The unprecendent crisis in the world telecommunications market, with a two-thirds fall in world demand for TLC cables and systems, provokes a drop of approximately EUR 90 mln in groupÂ's PBIT (EUR 150 mln including the supply agreement with Cisco) compared with first half of 2001.
In the first six months of 2002 Group sales amounted to 3,352 million euros, falling 11.9% (net of the currency effect) compared with the first half of last year. This essentially reflects the revenues contraction in the Telecom Cables and Systems Sector (-65%, roughly), even though the Company increased its market share in this sector.
The GroupÂ's gross operating profit/EBITDA in the first half of 2002 corresponded to 278 million euros, compared with 432 million euros in the first six months of last year. The bulk of the 35% reduction was registered in the Telecom Cables and Systems Sector, while the Tyres Sector held firm and the Cables and Energy Systems Sector posted an improved result. It should be highlighted that the first half of 2001 took profit from the tune of 59 million euros from the Cisco Systems supply agreement.
Operating income for the first half of 2002 corresponded to 93 million euros, compared with 184 million euros in the first six months of last year. The 49.4% decrease rises to 61.7% when taking into account the revenue impact on the first half of 2001 of the previously-mentioned Cisco Systems supply agreement.
Extraordinary income exceeded charges by 24 million euros. This item essentially consists of capital gains realized by Pirelli SpA (totalling 17 million euros) from the real estate reallocation process: among this, the sale to Pirelli & C. of the Rome Company Headquarters and the historical Bicocca degli Arcimboldi building. In the first half of 2001 this item consisted principally of pre-tax capital gains realized on the disposal on the open market of Pirelli SpA shares held by the company (30 million euros), and 36 million euros paid by Cisco Systems as part of the disposal of the Terrestrial Optical Systems unit in 2000.
Group net income in the first six months of 2002, excluding the impact of the equity stake in Olimpia, was equivalent to a 2 million euro profit; taking Olimpia into consideration this becomes a 52 million euro loss, compared with a 200 million euro profit recorded in the first half of 2001.
Prospects for the second half of the year are conditioned by market evolution in the Telecommunications Cables and Systems Sector. At an operating income level, considering both the Energy Cables and Systems and Tyres SectorsÂ' firm hold, it is expected that the GroupÂ's recorded trend during the first half of 2002 may be substantially confirmed, thanks to the efficiency exercise under way, while still influenced by the evolution of the Telecom Cables and Systems Sector reference market. Group management is continuing to closely monitor the high degree of instability characterizing the macro-economic framework, particularly in regard to the telecommunications and energy markets, and is ready to intensify its rationalization actions.
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(source: Pirelli)
