Pirelli & C. S.p.a. · MIL:PIRC
Pirelli & C — H1 2003 Earnings Presentation
24 slides from Pirelli & C's earnings presentation, Sep 5, 2003
Slide 1: Pirelli & C Group: Future key drivers and First Half 2003
Pirelli & C Group Future key drivers and First Half 2003 Milan, September 5th, 2003
Slide 2: Preliminary Notes
1 PRELIMINARY NOTES • 1H 03 results include the effects of Pirelli & C capital increase and “recesso”, along with the incorporation of Pirelli SpA and Pirelli & C Luxembourg • Financial and fiscal effects of the merger are retroactive to January 1, 2003 Milan, September 5th, 2003
Slide 3: Contents
2 CONTENTS • Key Milestones • Group Results • Industrial Business • Pirelli & C Real Estate • Olimpia • The New Vision and Outlook Milan, September 5th, 2003
Slide 4: Pirelli Group's Key Milestones
3 PIRELLI GROUP’S KEY MILESTONES … • Successful merger and capital increase… … and stronger financial position • Industrial businesses recovering after an impressive turnaround, with positive outlook • Real Estate activities growing in size and profitability • Olimpia ready to take direct advantage
Slide 5: Contents: Group Results
4 CONTENTS • Key Milestones • Group Results • Industrial Business • Pirelli & C Real Estate • Olimpia • The New Vision and Outlook Milan, September 5th, 2003
Slide 6: Pirelli Group Main Figures
5 PIRELLI GROUP MAIN FIGURES (ml Euro) H1 2003 Pro-forma H1 2003 H1 2002 Pre Merger Post Merger Net Sales 3,298 3,298 3,494 EBIT 129 142 101 EBIT Margin 3.9% 4.3% 2.9% Equity participation results 23 23 11 Olimpia (45) (45) (54) Op. result incl. Equity Partic. 107 120 58 Financial charges (74) (74)
Slide 7: New Pirelli Group Structure
6 NEW PIRELLI GROUP STRUCTURE … (effective as of September 1st, 2003) Main Shareholders (*) Camfin 23.7% Assicurazioni Generali 4.6% RCS MediaGroup 4.4% Fondiaria – SAI 4.2% Mediobanca 4.0% Edizione Holding 3.9% R.A.S. 3.8% 100% 100% 100% 61.7% 50.4% Pirelli Energy Pirelli Telecom Pirelli Tyre Pirel
Slide 8: Supported by Positive Market Reactions After the Merger Announcement
7 … SUPPORTED BY POSITIVE MARKET REACTIONS AFTER THE MERGER ANNOUNCEMENT Stock performance since March 12th 2003 135 125 - Capital Increase fully subscribed w/o intervention of the underwriting 115 syndicate - Limited “Recesso” from retail 105 shareholders 95 12/03/03 26/03/03 09/04/03 23/04/03 07/0
Slide 9: The New Pirelli Group Financials Framework
8 THE NEW PIRELLI GROUP FINANCIALS FRAMEWORK (ml Euro) Industrial Pirelli & C. Other Total Business Real Estate (incl. Olimpia) (post merger) 06/2003 06/2002 06/2003 06/2002 06/2003 06/2002 06/2003 06/2002 Net Sales 3,049 3,386 (***) 281 146 (32) (38) 3,298 3,494 - EBITDA 287 (*) 290 37 33 (**) (2)
Slide 10: Contents: Industrial Business
9 CONTENTS • Key Milestones • Group Results • Industrial Business • Pirelli & C Real Estate • Olimpia • The New Vision and Outlook Milan, September 5th, 2003
Slide 11: A Major Restructuring to Face a Tough Environment
10 A MAJOR RESTRUCTURING TO FACE A TOUGH ENVIRONMENT Continuous search ...improving margins, Actions... for efficiencies… in line with targets... - Re-sizing of capacity to match 44.000 100 7,0% market demand: 12 plants 6,0% closures (7 Energy, 4 TLC, 1 Tyres) starting from 2001 41.000 95 5,0% - Eff
Slide 12: Pirelli Energy Cables Sector
11 PIRELLI ENERGY CABLES SECTOR Very tough environment so far Profit and loss 1H 2003 1H 2002 Var. % - Investments contraction SALES 1,312 1,614 -18.7% - Price pressure EBITDA 70 (*) 77 -9.1% - Overcapacity EBITDA margin 5.3% 4.8% Impressive restructuring mostly completed EBIT 27 (*) 26 +3.8% EBIT m
Slide 13: Pirelli Telecom Cables Sector
12 PIRELLI TELECOM CABLES SECTOR Very weak market so far Profit and loss 1H 2003 1H 2002 Var. % - Cable demand low and flat - Pressure on prices/mix (-13%) in 1H2003 SALES 228 284 -19.7% - Copper cables improving in Latam and Australia EBITDA (2) (*) 11 n.m. EBITDA margin n.s. 3.9% - Competitors sti
Slide 14: Pirelli Tyres Sector
13 PIRELLI TYRES SECTOR Achievements Profit and loss 1H 2003 1H 2002 Var. % - Volume growth in Performance segments (Moto and Car HP/UHP/SUV) SALES 1,509 1,488 +1.4% - Price/Mix improvements across the markets EBITDA 219 202 +8.4% EBITDA margin 14.5% 13.6% - Raw material cost increase in South Ameri
Slide 15: Contents: Pirelli & C Real Estate
14 CONTENTS • Key Milestones • Group Results • Industrial Business • Pirelli & C Real Estate • Olimpia • The New Vision and Outlook Milan, September 5th, 2003
Slide 16: Pirelli & C. Real Estate Environment and Actions
15 PIRELLI & C. REAL ESTATE ENVIRONMENT AND ACTIONS Environment Pirelli Actions - Family high propensity - Portfolio rotation: sold € 322 ml, acquired € Residential to save money and buy 153 ml, € 500 ml under negotiation home, sustained demand for housing - Portfolio rotation: sold € 423 ml, acquis
Slide 17: Pirelli & C. Real Estate Business Results
16 PIRELLI & C. REAL ESTATE BUSINESS RESULTS Profit and loss Balance sheet 1H 2003 1H 2002 Var. % 1H 2003 FY 2002 Net Aggregate Equity 360 368 693 481 +44% Production value Net Financial 71 (12) EBIT including Results Position from Equity 53 42 +27% NFP incl. share- 249 167 Participations holders lo
Slide 18: Contents: Olimpia
17 CONTENTS • Key Milestones • Group Results • Industrial Business • Pirelli & C Real Estate • Olimpia • The New Vision and Outlook Milan, September 5th, 2003
Slide 19: Olimpia: An Industrial Core Investment
18 OLIMPIA: AN INDUSTRIAL CORE INVESTMENT MAJOR ISSUES - A reliable and efficient financial structure: • TI 1H 2003 Net Result after merger: 1,592 ml Euro Olimpia is the main • Reduced dividend leakage shareholder in TI with: • 11.6% ordinary stake - Business targets for the New TI 2003-2005 fully c
Slide 20: Contents: The New Vision and Outlook
19 CONTENTS • Key Milestones • Group Results • Industrial Business • Pirelli & C Real Estate • Olimpia • The New Vision and Outlook Milan, September 5th, 2003
Slide 21: A Stronger Group for Profitable Business
20 A STRONGER GROUP… - Simplified and strengthened post merger structure - A balance of assets - industrial, real estate and telecommuncations - strongly placed in all businesses - Leveraging on: . A strong and integrated management team . A strong Group culture focused on value creation . The shari
Slide 22: With Clear Outlook and Perspectives
21 … WITH CLEAR OUTLOOK AND PERSPECTIVES With a competitive cost structure, Pirelli “ready”… also for economic rebound - Good order book for 2H 03 Energy - Black-outs stimulating new round of capex Cables and Systems - Innovative services to utilities (maintenance, network control) - Effective colla
Slide 23: Annex
22 Annex Milan, September 5th, 2003
Slide 24: Merger Surplus
23 MERGER SURPLUS Surplus origination … … and allocation breakdown Book Value of Pirelli SpA 27 Intangible Allocation Minority Interest 1,304 Assets Steps 125 Property, First Merger Plant and allocation Surplus Equipment = € 1,304 104 Pension Funds € 2,239 Acquisition million 32 Other million Cost F