The Benetton Group Annual Report 1996

Manufacturing companies invested substantially, spending more than Lire 35 billion to technologically
upgrade plant and machinery and optimize the efficiency of production processes.
Continuing investment in communications systems based on optical-fiber technology has addressed
the links between the Ponzano and Castrette sites, with the aim of further integrating the orderprocessing,
production, warehousing and shipping stages.
The program to renew the Group's central data-processing equipment has continued, with substantial
enhancements to both processing and storage capacity through the introduction of new-generation
hardware. This investment, in highly competitive market conditions, has generated significant savings in
systems-operating costs.
Investment in applications software focused on manufacturing activities and involved applying new
software development technology to the management of fabric inventories for the Outerwear, Shirt
and Jacket Divisions, and to integration of the transition from samples to full-scale production. The
introduction of new EDI (Electronic Document Interchange) technology also improved the degree of
integration between the Cotton Division and the principal fabric suppliers.
Finance management
Attention throughout the year again focused on the optimization of treasury management and on
insulating the Group from exchange-rate exposures, in market conditions characterized by falling
interest rates and the marked appreciation of the lira.
The level of coordination and financial support for subsidiaries was maintained. Relevant developments
during the final quarter included the progressive start-up of Benetton Gesfin SpA, whose activities
include the centralization of treasury management and control of the Group’s financial exposures.
Constant attention to operating efficiency, combined with the lower cost of money, resulted in a
substantial reduction in financial charges.
The equity in foreign subsidiaries was again hedged against exchange risks, to protect the value of the
Group’s investments abroad.
On December 10, 1996, a US $220-million multi-currency loan was arranged in the domestic market,
coordinated by Banca di Roma SpA and Deutsche Bank SpA. The lending syndicate comprised over 30
leading banks at home and abroad. This 5-year loan, at LIBOR plus 0.20%, was received in lire in
February 1997 and enabled the l993 loan, on less favorable terms, from Istituto Bancario San Paolo di
Torino to be repaid early.
Personnel and organization
The Benetton Group employed 5,973 people at the end of 1996, including 4,358 in Italy, following a net
reduction of 45 during the year. The decrease primarily arose from the rationalization of Japanese
companies, some of which are no longer consolidated.
During 1996, personnel management focused on the related issues of employee mobility and training in
the context of the Group's world-wide expansion plans. The key themes were the constant
development of skills relevant to the Group's global role, and promotion of Benetton's innovative
business culture.
On the industrial relations front, the agreement signed in 1994 was fully implemented with the fixing of
pay rises for the next two years linked to the achievement of objectives and business-efficiency
parameters. This process confirmed the wisdom of adopting this new type of accord, which more
directly addresses the challenges posed by intensifying competition, primarily by creating a link
between the requirements of the Group and the aspirations of employees.
Licensing
The program to expand and extend the reach of the Group's brands continued during 1996. Apart from
the renewal of existing contracts, the year's efforts included preliminary negotiations concerning new
territories and discussions with potential licensees of proven reliability. Expansion targets extend beyond
clothing to new sectors, providing further evidence of the Group's dynamic, international stance. New
ventures must meet established Benetton standards, including an optimal mix of quality, value for
money, innovation and style.
A key event during 1996 was the collaboration agreement with Renault, which supplies the engines for
Benetton's Formula One racing cars. The new accord led to the production of the Benetton Twingo,
which features typical Benetton colors, character and style.