CIR Group: revenues of 3.5 billion (+11.5%). Gross operating margin of 289.7 million (+40.8%)

Board of Directors approves Financial Report as of September 30 2010

CIR GROUP: REVENUES OF 3.5 BILLION (+11.5%), GROSS OPERATING MARGIN OF 289.7 MILLION (+40.8%)

Net income for the first nine months 53.7 million euro. The result for the first nine months of 2009, a positive 138 million euro, included non-recurring income of 117 million euro. Net of this income, earnings for the first nine months of 2010 are up on 2009

Margins and earnings of all the main operating companies of the group are up Financial surplus at holding level is over 110 million euro


Consolidated results of the first nine months of 2010

Revenues: € 3,513.7 million (+11.5% from € 3,152 million in 9M 2009
EBITDA: € 289.7 million (+40.8% from € 205.8 million in 9M 2009)
Net income: € 53.7 million (€ 138 million, of which 117 million non-recurring, in 9M 2009)
Aggregate net financial surplus: € 111.7 million (€ 101.8 million at 30/06/2010)
Consolidated net debt: € 2,222.7 million (€ 2,195.7 million at 30/06/2010)

Milan, October 28 2010 – The Board of Directors of CIR-Compagnie Industriali Riunite SpA, which met today under the chairmanship of Stefano Micossi, examined and approved the Interim Financial Report of the group as of September 30 2010.

The CIR group operates in five business sectors: energy (Sorgenia), media (Espresso), automotive components (Sogefi), healthcare (KOS) and financial investments.


Performance of operations

The group closed the first nine months of 2010 with revenues and gross operating margin (EBITDA) up significantly on the same period of 2009. The performance of revenues reflects the increases reported by the energy, automotive components and healthcare sectors, with sales holding up in the media sector.  The rise in EBITDA was due to an improvement in the profitability of all the main operating subsidiaries of the group.

The net income of the group was 53.7 million euro in the first nine months of the year. Last year’s result, a positive figure of 138 million euro, included non-recurring gains of approximately 117 million euro (76.7 million of which came from the subscription of a capital increase by Verbund in Sorgenia and 40.1 million euro were capital gains on the partial disinvestment from the hedge funds held by the group).

Therefore, net of non-recurring items, the net income of the group in the first nine months of 2010 is higher than that of 2009. The contribution of the operating companies to the net income for the period showed a significant improvement on the figure for last year (58.8 million euro versus 5.8 million euro in 2009).


Consolidated results

The consolidated revenues of the CIR group in the first nine months 2010 came to 3,513.7 million euro and were up by 11.5% from 3,152 million euro in the first nine months of 2009. The change was due to the higher sales reported by Sorgenia, Sogefi and KOS, with the revenues of Espresso substantially holding up.

The consolidated gross operating margin came in at 289.7 million euro (8.2% of revenues), up from 205.8 million euro (6.5% of revenues) in the first nine months of 2009, posting a rise of 40.8%. This change was due to the rise in the profitability of all the operating subsidiaries. The consolidated operating result (EBIT) was 160.6 million euro, and was up by 53.2% from 104.8 million euro in 2009.

The financial management result, a negative 55.2 million euro, was the combination of net financial expense of 78.1 million euro, dividends and net gains from trading and valuing securities of  18.6 million euro and positive adjustments to the value of financial assets of 4.3 million euro. The change from the positive result of 79.6 million euro in the first nine months of 2009 was due mainly to the fact that last year there were non-recurring gains (approximately 117 million euro).

The consolidated net income of the CIR group in the first nine months of 2010 was 53.7 million euro. The net result of the same period of 2009, a positive 138 million euro, included non-recurring gains of approximately 117 million euro resulting from the capital increase subscribed by the shareholder Verbund in Sorgenia (76.7 million euro) and capital gains on the partial disinvestment from the hedge funds held by the group (40.1 million euro). Net of these non-recurring items, the net income of the group is actually higher than in 2009.

The net debt of the CIR group stood at 2,222.7 million euro at September 30 2010, up from 2,195.7 million euro at June 30 2010 and 1,801.1 million euro at December 31 2009. The consolidated net debt figure was the result of the following:
–  An aggregate net financial surplus at holding level of 111.7 million euro (101.8 million euro at June 30 2010). The decline from 121.6 million euro at December 31 2009 was due mainly to disbursements made for structure costs in the period;
–  Total net debt of the operating companies totalling 2,334.4 million euro (2,297.5 million euro at June 30 2010). The change from the figure of 1,922.7 million euro at December 31 2009 was principally caused by the new investments made in production capacity by Sorgenia and by the rise in working capital.

The net financial position includes the CIR group’s investment in shares of hedge funds (78 million euro at September 30 2010).

Total consolidated equity at September 30 2010 stood at 2,457.4 million euro, up from 2,332.3 million euro at December 31 2009. The group’s equity rose to 1,458.6 million euro from 1,396.7 million euro at December 31 2009.  

At September 30 2010 the CIR group had 12,903 employees (12,746 at December 31 2009).


Industrial businesses


Energy: Sorgenia

The revenues of the Sorgenia group in the first nine months of the year came to 1,947.2 million euro and were up by 12.3% on the figure for 2009 (1,733.8 million euro). The rise in sales volumes offset the reduction in the unit prices of energy products. EBITDA came in at 107.7 million euro, posting a rise of 11.6% on the figure for the same period of 2009 (96.4 million euro). The rise was due to the higher margins recorded by the company in the second and particularly in the third quarter of the year.

Sorgenia’s EBITDA benefited in particular from the rise in volumes of the electricity business (+14.1%) and from the start of contributions from the Modugno (Bari) combined cycle (CCGT) power plant, which more than compensated for the reduction in gas margins, high congestion costs on the national grid and the breakdown that caused the Termoli (Campobasso) power plant to remain idle until the end of March.
Net income was 57.6 million euro (21.1 million euro in the first nine months of 2009). The rise compared to the figure for last year was due mainly to a tax credit for investments made in new production capacity by the company.

As far as its business plan is concerned, Sorgenia has completed construction of the new combined cycle power plant at Bertonico-Turano Lodigiano (Lodi). Also in the third quarter, the subsidiary Sorgenia Solar started operating a new 2.6 MW photovoltaic plant in Sardinia. Lastly, the construction of two wind parks in France with a total output of 41 MW is nearing completion.


Media: Espresso

The revenues of the Espresso group for first nine months of the year came in at 639.5 million euro, in line with the figure of the corresponding period of last year (640.9 million euro). Net of optional add-on products, revenues posted a rise of 4%. Excluding add-on products, circulation revenues, which did not benefit from any price hikes, came to 202.2 million euro versus 206.9 million euro in the same period of last year (-2.3%). All the main titles of the group have reported a significantly better performance in 2010 than that of their respective markets.
According to the latest Audipress and ADS figures, la Repubblica confirms its ranking as the top Italian daily newspaper both in terms of copies sold on the news-stands and number of readers. Advertising revenues, totalling 369.3 million euro, rose by 7.1% compared to the first nine months of 2009, thus confirming in the third quarter the recovery experienced in the first half of the year. Revenues from add-on products came in at 53.4 million euro and were down by 31.2% on 2009.

Total costs were cut by 8% compared to the first nine months of last year and recurring costs, net of extraordinary expense, were reduced by 6.1%. Considering the savings already achieved in the first nine months of 2009, the trend of costs is entirely in line with the objective of the company reorganization plan which involves an overall reduction of 17% compared to the year 2008.

EBITDA was 104 million euro, up by 71.4% from 60.7 million euro in the first nine months of 2009. All the principal businesses of the group reported a clear improvement in their profitability, which for the daily newspapers was due to the drastic reduction in costs as a result of the reorganization plans, and for the radio and internet sectors was due to the significant rise in revenues. Net income came in at 36.3 million euro, up from 1.2 million euro in the same period of last year.


Automotive components: Sogefi

Sogefi’s revenues for the first nine months of the year came in at 687 million euro, up by 19.7% from the same period of 2009 (573.8 million euro). This favourable trend was seen in all segments of the market in which the group operates (original equipment, independent aftermarket and original equipment spares) and affected all the geographical areas in which Sogefi is present (Europe +11.3%, North America +12.6, South America +48.1%, China +106% and India +62.8%).

The positive performance of revenues, associated with further organizational action taken by Sogefi in the third quarter, enabled the group to achieve a strong rise in its profitability levels. EBITDA, totalling 64.5 million euro, doubled compared to the figure for the same period of 2009 (32.2 million euro). The net result turned positive with 13.5 million euro compared to a negative figure of 8.6 million euro in the first nine months of 2009.


Healthcare: KOS

The revenues of KOS in the first nine months totalled 239 million euro and were up by 17.4% on the same period of 2009 (203.5 million euro), thanks to the development of the three business areas (nursing homes for the non self-sufficient elderly, rehabilitation centres and hospital management) and to the acquisitions made in the period.

In the first nine months of the year the company incurred costs of approximately 2.4 million euro for the IPO procedure (1.8 million euro) and for expenses relating to the acquisitions made in the period (0.6 million euro).
EBITDA came in at 32.2 million euro, and was up by 30.9% compared to the first nine months of 2009 (24.6 million euro). Net income came to 4 million euro, versus a result of 0.2 million euro in the first nine months of 2009. The KOS group today manages 60 facilities, mainly in the centre-north of Italy with a total of over 5,600 beds in operation, plus approximately 400 more under construction.


Financial investments


As far as the financial investments of the group are concerned, CIR has a diversified portfolio of funds and minority shareholdings in the private equity sector (with a fair value of 70.3 million euro) and also has the venture capital fund CIR Ventures (with a fair value at September 30 of 14.6 million dollars). Among the other investments is Jupiter Finance, which is active in the non-performing loan sector. At September 30 2010 the nominal value of the loans under management amounted to approximately 2.2 billion euro. The value of CIR’s investment in this business at September 30 2010 was 58.3 million euro.

Regarding the official notification received by the subsidiary Jupiter Finance SpA from the Bank of Italy in recent weeks, CIR SpA has begun a process that will lead to a capital injection for Jupiter Finance SpA of an amount of 1.5 million euro, the aim of which is to bring the subsidiary into line with capital coefficient requirements.  Jupiter Finance SpA is also making a series of amendments to its corporate governance and its operating and control organization in order to comply with the points raised by Bank of Italy and thus create the conditions for a return to deal making.


Amendment of the Company Bylaws

As documented by a Notary Deed, the Board of Directors has voted to amend Articles 6, 8, 15, 16, 19 and 21 of the Company Bylaws in order to bring them into line with the mandatory requirements set out in D.Lgs. 27/2010. The most significant changes are on the subject of the following: filing the lists of candidates for the position of Director and Statutory Auditor; calling the Shareholders’ Meeting; intervention and voting rights at the Shareholders’ Meeting.


Approval of the procedure for related party transactions

In compliance with the rules contained in Consob Resolution no. 17221, the Board of Directors has adopted the “Procedure for related party transactions” and has set up a “Committee for related party transactions” (whose members are the same as those of the Internal Control Committee).


Outlook for the year

In the final months of the year the CIR group will continue with its management efficiency actions and with the investment programs planned for the development of all sectors of the business. The group confirms that for the full year 2010, as was the case in the first nine months of the year, consolidated net income will be lower overall than those of 2009, as there is not expected to be any non-recurring income as there was last year. However, the significant rise in the contribution of the operating subsidiaries to net income is confirmed.


Bonds maturing in the 24 months following September 30 2010


The company, which has a BB rating with a negative outlook issued by Standard&Poor’s, has the following bond maturity in the 24 months following September 30 2010. The bond was issued by the subsidiary CIR International SA with the guarantee of CIR SpA:
–  January 10 2011, maturity of the bond with a residual principal of 148 million euro (originally 300 million euro). The bond (ISIN code XS0169896817), listed on the Luxembourg stock exchange, pays an annual coupon of 6.375%.          


The executive responsible for the preparation of the company’s financial statements, Alberto Piaser, hereby declares, in compliance with the terms of paragraph 2 Article 154 bis of the Finance Consolidation Act (TUF), that the figures contained in this press release correspond to the results documented in the company’s accounts and general ledger.

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