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Improvement in net financial position in 2010, Benetton

01 Feb '11

5 min read

Income Statement
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.

Balance sheet
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.

Outlook
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.

The Benetton Group

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