Positive results for the first half of 2001
- Consolidated sales rose by 11% corresponding to organic volume growth of 3.9%.
- Increase in gross operating profit (+13.7%) and in pre-tax profit attributable to the Group (+16.1%)
Key consolidated results:
(billions of lire) First half 2001 First half 2000 2000
Sales 7,423 6,688 14,230
Gross operating profit 893 785 1,686
EBITDA margin 12.0% 11.7% 11.8%
Amortisation/depreciation 341 289 632
Net operating profit 552 496 1,054
ROS 7.4% 7.4% 7.4%
Group pre-tax profit 375 323 655
(millions of euros) First half 2001 First half 2000 2000
Sales 3,834 3,454 7,349
Gross operating profit 461 406 871
EBITDA margin 12.0% 11.7% 11.8%
Amortisation/depreciation 176 150 326
Net operating profit 285 256 545
ROS 7.4% 7.4% 7.4%
Group pre-tax profit 194 167 338
Today’s meeting of the Board of Directors of Parmalat Finanziaria spa, chaired by Cav. Lav. Calisto Tanzi, examined and approved the “Report on operations for the first half of 2001”.
In the first half of 2001 the Parmalat Group achieved significant growth and reported a 11% increase in sales, compared with the same period of the previous year, accompanied by rises of 13.7% in gross operating profit and of 16.1% in pre-tax profit attributable to the Group.
Organic volume growth amounted to 3.9%, compared to 3.5% in the same period of the previous year and 3.4% for 2000.
Consolidated sales in the first half amounted to ITL 7,423 billion, corresponding to an increase of ITL 735 billion compared to ITL 6,688 billion in the first half of the previous year.
Moreover, the Group benefited from the consolidation of the acquisitions made during the previous year and at the start of the current year. The impact of exchange rate movements on sales was marginal, since the positive and negative performances of the various currencies cancelled each other out.
During the first half the Group operated in 30 countries, one less, the Ukraine, compared with the previous year, and employed an average of 37,900 staff compared to an average of 39,532 for the corresponding period of the previous year.
The positive trend of operating profitability reported in 2000 continued, due to ongoing rationalisation, the constant improvement of production and distribution processes and the contribution of new products, providing greater added value.
The EBITDA margin (gross operating profit of ITL 893 billion on sales) settled at 12%, an improvement compared to the 11.7% for the same period of the previous year and 11.8% for entire 2000.
Due to greater amortisation and depreciation, the EBIT margin (net operating profit of ITL 552 billion on sales) stood at 7.4%, unchanged compared with the same period of the previous year and entire 2000. Amortisation and depreciation accounted for 4.6% of sales in the first half of the year compared with 4.3% for the same period of the previous year and 4.4% in 2000 as a whole.
Total interest expense for the first half, net of interest income and after exchange differences, amounted to ITL 114 billion, equal to 59 million euros, compared with the ITL 116 billion of the first half of 2000. The impact of interest expense on sales was 1.5% for the first half of 2001 compared with 1.7% for the first six months of the previous year. Pre-tax profit attributable to the Group amounted to ITL 375 billion, equal to 194 million euros, against the ITL 323 billion of the same period of 2000.
Operating cash flow (gross profit plus amortisation and depreciation) totalled ITL 767 billion, equal to 396 million euros, compared with ITL 651 billion for the first half of the previous year. Such funds were partially used to cover financial needs arising from investment and working capital requirements.
Total consolidated shareholders’ equity as of June 30, 2001, including pre-tax profit for the first half, amounts to ITL 5,799 billion (ITL 5,118 billion as of December 31, 2000), equal to 2,995 million euros, of which ITL 1,802 billion, equal to 931 million euros, attributable to minority interests. It should be noted that the increase in consolidated shareholders’ equity was in part due to the impact on the consolidated accounts of the positive performance of a number of key currencies. Such positive movements may, of course, be subject to future exchange rate movements.
Net debt breaks down as follows at the end of the first half:
(billions of lire) June 30, 2001 December 31, 2000
Bank debt and debenture loans
Falling due within 12 months 1,445.042 1,691.030
Falling due between 1 and 5 years 4,250.292 4,884.670
Falling due beyond 5 years 3,341.491 3,129.775
Total bank debt and debenture loans 9,036.825 9,705.475
Cash and cash equivalents
Cash on hand and at banks 3,143.144 3,718.520
Short-term financial assets 1,615.577 1,514.567
Other investment securities 75.532 74.257
Total cash and cash equivalents 4,834.253 5,307.344
Total debt net of cash
and cash equivalents 4,202.572 4,398.131
(millions of euros) June 30, 2001 December 31, 2000
Bank debt and debenture loans
Falling due within 12 months 746.302 873.344
Falling due between 1 and 5 years 2,195.093 2,522.722
Falling due beyond 5 years 1,725.736 1,616.394
Total bank debt and debenture loans 4,667.131 5,012.460
Cash and cash equivalents
Cash on hand and at banks 1,623.298 1,920.455
Short-term financial assets 834.376 782.209
Other investment securities 39.009 38.351
Total cash and cash equivalents 2,496.683 2,741.015
Total debt net of cash
and cash equivalents 2,170.448 2,271.445
Debenture loans include bonds convertible into Parmalat Finanziaria ordinary stock, totalling ITL 1,222 billion, equal to 631 million euros, registering an increase, with respect to the ITL 544 billion of December 31, 2000, of ITL 678 billion, equal to 350 million euros. This increase is due to the partial execution, on February 28, 2001, via Parmalat Netherlands bv, of the resolution passed by the Extraordinary General Meeting of shareholders of June 5, 2000, regarding the issue of bonds convertible into Parmalat Finanziaria ordinary shares.
On February 28, 2001, Parmalat Netherlands bv, a wholly owned subsidiary of Parmalat spa, issued convertible bonds totalling 350 million euros at a price equal to their par value. The securities are due to mature on June 30, 2021, with interest payable in arrears on June 30 of each year at a fixed rate of 0.875% per annum.
The Group invested a total of ITL 279 billion during the first half, including ITL 157 billion in capital expenditure and ITL 122 billion in new acquisitions.
February witnessed completion of the acquisition, agreed in July 2000, of the entire share capital of Gala Italia spa, a dairy producer operating mainly in Sicily, with annual sales of around ITL 127 billion. The investment, including the acquired company’s debt, amounted to ITL 97.5 billion. Gala Italia has since changed its name to Latte Sole.
The Group also purchased a 100% stake in Quesos Nacionales CA, a Venezuelan cheese manufacturer, at a cost of ITL 24.4 billion. The company has annual sales of US$ 24.5 million, equal to around ITL 53 billion.
Performance of the Group’s principal markets
The Group’s European sales amounted to ITL 2,394 billion, equal to an increase of ITL 247 billion with respect to the ITL 2,147 billion for the same period of the previous year, representing growth of 11.5%. With respect to the first half of the previous year, the Group’s basis of consolidation was extended by the inclusion of the Italian companies, Streglio and Latte Sole, the British company Dairytime, and the Spanish companies, Helados Royne and Nuprosa, all acquired in the second half of the previous year and at the start of the current year.
Sales primarily regard Italy, Spain, Portugal and Hungary.
Demand remained substantially stable in the western European market, while the eastern European market’s performance showed marked signs of recovery with an increase in sales.
Via its Aqua-Parmalat brand, the Group has entered the Italian mineral water market, offering an innovative pure water produced by controlled micro-filtration and mineralisation.
North and Central America
In North and Central America the Group’s sales amounted to ITL 2,546 billion, representing an increase of ITL 481 billion, equal to a 23.3% increase with respect to the ITL 2,065 billion for the same period of 2000. In addition to organic growth, the increase in sales was due to the consolidation of Mother’s Cake & Cookie Co. and Archway Cookies LLC, acquired in November of the previous year through MA Holdings, and the strength of the US and Canadian dollars with respect to the euro. In Canada and the US a business transformation plan is underway with the aim of improving the Group’s efficiency and profitability in the North American area.
Central America is a growth area in which the Group is continuing to invest.
South American sales amounted to ITL 1,855 billion during the first half, compared with ITL 1,843 billion for the first six months of 2000. Despite organic volume growth, sales did not register an increase due to the weakness of the Brazilian currency and the recession that has hit Argentina.
The Group has consolidated its position in the Brazilian market and is continuing with the reorganisation of its manufacturing and distribution operations.
Venezuela saw Parmalat confirm its leadership in all the sectors in which the Group operates and achieve pleasing results. With the exception of Argentina, the volume of sales in other South American countries was substantially in line with budget projections.
Rest of the world
Sales in other geographical areas during the first six months of 2001 totalled ITL 628 billion, compared with the ITL 633 billion of the first half of 2000. Sales are primarily accounted for by Australia and South Africa, where the weakness of the Australian dollar and the rand conditioned the Group’s performance.
South Africa witnessed volume growth, whilst Australian sales of branded products remained substantially flat compared with the same period of 2000. The Group set up a joint venture with local partners in Thailand in early 2001, with the aim of establishing a local production plant.
Parmalat Finanziaria spa closed the first six months of 2001 with a net profit of ITL 42 billion compared with ITL 39 billion in the same period of 2000.
The result primarily derives from collection of the dividend paid by the subsidiary, Parmalat spa, and the interest accrued on loans to subsidiaries.
The Company’s assets primarily consist of the value of its equity investments in subsidiaries, totalling ITL 1,675 billion and more or less unchanged with respect to the previous year, and loans granted to subsidiaries amounting to ITL 1,567 billion, compared with ITL 1,520 billion as of December 31, 2000.
The Extraordinary General Meeting of the shareholders of Parmalat Finanziaria spa, held on April 30, 2001, passed resolutions regarding:
- the re-denomination of the fully paid-in, subscribed share capital of ITL 1,529,014,169,000 in 795,087,367 euros via the rounding up of the par value of each share from ITL 1,000 to 0.52 euros and the corresponding partial release of the necessary sum from the extraordinary reserve; – the consolidation of ordinary shares in the ratio of 13 new ordinary shares with a par value of 1 euro each for every 25 existing ordinary shares with a par value of 0.52 euros each;
- the re-denomination in euro of the capital increases earmarked for the exercise of the “Warrants on ordinary shares of Parmalat Finanziaria 2003” (resolution of the Extraordinary Meeting of Shareholders of December 19, 1995) and for the convertible bonds issued by overseas registered companies controlled by Parmalat Finanziaria spa (resolutions of the Extraordinary Meetings of Shareholders of October 27, 1997 and June 5, 2000);
- the revocation of the mandates pursuant to articles 2443 and 2420-ter of the Italian Civil Code granted by the Extraordinary Meeting of Shareholders of June 5, 2000 and the granting of new mandates pursuant to art. 2443 up to a maximum of 156,000,000 euros and pursuant to art. 2420-ter up to a maximum of 250,000,000 euros.
As a result of the above resolutions adopted by the Extraordinary General Meeting of April 30, 2001, on May 21, 2001 the share capital was re-denominated in euros and the shares were consolidated in the ratio of 13 new ordinary shares with a par value of 1 euro each for every 25 existing ordinary shares with a par value of 0.52 euros each, resulting from the concomitant conversion of shares with a par value of ITL 1,000.
Between May 21 and June 30, 2,940,000 “Warrants on the ordinary shares of Parmalat Finanziaria 2003” were exercised. As foreseen in the relevant regulations approved by the Extraordinary General Meeting of December 19, 1995, subsequently updated by the resolutions passed by the Extraordinary General Meeting of April 30, 2001, regarding the re-denomination of the share capital in euro and the consolidation of the shares, this resulted in the subscription of a total of 1,528,800 Parmalat Finanziaria ordinary shares with a par value of 1 euro. The shares were allocated in return for payment of a unit price of 1.39443 euros each.
Following the above transactions, the Company’s subscribed, paid-in share capital as of June 30, 2001 amounts to 796,616,167 euros, equal to ITL 1,542,463,985,677, represented by 796,616,167 ordinary shares with a par value of 1 euro each.
Parmalat Finanziaria’s shareholders’ equity, including net profit for the period, totals ITL 1,750 billion as of June 30, 2001, equal to 904 million euros. This compares with the ITL 1,742 billion of December 31, 2000.
Significant subsequent events
The trend in sales since the close of the first half of the year has substantially confirmed the positive performance registered in the first six months.
Forecasts indicate that the Group’s sales during 2001 will benefit from the consolidation of the acquisitions made during the previous year and not consolidated across the full financial year, and from the acquisitions made at the beginning of the current year, net of disposals during 2000. Organic volume growth is expected to remain in step with the trend seen in 2000, whilst it is not possible to predict the performance of consolidated revenues, expressed in the Group’s unit of currency, given that this will depend on exchange rates over the year.
Continuation of the restructuring programme should result in confirmation of the consolidated operating profit margins seen during the first half of the year.
The Parent Company’s net profit for 2001 as a whole is expected to be substantially in line with that of the previous year.
The consolidated balance sheet and profit and loss account as of and for the six months ended June 30, 2001 are available on Parmalat Finanziaria spa web site www.parmalat.net. The accounts, which are in the process of being examined by Deloitte & Touche spa and have yet to be checked by the Board of Statutory Auditors, show the corresponding data for the first half of the previous year and for the year to December 31, 2000 for comparative purposes.