Board of Directors approves the 9 months results
BENETTON GROUP CONSOLIDATED REVENUES 1,491 MILLION EURO
The strong third quarter revenues performance (+13.1%) benefited, as expected, from the rescheduling of shipments decided in the previous quarter Benetton Group nine month revenues substantially in line with the excellent results of the corresponding period of 2008: -2.8% (-2.1% currency neutral) Margins maintained by careful cost control, offsetting the negative currency impact Investments of over ?100 million focussed on commercial growth and production activities Significant increase in cash flows: over ?200 million reduction in cash flow absorption Net debt in line with the previous year, with improvements expected by the year end.
Ponzano, November 12, 2009 - The Benetton Group Board of Directors examined and approved the consolidated results for the first nine months of 2009 and reviewed progress made in the achievement of the objectives set out in the reorganization plan.
Consolidated income statement
Group net revenues for the first nine months of 2009 were ?1,491 million, marginally down (-2.8%) against the reference period of 2008 (-2.1 % currency neutral). As already announced, the rescheduling of deliveries decided at the end of the first half year in order to match seasonality and provide improved service to clients, was fully recovered during the third quarter of the year.
Revenue performance was substantially maintained despite the deterioration in foreign currencies against the euro as well as product mix. In the period, on the other hand, the opening of more directly operated sto res had a positive effect.
Textile segment sales increased by ?10 million to ?78 million, while Apparel sales were ?1,413 million, ?53 million lower than in the first nine months of 2008. Apparel sales included ?324 million (+ ?12 million) attributable to direct sales, while ?1,089 million were generated in the wholesale channel (-?65 million).
In established markets, satisfactory performance was achieved by: Italy, the main Group market, France, Greece and Nordic countries; with a slowdown in the Iberian peninsula and continental Europe.
In emerging markets, which grew overall by 13%, currency neutral, particularly positive performance was achieved in India and China. In India, there was in fact a further acceleration in growth due to continued improvement in comparable performance and to growth in department stores in prime locations. In China, comparable performance was positive in the third quarter and for the year to date, due to the completion of t he initial phase of refocusing and closure of sales outlets, accompanied by the first new openings in locations of strategic interest.
In Mexico, market development has been focussed on both the direct network and department stores, where further acceleration is planned with the opening of 50 new corners for the winter season.
In Turkey, the market is contracting due to weakness of consumption and of the currency. Benetton's well-established presence benefits from high brand visibility; the latter was further increased by the recent opening of an important flagship store in the centre of Istanbul.
Finally, there was a downturn in volumes in the Russian market due to the strong impact of the economic crisis; however, the Benetton Group remains committed to seizing development opportunities in this important market.
Gross operating profit, amounting to ?680 million, reduced in absolute value (-?29 million), due to a different mix and, to an importan t extent, to the currency impact.
It should be mentioned that the margin (45.6% of revenues), net of the currency impact, increased by over 100 basis points, with a percentage of sales which rose to 47.3% from 46.2% in the first nine months of 2008. In fact, in the period, improved efficiencies of ?43 million were achieved in the industrial and sourcing area, including ?24 million resulting from actions identified in the reorganization plan.
The contribution margin was ?571 million (38.3% of revenues), down compared with ?597 million in the corresponding period of 2008 (38.9%). Lower distribution costs were important elements in this respect.
The aggressive actions pursued at the beginning of 2009 to reduce general and administrative expenses generated savings in the first nine months of the year of ?16 million, in the areas of general expenses, third party and consultancy services, and advertising due to lower rates. These initiatives counterbalanced th e expected increase in payroll and rental costs, associated with the opening of directly operated stores, and in depreciation and amortization, as a result of investments completed in previous periods. These included investments relative to expansion of the Castrette logistics centre.
Non-recurring items worsened by a total of ?22 million (from an income of around ?7 million in 2008 to a cost of ?15 million in 2009), mostly linked to reorganization costs.
As a result, operating profit (EBIT), net of non-recurring items and currency impacts, was in line with the number reported for the same period in the previous year (?175 million in the first nine months of 2008, against ?170 million in 2009). Reorganization plan actions already taken impacted positively by ?40 million on this level of profit. EBIT was ?134 million, compared with ?182 million in the corresponding period of 2008, due to the negative effect of foreign currency trends for ?21 million (with corres ponding hedging income to which reference is made in the next paragraph) and increased non-recurring expenses of ?22 million.
Financial management highlights were: a significant reversal in the trend of results for foreign currency hedging, which produced ?2 million of profit, compared with a loss of over ?9 million in the corresponding period of 2008, partially compensating for the negative impact of currencies, mentioned above, on revenues and costs; and also a significant improvement in net financial expenses due to the effect of lower interest rates, in the presence of an increase in average indebtedness in the nine months.
Net income, finally, was ?82 million (5.5% of revenues), compared with ?109 million (7.1%) in the corresponding period of 2008. The increase in the Group tax rate in the period should be noted.
Consolidated financial situation
Capital employed increased by ?146 million, compared with December 31, 2008, in line with the cycl ical nature of the business and due to the change in working capital. The latter (?845 million) was lower than at September 30, 2008 (?849 million) due to the reduction in finished product inventories.
Net debt at September 30, 2009 was ?819 million, substantially in line with values on the same date in 2008, revealing a large reduction in cash flow absorption since the start of the year, compared with the reference period in the previous year. A further improvement of indebtedness, also compared with the end of 2008, is expected in accordance with the seasonality of the business.
Summary of consolidated cash flows
Cash flow generated by operating activities improved, totalling ?31 million overall, as opposed to a negative amount of ?36 million in the comparable period; this growth mainly resulted from the reduced absorption of working capital.
In the first nine months of 2009, Group net investments were ?107 million compared with ?183 million in the corresponding period of 2008. Investments for the commercial network predominated, for an amount of ?73 million; actions for the renovation and expansion of stores were given preference. The thrust to develop production investments also continued in the nine months, with expenditure of over ?23 million (?37 million in 2008).
Free cash flow improved as a result, from a requirement of ?219 million in the first nine months of 2008 to one of ?76 million in 2009.
Total cash absorption in the nine months of 2009 was ?129 million, after payment of the dividend in May, a sharp improvement compared with a total absorption of ?346 million in the corresponding period of 2008.
Commenting on the results for the period, Benetton Group CEO Gerolamo Caccia Dominioni, stated: "the nine month results strenghten our confidence in the choices made in the reorganization process under way in the company. Benetton can always count on the force of a high quality product, a strong brand and a constant drive to invest. Additionally, the company has put in place incisive actions, particularly in respect of cost containment and financial management. On the basis of the good results in the first nine months, and in the absence of positive signals on the macroeconomic front, we expect to confirm revenues for the full year substantially in line with the 9 months trend. Due to higher than expected savings, we will ensure satisfactory profitability. Positive cash generation will result, by the end of the year, in lower indebtedness than at December 2008".
The appendixes relating to the press release are available on:
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