2011 First Half Results

July 28th, 2011

Business B i Analysis

2011 First Half Highlights

M

Revenues

Operating Profit
Increasing raw material pressure. EBIT SG&A reduction trend confirmed; lower one-time costs compared with H1 10. Positive impact from currency.

891

906

Performance Reported: +1.7% Performance Currency Neutral: +2.0%.

Ordinary EBIT

75

60

63

58

H1 10

H1 11

H1 10 11

H1 10 11

Net Income
Negative impact from currency hedging: -6 mio in H1 11 vs. +9 mio in H1 10.

Net Debt

Net Debt: slight increase.

40

30
Lower tax-rate: 34% in H1 11 vs. 46% in H1 10.

508

486

543

Cash Flow absorption driven by NWC increase and Investments.

H1 10

H1 11

H1 10

FY 10

H1 11

Revenues
M

H1 10

H1 11

Ch %

Ch % CN

Revenues
Textile Apparel

891
52 839

906
63 843

1.7%
20.0% 0.6%

2.0%
20.2% 0.9%

Apparel Segment - Wholesale - Direct Sales 616 223 631 212 2.6% -5.0%

Geographical Revenues
Asia 17% (16%) Americas 3% (4%) RoW 1% (1%)

5 Reported Overall Performance +1.7% C.N. CN +2.0%

Italy

Macro-Areas Europe Asia Americas +1.5% +2.6% +0.4% +1.2% +4.7% +4.5%

Europe 79% (79%) Note: ( ) H1 10 data

Europe The Mediterranean Italy: slightly positive performance (+1%) driven by (+1%), 2nd quarter results. Greece: double digit decline (-21%), confirming negative previous trend. Spain: mild growth (+4%) supported by improving (+4%), trend in the second quarter. Other European Countries Further acceleration in Russia: revenue growth of approx. +40%. approx +40% Continental Europe: steady performance, benefiting by Germany & Switzerland upside.

Asia Double-digit raise in South Korea; Middle East Area confirming notable upside (+27% C N ) C.N.). Negative performance in China, affected by refocused store network, partially balanced by positive LFL performance. Japan, Hong Kong and South East Asia continue to reduce overall results results. Americas Increasing results in Latin & South America, offsetting negative performance i N th A ti f in North America (USA & i Canada).

Geographical Revenues
Developing and Fast Growth Countries 25% (23%)

Traditional Western Economies 75% (77%) Note: ( ) H1 10 data London, London Oxford Circus

Reported

C.N.

Traditional Western E W t Economies i Developing and Fast Growth Countries

-0.1%

-0.4%

+8%

+10%

Moscow, Presnya

Highlights Asia

Others 23%

India 19%

Greater China 10% Turkey 16% South Korea 32%

Istanbul, Bagdad Street

Highlights India I di Flattish performance in India, strongly affected from ~140 DOS transfer to third parties management. Network: widespread presence accounting more than 400 stores, of which ~300 managed from partners; ~40 new stores openings in the first part of 2011, mainly in South-East area. Kids offer strengthening, supported by stand-alone stores openings: more than 20 dedicated stores (5 new openings in 2011). Turkey T k Dedicated collection development, starting from F/W 11, leveraging on successful Asian experience. Strategy supported by local sourcing increase, focusing on selected product categories. Successful price positioning strategies: increasing sell-out of entry-price points categories.

Highlights Americas & Europe

Americas
Others 28% Mexico 23%

Europe
Others 37% Russia & ex-USSR 6%

USA & Canada 49%

Italy 57%

Mexico Widespread network, accounting more than 20 Directly Operated Stores and over 200 corners in Department Stores, including 10 new openings in S/S 11 collections. Local partnership renewed and extended. South America Strong improvement, driven by outstanding performance in Chile, Peru and Colombia: new corners openings in Department Stores and new free standing free-standing stores.

Russia & ex-USSR Outstanding progress: positive impact from kids performance, performance driven by complete product categories offer, well appreciated by high-range spending customer. Man collections: positive customer response.

Italy Increasing performance, positively affected by deliveries, i li d li i in line with commercial requests, & new ith i l t initiatives introduced.

Apparel Revenues
Collections Trend
Positive

~ +2%
Flat

Performance A/W 11: further improvement compared with previous collections trend; positive performance expected.

~ (4%)
Negative N i

~ (2%) Drivers Volumes trend: resilient performance confirmed. Price/mix improvement vs. previous collections.

A/W 10

S/S 11

A/W 11 expected

Apparel Revenues by channel

M

839 223

843 212 212

+0.6% D.O.S. -5.0% Wholesale +2.6%

Wholesale Growth performance driven by improving collections trend, p y p g , differentiated delivery cycle and selected DOS transfer to third parties management in India. Directly Operated Sales y p Results affected by refocusing store network (nonprofitable stores closing in USA, Japan and China) and DOS transfer in India. LFL slightly positive performance in the 2nd quarter, showing notable progress vs. 1st quarter. Continued profitability improvement.

616

631

H1 10

H1 11

Brands & Collections

10

Sisley 16% UCB 50% ( (50%) ) (17%)

UCB Kids & Sisley Young

Kids 32% (31%) Playlife 2% (2%)

Note: ( ) H1 10 data

Brands & Collections

United Colors of Benetton Sisley UCB Kids

11

Appointment of the new Creative Director and Chief Merchandising Officer, strengthening g g management g and creative structure.

Ongoing partnership with different artists: new S/S 11 capsule collection, designed in collaboration with the world renowned artist and illustrator Milo Manara.

New A/W 11 mothers-to-be line proposals: collections renewal, characterized by higher mix content and targeting younger moms.

In-season innovative total look proposals: new mini-collections, delivered monthly, monthly show positive sell-out performance.

New A/W 11 communication campaign, interpreting new independent life-style brand philosophy and integrated with new digital and viral projects.

International Markets: ongoing growth, on the back of new initiatives adopted in each countries. countries

Brands & New Media

United Blogs of Benetton Sisley.com Im Unique

12

Many successful initiatives targeting g g Social Media (Facebook, You Tube, Twitter, Foursquare), leading to 50% fans increase on Facebook since January 2011. Blog.benetton.com New international blog, online from the end of May May.

New Web platform Sisley.com: total new look, y , interactive browsing and 2.0 approach.

Im unique casting: first casting on-line to find g faces of S/S 12 campaign.

Independentpeople.com Launch of new Blog/magazine, updated by dedicated editorial staff.

Dedicate blog and Facebook page, following the progress of casting. casting

P&L Analysis

Profit & Loss

M

14

H1 10

H1 11

Ch %

Revenues Gross Profit

%

891 425
47.7%

906 403
44.4%

1.7% -5.3% -6.8%

-3.4%

Contribution Margin
%

356
39.9%

332
36.6%

SGA

-281

-272

Ordinary EBIT y
%

75
8.5%

60
6.7%

-19.4%

Non recurring items

-12

-2

EBIT
%

63
7.1%

58
6.4%

-7.6%
-32.5%

Profit Before Taxation

65

44

Net income
%

40
4.5%

30
3.3%

-25.5%

Ordinary EBITDA
%

126
14.1%

112
12.4%

-10.6% -6.2% 6 2%

EBITDA
%

118
13.2%

110
12.2%

Gross Profit Analysis

M

15

H1 10

H1 11

Ch %

Ch % CN

Gross Profit
% on Revenues

425
47.7%

403
44.4%

-5.3%
-330 bp

-6.7%
-410 bp

Apparel A l

(1) 425

(28)

+6

+1 403

Gross Profit H1 10

Commercial Side

Industrial Side

FX Impact

Textile

Gross Profit H1 11

Ebit Analysis
M

16

One-off H1 10 H1 11 (12) (2)

Ordinary Ebit 75 60

Reported EBIT 63 6 58

% on revenues

7.1%

6.4%

63

(22)

(2)

10

58

EBIT H1 10

Gross Profit

Selling Costs

Apparel SGA

Non Recurring

EBIT H1 11

Financial Cost & Net Income Analysis

Financial expenses p
(9) (7)

17
M

Tax Rate
H1 10 H1 11 46% 34%

H1 10

H1 11

Currency hedging
+9

Minority Interests
H1 10
(6)

-5 -1 1

H1 11

H1 10

H1 11

H1 10

H1 11

Ch %

H1 10

H1 11

Ch %

P.B.T.
% on Revenues

65
7.3%

44
4.8%

-32.5%

Net Income
% on Revenues

40
4.5%

30
3.3%

-25.5%

Balance Sheet B l Sh t & Cash Flow Analysis y

Net Capital Employed

M

19

12.31.2010 12 31 2010 Working Capital

Asset to be sold Tang. and Intang. fixed assets Financial fixed assets Other assets/(liabilities)

06.30.2011 06 30 2011 684

1 1,294 22 10

Ch 62
-9 9 -20 -3 -3

622
10 1,314 25 13

Net Capital Employed p p y

financed by

1,984 ,

2,011 ,

27

Net Indebtedness Total Shareholders' Equity q y

486 1,498 ,

543 1,468 ,

57 -30

Net Capital Employed Analysis

+62

(23)

(12)

1,984

2,011

Net Capital Employed 12.31.10

Ch. in Working Capital

Ch. in T.I.F.* Fixed Assets

Ch. in Other Liabilities

Net Capital Employed 06.30.11

(*) T.I.F.: Tangible, Intangible and Financial Fixed Assets

Working Capital
M

20

06.30.2010 Working Capital

Net trade receivables Inventories (Trade payables) Other credits/(debts)

06.30.2011 684
783 423 -497 497 -25

Ch 61
74 48 -42 42 -19

623
709 375 -455 455 -6

Working Capital Analysis

+48 +74 623

(42)

(19) 684

Working Capital Ch. in Net Trade Ch. Inventories 06.30.10 Receivables

Ch. In Trade Payables

Ch. In Other Working Capital Credits/(Debts) 06.30.11

Net Debt
M

21

819 763 689

2009

678 589 543 534 508

645 556 486

556
2010 2011

486

Initial Net Debt

Q1

H1

9M

Year End Net Debt

Net Debt & Cash Flow generation

Free cash absorption in the first half of the Year, due NWC increase and continued investments.

Cash Flow
M
+150

22

+40

Net cash flow from operating activities

H1 10 H1 11

(54)

(51)

Net cash flow from Investment activities

H1 10 H1 11

(41)

(46)

Dividends
H1 10 H1 11

Net Investments
M

23

+ 54

Net Investments

+ 51

11 33

Real Estate Commercial Commercial Operations

11

+ 44

16

+ 27

+6

Production

+5

+ 10 Others

+9

(7)

Disinvestments

(8)

+1

Other changes g

+ 18

H1 10

H1 11

Annex

Breakdown by segment
M

25

Apparel Revenues EBIT

%

H1 10 840 64
7.7% 7 7%

H 11 844

Ch % 0.5%

54 -16.6%
6.4% 6 4%

EBITDA
%

115
13.6%

102 -10.9%
12.1%

Textile Revenues EBIT

%

H1 10 101 -1
-1.0%

H 11 111 5
4.8%

Ch % 9.5% 9 5% n.s n.s

EBITDA
%

3
3.2%

9
8.0%

Consolidated Balance Sheet & Working Capital

M

26

12.31.2010 Working Capital

Asset to be sold Tang. and Intang. fixed assets Financial fixed assets Other assets/(liabilities)

06.30.2011 684
1 1,294 22 10

Ch 62
-9 -20 -3 -3

06.30.2010 623
10 1,311 25 20

622
10 1,314 25 13

Net Capital Employed

financed by

1,984

2,011

27

1,989

Net Indebtedness Total Shareholders' Equity

486 1,498

543 1,468

57 -30

508 1,481

12.31.2010 Working Capital

Net trade receivables Inventories (Trade payables) Other credits/(debts)

06.30.2011 684
783 423 -497 -25 25

Ch 62
-21 130 -55 8

06.30.2010 623
709 375 -455 -6 6

622
804 293 -442 -33 33

Net Book Value of Land & Building

M

27

Land and Building

Commercial Industrial Other

06.30.2010 06.30.2011
639 103 20 648 110 19

Ch
9 7 -1

Total

762

777

15

Commercial
Italy Russia-Ex USSR R i E France Spain Japan Portugal Belgium Turkey Austria Iran USA India Kosovo Switzerland Mongolia M li

06.30.2010 06.30.2011
158 148 105 66 42 28 18 19 16 21 0 11 4 2 1 169 149 105 66 39 28 17 16 15 14 14 9 4 2 1

Ch
11 1 0 0 -3 0 -1 -3 -1 -7 14 -2 0 0 0

Total

639

648

Statement of Consolidated Cash Flow

M

28

H1 10
Cash from operating act. before changes in Working Capital Change in Working Capital Interests paid/received - Foreign currency gains/(losses) Payment of taxes 130 31 0 -11

H1 11
111 -49 -15 -7

Net Cash Flow from operating activities

Net Operating Assets Financial Fixed Assets

150
-47 -7

40
-53 2

Net Cash Flow from investment activities Free Cash Flow

Payment of dividends Purchase of treasury shares

-54 96
-41 0

-51 -11
-46 0

Surplus/(Deficit)

55

-57

Credit Facilities available as of June 30th, 2011

M

29

Term loans
400 m (2007-2012) 3 Term loans Current Position: Fully drawn
Covenant** EBITDA / Net Fin. Exp. N.D. / EBITDA min 4 max 3.5 1 half 2011 11.6x 1.8x

100 m BNL 150 m Unicredit 150 m Intesa S. Paolo Cost: Euribor 1/2/3/6 months +20/50 bp*

250 m (2010-2015) Club deal

Current Position: Fully drawn F ll d

Covenant** EBITDA / Net Fin. Exp. N.D. / EBITDA min 4 max 3.5 1 half 2011 11.6x 1.8x

50 m BNL 50 m Credit Agricole 50 m Cassa Risp. del Veneto 50 m Mediobanca 50 m Unicredit Cost: Euribor 1/2/3/6 months + 150/250 bp*

* Depending on the ratio N.D./EBITDA

** Covenants calculated every six months

Credit Facilities available as of June 30th, 2011

M

30

Revolving Credit Facilities

60 m (2009-2014) ( ) Committed credit facility Current Position: Not drawn
Covenant** 60 m Banca Pop. Vicenza Cost: Euribor 1/2/3/6 months +150/250 bp* EBITDA / Net Fin. Exp. N.D. / EBITDA min 4 max 3.5 11.6x 1.8x 1 half 2011

150 m (2010-2015) Committed credit facility (Club deal)

30 m BNL 30 m Credit Agricole g 30 m Unicredit 30 m Cassa Risp. del Veneto 30 m Mediobanca Cost: Euribor 1/2/3/6 months + 150/250 bp*

Current Position: Not drawn

Covenant** EBITDA / Net Fin. Exp. N.D. / EBITDA min 4 max 3.5 1 half 2011 11.6x 1.8x

460 m Uncommitted credit facilities

Cost: Interbank (or prime) rate + spread
* Depending on the ratio N.D./EBITDA;

Current Position: Drawn for 44 m

** Covenant calculated every six months

Disclaimer

31

This presentation contains forward looking statements which reflect Managements current views and estimates. The forward looking statements involve certain risks and uncertainties that could cause actual results to differ materially from those contained in the forward looking statements. Potential risks and uncertainties include such factors as general economic conditions, foreign exchange fluctuations, competitive product and pricing pressures and regulatory developments.