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Benetton faces margin erosion due to higher raw costs
13 May '11
4 min read
The contribution margin was €167 million, against €180 million in the reference period, and was 36.9% of sales.
Operating profit was €34 million (€35 million in 2010), and 7.5% of revenues compared with 7.7%, due to the effect of significant reductions in general costs and non-recurring expenses. Furthermore, the impact of exchange rate variations in the quarter was limited.
The increase in financial expenses, even with average indebtedness lower than in the corresponding quarter of 2010, was due to the higher cost of borrowing associated with a new credit line, as from June 2010, with less favourable terms than those previously in force. There was also a fall in income from exchange rate hedging operations.
Tax charges for the quarter were lower than expected, much improved against the comparative period of 2010 in which a concentration of negative factors resulted in a very high average tax rate.
Consequently, net income was €19 million, equivalent to 4.3% of revenues (€20 million in the first quarter of 2010, equivalent to 4.4%).
Balance Sheet
Compared with March 31, 2010, working capital reduced by €33 million: a small increase in inventories (+€20 million) and of receivables from third parties (+€12 million), was in fact offset by a large increase in trade payables of €51 million and in other payables of €14 million.
In the first quarter, the Group made net investments of €27 million, compared with €25 million in the corresponding period of 2010. As usual, the majority of investments related to renewal of the stores network.
Net financial indebtedness, confirming the downward trend under way for some time, was €534 million, compared with €589 million at the end of March 2010, and with an increase of €48 million compared with December 31, 2010, in line with the traditional seasonality of the business.
Operating profit was €34 million (€35 million in 2010), and 7.5% of revenues compared with 7.7%, due to the effect of significant reductions in general costs and non-recurring expenses. Furthermore, the impact of exchange rate variations in the quarter was limited.
The increase in financial expenses, even with average indebtedness lower than in the corresponding quarter of 2010, was due to the higher cost of borrowing associated with a new credit line, as from June 2010, with less favourable terms than those previously in force. There was also a fall in income from exchange rate hedging operations.
Tax charges for the quarter were lower than expected, much improved against the comparative period of 2010 in which a concentration of negative factors resulted in a very high average tax rate.
Consequently, net income was €19 million, equivalent to 4.3% of revenues (€20 million in the first quarter of 2010, equivalent to 4.4%).
Balance Sheet
Compared with March 31, 2010, working capital reduced by €33 million: a small increase in inventories (+€20 million) and of receivables from third parties (+€12 million), was in fact offset by a large increase in trade payables of €51 million and in other payables of €14 million.
In the first quarter, the Group made net investments of €27 million, compared with €25 million in the corresponding period of 2010. As usual, the majority of investments related to renewal of the stores network.
Net financial indebtedness, confirming the downward trend under way for some time, was €534 million, compared with €589 million at the end of March 2010, and with an increase of €48 million compared with December 31, 2010, in line with the traditional seasonality of the business.
Benetton Group
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