Presentation to the Financial Community · Financial Community. 1 2002: ... The “One Single Company” concept (1 organization, 1 structure, 1 manufacturing network,

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Presentation to the Financial Community

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2002: Merloni is a well established #3 with an extraordinary growth trend

Market (vol)

Merloni (vol)

Merloni (€)

Market (vol)

Merloni (vol)

Merloni (€)

BSH

Electrolux

Merloni

Whirlpool

Candy

Others

- 1.5%

8.1%

11.8%

11.6%

15.7%

17.9%

EASTERN EUROPE 2002

WESTERN EUROPE 2002

Market (vol)

Merloni (vol)

Merloni (€)

GREATER EUROPE 2002 lfl

1.1%

10.7%

14.0%

MARKET SHARES (Volume, Greater Europe 2002)

16.6% + 0.1%

16.2% =

14.9% + 0.9%

9.7% - 0.6%

4.6% +0.2%

38.0% - 0.6%

∆ ‘02 vs ‘01

Changing the IndLand

scape

About Innovatio

n and Execution

External – Impact and Trends

Why Merloni?

Market vs. Merloni LfL Growth, %



2

Merloni is leveraging scale and agility and making road both in volume and value

69.9 73.8 73.4 73.9 75.5

Total Demand Merloni’s Volumes Growth

EE

WE

E E

Retail Prices Merloni‘s Avarage Unit Revenue

E E

Merloni’s Way

1. Continuous offering renewal

2. Reduced time to market

3. Customer intimacy advances

4. Leveraging leadership in

eastern markets

Merloni’s Way

1. Fast product cycle

2. Better performance and

value proposition to clients

(digitalization, features, …)

3. Efficient communication via

focused brand portfolio

12.4

8.97.16.5

1999 2000 2001 2002 2003

(Mio Units) (Mio Units)

(1998 index)(1998 index) 107.5103.9

101.7100.0

1999 2000 2001 2002 2003

100.9100.0 100.6 100.6 100.9

1999 2000 2001 2002 2003

56.9 58.8 58.8 57.8 58.0

12.9 15.0 14.6 16.1 17.5

1999 2000 2001 2002 2003


scape

About Innovatio

n and Execution


Why Merloni?

3

• Quality:ü CAGR (00-02, Rev) = 20%ü CAGR (00-02, EBIT) = 42%

• Basis:ü Acquisition choice and

integration capabilitiesü Good mix of organic and

acquisition growth

Growth = focused organic growth + good acquisitions + fast integrations

Organic Growth

Organic Revenues’ Growth,M EUR

1999 2000

1,419

2001 2002

182

138

240

CAGR 11.7%

• Maintaining momentum

• Optimizing scale effects

• Exploiting synergies

• 12 acquisitions in 25 years

• 1/3 international

• Experience in acquiring and

integrating

STARStinol

Indesit

Sch-oltes

1977 1980 1982 1986 1987 1988 1989 1992 1995 1995 2000 2001

Fri-Sado

Smeg Colston

Philco

Fab-Por.

Pekel

New World

: International Acquisitions: Italian Acquisitions

Hot-point

STARStinol

Indesit

Sch-oltes

1977 1980 1982 1986 1987 1988 1989 1992 1995 1995 2000 2001

Fri-Sado

Smeg Colston

Philco

Fab-Por.

Pekel

New World

: International Acquisitions: Italian Acquisitions

Hot-point

AcquisitionsHistory

Acquisitions Total Growth 2000 - 2002

53%47%Organic

Acquired


scape

About Innovatio

n and Execution

Internal – Meloni Perspective

Why Merloni?

The “One Single Company” concept (1 organization, 1 structure, 1 manufacturing network, …)

enables Merloni to realize synergies from acquisitions fast and efficiently

4

The East/West gap represents a significant opportunity for Merloni

Volumes (mil.)

‘98 ‘03 ‘05

55.0 58.0 60.0

GDP (index) 100.0 110.5 116.0

Per Capita GDP (€) 21,800 24,000 25,100

House Holds (mil.) 154 156 157

Urbanization 78% 79% 80%

MODERATE GROWTHIN A MATURE MARKET

‘98 ‘03 ‘05

12.4 17.5 20.0

100.0 114.8 136.0

3,300 3,700 4,500

111 112 114

67% 69% 71%

FAST GROWTH IN AN EXPANDING MARKET

Source: Company estimates on IMF & Freedonia Group data

West Europe: 385 mil people East Europe: 415 mil people

Volumes (mil.)

GDP (index)

Per Capita GDP (€)

House Holds (mil.)

Urbanization


scape

About Innovatio

n and Execution


Why Merloni?

reduced volatility for the 10 East European countries scheduled to join the EEU

reduced volatility for the 10 East European countries scheduled to join the EEU20032003 upside +

5

Growth Frontiers: Merloni stays focused on Europe

1. High growth2. Low penetration3. Attractive potential market size

East Europe

Built In Segment

Dryers and Dishwashers

Merloni continues

to match

decisions related

to growth with its

capabilities and

opportunities

Choices in Growth


scape

About Innovatio

n and Execution


Why Merloni?

a)

b)

c)

1. High value2. Repositioning opportunities3. Innovation potential

1. Low penetration in mature markets2. Cross-production opportunities (Merloni-GDA)3. Needed scale to impact

6

The Built In segment focus is showing results in growth and market share gains


scape

About Innovatio

n and Execution


Why Merloni?

Built In Market Shares (vol)

BSH

Electrolux

Merloni

Whirlpool

Miele

22.2% -0.3%

20.7% +0.1%

14.1% + 0.9%

10.1% - 0.6%

3.8%% -0.1%

∆ ‘02 vs ‘012002

Market (vol)

Merloni (vol)

Merloni (€)

0.0%

9.1%

13.1%

Built In Growth (CAGR 2000-2002)


• Product innovation focus is an advantage of

Merloni in the Built In segment.

• System/collection value propositions

catalyse premium products.

7

Household appliance penetration, % West Europe 2003

Low penetration of dryers and dishwashers represents another significant opportunity


scape

About Innovatio

n and Execution


Why Merloni?

143.3

94.1

28.4

98.4

39.8

0

20

40

60

80

100

120

140

160

Fridges Washers Dryers Cookers Dishwashers

• Additional focus

• Included in Built In “View Line” systems

approach

• GDA synergies in cross-production:

• GDA dryers plant at Yate

• Merloni dishwashers at None

Dryers and Dishwashers

Source: Freedonia Group data

8

New product development is a significant profitability lever at Merloni

MERLONI PROFITABILITY LEVER

EBIT

Significant advantages- Scale in research and development- Lower promotion costs- Tactical advantage and price premiums

EBIT/Revenues, %

2000 2001

7.1%8.2%


GROSS MARGINS

• Scale and momentum: new features at same, or

lower costs

• Scope: horizontal platform architectures

New products contribution, %

2002 2003

28% 44% 57%

2001


REVENUES

• Redefining mix – repositioning

• Commanding price and increasing volumes

New products contribution, %

2002 2003

30% 44% 57%

2001

New products: products launched in the course of the year, or during the previous year (average age 18 months)


scape

About Innovation

and Execution

Why Merloni?

New Product Development

E

E

9

DevelopmentResearch

We’re focusing on breakthroughs on both ends of innovation: research & development

Washers Dishwashers Cookers Fridges

• Cost reduction: - 50%

• Standardization: from 300 to 150 parts

• Quality improvement: - 25% interventions

• Time to market: - 30%

• Suppliers: from 12 to 4

New design and organisation: 1 digital platform

• Dedicated technology

research company.

• Around 30 patents in

interconnectivity technology.

• 120 engineers.

• Technological partnership

with MIT.

and

Single horizontal platform


scape

About Innovation

and Execution

Why Merloni?


10

Vertical product architectures are the pillars of efficient and responsive development

1 platform 2 platforms1 platform 3 platforms

Washers Dishwashers Cookers Fridges

Vertical Platforms

Cost

Speed

Reduced capital investments

Component standardsReduced manufacturing cost

Consumer needs Positioning

Focused factory

Revenues

Costs

ROI

ROA


scape

About Innovation

and Execution

Why Merloni?


The bottom line

11

Improving value proposition through continuous management of technology


scape

About Innovation

and Execution

Why Merloni?


TechnologyTechnology

Thermodynamic

Fluid Dynamics

Induction technology

Acoustics

Three-phaseDed

icat

ed/v

ertic

al r

esea

rch

Horizontal research

Dig

ital

tec

hn

olo

gy

• Digital

• SW/HW

• Sensors and virtual

sensors

InnovationInnovation

Ice Party

Woolmark

Cooling A++

Washing A++

New Hobs

Super Silent

Value to consumersValue to consumers

Sensor Control

Safety

X

X

X

Comfort

X

X

X

X

X

Perfor-

mance

X

X

X

Efficiency

X

X

X

X

12

Examples: Technology for Consumer ValueExamples: Technology for Consumer Value

Super silent and Woolmark: advances in comfort through electronic management

Su

per

Sile

nt dB Sound

0 threshold of hearing

10 pin dropping at 10 m

20 soft whisper

30 library

40 quiet conversation

50 normal conversation

60 a busy office

70 vacuum cleaner

80 inside a small car

dB Sound



20 soft whisper

30 library



60 a busy office

70 vacuum cleaner


dB Sound



20 soft whisper

30 library



60 a busy office

70 vacuum cleaner


dBdB SoundSound

00 threshold of hearingthreshold of hearing

1010 pin dropping at 10 mpin dropping at 10 m

2020 soft whispersoft whisper

3030 librarylibrary

4040 quiet conversationquiet conversation

5050 normal conversationnormal conversation

6060 a busy officea busy office

7070 vacuum cleanervacuum cleaner

8080 inside a small carinside a small car


scape

About Innovation

and Execution

Why Merloni?


Wo

olm

ark

Merloni is the first washing machine producer to have been

awarded Woolmark (world-wide textile organization)

certification for washing of wool, delicates and knits.

13

2002/03E +30%

Further increases in new product investments and introductions in 2003

2001 2002 2003 E

Product Investments

7680

104[mln €]


scape

About Innovation

and Execution

Why Merloni?


14

We are increasing Ad. & Promo. investments on a focused brand portfolio

7586

101

2001 2002 2003E

(*) Committed

… and economies of scale

(mil €)

3.8% 3.5% 3.4%** Mktg /Revenue

Others160 Brands

Whirlpool8 Brands

Merloni6 Brands

Electrolux24 Brands

BSH13 Brands

Average Share of Market per Brand

Staying focused in a fragmented market

Advertising & Promotions:investing on brand leadership

(*)

Leveraging economies of scope ...

Advertising and Promotion Investments

1.23

2.45

0.67

1.48

0.27

~ 230 Brands on display (WE)

16% CAGR


scape

About Innovation

and Execution

Why Merloni?

Marketing and Sales

Pie chart: Market Shares (vol) **3.4% in 2003 assuming minimum revenues of 3,000 MEUR

15

Merloni is collaborating with retail on supply chain and store management

GOAL:

Excelling in service at lower costs (for both partners)

PROJECTS:

1. Virtual stock/warehouse (C2C)

2. Vendor managementinventory and shared management system

GOAL:

Revolutionizing white goods sales at store level

PROJECTS:

1. Category Management

2. In store customerexperience

3. Supporting services

SUPPLY CHAIN SELL OUT


scape

About Innovation

and Execution

Why Merloni?

Marketing and Sales

Additional distribution efficiencies and advances in consumer intimacy

16

GDA INTEGRATION

• ON THE RIGHT TRACK• SYNERGIES TARGET IMPROVED

FROM € 19 ML TO € 23ML• TIMING CONFIRMED

17

Service

20042003

INDUSTRIALPERFORMANCE

INTEGRATION

NEW PRODUCTS

Blythe Bridge Industrial Performance

Peterborough Industrial Performance

Purchasing

Products exchange

Kinmel Park New WM+WD

New Tumble Dryer

GDA Integration Project Portfolio

IMPROVEMENTS

Quality

Distribution & Supply chain

Finance

IT Integration 100%TOTAL

On track

2003 &

2004

20%Improvements

A littlebit

ahead

Jul 03:1st DW

Aug 03:1st Dryer

40%Integration

On track

200320%IndustrialPerformance

On track

From2Q04

20%NewProducts

StatusBenefit peak

% synergies

ProjectNET SYNERGIES 2003-2004: € 23 ML

18

New target increased by 15%

2003 Synergies trend

€ ml

0

2

4

6

8

10

12

Old target New target

1Q03 2Q03 3Q03 4Q03

19

FINANCIAL HIGHLIGHTSFINANCIAL HIGHLIGHTS

11stst Quarter Quarter 20032003

MERLONI ELETTRODOMESTICIMERLONI ELETTRODOMESTICI

20

FINANCIALSFINANCIALS-- CONSOLIDATED PROFIT & LOSSCONSOLIDATED PROFIT & LOSS

[€ ml] 1Q03 1Q02 ∆% 2002

Net sales 703 495 42.0% 2,480

EBITDA 78 52 51.0% 318

% on sales 11.1% 10.4% 12.8%

D&A 36 23 58.2% 115

% on sales 5.0% 4.6% 4.6%

EBIT 42 29 45.4% 203

% on sales 6.0% 5.9% 8.2%

Financial Income (5) (3) (23)(expenses)

Extraordinary income (1) 0 (14)(expenses)

PBT 36 26 41.7% 166

% on sales 5.2% 5.2% 6.7%

Taxes NA NA (58)Tax rate % 34.8%

Net profit NA NA 107

21

FINANCIALS FINANCIALS –– CONSOLIDATED BALANCE SHEET CONSOLIDATED BALANCE SHEET

762

470*

66%

292

762

(231)

3%

93

900

1Q03

43%82%% gearing

703716TOTAL SOURCES

521401*Total shareholders’ equity

181315Net financial position

703716NET INVESTED CAPITAL

(239)(180)Provisions, funds and other liabilities

1%2%% on net sales (rolling 12 months)

1638Net working capital

926858Total fixed assets

20021Q02€ ml

* Gross of tax

22

30357-13Operating free cash flow

-368-216-11CAPEX

20021Q02*1Q03 *€ M

-30-164-111TOTAL CASH FLOW

57-5-87**Others

-22--Dividends

-65-159-24Operating cash flow

5822

36-28

-77-8

Change in NWCChange in others

2224972Gross cash flow

1152336D&A

1082636Net income

Cash flow statementCash flow statement

*For the three month period net income is gross of tax** Included € 68 ml of change in shareholders capital due to the acquisition of an additionl 10% of GDA

23

2003 Outlook2003 Outlook

• Sales ≥ € 3.0 bn

• ROS improves with respect to previous year

• Gearing ratio below 40%

2003 OUTLOOK

Documents

Presentation to the Financial Community · Financial Community. 1 2002: ... The “One Single Company” concept (1 organization, 1 structure, 1 manufacturing network,