Overall positive results achieved in 2011, Benetton board

04 Feb '12

5 min read

As already fully reported in previous quarters, 2011 was characterised by strong pressure on margins as a result of increases in prices of the principal raw materials. The Group responded to this by launching major action programmes, to contain costs and rationalize expenses, which have contributed to a mitigation of the overall effect on the result.

Based on the preliminary estimate for the final quarter, the Group expects that Income from Operations for 2011 will be around 7.5% of consolidated revenues (8.6% in 2010).

The Group expects 2011 full year Net Income to slightly exceed € 70 million, due also to the improvement in the average tax rate and in spite of the expected increases in financial expenses and foreign exchange hedging costs.

The economic environment in the principal countries of interest to the Group continues to be characterised by three different scenarios: in Southern Europe, expectations of recession prevail and consumer demand remains weak. In the remainder of the traditional markets, reduced growth is expected, due, above all, to the uncertainties which the financial market continues to generate in the euro zone. Finally, in the emerging and high growth countries, expectations remain positive, with increases in consumption expected also in 2012.

Orders are now being taken for the United Colors of Benetton 2012 Spring/Summer collection and a slight decline in the trend is expected compared with the corresponding collection for the same period of last year. Given the high volatility of medium-term prospects, it is difficult, at present, to make a precise forecast for the subsequent Fall/Winter collection.

In this highly uncertain situation, the Group is defining an action programme for the year just started, aimed at maintaining the profitability and sustainability of the business, by leveraging the high capillarity of its geographical presence and the strength of the relationship with commercial partners.

The key points of this programme are: support for the brands by means of communication projects consistent with the objectives of each brand; continuous research to improve products and to offer the consumer a choice that responds to expectations in terms of quality and price; renewal of the sales network with emphasis on some key countries and cities; and definition of geographical priorities to take maximum advantage of the greater dynamism of some areas.

In the early months of the year, in particular, there is still a negative impact on margins caused by raw material price inflation. The Group will continue to act with determination to achieve maximum process efficiency and cost optimization. Overall, 2012 will also see continuation of the investment programme, in particular in the commercial area, aimed at improving and expanding the sales network.

Generally, Income from Operations will not see an improvement and, due to the increased debt costs,Net Income will also be under pressure. Some credit lines, totalling € 400 million, reach their expiry date next September and the Group expects to reach agreements for their renewal or replacement in advance of the expiry date in the third quarter.

The Benetton Group

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