The Fiat Group in 1999 - Report on Operations - Fiat SpA

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METALLURGICAL PRODUCTS — TEKSID
Highlights
(<strong>in</strong> millions of euros) <strong>1999</strong> 1998 1997
Net revenues 1,682 1,165 1,190
Operat<strong>in</strong>g <strong>in</strong>come 76 42 54
As a % of revenues 4.5 3.6 4.5
Income before m<strong>in</strong>ority <strong>in</strong>terest 26 4 20
Cash flow 123 74 98
Capital expenditures 182 73 78
Research and development 23 16 15
Net <strong>in</strong>vested capital 793 504 521
Number of employees 14,522 10,981 11,730
GROWTH STRATEGIES
Dur<strong>in</strong>g <strong>1999</strong>, Teksid cont<strong>in</strong>ued to pursue its growth strategy
by carry<strong>in</strong>g out transactions designed to strengthen its
leadership position <strong>in</strong> the global market and restructure
its European manufactur<strong>in</strong>g operations. In particular:
❚ With a transaction <strong>in</strong>volv<strong>in</strong>g a capital <strong>in</strong>crease reserved for
the Renault <strong>Group</strong>, it completed the purchase of Renault’s
foundry activities. Follow<strong>in</strong>g this transaction, <strong>Fiat</strong> S.p.A. will
cont<strong>in</strong>ue to hold a controll<strong>in</strong>g <strong>in</strong>terest of 66.5% <strong>in</strong> Teksid,
while the french Company will own the rema<strong>in</strong><strong>in</strong>g 33.5%.
❚ In the United States, it established Teksid Alum<strong>in</strong>um
Components (100% Teksid) and laid the groundwork
for an expansion of manufactur<strong>in</strong>g capacity at Meridian
Technologies Inc. (51% Teksid, 49% Norsk Hydro
Produksjons).
❚ In Ch<strong>in</strong>a, construction cont<strong>in</strong>ued at the Hua Dong factory
(cast iron crankcases), while the activities of two other jo<strong>in</strong>t
ventures (cast iron and alum<strong>in</strong>um components) progressed
on schedule.
❚ It started the process of <strong>in</strong>tegrat<strong>in</strong>g <strong>in</strong>to its organization
the former Renault facilities with the goal of <strong>in</strong>creas<strong>in</strong>g
the product specialization of the <strong>in</strong>dividual manufactur<strong>in</strong>g
locations. Accord<strong>in</strong>gly, it created two centers of excellence
<strong>in</strong> Italy: Crescent<strong>in</strong>o for cast iron and Carmagnola for
alum<strong>in</strong>um. <strong>The</strong> output of the Carmagnola cast-iron production
unit, which will be phased out <strong>in</strong> July 2001, will be picked
up by other Sector locations <strong>in</strong> Italy or abroad.
RESULTS FOR THE YEAR
In <strong>1999</strong>, the Sector booked revenues of 1,682 million euros,
for a ga<strong>in</strong> of more than 44% over 1998. Changes <strong>in</strong> the
scope of consolidation are the ma<strong>in</strong> reasons for this <strong>in</strong>crease.
Sales were up 28% to 729 million euros at the Cast Iron
Division and 45% to 718 million euros at the Alum<strong>in</strong>um
Division. <strong>The</strong> Magnesium Division reported revenues of
230 million euros.
Operat<strong>in</strong>g <strong>in</strong>come reached 76 million euros (4.5% of
revenues), up from 42 million euros (3.6% of revenues) <strong>in</strong> the
previous fiscal year. This ga<strong>in</strong>s reflects changes <strong>in</strong> the scope
of consolidation and the beneficial impact of the susta<strong>in</strong>ed
efforts made to improve operat<strong>in</strong>g efficiency, offset <strong>in</strong> part
by the consequences of an unfavorable product mix.
Net <strong>in</strong>come amounted to 26 million euros, up from 4 million
euros <strong>in</strong> 1998. <strong>The</strong> Sector’s <strong>in</strong>terest <strong>in</strong> net <strong>in</strong>come rose to
24 million euros, compared with a loss of 4.4 million euros
<strong>in</strong> the previous fiscal year.
Cash flow totaled 123 million euros (74 million euros <strong>in</strong> 1998).
<strong>The</strong> return on average net <strong>in</strong>vested capital was about 8%,
short of the level required to create value.