AGENDA. Group Overview & 2003 Results pp Industrial Businesses 2003 Results pp Pirelli Real Estate 2003 Insights pp.

Transcription

1 FY 2003 Results

2 SAFE HARBOUR This presentation contains statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of These statements appear in a number of places in this presentation and include statements regarding the intent, belief or current expectations of the customer base, estimates regarding future growth in the different business lines and the global business, market share, financial results and other aspects of the activities and situation relating to the Company. Such forward looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ materially from those in the forward looking statements as a result of various factors. Analysts are cautioned not to place undue reliance on those forward looking statements, which speak only as of the date of this presentation. Pirelli & C SpA undertakes no obligation to release publicly the results of any revisions to these forward looking statements which may be made to reflect events and circumstances after the date of this presentation, including, without limitation, changes in Pirelli & C. SpA business or acquisition strategy or to reflect the occurrence of unanticipated events. 2

3 AGENDA Group Overview & 2003 Results pp.4-10 Industrial Businesses 2003 Results pp Pirelli Real Estate 2003 Insights pp Q & A 3

4 Main Actions Pirelli & C capital increase and merger with Pirelli & C Luxembourg and Pirelli SpA Improved Corporate Governance 2003 ROAD MAP Results Simplified Control Chain Strengthened Financial and Economical Structure: Group Organic Sales + 7% Y.o.Y Group EBIT +125%Y.o.Y Industrial Businesses: Industrial Turnaround Industrial Organic Sales +3% Y.o.Y Industrial EBIT increased from 162 m to 264 m (+63% Y.o.Y) Operating Free Cash Flow 1 bn in 2 years Significant reduction in break even point:-13% Pirelli RE: Consolidation of integrated Business Model New long-term approach: fundmanagement Launch of Franchising Network Pirelli RE Group EBIT including income from equity participations +25% Asset under Management reached 10.5 bn at market value (Pirelli Stake 28%) 4

5 SIMPLIFIED CONTROL CHAIN Former Structure As 11 th March 2003 Current Structure effective from 4th Aug Camfin 24% Pirelli & C. S.a.p.a. 100% Ass. Generali Group 4.6% RCS MediaGroup 4.4% Fondiaria SAI 4.2% Edizione Holding 3.9% Pirelli & C. Luxembourg 27,5% 61,2% R.A.S. 3.9% Mediobanca 3.9% Pirelli & C. S.p.a. P Labs 100% Pirelli S.p.A. 14,2% Real Estate P Labs 100% 100% 100% 100% 50,4% 100% 100% 100% 50,4% 61,1% Energy Cables Telecom Cables Tyres Olimpia Energy Cables Telecom Cables Tyres Olimpia Real Estate From three to one-layer structure Completed Group simplification started in 1999 with the incorporation of Société Internationale Pirelli and Pirelli Partecipazioni into Pirelli S.p.A. 5

6 MAIN STEPS TOWARDS AN EFFECTIVE CORPORATE GOVERNANCE 2004: Board of Directors has proposed to General Shareholder meeting: The modification of the By-laws with the introduction of the Cumulative Vote and the possibility for minorities to appoint one fifth of the members 2003: Conversion into Società per Azioni (Public Limited Company) of Pirelli & C. Sapa Group Ethical Code 2002: Code of Conduct in Insider Dealing Procedure for compliance with the requirements of article 150 It. L.D. (defining method, frequency and content of information on the significant activities and transactions to be given to the Statutory Auditors) and Rules of Conduct for affecting transactions with related parties. 1999: Corporate Governance Code recommended by Borsa Italiana In 2004, Financial Times has included Pirelli among 2003 European Best Practised Corporate Governance Companies Pirelli is included for 2004 in the FTSE4Good and the DJSI 6

7 FY 2003 ECONOMIC and FINANCIAL RESULTS (m ) Industrial Businesses Pirelli Real Estate Others Total Net Sales (as reported) Net Sales (Organic) EBITDA EBITDA margin EBIT EBIT margin Results from Equity Part. Olimpia 6, % % (2) 6,346 5, % % (35) 645 (^) (8) (52) (52) (18) (^^) (30) (57) (16) (100) (86) (50) (150) 6, % % 49 (100) 6,718 6, % % (25) (150) -0.7% % + 20 % % Op. Result incl. Equity Part (173) (286) 217 (57) Financial Expenses (86) (118) 1 (2) (49) (58) (134) (178) PBEIT (222) (344) 83 (235) Extraordinary Items (2) (253) (6) 50 (1) 120 (9) (83) Income Taxes (62) (61) (21) (24) 13 (2) (70) (87) Net Income (loss) Attributable 112 (305) (^^^) (210) (226) 4 (39) (405) (58) NFP (12) % (^) Figure does not represent business volumes; Aggregate Production Value 1525 m 18% YoY) (^^) Include Settlement Ciena +10m (^^^) Of which 83 m real estate activities and 43 m other components (sales of ex UNIM securities) 7

8 FINANCIAL STRUCTURE: NET FINANCIAL POSITION TREND FY 2003 Debt Reduction from Operating Activities (239) (21) (649) NFP YE 2002 Net Cash Flow from operating activities NFP bef. Extraordinary Items and Div. Dividends PUT CISCO PUT BZ Net Balance Acq./ Sale Participations Others NFP before Capital Increase Net Capital Increase Olimpia Capital Increase NFP YE

9 OLIMPIA BALANCE SHEET (m ) Assets TI Shares & Bonds 20% Holinvest Other Total Liabilities ,426 9, ,599 9, Olimpia current stake in Telecom Italia: 1,752 m ordinary Shares (17% of ord. capital) TI Book Value in Olimpia: 5.2 per share TI Book Value in Pirelli: 4.5 per share Equity NFP Total 4,923 3,676 8,599 6,324 3,278 9,602 Improved financial structure: Gearing reduced from 0.75x to 0.52x Following the dividend proposed by the TI Board ( / share) Olimpia in Break Even in

10 STATUTORY ACCOUNTS As proposed by the Board to shareholders Pirelli & C. S.p.A. Net Profit 138 m Dividend Proposed Ordinary Shares Saving Shares

11 AGENDA Group Overview & 2003 Results pp Industrial Businesses 2003 Results pp Pirelli Real Estate 2003 Insights pp Q & A 11

12 INDUSTRIAL CORE BUSINESSES Pirelli Energy Cables & Systems - Utilities - HV/Submarine - General Market - Special Cables Pirelli Telecom Cables & Systems Pirelli Tyre -Car -Moto -Truck - Steel Cord - Cables & Fibers - Submarine Systems - BBA Systems - Photonic Products 12

13 INDUSTRIAL WORLDWIDE PRESENCE AT A GLANCE 77 Factories in 22 Countries Energy 48 Telecom 11 Tyre 22 (Energy/TLC 4 shared) 33,401 Employees Energy 32% Telecom 7% Tyre 61% 6 Bn Total Sales Sales Geographical Breakdown Italy 18% Africa, Asia & Pacific 14% Italy 15% Tyre 49% Energy 44% North America 11% Telecom 7% South America 13% Rest of Europe 47% 13

14 . DRIVEN by a HIGHLY SKILLED & TALENTED MANAGEMENT TEAM 80% of total Senior Executives (150) grown through an international experience Exploiting business and technological synergies among sectors all over the world Cross fertilization among different managerial skills, experiences, organisations and methods (400 managers missioning abroad) Common culture and ethical behaviour as guarantee for stakeholders 14

15 SPARKLE ON INDUSTRIAL ROAD MAP Actions Results Resizing of Capacity Efficiency Recovery Process/Product Innovation Significant Renewal of management team Total efficiency in FY2003 up to 170 m (370 m in 2 years) Break Even Point reduced by 13% from 2001 MIRS fully implemented in US, UK and Germany BBA sales from 9 m to 29 m Continuous ROS improvement QoQ 50 % of executives (215) have had new and unlarged responsibilities within the group in the last two years with unchanged R&D commitment (3.4% of sales) 15

16 2003 INDUSTRIAL BUSINESSES RESULTS (m ) Var(%) Net Sales (as reported) Net Sales (Organic) EBITDA EBITDA margin EBIT EBIT margin 6,034 6, % 6,034 5, % % 9.4% 7.9% % 4.4% 2.6% Volume: 3.9 % Price/Mix: -0.9% Organic Variation: 3.0% Exchange Rates: -6.0% Metal Price: -0.3% Perimeter: -1.6% Total Variation: - 4.9% Net Result 112 (305) n.m. Operating Free Cash Flow

17 POSITIVE INDUSTRIAL EBIT TREND (m ) Q 2Q 3Q 4Q ROS ,3% 4,6% 4,0% 4,7% ,1% 3,8% 0,7% 2,3% 1Q 2Q 3Q 4Q 17

18 FOCUS on COST CONTROL AND PROFITABILITY Efficiencies Break Even Point %Vs 2001 F.C.F 2002/ ROI % 2003 Energy % % 8.5% Telecom % % -9.1% Tyre % % 13.2% Industrial Businesses % % 8.6% 18

19 ENERGY SECTOR RESULTS (m ) Var (%) Net Sales (as reported) 2,637 3, % Net Sales (Organic) 2,637 2, % Volume: -1.7% Price/Mix: -2.7% Organic Variation: % Exchange Rates: -4.6% Metal Price: -0.4% Perimeter: -3.3% EBITDA EBITDA margin EBIT EBIT margin % 6.4% 5.2% % 3.1% 1.8% Total Variation: -12.7% Gross efficiencies (98m ) more than offset decrease in prices/mix (-35m ) and volumes (-12m ) 19

20 ENERGY SECTOR Sales Breakdown by BU FY2003 MARKET OUTLOOK 2004 Industrials & Specials 19% Utilities 46% Positive trend in High Voltage, Special Cables and Submarine General Market 35% Sales Geograph. Breakdown FY2003 South America 8% North America 12% Africa Asia & Pacific 14% Italy 10% Rest of Europe 56% Slight recovery in volumes in Western Europe in General Market and Power Distribution North America: volumes recovery driven by utilities investments Stable market environment in South America Continuous positive trend in Asia and Pacific area Raw materials still under pressure 20

21 PIRELLI TELECOM SECTOR (m ) Var(%) Net Sales (as reported) % Volume: 18.3 % Price/Mix: -21.5% Organic Variation: -3.2% Net Sales (Organic) % EBITDA (1) (22) n.m. EBITDA margin n.m. n.m. Exchange Rates: -5.6% Total Variation: -8.8% EBIT EBIT margin (39) (84) n.m. n.m. n.m. Continuous efficiencies (55m ) in a still negative market scenario 21

22 TELECOM SECTOR: 2003 ACHIEVEMENTS New business MODEL: Cable - Fiber - Access systems - Photonic Components Diversify business towards ACCESS Market (Age, ADSL gateway) leveraging on Pirelli LABS Support / repositioning FIBER PRICE EBIT strongly improved but still negative with a clear improvement forecast 22

23 NEW TELECOMS DEVELOPMENT Traditional Blown Fiber Innovative Radio Over Fiber OPGW Cable (Optical Ground Wire) ROF Module Fiber Optic ROF Modules Fiber or Copper Radio signal Fiber Optic Central Base Stations RNC/Radio Network Controller ROF Module Sewer Systems Broadband Access Systems Leading traditional and high tech businesses 23

24 TELECOM SECTOR Sales Breakdown by BU FY 2003 MARKET OUTLOOK 2004 Submarine Connectivity & Other 16% BBA 7% Continuous operating result improvement thanks to cost control and new products deployment Copper Cables 24% Optical Cables and Fiber 53% BBA business expected to grow strongly reaching 15% of total sales Optical cables volumes to offset prices still under pressure Sales Geograph. Breakdown FY 2003 Africa Asia Italy 9% & Pacific 22% First signs of recovery from Europe, North America (FTTP) and Latam (Copper) South America 10% North America 18% Rest of Europe 41% 24

25 PIRELLI TYRES SECTOR (m ) Var (%) Net Sales (as reported) 2,970 2, % Net Sales (Organic) 2,970 2, % Volume: 7.5% Price/Mix: 4.1% Organic Variation: 11.6% Exchange Rates: -7.6% Total Variation: 4.0% EBITDA EBITDA margin EBIT EBIT margin % 13.4% 12.8% % 7.4% 6.7% Growth sustained by both Price/Mix and Volumes, more than compensating increase in raw materials 25

26 PIRELLI TYRES BRAND POSITIONING Sales Mix Enrichment CAGR +24% MOTO MIX INDEX +15% +10% +10% UHP SUV LOW SECTION (High Mix Truck) 2004 OEM Portfolio 26

27 THE AMERICAN CHALLENGE Replacement Coverage OE Penetration Index RETAIL WHOLESALERS New Factories GEORGIA, US BAHIA, BRAZIL J.D. POWER 27

28 TYRE SECTOR Breakdown by BU FY 2003 Industrial 29% MARKET OUTLOOK 2004 Sustained volumes in Car and SUV Tyres Price/Mix improvements driven by two digit growth of Performance, SUV and Winter segments Geograph. Breakdown FY 2003 Africa Asia & Pacific 14% South America 20% North America 7% Consumer 71% Italy 14% Rest of Europe 45% Double digit growth in Motorcycle Tyre, supported by new products and racing activities Sales in Industrial Tyres and Steelcord increasing in Europe, Middle East and Latam with positive price/mix development Raw materials price (natural rubber and steel) still on upward trend 28

29 AGENDA Group Overview & 2003 Results pp.4-10 Industrial Businesses 2003 Results pp Pirelli Real Estate 2003 Insights pp Q & A 29

30 Pirelli RE - Consolidated P&L (m ) Actual December 03 Actual December 02 Growth % Actual 03 vs Actual 02 Aggregate Production Value net of acquisitions 1, , % Consolidated Production Value EBIT incl. Income from Equity Participations % Profit before Extraordinary Items Net Attributable Income from RE Activities % Other Components (*) (*) deriving almost entirely from the sale of securities portfolio Ex-Unim 30

31 Pirelli RE CONSOLIDATED BALANCE SHEET (m ) ACTUAL ACTUAL December 2003 December 2002 Fixed Assets of which investments in participated companies Net Working Capital of which inventories Net Capital Invested Shareholders' Equity of which minority interests Funds and Provisions Net Financial Position 9.2 (12.3) Total Shareholders' Loans Total Investment in Equity Participations "Adjusted" Net Financial Position (not including Shareholders' Loans) "Adjusted" Net Financial Position (not including SL)/Equity

32 Pirelli RE - NET ASSET VALUE (m ) Book Value 100% Book Value Pro- quota Market Value 100% Market Value Pro- quota NAV Dicember 2003 RESIDENTIAL 1, , COMMERCIAL 5, , , , LAND NPL 925.2* TOT. ASSET UNDER MGT. 7, , , Attr. Shareholders' Equity Dec Total NAV Pirelli & C. Real Estate Not including NPL, Service Provider, Fund Management Investments * Gross Book Value (200.6 m of Net Book Value) 32

33 Pirelli RE 2004 OUTLOOK ASSET MANAGEMENT Residential Acquisition for around Euro 600m (Book Value), negotiation under way for around Euro 350m and sale for around Euro 800m-1bn (Market value) Commercial Acquisition for around Euro 1bn (Book Value), negotiation under way for around Euro 400m and sale for around Euro 600m-700m (Market value) Launch of three funds during 2004 for a contribution value of around Euro 2.2b (including Tecla successfully placed in March 2004) NPL s Acquisition for around Euro 3.5bn (Gross Book Value), negotiation under way for around Euro 2.5bn (Gross Book Value) and securitization for around Euro 500m (Gross Book Value) LAND Short listed for Fiera di Milano Project SERVICES Value of production: double digit growth and stabilize revenues over a longer period thanks to the fund management (7-10 years) ;ROS improvement FRANCHISING NETWORK 500 contracts by year-end (258 in 2003) and widening the offer with real estate and financial related products YEAR END TARGET: EBIT incl. income from equity investment % in line with the plan 33

34 AGENDA Group Overview & 2003 Results pp.4-10 Industrial Businesses 2003 Results pp Pirelli Real Estate 2003 Insights pp Q & A 34

35 FY 2003 Results