2006 Annual Report - Fiat SpA
2006 Annual Report - Fiat SpA
2006 Annual Report - Fiat SpA
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Metallurgical Products – Teksid Production Systems – Comau<br />
Operating Performance<br />
In <strong>2006</strong>, an unsettled energy market continued to put strong<br />
pressure on the metallurgical industry. Against this challenging<br />
background, the Sector’s diversification in terms of customers,<br />
products and geographical destination, as well as ongoing<br />
improvements in process efficiency and logistics, made it<br />
possible to improve overall performance.<br />
In <strong>2006</strong>, a French company (SBFM) active in the Cast Iron<br />
business was sold. Excluding the impact of this sale, Teksid<br />
revenues would have increased (+3.5%) with respect to the<br />
previous year.<br />
Revenues of the Cast Iron Business Unit decreased by 5.6%<br />
and volumes by 6.5%. The change is connected to the<br />
mentioned sale of SBFM. On a comparable basis, revenues<br />
would have increased by 7.2% due to both higher volumes<br />
(+1.5%) and the favourable effect of exchange rates, the<br />
Brazilian real in particular. Brazil was the highest growing area<br />
also in terms of revenues.<br />
It is worth noting that in the Cast Iron business, Teksid is also<br />
active in China through Hua Dong Teksid Automotive Foundry<br />
Co. Ltd, a jointly controlled company accounted for using the<br />
equity method. This company recorded a 20.2% increase in<br />
volumes from 2005.<br />
The Magnesium Business Unit (where Teksid operates through<br />
Meridian Technologies Inc., in which Teksid holds a 51%<br />
interest and Norway’s Norsk Hydro group the remaining 49%)<br />
recorded a reduction in both revenues (-5.2%) and volumes<br />
(-6.2%) due to a slowdown in the reference market, in<br />
particular the North American market, which nevertheless<br />
continued to account for approximately 80% of revenues<br />
in <strong>2006</strong>.<br />
78 <strong>Report</strong> on Operations Teksid<br />
Highlights<br />
(in millions of euros) <strong>2006</strong> 2005<br />
Net revenues 979 1,036<br />
Trading profit 56 45<br />
Operating result (*) 26 27<br />
Investments in tangible and intangible assets 32 45<br />
Total R&D expenses (**) 5 5<br />
Employees at year-end (number) 8,342 8,952<br />
(*) Including restructuring costs and unusual income (expenses).<br />
(**) Including R&D capitalised and charged to operations.<br />
As part of Teksid’s strategy to focus on its core business,<br />
in December <strong>2006</strong> the <strong>Fiat</strong> Group and Norsk Hydro reached<br />
an agreement for the sale of their interests in Meridian<br />
Technologies Inc. to a consortium of investors headed by<br />
the Swiss holding company Estatia AG. Completion of the<br />
transaction is subject to approval by competent authorities<br />
(received in 2007) and closing of the financing to the purchaser<br />
by financial institutions.<br />
Operating Performance<br />
In <strong>2006</strong>, the Sector’s reference market continued to be<br />
impacted by uncertainty, shrinking volumes and intense<br />
pressure on prices.<br />
Car manufacturers in the Western World generally scaled back<br />
their investment programs, but they did not stop introducing<br />
new models on the market. They continued to focus on<br />
converting existing facilities and rationalising production<br />
capacity, while greenfield investments were suspended or<br />
postponed.<br />
By contrast, a number of countries in Asia and Eastern Europe<br />
have shown an increase in investments, often through joint<br />
ventures between Western car manufacturers and local<br />
partners.<br />
The unfavourable market conditions negatively impacted<br />
Comau revenues, which decreased by approximately 18.6%<br />
from 2005 mainly due to a slowdown in activity levels at the<br />
European Body-welding operations.<br />
Highlights<br />
(in millions of euros) <strong>2006</strong> 2005<br />
Net revenues 1,280 1,573<br />
Trading profit (66) 42<br />
Operating result (*) (272) (8)<br />
Investments in tangible and intangible assets (**) 56 38<br />
- of which capitalised R&D costs 7 9<br />
Total R&D expenses (***) 20 20<br />
Employees at year-end (number) 12,293 12,725<br />
(*) Including restructuring costs and unusual income (expenses).<br />
(**) The <strong>2006</strong> figure includes 34 million euros for investments by Comau North America<br />
related to sales/leaseback transactions carried out in previous years.<br />
(***) Including R&D capitalised and charged to operations.<br />
To meet the challenge of slow markets, flagging order intake<br />
and diminishing revenues, Comau embarked on a restructuring<br />
program in the third quarter of <strong>2006</strong>, reshaping the scope of<br />
its activities and presence in the countries where it operates.<br />
The programme will start to show benefits in 2007, while its<br />
full effect on profitability will be achieved from 2008 onwards.<br />
With markets shrinking, order intake totalled 1,194 million<br />
euros in <strong>2006</strong>, down approximately 16% from 2005.<br />
In <strong>2006</strong>, new orders for contract work came to 929 million<br />
euros, down 23% from 2005. Overall, 54% of the orders for<br />
contract work were acquired in Europe, 27% in the Nafta area,<br />
while the remaining 19% came from the Mercosur and new<br />
markets (5% in China). 32% of all orders came from <strong>Fiat</strong> Group<br />
companies and 68% from other manufacturers. At<br />
December 31, <strong>2006</strong> the order backlog totalled 593 million<br />
euros, down approximately 15% from 2005.<br />
For Service operations, <strong>2006</strong> saw a significant increase<br />
in orders (+11%), reaching a value of 265 million euros<br />
(25% of which coming from <strong>Fiat</strong> Group companies).<br />
<strong>Report</strong> on Operations Comau 79