Presentation to the Financial Community. July 2004

Transcription

1 Presentation to the Financial Community

2 Agenda 1 Who is Merloni Industry Landscape Merloni in the Competitive Arena Financial Results Merloni Strategy for the Future

3 Merloni Elettrodomestici: a success story 2 Merloni Elettrodomestici was created in 1975 from the Household Appliances Division of Industrie Merloni, a company founded in 1930 by Aristide Merloni Focus on household appliances Complete product mix, equally split among cooking, cooling and washing 3,000 2,500 Euro (millions) Merloni turnover, ml 3,008 ml in 2003 Well balanced geographical presence in European countries From the 300 th to the 3 rd position in Europe by market share 2,000 1,500 1,000 Over 3,000 ml revenues in

4 A truly European Group, 19 plants in 7 countries 3 Cooking Factory Cooling Factory Washing Factory Dishwashing Factory Dryer Factory New plant in Lodtz (Poland): cooling factory starting production from 4Q 2004 New plant in Lipetzk (Russia): Washing Machines factory, started production in 2Q 2004 Operations are spread all over Europe, with offices in 21 countries Sales are well distributed between West Europe (67%) and New Europe (33%) Headquarters in Fabriano

5 The Merloni way to growth: a balanced mix of organic growth and external acquisitions 4 Benefits of organic growth Growth: by acquisition Optimizing scale effects Exploiting synergies Rapid innovation Fast expansion towards New Europe (East Europe and Russia) Colston International acquisitions Italian acquisitions Fri Sado Indesit Philco Smeg Fab Por Scholtes New World Pekel STAR Stinol Hot point Total Growth Organic 47% 53% Acquired CAGR : Revenues: 23% EBIT: 37%

6 The Merloni value creation 5 Merloni excellence in economic results.... and in value creation Euro (millions) % EBIT on Revenues EBIT ( ml) % EBIT Euro (millions) EVA ( ml) % 8.2% 8.2% 8.0% 80, % 5.0% 6.0% % 4.0% 60,0 40, % 20, * * 8.0% WACC used in 2003

7 A 30 year path to the new Corporate Governance Merloni Elettrodomestici was founded Milan Stock Exchange Listing Free Float: 25% The 1 st External CEO was appointed 1 st Auditing Committee & Human Resources Committe: 2 yrs in advance vs law 2001 Free float increase and admission to the Star Segment Free Float: 30% 2001 New Corporate Governance 2002 Majority of indipendent Board members (7 out of 13): more stringent then law 2002 Merloni shares on the Midex Index Free Float: 30% Introduction of Insider Dealing Code of Conduct : limits of communication double then required Introduction of Blocking Periods Merloni Elettrodomestici is not under control & co-ordination of Fineldo (Vietti Law) New name of the Company: INDESIT

8 Agenda 7 Who is Merloni Industry Landscape Merloni in the Competitive Arena Financial Results Merloni Strategy for the Future

9 The White-Goods market 8 Merloni addressed appliances Cooking Cooling DishWashers Washing Machines Dryers Hoods

10 White Goods market by region 9 Africa South America North America White goods Market 250 ml units % Merloni covered market 32% 30% Asia 75 9% Big Europe 80 9% 2003 Greater Europe is the largest market with 80 million units sold in 2003 Source: Company Estimates, GFK, others

11 Different drivers for West and New Europe growth 10 European market Population (ml) G.D.P. ($) Annual units sold per capita ml units New Europe , West Europe 3, West New West New West New CAGR : West Europe: + 1.2% New Europe: + 8.0% Total Europe: + 2.7% Today the battle is in Western Europe but the great opportunity resides in New Europe Source: Company Estimates, GFK, others

12 Industry is consolidating along the value chain 11 European market Brands 258 brands in display Very high fragmentation Years %market #producers Producers Retailers % % % % % 4 Market share of the first 5 distributors 52% 52% % 34% 31% 30% 22% 16% 4 producers represent 64%of total market Market share of 5 largest distributors increased significantly in the last 12 years Size and growth are critical issues to compete in this market Italy France UK Germany Source: Company Estimates, GFK, others

13 Consolidation in Europe still on the run 12 US and European market concentration The cost of a fragmented market Average % Ebit* 10.0% 8.4% Top 4 USA producers 78% Top 4 EU producers 64% 8.0% 6.0% 4.0% 2.0% 6.1% Top 4 USA Top 4 Europe Margins outlook Size growth, economy of scale and operational efficiency are key success factors to compete in this industry The consolidation trend in Europe carries a promise of even higher margins * Source: Companies Annual Reports

14 Agenda 13 Who is Merloni Industry Landscape Merloni in the Competitive Arena Financial Results Merloni Strategy for the Future

15 Merloni is the third European player market shares by volumes* Merloni market share throughout Europe - volumes Player 2003 CAGR > 25% Electrolux BSH 16.7% +2.1% 16.0% -2.9% > 10% - 25%< > 5% - 10% < < 5% Merloni 15.5% +19.9% Whirlpool 10.0% +2.4% Others 41.8% -4.8% * Own branded products Source: Company Estimates, GFK, others

16 Merloni extraordinary growth trend over last 4 years 15 European Market Merloni performance Merloni s Way (ml Units) Market Cagr 99-03: 3.4% East West Merloni Cagr 99-03: 19.2% (ml Units) 6.5 Continuous offering renewal Reduced time to market Customer focused Leveraging leadership in New Europe markets Merloni is leveraging scale and agility over-performing market in volumes thanks to its established brands and recognized quality Source: Company Estimates, GFK, others

17 Merloni price performance versus market 16 European Retail Prices Merloni Price Index Merloni s Way Merloni price is over performing market indexes thanks to: (1999 index) (1999 index) Fast product cycle Performance and value proposition to customers Efficient communication via focused brand portfolio Source: Company Estimates, GFK, others

18 Merloni brand strategy is balanced and focused 17 Brands fragmentation.. and Merloni strength on brands Number of Brands Top 4 6 followers Others Delta 03-01: Market share per Brand 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 2.0% 1.4% 0.4% 0.2% 3.1% 1.7% 0.4% 0.1% Merloni Top 4 6 Followers Others Market share % 80% 60% 40 20% 57.0% 58.2% 15.9% 16.6% 27.1% 25.2% Top 4 6 followers Others Delta 03-01: +1.2% +0.7% -1.9% Top 4 producers still increasing market share and consolidating brands number Merloni most focused player on brand management to prevent possible fragmentation Source: Company Estimates, GFK, others

19 nnovation in products and branding constantly increasing 18 Investments in processes and products, information technology and new plants Advertising & Promotions: investing in brand leadership Euro (millions) Euro (millions) % CAGR %% CAGR E E Strong and growing investments in R&D, industrial infrastructures and brand marketing drive superior economic performance

20 Merloni European brands: Indesit 19 Indesit is number one in free-standing with an 8.2% market share in greater Europe Vision and mission FRIENDS AND HOBBIES EFFECTIVE SOLUTIONS DYNAMIC YOUNG IN SPIRIT SIMPLE TO OPERATE BEST VALUE FOR MONEY Target Younger (25-35), thriving, rising, aspiring professional, single, pre-family, budget conscious young family Big idea LEADER FOR YOUNG EUROPE Territories Values SIMPLE, RELIABLE, STRONG, INVOLVING Pay-off We work, you play Sport Films On the move

21 Merloni European brands: Ariston 20 Ariston is number one in built-in with an 7.7% market share in greater Europe Vision and mission BUSY LIVES FAMILY AND FRIENDS DO YOUR BEST CARE QUALITY TIME LOVE Big idea FOR THE LOVE OF CARING AND THE JOY OF SHARING Target Territories years old, two children under 10, middle-class, they are unpretentious, extrovert and sociable Values CARE, STYLE, QUALITY, PERFORMANCE Pay-off Time together Caring Shop & Restaurants

22 Agenda 21 Who is Merloni Industry Landscape Merloni in the Competitive Arena Financial Results Merloni Strategy for the Future

23 Merloni consolidated P&L 22 P&L, ml Net sales Yoy % growth 1, % 1, % 2, % 3, % EBITDA % of net sales % % % % EBIT % of net sales (ROS) % % % % PBT % % % % Net income % of net sales % % % %

24 Consolidated Balance Sheet 23 Balance Sheet, ml Total fixed assets Trade receivables Stocks Trade accounts payable Net working capital % on net sales 4% 4% 0.7% -0.8% Provisions, funds and other liabilities Net invested capital Net financial position Group shareholders equity Minority interest Total sources

25 2003 quarterly financial trends 24 Net Financial Position December 2002 March 2003 June 2003 September 2003 December Gearing % 43% 66%* 83%* 66%* 40% Net Working Capital (25) Net Working Capital on 12 rolling months sales 0.7% 3.1% 4.7% 5.0% (0.8%) * Gross of tax 2003 Average net quarterly financial position: 274 ml 2003 Average net monthly financial position: 311 ml 2003 Average quarterly gearing (gross of tax): 58% 2003 Average Net Working Capital: 76 ml 2003 Average Net Working Capital on sales: 2.6%

26 Merloni Cash Flow statement 25 Cash Flow Statement, ml Gross Cash Flows Net Operating Cash Flow Cash Flow for Investments Free Cash Flow Residual Cash Flow

27 Key Financial Ratios Summary 26 Key Indicators ROS 1) 6.0% 7.1% 8.2% 8.2% ROIC 2) 18% 26% 29% 35% ROE 3) 15% 20% 25% 25% Gearing 4) 79% 41% 43% 40% Interest coverage 5) ) ROS:EBIT/NET SALES 2) ROIC:EBIT/Net invested capital 3) ROE: Net profit of the Group/Shareholders capital of the Group 4) Gearging: Net financial position/shareholders capital of the Group 5) Interest coverage: EBITDA/Net financial charges

28 Agenda 27 Who is Merloni Industry Landscape Merloni in the Competitive Arena Financial Results Merloni Strategy for the Future

29 6 Dimensions in Merloni development Strategy 28 Execution Consumer value 6 1 Business segments 5 Merloni Strategy 2 Innovation 4 3 New Europe Brand strategy

30 1) Tangible consumer value: the key challenge 29 Beyond the energy labelling, litres & rpm we want to deliver a touchable value to our customers Super Silent Our focus Value to Customer Time4You Just You Ever Fresh Volume

31 1) Consumer Value and products 30 Quality of Time: The Self Cleaning technology Power: Ability without chemicals Safe: Automatic door lock & triple glazed door Flexible: The ability to change the clean time Efficient: At a cost of 1 euro per clean

32 1) Consumer Value and products 31 A more comfortable way of life Best Food Preservation fresh raw meat X3 fresh fish X2 cheese X4 fresh fruits X2 No taste changes Integrated Everfresh Time & cost savings

33 1) Consumer Value and products 32 Simplification and ease of use New Touch Control Oven Combines all our knowledge of cooking presented in a simple and instantly easy way.

34 1) Consumer Value and products 33 Product Distinction INDESIT Graffiti Write what you want, where you want on the outside to make your mark!

35 1) Consumer Value and products 34 Product Distinction Sport 2 unique fast programmes dedicated to wash sports garments and sport shoes Special Sport Special Shoes

36 2) Innovation: new products development process 35 Research Innovation drivers New Products Strong effort in R&D: 400 engineers Around 240 patents Technological partnership with MIT Medialab and Politecnico of Milan 2004 New Innovation and Technology Committee 55 engineers dedicated to electronics technology research ALL IN ONE : Big size STOP THE TIME : Always fresh SPEED PLUG & PLAY Ease of Use LASTING Quality Studiness MORE TIME FOR YOU : new functions

37 2) Innovation: : Super Silent and Woolmark 36 Sound db Merloni new products thresholdofhearing of hearing 0 Super Silent pin pindroppingat 10 m softwhisper library quiet conversation normal conversation aabusyoffice Super Silent Merloni innovation vacuum cleaner 70 inside a asmall car 80 Woolmark Merloni is the first washing machine producer to have been awarded Woolmark (world-wide textile organization) certification for washing of wool, delicates and knits

38 3) Merloni brands aim for stronger market leadership 37 To consolidate leadership in Built in & increase presence in Free Standing To consolidate leadership in Free Standing CONSUMERS Needs Features Products BRANDS WE ARE WORKING HARD TO CONQUER SHARE OF MIND OF OUR CONSUMERS

39 4) Rebalancing production to exploit the East-opportunity 38 Sales and production split Production re-balancing towards East % of total units sold % units produced Action Timing Capacity at full production 67% 62% 33% 38% E West New 86% 14% 72% 28% E Doubling production capacity in existing Polish cooking factory New washing machine factory in Russia New cooling factory in Poland Doubling production from 1Q-04 Started production in 2Q-04 Start of production in 4Q-04 1 million units DONE 1 million units 1 million units Move towards New Europe strategy: rebalancing sales and production in New Europe Total capex : 100 ml euro, out of which 25 ml already spent in 2003 Due to its established presence and market share, Merloni is the best positioned player to exploit New Europe opportunity over next years

40 5) Built-In, Dryers and Dishwashers major opportunity 39 Built-In opportunity: margin evolution Lower level of competition in a fragmented and specialized market and higher differentiation potential: a great opportunity for Merloni Product innovation capacity is a competitive advantage for Merloni to be exploited in the built-in segment Dryers and Dishwashers opportunity: sales evolution Dryers and Dishwashers show important opportunity of growth for different drivers: Actual low penetration: penetration of dryers (28.4%) and dishwashers (39.8%) in West Europe is a potential opportunity for growth Dishwasher: Low competition intensity, only few important producers present in the market and New Europe market is still to be exploited Distribution synergies: Important synergies achieved in cross-selling of dryers from ex- GDA and Dishwashers from Merloni Appliancies penetration, % West Europe Fridges Washers Cookers Dryers Dishwashers Source: Freedonia Group data

41 6) Execution: vertical platforms pillars of efficient development 40 1 platform 1 platform 2 platforms 3 platforms 1 platforms Washers Dishwashers Cookers Fridges Dryers Vertical Platforms Speed Cost Reduced Capex Consumer needs positioning Component standards Reduced manufacturing cost Focused factory Revenues Costs ROA The bottom line ROI

42 41 6) Execution: Horizontal Digital Platform for all products 1 Horizontal Digital platform User Focus Brand Specificity Promote ease-of-use through - better use of manmachine interface design - standardisation across product line Making man-machine interface a key brand equity through - MMI highly recognisable and distinctive - creating sticky customers through familiarity MMI Platform (Man-Machine Interface) Cost Savings Faster Time to Market Efficient product testing

43 6) Execution: Sourcing Efficiency 42 Suppliers Optimization Reinforcing Sourcing Component Standardization Reduction of Suppliers accounts: average growth per single supplier superior to 15% p.a. Reinforcing sourcing in Poland, Turkey and Russia and new sourcing organization in China Development of common multi-usage components Number of suppliers Accounts Sourcing Areas Number of components used index LCC 15% TODAY index -5% 89 Traditional 85% % E LCC 40% Traditional 60% E

44 The future of Merloni 43 Merloni vision To be the European leader in producing innovative solutions to create day after day the Quality of Time