Piaggio Group: First nine months 2006

Nov 13 2006 17:43
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Board of Directors approves quarterly report at 30 September 2006

PIAGGIO GROUP: NEW APPOINTMENTS ROBERTO COLANINNO CHAIRMAN AND CHIEF EXECUTIVE OFFICER
NEW ORGANISATIONAL STRUCTURE APPROVED: BANDIERA AND PALLOTTINI CHIEF OPERATING OFFICERS NERI JOINS BOARD OF DIRECTORS

FIRST NINE MONTHS 2006
- NET SALES € 1,285.8 MLN (+10.4% YoY)
- EBITDA € 183.5 MLN (+5.6%), EBITDA MARGIN OF 14.3%
- OPERATING INCOME € 118.5 MLN (+13.5% YoY)
- NET PROFIT € 77.6 MLN (+20.4% YoY)
- NET DEBT DOWN TO € 295.2 MLN

* * *

NEW DIESEL ENGINE FACTORY IN INDIA


Milan, 13 November 2006 – At a meeting today in Milan chaired by Roberto Colaninno, the Board of Directors of Piaggio & C. S.p.A. examined and approved the quarterly report at 30 September 2006.

At the start of the meeting, the Board noted that chief executive officer Rocco Sabelli had presented his resignation last 25 October, with effect from today. The company chairman, Roberto Colaninno, was named chief executive officer, with the powers already held in his capacity as chairman.
The directors also named Gianclaudio Neri to the Board, replacing Rocco Sabelli. Mr Neri holds 847,073 Piaggio & C. S.p.A. shares. His curriculum vitae will be posted on the company website, www.piaggiogroup.com.

The Group continued its positive business performance in the third quarter of 2006, thanks to the market’s warm response to the new products launched during the year, growing demand for light transport vehicles in Europe and in India, and on-going progress on the American market (+60% over the first nine months of 2005).

Consolidated net sales for the first nine months of 2006 totalled € 1,285.8 million, up by 10.4% on the result for the year-earlier period (€ 1,164.2 million). A brand-by-brand analysis shows significant progress for Gilera and Vespa (+ € 38.8 million), Aprilia and Moto Guzzi (+ € 39 million), as well as growth in net sales of Light Transport Vehicles (LTV) in Europe and in India (+ € 42.8 million). Consolidated net sales also benefited from the Piaggio parent company’s supply contract with the Italian Post Office, for € 36.5 million, recognised largely in the first quarter of the year. On the 50 cc motorcycle market, which has been experiencing a general slump in demand, net sales for the Derbi brand dropped 27% in the first nine months, although the brand made a recovery compared with the first half of the year.

The industrial gross margin was € 403.4 million, with a return on net sales of 31.4%.

Consolidated EBITDA amounted to € 183.5 million, a rise of 5.6% on € 173.8 million in the year-earlier period. The EBITDA margin in the first nine months was 14.3%, compared with 14.9% in the 2005 period. Net of operating expense for admission to trading procedures (€ 9.9 million) and income for eco-incentives received in 2005
(€ 18.6 million), EBITDA would have been € 193.4 million at 30 September 2006 and € 155.2 million at 30 September 2005, giving an improvement of 24.6% and an EBITDA margin of 15.0% and 13.3% respectively,

Operating income was € 118.5 million, a rise of € 14.1 million over € 104.4 million in the first nine months of 2005. The return on net sales, at 9.2%, was slightly higher than in the prior period (+0.2 percentage points).

The Group posted a net financial charge of € 21.0 million (€ 22.5 million in the first nine months of 2005).

After tax of € 19.9 million, the first nine months of 2006 closed with consolidated net profit of € 77.6 million, compared with € 64.5 million a year earlier.

Net debt stood at € 295.2 million, down from € 326.2 million at 30 June 2006 and from € 411.4 million at 31 December 2005. The decrease reflected positive cash flow from operations and the positive effect of the share capital increase for the partial exercise of stock options granted under the 2004/2007 plan.

Shareholders’ equity at 30 September 2006 was € 441.0 million, up from € 413.3 million at 30 June 2006.

Events since 30 September 2006

On 25 October, Rocco Sabelli, the chief executive officer of the parent company Piaggio & C. S.p.A., resigned from all positions held in the company and in the subsidiaries.
Also on 25 October 2006, and with effect from 31 October 2006, Gianclaudio Neri resigned as chief operating officer of Piaggio & C. S.p.A., and as director in some subsidiaries of the Piaggio Group, in order to take on other positions in the IMMSI Group.

New organisational structure

The Board of Directors approved the new organisational structure, an efficient solution to the Group’s operating requirements. The directors approved the appointments of Daniele Bandiera as chief operating officer for development, production and sales & marketing, and Michele Pallottini as chief operating officer for administration, finance and control, information systems, legal affairs and equipment and services procurement. The new organisational model supports a new industrial phase in which the Group will be focusing increasingly on its international operations.

Diesel engine production plant in India

The Board of Directors also approved an industrial project in India for the construction of a new diesel engine production facility by the Indian subsidiary PVPL. The facility will have an annual production capacity of up to 200,000 engines and will begin operations between the end of 2009 and the start of 2010. According to preliminary estimates, the total investment, to be paid over the next four years, will be around € 60-65 million.

Outlook

The results for the third quarter of 2006 indicate that a substantial net profit will be posted for the full year, despite slack seasonal trends in the two-wheeler business.
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Piaggio Group reclassified income statement for the year to 30 September 2006

In thousands of euro Note 1/1-30/9/2006 1/1-30/9/2005 Change
    
Net sales 4 1,285,772 1,164,196 121,576
    
Costs for materials 5 740,582 661,905 78,677
Costs for services and use of third-party assets 6 252,155 234,141 18,014
Staff costs 7 180,269 171,658 8,611
Depreciation of PPE and investment property 8 29,782 32,857 (3,075)
Amortisation of intangible assets 8 35,218 36,538 (1,320)
Other income from operations 9 91,381 107,627 (16,246)
Other costs from operations 10 20,669 30,323 (9,654)
Operating income   118,478 104,401 14,077
    
Profit on equity investments  (3) 549 (552)
Financial income 11 8,529 11,541 (3,012)
Financial charges 11 (29,520) (34,011) 4,491
Income before tax   97,484 82,480 15,004
    
Tax for the period 12 19,865 18,746 1,119
    
Net result from assets in use   77,619 63,734 13,885
    
Assets to be discontinued:    
Gain or loss from assets to be discontinued 13 0 724 (724)
    
Consolidated net profit   77,619 64,458 13,161
    
Attributable to:    
Equity holders of the parent  77,172 64,156 13,016
Minority interests  447 302 145
    
Earnings per share (in €) 14 0.21 0.17 0.04
Diluted earnings per share (in €) 14 0.19 - -


 Piaggio Group balance sheet at 30 September 2006
In thousands of euro Note At 30 September 2006 At 31 December 2005 Change
    
ASSETS    
    
Non-current assets    
Intangible assets 15 632,526 624,746 7,780
Property, plant and equipment 16 246,417 259,591 (13,174)
Investment property 17 0 506 (506)
Equity investments 18 767 650 117
Other financial assets 19 5,138 10,354 (5,216)
Non-current tax receivables 20 7,224 7,156 68
Deferred tax assets 21 39,112 35,135 3,977
Trade and other receivables 22 2,000 7,140 (5,140)
Total non-current assets   933,184 945,278 (12,094)
    
Assets held for sale 27 646 55 591
    
Current assets    
Trade and other receivables 23 242,833 176,772 66,061
Current tax receivables 20 22,124 12,440 9,684
Inventories 24 251,171 192,029 59,142
Other financial assets 25 58,652 137 58,515
Cash and cash equivalents 26 50,040 42,770 7,270
Total current assets   624,820 424,148 200,672
    
TOTAL ASSETS   1,558,650 1,369,481 189,169

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