Press Releases and Statements
Benetton Group Board of Directors reviews preliminary 2010 results
Benetton Group, positive first half year
Ponzano, January 31, 2011 – The Benetton Group Board of Directors met today to review key preliminary data for 2010(*). Complete and final results will be examined and approved by the Board at its meeting on March 15.
All comparisons of revenue with 2009 are currency neutral, unless otherwise indicated.
Preliminary revenues for 2010 reached €2,053 million, compared with €2,049 million in 2009, (+0.2% at current rates, -1.9% currency neutral); this result reflects the difficult economic situation in the year just ended in some of the Group’s most important reference markets, and the commitment to development in areas with the greatest growth opportunities. During the year, the strength of Group brands was confirmed, accompanied by continued support of the numerous partners with whom Benetton has worked for many years. The support received from these partners made it possible to achieve a result in line with expectations, in spite of the difficult conditions in many countries, especially in the first part of 2010.
More specifically, the Textile segment increased sales by €3 million compared with the previous year, reaching €105 million (+2.7% at current rates), while Apparel was at €1,948 million, the same as in 2009, corresponding to a currency neutral reduction of 2.1%.
In the fourth quarter of 2010, total sales were €555 million, down by €3 million (-0.6%) compared with the corresponding period of 2009.
During the fourth quarter of 2010, and in the total for the year, direct sales on a like-for-like basis continued a trend in line with the preceding nine months, with a slowdown, however, in the last part of the year, after a good start to the Fall/Winter season.
Examining revenue performance by geographical area, Europe showed a reduction of 3.3%. Challenging conditions experienced in Greece, and to a lesser extent also in Spain and Italy, contrasted with the satisfying progress achieved in Russia, which registered double-digit growth, and many of its bordering countries, as well as the good support generated by the central European area.
There was growth in all other geographical areas: Americas +5.3%, Asia +3.8%, Rest of the World +4.0%, with differing levels of performance in countries of major interest to the Group, as shown in more detail below.
In the Americas, there was strong growth in Mexico (+32.5%) and overall in South American countries, while in the USA there was a modest contraction (-1.0%), associated with the restructuring of the sales network, although on a like-for-like basis the result was up on 2009.
In Asia, there was double-digit growth in India (+12.4%), in the context of a challenging transfer of stores from direct to third-party operation, and Taiwan (+15.2%); significant progress was also made in Korea and Turkey. The Chinese area achieved significant growth on a like-for-like basis, while it was negative in terms of absolute value, due to the policy to refocus the direct network, implemented in 2009 and concluded in 2010, in the People’s Republic and Hong Kong.
(*) Preliminary values, not yet audited
During the fourth quarter, as expected, strong pressures on the prices of some important raw materials impacted product costs and will be felt more strongly in coming months. On the basis of the cumulative result for the first nine months and preliminary estimates for the last quarter of 2010, the Group expects full year Income from Operations to be around 8.5% of revenues (10% in 2009).
As for the bottom line, which was affected positively by good results achieved in reducing net debt and in foreign exchange management, and negatively by an increase in the average tax rate, the Group expects 2010 full year Net Income to be slightly higher than €100 million.
Again in 2010, there was an improvement in the net financial position due to cash generation in the year of €66 million which made it possible to reduce indebtedness to €490 million. All available levers (receivables, payables and inventories) were utilized, leading to a significant reduction in net working capital, while the Group developed a large investment programme, in particular for the renewal of the commercial network, higher than in 2009.
Orders are now being taken for the 2011 Spring/Summer collection, and some improvement is forecast compared with the performance of recent collections (-4%), with expectations of further recovery for the 2011 Fall/Winter collections. The contribution of the more recently developed countries will be fundamental to sustain Group revenues, while uncertainty still prevails in western economies.
2011 does, however, present some challenging areas: high cost increases, especially of raw materials, the still negative economic picture in southern European countries, the continued presence and, in some cases, strengthening of protectionist barriers which restrict international trade. In particular, if the recent high inflation in raw material costs does not reduce in the near future, there could be a significant erosion of margins in coming months.
In this environment, the Group is defining its action priorities for 2011, in a business plan currently being formulated, focussing on both development projects and further process efficiency and cost optimization.
The development projects are aimed at revitalizing the commercial offerings of all product lines, continued improvement of the sales network, strengthening of brand attractiveness and reduction of time to market, with the objective of improving store profitability.
2011 will also see continued renewal of the commercial network, with a large investment programme.
Finally, on the cost and process front, the Group intends to react to all current challenges, in order to counter the expected erosion of margins and contain the negative impact on income from operations, implementing further efficiency actions, also by resorting to extraordinary operations, in all areas and functions.
Declaration by the manager responsible for preparing the company’s financial reports
The manager responsible for preparing the company’s financial reports, Alberto Nathansohn, declares, pursuant to paragraph 2 of Article 154-bis of the Consolidated Law on Finance, that the accounting information contained in this press release corresponds to the document results, books and accounting records.
This document includes forward-looking statements, specifically in the section entitled “Outlook for the year”, relating to future events and operating, economic and financial results of the Benetton Group. By their nature, such forecasts contain an element of risk and uncertainty, because they depend on the occurrence of future events and developments. The actual results may differ significantly from those announced for a number of reasons.
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