in the First Half of 2003 98th Fiscal Year - FIAT SpA

Based on preliminary estimates, sales of Italian newspapers
during the first five months of 2003 were down slightly (-0.4%)
from the corresponding period a year ago.
During the January-May period, also based on preliminary data,
the Italian advertising market contracted for the third
consecutive year, falling by 2.4% compared with the first five
months of 2002. For the period under review, advertisements
were down 4.3% for newspapers and 4.5% for magazines. The
television market experienced a smaller decline of 1.4%.
The Sector will be faced with a challenging environment for
the remainder of 2003, due mainly to a number of factors that
make forecasting the start of a turnaround in advertising
demand especially difficult. In any case, no improvement is
expected before 2004.
Editrice La Stampa S.p.A. reported an average daily circulation
of about 369,000 copies, down from 386,000 copies at June 30,
2002. Lower newsstand sales and a reduction in subscriptions
account for this decrease. During the first six months of 2003,
the Sector intensified its brand-stretching initiatives, using the
La Stampa brand to sell high-quality publications directly
through newsstands. During this period, a total of seven series
(two launched at the end of 2002) were distributed through
the newsstand channel. In addition, the Sector also expanded
the tie-ins linking La Stampa with local newspapers and
implemented programs designed to broaden the newspaper
readership base (distribution to students). In May 2003, La
Stampa launched the Sogno d’Estate [summer dream] contest.
In addition, the planned relaunch of Specchio in September
with new graphics, an innovative format and enhanced content,
is at an advanced stage.
Revenues from the sale of newspapers totaled 34.3 million euros
in the first six months of 2003, compared with 35.3 million euros
in the same period last year.
Advertising revenues amounted to 46.2 million euros (49.3
million euros in the first half of 2002 and 54.6 million euros in
2001), accounting for about 57% of Editrice La Stampa’s total
revenues (58% in the first six months of 2002).
At the end of April 2003, the Sector sold its 41.4% interest in
EDM S.r.l. for 8 million euros.
During the first half of 2003, Editrice La Stampa continued to
implement cost cutting programs, achieving savings of 7.5%
compared with the same period last year, and reached
agreements with its unions on the downsizing of its printing
and journalist staff.
In the first half of 2003, Publikompass S.p.A. booked advertising
revenues totaling 153 million euros, or 4.8% more than in the
same period in 2002. This increase was due primarily to the
signing of a contract with the Perrone Group, which licensed
Publikompass to sell Italian advertising on behalf of Secolo XIX.
In addition, the full benefits of several new advertising contracts
signed in the second half of 2002 with clients producing
conventional newspapers, free press, magazines and television
programming were felt for the first time this year. Following the
diversification represented by these new contracts, revenues
were up in all media segments, with gains of 25.9% for
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Publishing and Communications — Itedi
magazines and 34.1% for television. Sales of newspaper
advertisements were also up slightly compared with the first
six months of 2002.
Operating performance
The Sector reported net revenues of about 190 million euros
for the first six months of 2003, up from 181 million euros in
the same period last year. The increase of about 9 million euros
reflects the positive impact of higher advertising billings
generated by the new contracts signed by Publikompass,
which offset a drop in the advertising revenues earned by
Editrice La Stampa.
Operating income totaled 5 million euros, for a gain of 6 million
euros over the loss of 1 million euros reported in the first half
of 2002. This improvement was made possible by the ongoing
implementation of efficiency measures, the renegotiation of
outstanding supply contracts, a drop in paper prices and the
higher margins earned by Publikompass on its expanded
revenue base.