Group performance and results 2014

In this document, in addition to the financial figures provided by the International Financial Reporting Standards (IFRS), alternative performance indicators derived from IFRS are used in order to allow a better assessment of Group operations. These indicators are: Gross Operating Margin, Fixed assets, Funds, Operating Working Capital, Net Working Capital, Net Financial Position. A more detailed description of these indicators is made in paragraph “Alternative Performance Indicators”.

As a result of the signing of the agreement for the disposal of the steelcord business between Pirelli and Bekaert on February 28, 2014, the steel cord business qualifies as a "discontinued operation"; the result of the year of the discontinued operation along with the results from the disposal of the steelcord businesses in Italy, Romania and Brazil, was reclassified to the income statement in a single item "net income (loss) from discontinued operations". The comparative economic data of 2013 were restated, unless otherwise indicated; specifically, the steelcord business was part of the Industrial Business, the results of which were the subject of the restatement.

* * *

The Group's results, in line with the targets, highlight the improvement in key economic indicators, the strengthening of the Premium segment positioning and high cash generation. 

In particular, the results are characterized by:

  • the strong growth in the Premium segment, volumes at +17.8%, higher than expected (>+16% the target), with an increase in market share which strengthens the position of Pirelli in all main geographical areas. Premium revenues (euro 2,536.0 million) represent 55% of Consumer revenues, up from 50.8% in 2013;
  • improved price/mix component at +4.2% (+4%/+5% the target set for 2014) thanks to the performance in the Premium segment, the product mix in the Industrial Business and price increases in emerging countries;
  • organic revenue growth +5.9% (-0.7% net of the negative change in exchange rates equal to 6.6%), obtained not only thanks to the aforementioned improvement in the price/mix but to higher volumes (+2.0%) as well;
  • the achievement of internal efficiencies for euro 92.4 million (in line with the annual target of euro 90 million, euro 350 million the quadrennial efficiency plan 2014-2017);
  • a significant improvement in profitability, with an EBIT growth of 6.8% that reached euro 837.9 million (about euro 840 million target set for 2014) and profitability (EBIT margin) at 13.9%, +1 percentage point compared to 2013. The Premium strengthening strategy and efficiencies more than offset the negative impact of exchange rates and inflation of production factors;
  • the positive performance of the business in Europe, Asia Pacific and NAFTA, with an overall growth in revenues higher than the Group average and an improvement in Operating Income (EBIT) that mitigates the effects of the slowdown in the South American market;
  • the turnaround of the business in Russia, characterized by a significant improvement in product mix and positive profitability "mid-single digit" (versus a loss in 2013), and the improvement of the results in the MEAI area;
  • a net profit of euro 332.8 million, up 8.6%, and which reflects the impact of the devaluation of the exchange rate in Venezuela and the value adjustment of financial shareholdings;
  • a net financial position negative for euro 979.6 million, a significant improvement compared to euro 1,322.4 million at the end of 2013 thanks to improved Operating Income and careful management of working capital. The data also reflects the positive impact of the partial disposal of the steelcord business already realized by December and the deconsolidation of the Chinese company Sino Italian Wire for a total of euro 187.9 million.
  • operational cash flow before dividends and before the disposal of the steelcord business higher than expectations (> euro 250 million 2014 target) and equal to euro 311.6 million (5.2% weight on revenues, 3.8% in 2013).

 

The group’s main economic-financial and equity results are summarized in the table below:

(in millions of euro)12/31/2O1412/31/2O13 restated (*)12/31/2O13  reported
Net sales 6,018.1 6,061.0 6,146.2
Gross operating profit before restructuring expenses 1,168.0 1,095.0 1,105.4
% of net sales 19.4% 18.1% 18.0%
Operating income (loss) before restructuring expenses 869.2 810.2 816.5
% of net sales 14.4% 13.4% 13.3%
Restructuring expenses (31.3) (25.5) (25.5)
Operating income (loss) 837.9 784.7 791.0
% of net sales 13.9% 12.9% 12.9%
Net income (loss) from equity investments (87.0) (78.3) (78.3)
Financial income/(expenses) (262.4) (192.9) (195.8)
Net Income (loss) before tax 488.5 513.5 516.9
Tax expenses (173.3) (209.0) (210.4)
Tax rate % 35.5% 40.7% 40.7%
Net income (loss) from continuing operations 315.2 304.5 306.5
Net income (loss) from discontinued operations 17.6 2.0 -
Total net income (loss) 332.8 306.5 306.5
Net income attributable to Pirelli & C. S.p.A. 319.3 303.6 303.6
Total net earnings per share attributable to Pirelli & C. S.p.A. (in euro) 0.654 0.622 0.622
Operating fixed assets 3,874.0 4,043.0 4,043.0
Inventories 1,055.0 987.3 987.3
Trade receivables 673.8 666.4 666.4
Trade payables (1,394.4) (1,244.5) (1,244.5)
Operating working capital related to continuing operations 334.4 409.2 409.2
% of net sales 5.6% 6.8% 6.7%
Other receivables/other payables 33.9 3.0 3.0
Total Net working capital related to continuing operations 368.3 412.2 412.2
% of net sales 6.1% 6.8% 6.7%
Net invested capital held for sale 30.8 - -
Total Net invested capital 4,273.1 4,455.2 4,455.2
Equity 2,611.5 2,436.6 2,436.6
Total Provisions 682.0 696.2 696.2
of which provisions held for sale 5.2 - -
Total Net financial (liquidity)/debt position 979.6 1,322.4 1,322.4
of which Net Financial (liquidity)/debt position held for sale (5.8) - -
Equity attributable to Pirelli & C. S.p.A. 2,548.3 2,376.1 2,376.1
Equity per share attributable to Pirelli & C. S.p.A. (in euro) 5.222 4.869 4.869
Investments in property, plant and equipment and intangible assets 378.1 413.1 413.1
Research and development expenses 205.5 199.2 199.2
% of net sales 3.4% 3.3% 3.2%
Headcount (number at end of period) 37,561 37,979 37,979
Industrial sites (number) 19 23 23

(*) only Income Statement figures related to Steelcord business have been reclassified as “net income (loss) from discontinued operations”. 

For a better understanding of the Group's performance, the following is the economic data by business segment.

(in millions of euro)ABA+B=CDC+D=E
  Consumer Industrial                 Total Tyre Other business TOTAL
2014201320142013201420132014201320142013
Net sales 4,610.3 4,478.9 1,397.2 1,551.7 6,007.5 6,030.6 10.6 30.4 6,018.1 6,061.0
Gross operating margin  before restructuring expenses 934.7 839.6 242.2 280.3 1,176.9 1,119.9 (8.9) (24.9) 1,168.0 1,095.0
Operating income (loss)  before restructuring expenses 697.2 612.2 183.2 226.9 880.4 839.1 (11.2) (28.9) 869.2 810.2
Restructuring expenses (20.8) (15.8) (7.0) (7.6) (27.8) (23.4) (3.5) (2.1) (31.3) (25.5)
Operating income (loss) 676.4 596.4 176.2 219.3 852.6 815.7 (14.7) (31.0) 837.9 784.7

TOTAL GROUP
(in millions of euro)
1Q 2Q3Q 4Q TOTAL 
2014201320142013201420132014201320142013
Net sales 1,473.2 1,514.6 1,513.7 1,575.4 1,541.8 1,496.4 1,489.4 1,474.6 6,018.1 6,061.0
yoy -2.7% - -3.9% - 3.0% - 1.0% - -0.7% -
Gross operating margin before restructuring expenses 277.3 253.0 305.5 276.3 284.9 277.5 300.3 288.2 1,168.00 1,095.0
% of net sales 18.8% 16.7% 20.2% 17.5% 18.5% 18.5% 20.2% 19.5% 19.4% 18.1%
Operating income (loss) before restructuring expenses 206.7 181.7 232.2 204.2 208.9 207.5 221.4 216.8 869.2 810.2
% of net sales 14.0% 12.0% 15.3% 13.0% 13.5% 13.9% 14.9% 14.7% 14.4% 13.4%
Restructuring expenses (5.7) (3.2) (7.0) (4.2) (5.4) (7.8) (13.2) (10.3) (31.3) (25.5)
Operating income (loss) 201.0 178.5 225.2 200.0 203.5 199.7 208.2 206.5 837.9 784.7
% of net sales 13.6% 11.8% 14.9% 12.7% 13.2% 13.3% 14.0% 14.0% 13.9% 12.9%

The Group net sales as at December 31, 2014 amounted to euro 6,018.1 million compared to euro 6,061.0 million at December 31, 2013. The sales trend (+5.9% net of the exchange rate negative impact for 6.6%) was driven by the growth in the Consumer Business (+8.9% net of exchange rates) while the Industrial Business (-1.5% revenue performance net of exchange rates) was affected by the slowdown in the South American market.

Specifically Tyre business showed the following performance:

TYRE BUSINESS1Q 2Q 3Q 4Q TOTAL 
 2014201320142013201420132014201320142013
Net sales 1,469.5 1,505.0 1,511.3 1,567.9 1,539.20 1,489.4 1,487.5 1,468.3 6,007.5 6,030.6
yoy -2.4%   -3.6%   3.3%   1.3%   -0.4%  
Gross operating margin before
restructuring expenses
280.3 257.8 308.7 280.8 287.2 282.3 300.7 299.0 1,176.9 1,119.9
% of net sales 19.1% 17.1% 20.4% 17.9% 18.7% 19.0% 20.2% 20.4% 19.6% 18.6%
Operating income (loss) before
restructuring expenses
210.3 187.5 236.1 209.7 211.7 213.3 222.3 228.6 880.4 839.1
% of net sales 14.3% 12.5% 15.6% 13.4% 13.8% 14.3% 14.9% 15.6% 14.7% 13.9%
Restructuring expenses (5.4) (3.2) (7.0) (3.4) (5.4) (7.6) (10.0) (9.2) (27.8) (23.4)
Operating income (loss) 204.9 184.3 229.1 206.3 206.3 205.7 212.3 219.4 852.6 815.7
% of net sales 13.9% 12.2% 15.2% 13.2% 13.4% 13.8% 14.3% 14.9% 14.2% 13.5%
    

Tyre business net sales amounted to euro 6,007.5 million, with organic growth of 6.2% (-0.4% including the negative exchange rate impact of 6.6%) compared to 2013.

Premium segment net sales (tyres with rim diameter equal or higher than 17 inches for the car business and radial tyres and X-ply custom touring, off-road and Sport Touring tyres with speed index ≥ H in the motorcycle business) amounted to euro 2,536.0 million (+11.5%, +13.2% excluding the impact of exchange rates), with a weight on Consumer revenues up to 55.0% (50.8% in 2013).

The following table outlines the drivers of the tyre sales performance:

 1Q 2Q 3Q 4Q CUMULATIVE 12/31
 20142013 reported20142013 reported20142013 reported20142013 reported20142013 reported
Volume 3.8% 3.9% -0.2% 8.8% 3.1% 5.4% 1.6% 4.9% 2.0% 5.7%
of which Premium volume 22.2% 4.0% 20.9% 12.9% 17.3% 19.1% 10.7% 27.5% 17.8% 15.3%
Price/mix 4.6% 0.0% 6.0% 5.1% 3.3% 2.5% 2.8% 4.3% 4.2% 2.9%
Changeon a like-for-like basis 8.4% 3.9% 5.8% 13.9% 6.4% 7.9% 4.4% 9.2% 6.2% 8.6%
Translation effect -10.8% -4.9% -9.4% -5.0% -3.1% -9.9% -3.1% -9.1% -6.6% -7.2%
Total change -2.4% -1.0% -3.6% 8.9% 3.3% -2.0% 1.3% 0.1% -0.4% 1.4%
 

The increase in volumes (+2.0%) reflects a trend in the opposite direction between Consumer and Industrial.

Volume growth in the Consumer segment (+5.0%) was supported by the good performance of the business in all major markets and particularly by the continued growth of Premium. The trend in Industrial volumes (-6.5%) reflects in particular results in South America, which are up against a very strong 2013, especially in the first half year, the decline in the Truck Original Equipment market (-23% in 2014), and the gradual exit from conventional business.

The improvement in the price/mix (+4.2% in Tyre business, +3.9% in Consumer, +5.0% in Industrial) proves the success of the Groups' value strategy oriented towards value creation through the gradual improvement in the mix and the price increases in emerging markets.

The breakdown of Tyre business net sales by geographical area and product category is as follows:

GEOGRAPHICAL AREA2014  2013
 Euro\mlnyoy  
Italy 347.6 2.0% 5.8% 5.7%
Rest of Europe 1,709.1 5.1% 28.4% 26.9%
Russia and CIS 237.9 -6.4% 4.0% 4.2%
NAFTA 707.5 4.7% 11.8% 11.2%
Central and South America 1,963.5 -9.5% 32.7% 36.0%
Asia\Pacific 558.4 16.0% 9.3% 8.0%
Middle East\Africa\India 483.5 0.2% 8.0% 8.0%
TOTAL 6,007.5 -0.4% 100.0% 100.0%

PRODUCT2014  2013
 Euro\mlnyoy  
Car 4,224.50 3.2% 70.3% 67.9%
Motorcycle 385.8 -0.3% 6.4% 6.4%
Consumer 4,610.30 2.9% 76.7% 74.3%
Truck 1,236.00 -9.0% 20.6% 22.5%
Agriculture 161.2 -16.4% 2.7% 3.2%
Industrial 1,397.2 -10.0% 23.3% 25.7%

The Group's operating income (EBIT), up 6.8% despite the volatility of exchange rates, amounted to euro 837.9 million, against euro 784.7 million in 2013. The improvement of euro 53.2 million is due for euro 36.9 million to the Tyre business and for euro 16.3 million to the other activities.

The operating income was impacted by restructuring costs for euro 31.3 million relative to continual operations to rationalize the structures. Restructuring costs at December 2013 were euro 25.5 million. Furthermore, in 2014 one-off gains occurred relative to the sale of real estate in Germany, Turkey and Brazil, giving rise to a positive net balance of euro 14.6 million, net of relative expenses; in 2013 one-off events had registered a positive net balance of about euro 22 million deriving from sale of real estate, bad debts in litigation from the 1990s and the costs related to closing an outstanding legal action in Brazil.

Specifically, the Operating Income of Tyre business shows the following quarterly performance:

(in millions of euro) 1 Q2 Q3 Q4 QTOTAL
2013 Operating income (loss) 184.3 206.3 205.7 219.4 815.7
Foreign currency translation from consolidation (19.2) (28.3) (15.3) (17.8) (80.6)
Prices/mix 39.3 54.0 33.8 30.1 157.2
Volumes 24.0 2.0 14.7 17.6 58.3
Cost of prodution factors (commodities) 7.9 5.8 4.2 (13.4) 4.5
Cost of prodution factors (labour/energy/others) (29.5) (21.5) (37.7) (38.0) (126.7)
Efficiency 27.6 21.3 22.1 21.4 92.4
Amortisation, depreciation and other (27.2) (7.0) (23.2) (6.0) (63.4)
Restructuring expenses (2.3) (3.5) 2.0 (1.0) (4.8)
Change 20.6 22.8 0.6 (7.1) 36.9
2014 Operating income (loss) 204.9 229.1 206.3 212.3 852.6

The Operating Income of Tyre business at December 31, 2014 amounted to euro 852.6 million (euro 815.7 million in 2013), with an EBIT margin of 14.2% (14.7% before restructuring costs) an improvement of 0.7 percentage points compared to 2013.

The improvement in profitability was affected by:

  • the growing contribution of the price/mix component (euro +157.2 million) which, along with lower raw material costs (euro +4.5 million), more than offset the negative translation effect (euro 80.6 million) with a net profit of euro 81.1 million;
  • the efficiencies for euro 92.4 million, which mitigated the inflation of production factors (euro 126.7 million of the growth in input costs);
  • the positive contribution of volumes (euro +58.3 million), which helped to reduce the impact of higher depreciation and other costs (euro 63.4 million) and the increase in non-recurring expenses (euro 4.8 million).

Geographically Europe (34% of Tyre revenues) is one of the main areas of growth, with an organic increase in revenues of 4.2%, an improvement in profitability (EBIT margin before restructuring costs at "mid- teens" levels from "double digit") thanks to the growth in high range, especially in the Super Premium segment (tyres with rim diameter equal to or more than 18 inches) where in 2014 Pirelli gained 1 percentage point of market share - and the contribution of efficiencies. Greater presence in specialized retailer and car dealer channels also boosted Premium positioning in Europe.

NAFTA (12% of tyre revenues) recorded an organic growth of 5.3% (+4.7% including the impact of exchange rates), thanks to the strengthening of Premium and an improvement in profitability at "mid-teens" level, with an increase of more than 1 percentage point; positive customer response to the launch of 4 new product lines dedicated to the North American market.

APAC (9% of tyre revenues, +1 percentage point compared to 2013) is confirmed as the major growth area: +17.5% increase in revenues in organic terms (+16.0% including the impact of exchange rates) driven by sales in the high range (+28.3% Premium revenue growth, especially Super Premium, with an increase of over 2 percentage points of market share), a "twenties " EBIT margin, improving on 2013. The Apac market benefited particularly from the "pull-through" effect on sales that the Pirelli leadership in the local Premium original equipment is able to generate in the replacement channel.

The turnaround of the business in Russia (4% of revenues): +10.4% organic growth in revenues (-6.4% after the impact of exchange rates) and "mid single digit" profitability, in increase compared to 2013 ("negative" EBIT margin), is in line with the expectations thanks to the improvement of product mix and the efficiency program, despite the unfavourable conditions of the market.

MEAI (8% of tyre sales) remained among the most profitable geographic areas with "high-teens" profitability, an improvement compared to 2013 and organic revenue growth of 6.8%. The increase in prices and the improved mix offset the negative impact of exchange rates, equivalent to 6.6%.

South America (33% of tyre revenues) recorded organic revenue growth of 5.4% (-9.5% including the negative exchange rate impact), driven by good Car volumes in the replacement channel, Premium in particular (overall Premium volumes +15.1% with an increase in market share) and by price increases in response to exchange rate volatility. Profitability "low-teens" (down compared to 2013), which reflects the performance of the original equipment market car (-17%) and truck (-23%) and the decline of the tire market in Argentina (-7.5%) and Venezuela (-30%). This trend prompted actions to reduce production in order to safeguard the optimal management of stocks.

This, together with the increase in inflation of production factors, has reflected on short-term profitability. Pirelli mitigated the effects of these movements with growth in its high value segments in the car replacement market, where overall it gained over 1 percentage point of market share, thanks also to the policy of strengthening the distribution chain.  

The net income from equity investments of the Group was negative for euro 87.0 million and mainly relates to the impact from the consolidation with the equity method of results of the associates Prelios S.p.A. (pro-rata loss of the fourth quarter 2013 and of the nine months of 2014) and Fenice S.r.l. (pro-rata loss of the entire year 2014) for a total of euro 54.4 million, plus the impairment regarding Fenice S.r.l. for a total of euro 19.0 million in order to align the value to the fair value. Additional impairments affected the equity investments in GWM Renewable Energy II S.p.A. (euro 1.4 million), Alitalia S.p.A. (euro 11.2 million) and RCS Media Group (euro 15.9 million). These negative impacts were partially offset by the effect resulting from the replacement during the year 2014 of the convertible loan with class A and B Prelios shares, which generated a positive effect of euro 13.3 million.

The Group net income from continuing operations at December 31, 2014 was euro 315.2 million (euro 304.5 million in 2013). This result, in addition to the dynamics highlighted in the comments on the operating result and the result from investments was significantly influenced by higher net financial expenses that went from euro 192.9 million at December 31, 2013 to euro 262.4 million at December 31, 2014, with an increase of euro 69.5 million partially offset by lower taxes for euro 35.7 million.

Financial expenses include euro 72.1 million related to foreign exchange losses on past trade payables of the Venezuelan subsidiary. Excluding this effect expenses show a decrease of euro 2.6 million mainly due to a lower level of debt in countries outside the Eurozone (about 40% of the total) in which Pirelli operates, characterized by high interest rates, achieved primarily through share capital increases in Brazil and Mexico. The average cost of debt for the period was 6.05%.

Tax expenses amounted to euro 173.3 million, down compared to 2013 (euro 209.0 million) with a tax rate that stood at 35.5% (31.9% net of the equity consolidation of associated companies) with respect to an incidence of 40.7% in 2013.

The decrease in the item compared to the same period of the previous year is mainly attributable to the recognition of deferred tax assets in relation to the expected recoverability of tax losses by the Group’s Italian companies following the improvement in future plans that allowed the recognition.

The net income from discontinued operations at December 31, 2014 amounted to euro 17.6 million and includes the income for the period of the steelcord business for euro 3.0 million as well as gains from the disposal of the steelcord business in Italy, Romania and Brazil, amounting to euro 17.9 million net of the related tax effect (euro 7.8 million) and net of the reversal of foreign exchange reserves to the income statement (euro 3.3 million) recorded on the date of the disposal.

Total net income amounted to euro 332.8 million compared to euro 306.5 million in 2013 (+8.6%); the share of net income attributable to Pirelli & C. S.p.A. was positive for euro 319.3 million (euro 0.654 per share) compared to euro 303.6 million of the previous year (equal to euro 0.622 per share).

Equity changed from euro 2,436.6 million as at December 31, 2013 to euro 2,611.5 million as at December 31, 2014.

The equity attributable to Pirelli & C. S.p.A. at December 31, 2014 amounted to euro 2,548.3 million (euro 5.222 per share) compared to euro 2,376.1 million at December 31, 2013 (euro 4.869 per share).

The change, detailed in the table, is essentially due to the net income for the year, negative currency effect linked to the conversion of equities in foreign currency into euro, dividends paid, actuarial losses relating to employee benefits partly offset by the inflation effect of the Venezuelan subsidiary.

(in millions of euro)GroupNon-controlling interestsTotal
Equity at 12/31/2013 2,376.1 60.5 2,436.6
Translation differences (55.1) - (55.1)
Net income (loss) 319.3 13.5 332.8
Fair value adjustment of other financial assets/derivative instruments 50.4 - 50.4
Net investment hedge (4.8) - (4.8)
Actuarial gains/(losses) on employee benefits (29.9) (0.4) (30.3)
Dividends paid (156.7) (3.4) (160.1)
Venezuela inflation effect 49.1 1.9 51.0
Disposal of minorities stakes (3.0) 5.6 2.6
Acquisition through capital increase reserved to third parties - 10.3 10.3
Steelcord disposal - (21.4) (21.4)
Other changes 2.9 (3.4) (0.5)
Total changes 172.2 2.7 174.9
Equity at 12/31/2014 2,548.30 63.2 2,611.5

The following is the reconciliation statement between the equity of the Parent Company and the consolidated equity of the Parent Company’s shareholders, pursuant to Consob Communication of July 28, 2006.

(in millions of euro)Share CapitalTreasury reservesNet income (loss)TOTAL
Equity of Pirelli & C. S.p.A. at 12/31/20141,343.3454.9258.02,056.2
Net income (loss) for the year of consolidated companies (before consolidation adjustments) - - 340.7 340.7
Share capital and reserves of consolidated companies (before consolidation adjustments) - 1,297.2 - 1,297.2
Consolidation adjustments:      
- carrying value of equity investments in consolidated companies - (1,141.1) - (1,141.1)
- intercompany dividends - 308.3 (308.3) -
- others - (33.6) 28.9 (4.7)
Consolidated equity of Group at 12/31/2014 1,343.3 885.7 319.3 2,548.3

The total net financial position is negative for euro 979.6 million (of which cash for euro 5.8 million associated with assets held for sale) compared to euro 1,322.4 million at the end of 2013 and is detailed in the following table:

(in millions of euro)12/31/201412/31/2013
Current borrowings from banks and other financial institutions 530.9 316.7
Current derivative financial instruments 4.6 3.2
Non-Current borrowings from banks and other financial institutions 1,781.7 2,014.3
Total gross debt continuing operations 2,317.2 2,334.2
Cash and cash equivalents (1,166.7) (879.9)
Securities held for trading (61.4) (48.1)
Current financial receivables (41.5) (17.7)
Current derivative financial instruments (6.1) (6.7)
Non-current financial receivables (56.1) (59.4)
Total financial receivables and cash (1,331.8) (1,011.8)
A Net financial (liquidity)/debt position continuing operations 985.4 1,322.4
B Net financial (liquidity)/debt position discontinued operations (5.8) -
A+B Total net financial (liquidity)/debt position 979.6 1,322.4

Excluding the effect deriving from the disposal of the steelcord business the value of the net financial position would amount to euro 1,167.5 million.

Group net debt at the end of 2014 includes the impairment of the net liquidity of Venezuela for euro 57 million due to the gradual adjustment of bolivar/dollar exchange rates:

  • from 6.3 to 10.7 in the first quarter of the year (adjustment from the official exchange rate to Sicad 1) with a negative impact on the net financial position for euro 46 million;
  • and from 10.7 to 12 (new value of Sicad 1) in the last quarter of the year with a further negative impact for euro 11 million.      

The structure of the gross financial debt from continuing operations amounts to euro 2,317.2 million and is as follows:

(in millions of euro)Financial Statements
12/31/2014
Maturity date 
  20152016201720182019 and beyond
Use of committed credit facilities 75.0 75.0 - - - -
Bond 5,125% - 2011/2016 500.0 - 500.0 - - -
Bond 1,750% - 2014/2019 600.0 - - - - 600.0
EIB loans 250.0 100.0 100.0 20.0 20.0 10.0
USD private placement 123.6 - - 12.4 - 111.2
Schuldschein 155.0 - 114.0 31.0 - 10.0
Other loans 613.6 360.5 104.2 92.8 31.8 24.3
Total gross debt operating activities 2317.2 535.5 818.2 156.2 51.8 755.5
    23.1% 35.4% 6.7% 2.2% 32.6%
  

At December 31, 2014 the Group had at disposal additional not used euro 1,125 million related to a part of the committed credit facilities for euro 1.2 billion (euro 625 million available at December 31, 2013), which added to the euro 1,228.1 million related to cash and cash equivalents and securities held for trading provide the Group with a liquidity margin of euro 2,353.1 million.

The trend in cash flows for the period in terms of change in the net financial position is as follows:

 

(in millions of euro)1Q2Q3Q4QTOTAL
 2014201320142013201420132014201320142013
Operating income (loss) before restructuring expenses 206.7 181.7 232.2 204.2 208.9 207.5 221.4 216.9 869.2 810.2
Amortisation and depreciation 70.6 71.3 73.3 72.1 76.0 70 78.9 71.4 298.8 284.8
Investments in property, plant and equipment and intangible assets (65.3) (79.7) (78.3) (84.3) (101.1) (74.3) (133.4) (174.8) (378.1) (413.1)
Change in working capital/other (686.6) (468.4) 77.4 (12.2) (155.0) (153.8) 714.6 678.3 (49.6) 43.9
Operating net cash flow (474.6) (295.1) 304.6 179.8 28.8 49.4 881.5 791.9 740.3 725.8
Ordinary financial income/(expenses) (43.3) (58.0) (48.8) (45.5) (43.6) (43.3) (126.7) (46.1) (262.4) (192.9)
Ordinary tax expenses (53.5) (42.2) (61.3) (59.0) (49.5) (50.3 (9.0) (57.5) (173.3) (209.0)
Ordinary net cash flow (571.4) (395.3) 194.5 75.3 (64.3) (44.2) 745.8 688.1 304.6 323.9
Financial investments/disinvestments (3.7) - 2.8 - (12.1) (31.6) (6.4) (7.5) (19.4) (39.1)
Real estate disposals - - - - - 26.5 - - - 26.5
Impact of consolidation of Sino Italiana Wire - - - - - - - (39.5) - (39.5)
Investments for Retail development - - - - - (4.1) - (7.9) - (12.0)
Other dividends paid to third parties (0.5) - (2.9) (3.1) - - - - (3.4) (3.1)
Cash Out for restructuring (12.9) (7.5) (5.9) (5.2) (8.0) (4.2) (4.3) (5.7) (31.1) (22.6)
Devaluation Venezuela included in financial expenses - - - - - - 72.1 - 72.1 -
Deferred taxes included in tax expenses - - - - - - (30.2) - (30.2) -
Net cash flow from discontinued operations (8.7) (22.6) 10.5 7.8 2.5 (4.9) (4.3) 9.7 - (10.0)
Differences from foreigh currency translation/other (46.0) (49.6) (11.9) 29.5 13.2 17.1 63.7 11.3 19.0 8.3
Net cash flow before dividends paid (643.2) (475.0) 187.1 104.3 (68.7) (45.4) 836.4 648.5 311.6 232.4
Dividends paid by Parent - - (156.7) (156.7) - - - - (156.7) (156.7)
Impact Steelcord units disposal - - - - - - 187.9 - 187.9 -
Prelios: receivable conversion/share capital increase - - - - - (192.9) - - - (192.9)
Net cash flow (643.2) (475.0) 30.4 (52.4) (68.7) (238.3) 1,024.3 648.5 342.8 (117.2)
 

The net cash flow from operations in 2014 was positive for euro 740.3 million.

Total investments were made for approximately euro 378.1 million (euro 413.1 million in 2013), mainly for the increase of the Premium capacity in Europe, NAFTA and China and the improvement of the mix.

The total net cash flow in 2014, before dividends and excluding the impact of operations already completed for partial disposal of steelcord, was positive for euro 311.6 million (positive for euro 232.4 million in 2013), with strong cash generation in the fourth quarter related to the collections of seasonal markets and winter sales in Europe and Russia.

The total cash flow was positive for euro 342.8 million, in improvement over the previous year (negative for euro 117.2 million), including Parent Company dividend payments for euro 156.7 million, and the positive effect of the disposal of the steel cord business for euro 187.9 million.

The decrease includes the effect of the disposal in December of the steelcord business in Italy, Brazil and Romania for a total of 1,364 resources; net of this disposal would result in a growth of 946 resources compared to the previous year, mainly attributable to the increase in Premium production capacity in Mexico, China and Romania.

The following tables show the headcount breakdown by geographical area and by type:

GEOGRAPHICAL AREA12/31/2014 12/31/2013
Italy 3,162 8.4% 3,611 9.5%
Rest of Europe 11,574 30.8% 12,063 31.9%
of which Russia 3,483 3,394
NAFTA 1,455 3.9% 1,152 3.0%
Central and South America 13,996 37.3% 14,244 37.5%
Middle Est/Africa 3,226 8.6% 3,311 8.7%
Asia/Pacific 4,148 11.0% 3,598 9.5%
 Total workforce 37,561 100.0% 37,979 100.0%

TYPE12/31/2014 12/31/2013
Executives 313 0.8% 322 0.8%
White collar 7,024 18.7% 7,135 18.8%
Blue collar 27,776 74.0% 27,902 73.5%
Temps 2,448 6.5% 2,620 6.9%
Total workforce 37,561 100.0% 37,979 100.0%