIBLE FIXED ASSETS Amortisation and depreciation Amortisation and depreciation Change Values Consolid.td Change Jun Jun Jun CLAV Share listing costs 154, , ,909 - Goodwill 77, ,991 (147,574) 85, ,703 (62,288) Research & development and advertising costs 84,066 23,218 60,848 9,069 93,136 69,917 Set-up and expansion costs 14,307-14,307 1,781 16,088 16,088 Patents and other intellectual property rights 35,383 30,018 5,365 14,337 49,720 19,702 Franchises, licences and trademarks 340, , , , ,858 Maintenance 3rd-party areas ,026 1,026 Other reserves 25,856 71,147 (45,289) ,235 (44,912) TOTAL 732, ,148 (111,270) 259, , ,391 Below is the pro-forma version of the table: INTANGIBLE FIXED ASSETS Amortisation and depreciation Amortisation and depreciation Change Values Consolid.td Change pro-forma Jun Jun CLAV Jun Share listing costs 154, , ,909 - Goodwill 77, ,991 (147,574) 170, ,987 22,996 Research & development and advertising costs 84,067 23,218 60,848 18, ,204 78,986 Set-up and expansion costs 14,307-14,307 3,562 17,869 17,869 Patents and other intellectual property rights 35,383 30,018 5,365 28,674 64,057 34,039 Franchises, licences and trademarks 340, , , , ,577 Maintenance 3rd-party areas ,120 1,120 Other reserves 25,856 71,147 (45,289) ,617 (44,530) TOTAL 732, ,148 (111,270) 519,328 1,252, ,056 Centrale del Latte di Torino & C. S.p.A. Consolidated half-yearly report at June

20 Tangible fixed assets Amortisation and depreciation Amortisation and depreciation Change Values Consolid.td Change Jun Jun Jun CLAV TANGIBLE FIXED ASSETS Land & buildings 235, ,956 10, ,380 10,424 Plant & machinery 902, , , ,333 1,141, ,808 Industrial, commercial & office equipment 202, ,857 37,010 23, ,379 60,523 Other tangible fixed assets 39,054 32,000 7,054-39,054 7,054 TOTAL 1,380,004 1,138, , ,845 1,641, ,809 The pro-forma version is given below: Amortisation and depreciation Amortisation and depreciation Change Values Consolid.td Change pro-forma Jun Jun CLAV Jun TANGIBLE FIXED ASSETS Land & buildings 235, ,956 10, ,380 10,424 Plant & machinery 902, , , ,665 1,379, ,141 Industrial, commercial & office equipment 202, ,857 37,010 47, ,892 84,035 Other tangible fixed assets 39,054 32,000 7,054-39,054 7,054 TOTAL 1,380,004 1,138, , ,690 1,903, ,654 Financial income and expense A reduction in financial income was seen in the first half of 2002 by comparison to the prior year. In part this reduction was due to lower tax credits on dividends distributed by the Centro Latte Rapallo S.p.A. subsidiary that, based on tax regulations in force at June , amounted to 56.25% of dividends compared with 58.73% in But above all there was a reduction in bank deposits and securities in portfolio, utilised to complete the acquisition of Centrale Latte Vicenza S.p.A. and which considerably reduced interest calculated on these assets. Financial expense for the companies in Piedmont and Liguria remained essentially stable. Consolidation of CLAV for the period ended June led to the recording of financial expense related to financing used by CLAV Industria S.p.A. to acquire 100% of the shares in CLAV. Details of financial income and expense are given in the notes to the consolidated financial statements. Centrale del Latte di Torino & C. S.p.A. Consolidated half-yearly report at June

21 Adjustment to value of financial assets The first half of 2002 saw a recovery in the Company's share price; at June the average monthly price was euros that, when applied to the 150,750 shares of treasury stock owned by CLTO and recorded in current assets, led to a gain of 47,095 euros over the value stated in the balance sheet at December Financial expense includes a writedown of the investment in Frascheri S.p.A. equal to 40% of the loss reported in the 2001 financial statements for this associated company. This writedown amounted to 35,548 euros and has been charged to this year as approval of the Frascheri S.p.A. financial statements was given after the Board of Directors had approved the 2001 financial statements for Centrale del Latte di Torino & C. S.p.A.. Extraordinary income and expense Extraordinary income mainly refers to third-party consultancy activities performed for the benefit of third parties in relation to the acquisition of Centrale Latte Vicenza S.p.A. and amounting to a positive balance of 477,723 euros as recorded in the Parent Company accounts for the period. The realignment of accounting entries relevant to CLAV for prior fiscal years gave rise to the following extraordinary expenses: - allocation to provision for risks covering doubtful debts amounting to a total of 41,700 euros, including 20,850 euros recorded in the consolidated accounts; - allocation to provision for risks and charges, covering amounts payable, arising from the milk quota dispute, for which the previous management had not provided appropriate coverage, amounting to a total of 47,099 euros, including 23,550 euros recorded in the consolidated accounts; - allocation to provision for inventory writedowns arising from obsolete packaging materials, amounting to a total of 42,255 euros, including 21,127 euros recorded in the consolidated accounts; - sundry contingencies amounting to a total of 357,292 euros, including 178,654 euros recorded in the consolidated accounts; - contingent assets amounting to a total of 136,306 euros, including 68,153 euros recorded in the consolidated accounts. Centrale del Latte di Torino & C. S.p.A. Consolidated half-yearly report at June

22 Group consolidated balance sheet and financial situation Jun Jun Dec Fixed assets Tangible fixed assets 23,498,820 17,448,169 18,000,679 Intangible fixed assets 18,711,940 14,971,901 14,297,896 Investments and securities 1,849,754 1,884,763 1,884,763 Total fixed assets 44,060, % 34,304, % 34,183, % Working capital Trade receivables 15,503,394 10,802,303 11,592,593 Inventories 2,324,732 1,812,234 1,745,632 Other current assets 7,905,326 6,926,217 6,306,406 Prepaid expenses and accrued income 650, , ,081 Trade payables (15,039,284) (13,139,961) (14,997,378) Other payables (6,056,154) (4,785,175) (4,421,747) Taxes payable (165,875) (1,283,424) (318,595) Accrued expenses and deferred income (1,220,040) (315,306) (1,073,480) Net working capital 3,902, % 608, % (854,487) -2.6% TOTAL CAPITAL EMPLOYED 47,962, % 34,912, % 33,328, % Reserves for long-term liabilities Reserve for employee severance indemnity 2,874,427 2,110,697 2,155,293 Other provisions 96, Provision for deferred taxes 275, , ,000 Total long-term liabilities and reserves 3,245, % 2,408, % 2,414, % Financial position Cash, banks and securities (10,362,529) (13,659,860) (16,163,013) Treasury stock (430,090) (178,346) (382,995) Payables to banks 17,042,406 10,071,652 12,191,101 Receivables from controlling companies (96,836) (96,836) (96,836) Medium/long-term financing 500, , ,532 Net financial position 6,653, % (3,362,857) -9.6% (3,951,210) -11.9% Shareholders' equity Share capital 20,600,000 20,600,000 20,600,000 Reserves 15,110,113 15,082,043 15,100,662 Net income (loss) 754, ,308 (834,894) Total shareholders' equity 36,464, % 35,867, % 34,865, % Capital and reserves attributable to minority interests 1,598, % - 0.0% - TOTAL OWN AND MINORITIES CAPITAL EMPLOYED 47,962, % 34,912, % 33,328, % Centrale del Latte di Torino & C. S.p.A. Consolidated half-yearly report at June

23 Pro-forma Group consolidated balance sheet and financial situation Jun Jun Dec Fixed assets Tangible fixed assets 29,422,329 17,448,169 18,000,679 Intangible fixed assets 23,601,435 14,971,901 14,297,896 Investments and securities 1,850,292 1,884,763 1,884,763 Total fixed assets 54,874, % 34,304, % 34,183, % Working capital Trade receivables 19,501,114 10,802,303 11,592,593 Inventories 2,855,173 1,812,234 1,745,632 Other current assets 8,879,110 6,926,217 6,306,406 Prepaid expenses and accrued income 756, , ,081 Trade payables (18,675,016) (13,139,961) (14,997,378) Other payables (6,743,200) (4,785,175) (4,421,747) Taxes payable (199,860) (1,283,424) (318,595) Accrued expenses and deferred income (1,258,476) (315,306) (1,073,480) Net working capital 5,115, % 608, % (854,487) -2.6% TOTAL CAPITAL EMPLOYED 59,989, % 34,912, % 33,328, % Reserves for long-term liabilities Reserve for employee severance indemnity 3,513,301 2,110,697 2,155,293 Other provisions 167, Provision for deferred taxes 275, , ,000 Total long-term liabilities and reserves 3,956, % 2,408, % 2,414, % Financial position Cash, banks and securities (5,162,084) (13,659,860) (16,163,013) Treasury stock (430,090) (178,346) (382,995) Payables to banks 21,056,530 10,071,652 12,191,101 Receivables from controlling companies (96,836) (96,836) (96,836) Medium/long-term financing 500, , ,532 Net financial position 15,868, % (3,362,857) -9.6% (3,951,210) -11.9% Shareholders' equity Share capital 20,600,000 20,600,000 20,600,000 Reserves 15,954,500 15,082,043 15,100,662 Net income (loss) 413, ,308 (834,894) Total shareholders' equity 36,967, % 35,867, % 34,865, % Capital and reserves attributable to minority interests 3,197, % - 0.0% - TOTAL OWN AND MINORITIES CAPITAL EMPLOYED 59,989, % 34,912, % 33,328, % Centrale del Latte di Torino & C. S.p.A. Consolidated half-yearly report at June

24 Consolidated financial situation Jun Dec CASH FLOW GENERATED BY OPERATIONS Net income (loss) for the period (A) 754,448 (834,894) Third-party capital 1,598,847 - Adjustments for items not affecting cash flow Amortisation and depreciation 2,634,390 4,367,822 Allocations to employee severance indemnity less amount paid out 719, ,344 Allocations (utilisation) of provisions for risks and charges 112,414 14,355 Total adjustments for items not affecting cash flow (B) 5,064,783 4,506,521 Changes in current assets and liabilities Net trade and other accounts receivable (5,509,722) (232,924) Inventories (5,079,100) 96,878 Receivables from controlling companies - - Prepaid expenses and accrued income (338,037) 72,739 Trade payables 48,057 (257,593) Payables to controlling companies - - Other accounts payable 1,628, ,709 Accrued expenses and deferred income 146, ,937 Taxes payable (152,721) (473,848) Total changes in current assets and liabilities (C) (9,256,707) 144,898 Total cash flow generated by operations (A+B+C) (3,437,476) 3,816,525 CASH FLOW GENERATED BY INVESTMENT ACTIVITY (Increases) decreases in technical fixed assets (7,139,989) (3,377,213) (Increases) decreases in intangible fixed assets 17,235 (1,857,334) (Increases) decreases in intangible fixed assets (5,406,601) (415,236) Total cash flow generated by investment activity (12,529,354) (5,649,783) CASH FLOW GENERATED BY FINANCIAL ACTIVITY Increases (decreases) in medium/long-term debt 2,629,948 3,968,270 Dividends paid - (300,000) (Increases) decreases in other fixed assets 6,800,504 (697,923) Increase in share capital 862,161 - Total cash flow generated by financial activity 10,292,612 2,970,347 Increase (decrease) in cash and bank accounts (5,674,218) 1,137,090 CASH AND BANKS AT BEGINNING OF FINANCIAL YEAR 8,068,009 6,930,920 CASH AND BANKS AT END OF FINANCIAL YEAR 2,393,791 8,068,010 (excluding payables for mortgages and financing. short-term payables and securities in portfolio) Centrale del Latte di Torino & C. S.p.A. Consolidated half-yearly report at June

25 Pro-forma consolidated financial situation Jun Dec pro-forma CASH FLOW GENERATED BY OPERATIONS Net income (loss) for the period (A) 413,316 (834,894) Third-party capital 3,197,694 - Adjustments for items not affecting cash flow Amortisation and depreciation 3,155,898 4,367,822 Allocations to employee severance indemnity less amount paid out 1,358, ,344 Allocations (utilisation) of provisions for risks and charges 183,827 14,355 Total adjustments for items not affecting cash flow (B) 7,895,427 4,506,521 Changes in current assets and liabilities Net trade and other accounts receivable (10,481,226) (232,924) Inventories (1,109,542) 96,878 Receivables from controlling companies - - Prepaid expenses and accrued income (444,709) 72,739 Trade payables 3,689,940 (257,593) Payables to controlling companies - - Other accounts payable 2,309, ,709 Accrued expenses and deferred income 184, ,937 Taxes payable (118,736) (473,848) Total changes in current assets and liabilities (C) (5,970,125) 144,898 Total cash flow generated by operations (A+B+C) 2,338,618 3,816,525 CASH FLOW GENERATED BY INVESTMENT ACTIVITY (Increases) decreases in technical fixed assets (13,325,342) (3,377,213) (Increases) decreases in intangible fixed assets (1,077) (1,857,334) (Increases) decreases in intangible fixed assets (10,555,759) (415,236) Total cash flow generated by investment activity (23,882,178) (5,649,783) CASH FLOW GENERATED BY FINANCIAL ACTIVITY Increases (decreases) in medium/long-term debt 5,209,948 3,968,270 Dividends paid - (300,000) (Increases) decreases in other fixed assets 6,800,504 (697,923) Increase in share capital 1,724,321 - Total cash flow generated by financial activity 13,734,773 2,970,347 Increase (decrease) in cash and bank accounts (7,808,787) 1,137,090 CASH AND BANKS AT BEGINNING OF FINANCIAL YEAR 8,068,009 6,930,920 CASH AND BANKS AT END OF FINANCIAL YEAR 259,221 8,068,010 (excluding payables for mortgages and financing. short-term payables and securities in portfolio) Centrale del Latte di Torino & C. S.p.A. Consolidated half-yearly report at June

26 Group balance sheet and financial situation Financial situation. Major changes in the consolidated balance sheet for the period ended June are summarised in the following table: Jun Jun Dec Net fixed assets 44,060,514 34,304,833 34,183,338 Shareholders' equity 36,464,561 35,867,350 34,865,768 Net financial position (6,653,484) 3,362,857 3,951,210 Own capital / Net fixed assets 82.76% % % Jun Jun Dec pro-forma pro-forma pro-forma Net fixed assets 54,874,056 34,304,833 34,183,338 Shareholders' equity 36,967,817 35,867,350 34,865,768 Net financial position (15,868,052) 3,362,857 3,951,210 Own capital / Net fixed assets 67.37% % % Now that CLAV is part of the Group the value of its net assets have been included in consolidated assets. There was no significant capital expenditure for intangible fixed assets in the period, the amount recorded of million euros mainly refers to expenditure for maintenance of plant and equipment. The Group's net financial position shows a reduction from the same period in the previous year. This reduction is the result of including outstanding payables to banks in the CLAV liabilities and also the use of part of the liquidity to complete the entire acquisition of the Vicenza-based company. Centrale del Latte di Torino & C. S.p.A. Consolidated half-yearly report at June

27 Jun Jun Dec Cash, banks and securities 10,362,529 13,659,860 16,163,013 Treasury stock 430, , ,995 Payables to banks (17,042,406) (10,071,652) (12,191,101) Receivables from controlling companies 96,836 96,836 96,836 Payables to other financing sources (500,532) (500,532) (500,533) Net financial position (6,653,484) 3,362,857 3,951,210 Below is the pro-forma table: Jun Jun Dec pro-forma pro-forma pro-forma Cash, banks and securities 5,162,084 13,659,860 16,163,013 Treasury stock 430, , ,995 Payables to banks (21,056,530) (10,071,652) (12,191,101) Receivables from controlling companies 96,836 96,836 96,836 Payables to other financing sources (500,532) (500,532) (500,533) Net financial position (15,868,052) 3,362,857 3,951,210 Trend of net working capital The table below summarises the trend of net working capital for the period ended June : Jun Jun Dec Trade receivables 15,503,394 10,802,303 11,592,593 Inventories 2,324,732 1,812,234 1,745,632 Other current assets 7,905,326 7,105,166 6,306,406 Prepaid expenses and accrued income 650, , ,081 Trade payables (15,039,284) (13,139,961) (14,997,378) Other payables (6,056,254) (4,785,175) (4,421,747) Taxes payable (165,875) (494,255) (318,595) Accrued expenses and deferred income (1,220,040) (1,283,424) (1,073,480) Net working capital 3,902, ,028 (854,488) Consolidated net working capital at June includes figures for CLAV at the same date and therefore this has caused a large increase in trade receivables and trade payables. Following is the table showing the pro-forma figures: Centrale del Latte di Torino & C. S.p.A. Consolidated half-yearly report at June

28 Jun Jun Dec pro-forma pro-forma pro-forma Trade receivables 19,501,114 10,802,303 11,592,593 Inventories 2,855,173 1,812,233 1,745,632 Other current assets 8,879,110 7,105,166 6,306,406 Prepaid expenses and accrued income 756, , ,081 Trade payables (18,675,016) (13,139,961) (14,997,378) Other payables (6,743,200) (4,785,175) (4,421,747) Taxes payable (199,860) (494,255) (318,595) Accrued expenses and deferred income (1,258,476) (1,283,424) (1,073,480) Net working capital 5,115, ,028 (854,488) Treasury stock. At June Centrale del Latte di Torino & C. S.p.A. owned the following treasury stock: percentage of average book value Par value Category no. shares category capital per share total per share Ordinary shares 150, % 1.51% , Operations with related parties During the course of the half-year covered by this report operations concerning branded products were recorded with the Centro Latte Rapallo S.p.A. subsidiary and were conducted at normal market conditions. Sales of bulk milk to the subsidiary were made on the basis of an agreement between the parties that is reviewed quarterly and foresees the application of average purchase price increases based on market trends. Operations also took place with the associated company, Frascheri S.p.A., which were also at normal market conditions as regards branded production. The sales prices applied have been checked and verified by a member of the Company's Internal Audit Committee. No criticism could be found in the conduct of these activities, which were covered in detailed reports submitted to the Board of Directors. Certain personnel were temporarily assigned to the associated company, Centrale Latte Vicenza S.p.A., during the period and the latter was debited the relevant amounts for compensation, social security contributions and associated costs. During the half-year the Parent Company entered into a rental agreement for an area adjacent to the Turin plant, owned by the Holding Company, Finanziaria Centrale del Latte di Torino S.p.A.. This contract Centrale del Latte di Torino & C. S.p.A. Consolidated half-yearly report at June