PIRELLI GROUP STRATEGIES & 1999 RESULTS LONDON AND MILAN PRESENTATION

Transcription

1 PIRELLI GROUP STRATEGIES & 1999 RESULTS LONDON AND MILAN PRESENTATION

2 E-PIRELLI Total project ivetmet : >Euro 1 bl ( Itl bl )

3 E-PIRELLI 2000 expected o-lie ale Euro 1 bl

4 PICTURE OF GROUP INITIATIVES Compoet, product ad ytem Service Create Value - IPO Iovate & Grow Pirelli SpA Pirelli & C. Iteratioal developmet Pot merger itegratio to world leaderhip Relauch with radical compay iovatio Pot merger itegratio to local leaderhip Develop ew buiee alo abroad Optical compoet Special Fiber TLC Cable TLC Sytem (Submarie, ) Eergy Cable, Sytem, Device Tyre E-buie developmet ad iovatio temmig from traditioal buiee (e.g. E-Tyre) Real Etate Service (e.g. UMTS, bad-width) buie ivetmet Break ito ew market pace ad boot operatig performace i all buie area Capture value creatio opportuitie through icubator

5 E-PIRELLI PERIMETER AND ENVISAGED INVESTMENTS Optical compoet Special Fiber TLC Cable TLC Sytem (Submarie, )) Eergy Cable, Sytem, Device Tyre E-buie developmet ad iovatio temmig from traditioal buiee (e.g. E-Tyre) Real Etate Service (e.g. UMTS, bad-width) buie ivetmet Iitiative that itegrate our upplier, cutomer, ed-uer

6 Optical compoet Optical compoet Special Fiber Special Fiber Cable Cable Sytem (Sub, ) Sytem (Sub, ) E- buie developmet ad iovatio temmig from traditioal Eer gy Cabl e, Syte m, Devi ce buiee E- buie developmet ad iovatio temmig from traditioal buiee Tyre & E- Tyre Real Etat e Service ( eg. UMTS, Service bad- ( eg. width) UMTS, bad- buie width) ivetmbuie et ivetm et VALUE ENHANCEMENT OF BUSINESSES LINKED TO INTERNET DEMAND E.g. Optical Compoet Pirelli amog the fouder of optical techologie Numerou patet ad capability to produce compoet ad module USD 6 Bl market, with 60% growth rate Start-up of High-Tech compay i the USA, with local maagemet ad 10% Cico participatio

7 Optical compoet Optical compoet Special Fiber Special Fiber Cable Cable Sytem (Sub, ) Sytem (Sub, ) E- buie developmet ad iovatio temmig from traditioal Eer gy Cabl e, Syte m, Devi ce buiee E- buie developmet ad iovatio temmig from traditioal buiee Tyre & E- Tyre Real Etat e Service ( eg. UMTS, Service bad- ( eg. width) UMTS, bad- buie width) ivetmbuie et ivetm et VALUE ENHANCEMENT OF BUSINESSES LINKED TO INTERNET DEMAND E.g. Submarie Optical Sytem USD 7 Bl market Pirelli wet techology holder Start-up of dedicated compay, complete with egieerig ad itallatio ervice (10% Cico participatio) Syergie with ubmarie optical cable maufacture

8 Optical compoet Optical compoet Special Fiber Special Fiber Cable Cable Sytem (Sub, ) Sytem (Sub, ) E- buie developmet ad iovatio temmig from traditioal Eer gy Cabl e, Syte m, Devi ce buiee E- buie developmet ad iovatio temmig from traditioal buiee Tyre & E- Tyre Real Etat e Service ( eg. UMTS, Service bad- ( eg. width) UMTS, bad- buie width) ivetmbuie et ivetm et TRANSFORMATION OF CORE BUSINESS E.g. E-TyreE Approximately 20 iitiative lauched Radical proce ad product iovatio (MIRS), i Car, Truck ad Motorcycle tyre Developmet of Itelliget Tyre, capable of iteractig o- ad off-lie with: vehicle ecurity ytem ed-uer dealer vehicle maufacturer Orgaizatio maaged by ed to ed procee, itegratig upplier, cutomer, etc. through Iteret Iovatio i relatio with cutomer ad ditributio chael A chage detied to revolutioize the ector profitability parameter

9 Optical compoet Optical compoet Special Fiber Special Fiber Cable Cable Sytem (Sub, ) Sytem (Sub, ) E- buie developmet ad iovatio temmig from traditioal Eer gy Cabl e, Syte m, Devi ce buiee E- buie developmet ad iovatio temmig from traditioal buiee Tyre & E- Tyre Real Etat e Service ( eg. UMTS, Service bad- ( eg. width) UMTS, bad- buie width) ivetmbuie et ivetm et TRANSFORMATION OF CORE BUSINESS E.g. B2B Cable I Italy, 20% of Pirelli ale to electrical ditributor already y made through Iteret The ervice permit 24 x 7 acce to the followig: product iformatio izig oftware order takig e-paymet Track-Tracig Tracig - VMI (Vedor Maaged Ivetory)

10 Optical compoet Optical compoet Special Fiber Special Fiber Cable Cable Sytem (Sub, ) Sytem (Sub, ) E- buie developmet ad iovatio temmig from traditioal Eer gy Cabl e, Syte m, Devi ce buiee E- buie developmet ad iovatio temmig from traditioal buiee Tyre & E- Tyre Real Etat e Service ( eg. UMTS, Service bad- ( eg. width) UMTS, bad- buie width) ivetmbuie et ivetm et Pirelli & Co. INVESTMENTS IN NEW BUSINESS OPPORTUNITIES E.g. Euro Cube Fud Fud dedicated to High-Tech/Iteret tart-up i Europe Ivetor: Pirelli, Camfi,, Beetto, Caltagiroe, Gazzoi Merrill Lych, Mediobaca, Baca Itea Maagemet Compay (My Qube) directed by G.L. Braggiotti Firt project: Italia Real Etate Portal

11 Optical compoet Optical compoet Special Fiber Special Fiber Cable Cable Sytem (Sub, ) Sytem (Sub, ) E- buie developmet ad iovatio temmig from traditioal Eer gy Cabl e, Syte m, Devi ce buiee E- buie developmet ad iovatio temmig from traditioal buiee Tyre & E- Tyre Real Etat e Service ( eg. UMTS, Service bad- ( eg. width) UMTS, bad- buie width) ivetmbuie et ivetm et Pirelli & Co. INVESTMENTS IN NEW BUSINESS OPPORTUNITIES E.g.: Dix.it Pirelli participate i the Dix.it coortium biddig for the fifth fth UMTS mobile telephoy licece,, with joit hare alogide e-e Bicom, Securfi,, IFIL, Baca di Roma, e-plaete

12 Optical compoet Optical compoet Special Fiber Special Fiber Cable Cable Sytem (Sub, ) Sytem (Sub, ) E- buie developmet ad iovatio temmig from traditioal Eer gy Cabl e, Syte m, Devi ce buiee E- buie developmet ad iovatio temmig from traditioal buiee Tyre & E- Tyre Real Etat e Service ( eg. UMTS, Service bad- ( eg. width) UMTS, bad- buie width) ivetmbuie et ivetm et Pirelli & Co. INVESTMENT IN NEW BUSINESS OPPORTUNITIES Ititutioal iitiative Mater i e-commercee Iteret Award

13 Pirelli ha ample reource to fiace thi developmet (ow fud ad icome derived from Cico operatio) The Group ha already put the plaed iitiative i tock

14 PIRELLI GROUP

15 MISSION Ehacig hareholder value by Techology Quality Iovatio for Cutomer atifactio

16 MAJOR EVENTS IN 1999/2000 Corporate Merger with SIP - Société Iteratioale Pirelli Cable & Sytem Acquiitio Sieme Power Cable Diviio Power cable ad cotructio buie of Metal Maufacturer - (Autralia) NKF power activitie i Netherlad ad Filad FOS (fibre optic) BICCGeeral activitie i UK, Italy, Aia ad Africa Alliace Tyre Strategic alliace with Cico Strategic alliace with Cooper Tire Acquiitio of ATCo - Egypt maufacturig proce - MIRS

17 THE CISCO DEAL Euro/ Ml Teroptic ale Gro capital gai Related cot Net Tax 1,576 1,522 (93) (298) TOTAL 1,131 Impact o 1t quarter 2000

18 NORTH AMERICA GDP +3.8% Iflatio rate 2.6% Iteret rate 5.8% 2000 SCENARIO EUROPEAN UNION GDP +3.1% Iflatio rate 2% Iteret rate 4% TURKEY GDP +4.5 % Iflatio rate 53% JAPAN GDP +0.7% CHINA GDP +7.4% BRAZIL GDP +2.2% Iteret rate 18.4% Iflatio rate 7% EASTERN EUROPE GDP Hugary +4.6% Czech Rep. +1.7% Iflatio rate Hugary 8.6% Czech Rep. 3.9% SOUTH-EAST ASIA Strog recovery after the ecoomic crii

19 SHAREHOLDER STRUCTURE (a of 29/02/2000) PIRELLI & C. BZ Group Holdig Limited 30.5% 10.6% PIRELLI S.p.A % 100% PIRELLI TYRE HOLDING N.V. PIRELLI CAVI e SISTEMI S.p.A. TREASURY SHARES AT : 1999: 173,074,000 (9.1% of capital) BOOK VALUE: Euro Ml 336

20 BY SECTOR TURNOVER AT BY GEOGRAPHIC AREA Cable & Sytem Tyre 60% 40% ,482 Millio Euro Italy Ret of Europe Cetral ad S. America North America Autralia, Aia ad Africa 12% 46% 17% 15% 10%

21 PROFIT & LOSS Euro/ Ml Net Sale Gro Op. Margi % o Net Sale Operatig Reult % o Net Sale , % FULL YEAR RESULTS 1998@ Var Var. 5, % 12.8% % +23% -12% 5, % % +18% 678 0% -6% -20% Net pre-mioritie % o Net Sale % % +27% % +11% Net Reult % % Net Debt 1, AT 1999 EXCHANGE RATES

22 SALES VARIATIONS /1998 Var. % Volume Currecy Price Agri decoolidatio Mix ad other coolidatio TOTAL + 9.1% - 4.4% - 5.2% - 1.0% + 4.8% % %

23 EBIT VARIATIONS 1999/1998 Euro/ Ml Exchage rate (34) Agri - decoolidatio (11) Price (271) Total (316) Volume ad mix +155 Sieme, MM & ATCo - co. +39 Material +35 Efficiecy +67 Other (61) Total (81)

24 PERSONNEL EFFICIENCIES Employee at Acquiitio Efficiecie Agri decoolidatio *36,226 6,284 **(1,913) (494) Employee at ***40,103 * excludig acquiitio ** of which 1,101 o ew acquiitio *** icludig 2,192 temporarie

25 FINANCIAL HIGHLIGHTS Euro/ Ml Total Group Net Debt 1,017* 265 Capital Expediture R&D Expediture Employee 40,103 38,209 *of which Euro 291 Ml due to ew acquiitio ad Euro 229 Ml to the merger with SIP

26 CONSOLIDATED CASH FLOW STATEMENT (Euro Ml) (647) (54) (91) (109) (185) (201*) (526) EBIT Deprec. Net ad Ivet. Amortizatio Operat. Other Work. ad Fud Capital Variatio Variatio Free Cah Flow Net fiacial charge Taxatio Divided Acquiitio paid of treaury hare Extraord. Item ad other Variatio Net Cah Flow *of which Euro 159 Ml due to ew acquiitio

27 12.5% WACC 6.9% 5.4% 10.3% KEY RATIOS ECONOMIC VALUE ADDED (Euro Ml) 11.8% 11.3% 7.7% 12.2% 10.2% 10% 9.0% NOPAT/CNI R.O.I. 12.8% 9.4% 8.8% 8.8% 8.3% 8.3% 7.4% 7.0% 9.2% EBIT (230) NOPAT EVA (131)

28 ENHANCING SHAREHOLDER S VALUE % i 7 year PIRELLI + 481% i 8 year MIB (Mila Stock Idex) + 331% i 8 year Ja. 92 Dec. 99 BASE 1992 = 100

29 A VALUE ORIENTED TEAM STOCK OPTION PROGRAMS 1t tep (lauch: 1999) Icetive Pla ( ): 300 Key Executive ad Cadre 2d tep (lauch: 2000) Retetio Pla for 800 people : Executive (90 Seior Executive) ad Key Cadre Icetive Pla ( ): 90 Seior Executive Mai target for Icetive Pla: Net Reult ad EVA

30 PIRELLI S.P.A. STATUTORY ACCOUNTS a propoed by the Board to Shareholder Euro Net Profit (millio) Divided Ordiary Savig

31 INFORMATION TECHNOLOGY: A TOOL FOR BUILDING VALUE I P H A S E Cliet Server Architecture Stadardizatio SAP Itraet Itegratio Globalizatio 12,000 coected uer 5,000 SAP uer 78 WEB Applic. II P H A S E Buie Complexity Buie Itelligece Supportig Buie Strategy Itegratio with upplier Supply Chai Maag. Iteret Electroic erce Itraet Corporate Portal

32 PIRELLI GROUP