1.1MB - Pirelli

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Comfort, silence and low rolling resistance characterise the new high performance P6000 Powergy. In the USA, research continued into superconductivity, the new technological frontier in power transmission. • Net financial debt rose from Lire 478 billion at December 31, 1997 to Lire 513 billion at December 31, 1998; the increase of Lire 35 billion is composed as follows: – Exchange difference 50) (*) – Operating profit (798) – Depreciation and amortization (599) – Net investments: 879 • Intangible assets and property, plant and equipment 793 • Financial assets 86 – Change in working capital 151 – Change in provisions (30) – Other changes 50 – Free cash flows (347) (*) – Dividends paid 298 (*) – Purchase of treasury shares 276 (*) – Income taxes 249 (*) – Extraordinary items, net 15 (*) – Net cash flows 491) (*) – Bond conversions (505) (*) – Other changes in shareholders’ equity (1) (*) 35) (*) (*) Includes the effect of the acquisition of the Power Cables Division from Siemens A.G. for Lire 270 billion. • The debt to equity ratio has remained unchanged compared to 1997 at 0.11. It was affected by the investment for the acquisition of the business from Siemens A.G., without which the ratio would have been 0.05. • Capital expenditures reached Lire 699 billion during the year compared to Lire 619 billion in 1997, considering the same companies in consolidation. The capital expenditures to depreciation ratio is 1.27 (1.19 in 1997). Investments were mainly concentrated in Europe in the Telecommunications and Submarine Systems business for the Cables and Systems Sector and in the car area for the Tyres Sector. 1998 saw a further increase in net property, plant and equipment for Lire 105 billion following the consolidation of the Power Cables Division acquired from Siemens A.G., which brings the total to Lire 804 billion. • R&D expenditures were completely charged to the profit and loss account for Lire 379 billion compared to Lire 355 billion in 1997 and represent 3.6 percent of sales (3.2 percent in 1997). • Personnel number almost the same as in 1997, with an increase of 15 units reaching a total of 36,226 (+560 personnel hired under temporary labor contracts with a reduction in the permanent work force of 545 units), without considering the employees of the German units acquired from Siemens, consolidated line-by-line in the balance sheet; if i 13
The added value of submarine systems, laid mainly by Pirelli’s cableship Giulio Verne, has increased. The strategic alliance with Cooper Tire will increase competitiveness in the American replacement market. the German units are counted, the consolidated work force rises to 38,209 units. Sales per person, considering the same companies in consolidation, equal Lire 291 million. • Factories went from 72 at the end of 1997 to 70 at the end of 1998. The reduction is due to the Tyres Sector for the sales of the Tivoli factory to Trelleborg Wheel Systems S.p.A. and the San Pietro all’Olmo (Mi) factory; with the acquisition of the German units bought from Siemens and consolidated line-by-line, the number of factories becomes 73. • Economic value added has for a number of years now been included by Pirelli Group among its measurements of operating results. It is defined as the difference between the net return on capital invested and its cost. During 1998, the economic value added remained at levels similar to 1997, considering the same companies in consolidation, excluding the acquisition of the business segment from Siemens. (billions of lire) 1998 1997 • Economic value added 30 24 Economic value added in 1998 was affected by higher tax charges compared to 1997, which reduced the net return on capital invested. Significant subsequent events During 1999, the process continued for the acquisition of Siemens A.G.’s world power cables business, in compliance with the resolution passed by the Board of Directors of Pirelli S.p.A. on July 15, 1998. In particular, the acquisition has been completed for OEKW Montagegesellschaft der Österreichischen Kabelwerke GmbH in Austria, Codelca Due S.p.A. in Italy, Fercable S.A. in Spain. During the same month of January, Pirelli Cavi e Sistemi S.p.A., through its 51 percentowned Australian subsidiary, Pirelli Cables Australia Limited, concluded the agreement by which Pirelli Cables Australia Limited will purchase the Power Cables and Construction Division of the Australian company Metal Manufacturers Ltd. The total amount of the deal, which is subject to the approval of the authorities according to the normal procedures existing in these cases, is about Australian $65 million (about Lire 65 billion). The Cables and Systems Sector will thus further strengthen its position on the Australian market with this purchase, and complete the offering of its products and expand its customer portfolio. On February 9, 1999, Pirelli Pneumatici S.p.A., through its american subsidiary, Pirelli Tire LLc, and Cooper Tire & Rubber Company entered into a strategic alliance which will allow both companies to effectively pool their respective resources, with the objective of increasing the competitive position on the replacements market in North and South America. The alliance, which is only based on contractual agreements and does not call for any joint stock ownership, will create synergies founded upon the strong points of both companies. Pirelli will contribute its state-of-the-art technology in premium tyres and its well-known brand name and Cooper will contribute not only its extensive sales network, acting as a sales agent for Pirelli Tire LLc, but also its experience in the production of low cost tyres for the replacements market. The new venture will also bring synergies in the area of raw materials purchases. 14 i
Page 1 and 2: Pirelli S.p.A. Milan Annual Report
Page 3 and 4: Contents Board of Directors; Board
Page 5 and 6: Structure of Pirelli Group at Decem
Page 7 and 8: Five-year Summary of Selected Conso
Page 9 and 10: Gross Domestic Product of the main
Page 11 and 12: 1997-1998 trend in raw materials pr
Page 13: Distribution of Pirelli Group 1998
Page 17 and 18: Cables and Systems Sector Overall p
Page 19 and 20: Distribution of 1998 Cables and Sys
Page 21 and 22: Advanced studies within the laborat
Page 23 and 24: The first submarine optical amplifi
Page 25 and 26: In Iceland, Pirelli installed 150 k
Page 27 and 28: The rotating platform of the Pirell
Page 29 and 30: The new Audi TT is fitted with ultr
Page 31 and 32: The Lamborghini Diablo is among the
Page 33 and 34: The trend of truck tyres in Brazil
Page 35 and 36: New types and sizes of the “Scorp
Page 37 and 38: Pirelli supplied the Berlin electri
Page 39 and 40: The Pirelli Corporate Web, the Intr
Page 41 and 42: Certification activities in line wi
Page 43 and 44: Distribution of Group personnel by
Page 45 and 46: • revenues for goods and services
Page 47 and 48: Corporate Governance As represented
Page 49 and 50: Results of operations The 1998 resu
Page 51 and 52: Appointment of the audit firm Upon
Page 53 and 54: Consolidated balance sheets Assets
Page 55 and 56: Liabilities and shareholders’ equ
Page 57 and 58: Consolidated statements of income (
Page 59 and 60: - positive differences, where not a
Page 61 and 62: • Provision for income taxes The
Page 63 and 64: "Investments in associated companie
Page 65 and 66:
- Other receivables Other receivabl
Page 67 and 68:
Provisions for income taxes The pro
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An analysis of payables by due date
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MEMORANDUM ACCOUNTS Memorandum acco
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Personnel costs Personnel costs con
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for liabilities and expenses accrue
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R&D expenditures In 1998 the Group
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Consolidated statements of cash flo
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Reconciliation of net results and s
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Assets (continued) (in thousands of
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Memorandum accounts (in thousands o
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List of investments Companies conso
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Percentage Company Activity Headqua
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Percentage Company Activity Headqua
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Other investments in subsidiaries a
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improvements and loan acquisition c
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Extraordinary part of the sharehold
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the two companies, given that that
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the formation of the value in this
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The weighted average cost of capita
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Result of the valuation and the sha
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Entering into the merits of the mer
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Group structure at December 31, 199
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Notice pursuant to art. 10, paragra
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1.i - Evaluations by the Board of D
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December 31, 1998, with the cancell
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Amendment of the by-laws Present wo
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6. Effects of the merger The transa
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and abroad, pursuant to the terms o
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or Managing Directors, the chair sh
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e enclosed with the lists together
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Attachment 2 Pirelli S.p.A. - Milan
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Article 10 In view of the nature of
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Article 19 The Board is authorized
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Failing any lists, the Board of Sta
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