QUARTERLY REPORT
THIRD QUARTER 2007
Document not authorised for publication until the approval by the Board of Directors on November 13,
2007.
The present document will be available on the website www.marazzigroup.com, investor relations
section.
BOARD OF DIRECTORS
Chairman Filippo Marazzi
Chief Executive Officers Mauro Vandini
Emil Schneeberg
1) 4)
Directors Roger Abravanel
1) 3)
Fabio Buttignon
Paolo Colonna 1) 4)
Giovanni Battista Graziosi 3)
Gianni Lorenzoni 1) 2) 3)
Rosaria Marazzi
Fabio Lorenzo Sattin 1) 4)
Gian Pietro Severi
1) Independent Directors
2) Lead Independent Director
3) Member of the Internal Control Committee
4) Member of the Remuneration Committee
SUPERVISORY BOARD
Fabio Buttignon
Alberto Schiavini
Gianfranco Tomassoli
Table 1.1
Table 1.2
30.09.2007 30.06.2007 31.12.2006
Net working capital 297,637 297,742 259,941
Fixed assets and other assets 593,553 589,480 585,269
Long-term liabilities (127,893) (128,802) (131,809)
Net financial debt 236,942 242,954 203,214
Group Net Equity 519,955 509,301 504,472
Net equity per share (Euro) 5,086 4,982 4,935
Number of shares 102,232,000 102,232,000 102,232,000
Net financial position/ Net equity 0.45 0.47 0.40
Table 1.3
9 months 2007 9 months 2006 9 months 07/06
Operating cash flow 44,413 58,232 -23.7%
Amortisation & depreciation 40,501 40,962 -1.1%
Cash flow for investments (54,628) (31,996) 70.7%
Number of shares (average) 102,232,000 101,021,846 1.2%
Earnings per Share (Euro) 0,450 0,461 -2.3%
Diluted earnings per Share (Euro) 0,438 0,458 -4.3%
Number of employees (average in period) 6,472 6,236 3.8%
Pursuant to article 82 of the Issuers’ Regulations, the present quarterly report has been prepared in
accordance with international accounting standards (IFRS) and in accordance with Attachment 3D
of these Regulations.
Currency markets
In the first nine months of 2007, the average exchange rate of the Euro, utilised for the translation of
the income statements in foreign currencies, appreciated by 8.06% on the US Dollar and 2.17% on
the Ruble compared to the same period in the previous year, limiting the comparisons between the
periods.
The exchange rate at September 30, 2007 of the Euro was 1.418 against the US Dollar and 35.349
against the Ruble; compared to December 31, 2006, there was a significant appreciation on the
Dollar (+7.66%) while the appreciation on the Ruble was more limited (+1.93%).
Summary of the consolidated results in the third quarter and first nine months
The third quarter of the year saw a marked deterioration in the economic climate, a consequence of
the subprime mortgage crisis in the United States, whose effects rapidly spread to Europe; in the
United States there was a further decline in the construction industry, while in Europe there were
signs of a slowdown in the real estate market with a possible impact on the level of consumption.
In this economic climate, the Group in fact accelerated the growth trends already seen in the first
quarter, consolidating the improvements in the financial indicators, despite the fact that the 8%
depreciation of the US Dollar significantly reduces the direct comparison with the results in the same
period of the previous year.
In the third quarter, revenues from sales amounted to Euro 247.7 million, a growth of 4.4% (+6.2%
excluding the exchange effect) compared to the same period of 2006.
Sales in Europe recorded a strong increase in the Italian and Spanish Business Units (+2.2% and
+9.8% respectively), with an increase in the penetration of both the domestic markets and of the main
Central and Eastern European markets. In particular, the positive sales dynamics for ceramic
products continues in the Italian BU (+5.4%), while sales of raw materials and semi-finished products
decreased by 12.4%.
The French BU registered sales in line with the same period of the previous year.
The Russian BU continued with growth rates well ahead of the market. Sales in the third quarter of
2007 grew by 23% (+25.9% on like-for-like exchange rates).
Although the US real estate market does not show signs of improvement (the data of the US Census
Bureau estimated a decrease in the consumption of tiles of 19% in the first 6 months of 2007, with a
trend of a further slowdown in the following quarter), sales of the USA BU registered an increase of
4.4% in USD (-3.2% in Euro), reversing the trend following three quarters in decline. Market share
growth in fact continued due to the greater competitiveness of domestic production compared to
imports (which represents more than 75% of US consumption), also strengthened by the progressive
depreciation of the Dollar.
The results for the quarter therefore consolidated the growth trend already registered in the first 6
months of the year: in the period January-September, consolidated sales grew by 3.9% amounting
to Euro 756.2 million (+5.6% on like-for-like exchange rates). All the Business Units, with the
exception of France, registered increases higher than their relative markets: in the first 9 months, the
Russian BU grew by 29.7% (+32.6% on like-for-like exchange rate); revenues in Italy grew by 5.5%;
the Spanish BU grew by 8.4%.
In a market that has declined by approx. 20%, revenues in the United States in the first 9 months of
2007 decreased by 4% in Dollars terms (-11.2% in Euro).
The results in the first 9 months of the year strengthened market share both on the domestic markets
of the individual BUs, and in the international markets served by the Italian and Spanish BUs.
The Ebitda in the third quarter amounted to Euro 46.9 million, +6.5% compared to the same period
in 2006 (+8.8% excluding the exchange effect). The Ebitda sales margin was 18.9%, an increase of
30bp compared to the same period in the previous year. Particularly good results were achieved by
the Italian, Russian and United States BUs.
In the first nine months of the year, the Ebitda grew by 2.6% (+4.6% on like-for-like exchange rates),
with a sales margin of 18.4%, in line with the same period of the previous year.
The quarter reports a more marked increase in the Ebit, amounting to Euro 33.7 million, an increase
of 10.7% (+13.1% on like-for-like exchange rates) on the same period in the previous year.
The Ebit for the first nine months amounted to Euro 98 million, an increase of 7.3% (+9.5% on like-
for-like exchange rates). The sales margin was 13%, an improvement of 40bp compared to the same
period of the previous year, which included Euro 3 million of restructuring charges.
The net financial charges for the first nine months amounted to Euro 16.2 million, an increase of
9.2% compared to 2006; this increase is due to higher average debt, following greater investments
(+70.7% compared to the same period of the previous year), and higher interest rates in the principal
currencies.
The currency management in the first nine months generated net charges of Euro 3.3 million, an
increase of 30.8% compared to the same period of the previous year, due in particular to the strong
revaluation of the Euro, compared to the Dollar and the Ruble, especially in the last quarter.
The net profit in the third quarter, equal to Euro 16.9 million, grew by 5%, also thanks to lower fiscal
charges which benefited from the recording of Euro 1 million deferred tax income relating to the
French BU, which generated assessable income in the quarter. In the period January-September,
the net profit was Euro 46.8 million, substantially in line with the same period of the previous year,
which had benefited by Euro 4 million from the realignment of fiscal and statutory values on fixed
assets of the Italian companies.
At September 30, 2007 the net debt was Euro 236.9 million, an increase of Euro 33.7 million
compared to December 31, 2006 principally due to the higher levels of investment for expansion in
Russia and USA. The reduction of Euro 6.1 million compared to June 30, 2007 is due to the normal
seasonal movements in working capital. The gearing ratio between net borrowings and
shareholders’ equity at September 30, 2007 was 0.45 (0.40 at December 31, 2006).
The Group rescheduled its medium term credit lines in Euro in the quarter. The average expiry date
has changed from 2009 to 2014, while the total medium term credit lines increased by 20% to Euro
310 million. At the same time, better economic conditions were negotiated; currently approx. 20% of
the medium term debt is at fixed rates.
The Marazzi Group is organised into five independent Business Units. Each Unit is structured
according to the characteristics of its geographic area, and has its own staff functions (including
research and development and marketing), production plants and sales organisation. Each
Business Unit is managed by a Country Manager who is responsible for the results of the BU. The
country manager reports to the Group management and liaises with the other BUs.
The table below shows the Income Statement for the period:
Table 1.4
9 months 9 months
(Euro thousands) Q3 2007 Q3 2006 Cge % Cge %
2007 2006
Table 1.5
9 months 9 months
Revenues by Business Unit Q3 2007 Q3 2006 % %
2007 2006
Italy 122,518 119,858 2.2% 397,208 376,553 5.5%
USA 43,744 45,178 -3.2% 128,391 144,519 -11.2%
France 20,301 20,414 -0.6% 64,726 68,041 -4.9%
Spain 22,295 20,313 9.8% 71,773 66,188 8.4%
Russia 38,839 31,582 23.0% 94,072 72,511 29.7%
Total 247,697 237,345 4.4% 756,170 727,812 3.9%
Ebitda
Table 1.6
9 9
(Euro thousands) Q3 2007 % Q3 2006 % months % months %
2007 2006
Ebit 33,747 13.6% 30,487 12.8% 98,027 13.0% 91,373 12.6%
Amortisation & depreciation 13,142 5.3% 13,459 5.7% 40,501 5.4% 40,962 5.6%
Restructuring charges and write-
35 0.0% 99 0.0% 285 0.0% 2,964 0.4%
downs
EBITDA 46,924 18.9% 44,045 18.6% 138,813 18.4% 135,299 18.6%
This section presents a brief description of the trend of the main Group financial indicators at
September 30, 2007 compared to the same data at June 30, 2007 and December 31, 2006.
Table 1.7
(Euro thousands) 30.09.2007 % 30.06.2007 % 31.12.2006 %
Capital employed
Net working capital 297,637 39.0% 297,742 39.3% 259,941 36.4%
Fixed assets and other long-term
593,553 77.8% 589,480 77.7% 585,269 82.0%
assets
Long-term liabilities (127,893) -16.8% (128,802) -17.0% (131,809) -18.5%
Net capital employed 763,297 100.0% 758,421 100.0% 713,401 100.0%
Sources
Net financial position 236,942 31.0% 242,954 32.0% 203,214 28.5%
Group shareholders' equity 519,955 68.1% 509,301 67.2% 504,472 70.7%
Shareholders’ equity - Minority interest 6,400 0.8% 6,166 0.8% 5,715 0.8%
Total sources of financing 763,297 100.0% 758,421 100.0% 713,401 100.0%
The net working capital increased by Euro 37.7 million compared to December 31, driven by growth
in trade receivables.
Table 1.8
(Euro thousands) 30.09.2007 % 30.06.2007 % 31.12.2006 %
Cash and cash equivalents 45,340 -19.1% 48,341 -19.9% 49,382 -24.3%
Current financial assets 5,988 -2.5% 5,509 -2.3% 5,254 -2.6%
Current financial payables (including
(54,889) 23.2% (76,472) 31.5% (64,877) 31.9%
current portion of LT payables)
Medium/long term financial payables (233,381) 98.5% (220,332) 90.7% (193,362) 95.2%
Other non-current
0 0.0% 0 0.0% 389 -0.2%
payables/(receivables)
Net financial debt (236,942) 100.0% (242,954) 100.0% (203,214) 100.0%
The increase compared to the debt at December 31, 2006 is due to the cash flow movements in the
period summarised in the table below:
Table 1.9
Change
(Euro thousands) 9 months 2007 9 months 2006
2007-2006
Net profit 46,846 47,577 -1.5%
Amortisation & depreciation 40,501 40,962 -1.1%
Other non-cash items 1,589 7,342 -78.4%
Cash flow from operations 88,936 95,881 -7.2%
Change in working capital (44,523) (37,649) 18.3%
Operating cash flow 44,413 58,232 -23.7%
Cash flow from investing activity (54,628) (31,996) 70.7%
Cash flow from financing activity (23,514) 42,801 -154.9%
Change in Net financial position (33,729) 69,037 -148.9%
No events arose after September 30, 2007 which would impact on the income statement and balance
sheet as reported in the present quarterly report.
The difficult market conditions stamming from the construction segment in the United States, which
also affected the credit market, have led to worries of a slowdown in the global economy.
Despite the deterioration in the macro-economic prospects, it is considered that, in the absence of a
significant slowdown of the real economy, or a further strengthening of the Euro against the Dollar
and the Ruble, further improvements to Group results can also be made in the final quarter of the
year.
The performance of sales in the United States BU provides the foundations for the belief that, in the
absence of a deterioration in the construction sector, the variance compared to the results of the
previous year may be reduced.
The European BUs should produce results in line with current trends.
Further improvements within the French BU will also permit a more consistent utilisation of the losses
carried forward, contributing to a reduction in the level of taxes on the consolidated profit.
The Group Consolidated Balance Sheet as at September 30, 2007 compared with June 30, 2007 and
December 31, 2006 is shown below.
Table 2.1
Changes
(Euro thousands) 30.09.2007 30.06.2007 31.12.2006 Sept 07- Dec Note
06
Assets
Current assets
Cash and cash equivalents 45,340 48,341 49,382 -8.2% 2.1
Accounts receivables 229,858 237,722 188,287 22.1% 2.2
Inventories 279,566 283,523 268,967 3.9% 2.3
Other current assets 40,606 40,292 39,499 2.8% 2.4
Current financial assets 5,988 5,509 5,254 14.0% 2.5
Total current assets 601,358 615,387 551,389 9.1%
Non-current assets
Property, plant and equipment 519,276 519,438 514,442 0.9% 2.6
Investment property 5,646 5,651 5,660 -0.2% 2.7
Intangible assets 12,939 10,240 9,327 38.7% 2.8
Goodwill 7,380 7,380 7,349 0.4% 2.9
Non-current financial assets 0 0 389 -100.0% 2.10
Investments valued under the equity method 18,783 18,692 18,515 1.4% 2.11
Other investments 2,584 2,576 2,423 6.6% 2.12
Deferred tax assets 23,153 21,780 23,186 -0.1% 2.35
Other non-current assets 3,792 3,723 4,367 -13.2% 2.13
Total non-current assets 593,553 589,480 585,658 1.3%
TOTAL ASSETS 1,194,911 1,204,867 1,137,047 5.1%
Table 2.2
Change
(Euro thousands) 30.09.2007 30.06.2007 31.12.2006 Note
Sept 07-Dec 06
SHAREHOLDERS' EQUITY AND LIABILITIES
Current liabilities
Short-term loans 25,424 45,872 33,713 -24.6% 2.14
Current portion of long-term loans 29,416 30,571 31,143 -5.5% 2.20
Consolidated Income Statement for the three months ended September 30, 2007
The Group consolidated income statement for the third quarter of 2007 compared to the third quarter
of 2006 and for the first nine months of 2007 compared to the same period in 2006 is shown below.
The Group statement of changes in consolidated shareholders’ equity for the first nine months of
2007 compared with the changes in the same period of the previous year is shown below.
Table 2.4
Retained
Shareholde
STATEMENT OF CHANGES IN earnings, Currency Total
Other rs’ equity –
CONSOLIDATED Share capital including translation Total shareholde
reserves minority
SHAREHOLDERS’ EQUITY profit for adjustment rs' equity
interest
period
Balance at December 31, 2005 95,050 167,355 13,188 135,338 410,931 4,055 414,986
Net profit 46,608 46,608 969 47,577
Profits/(losses) recorded dir. in
equity:
Effect of application of IAS 32-39 122 122 122
Effect of application of IFRS 2 387 387 387
Exchange effect on investments
(60) (60) (60)
valued at equity as per IAS 28
Share capital increase for share
7,182 60,200 67,382 67,382
listing
Dividends distributed (20,447) (20,447) (150) (20,597)
Translation reserve (5,159) (5,159) (82) (5,241)
Change in consolidation scope 0 1,913 1,913
Balance at September 30, 2006 102,232 193,516 7,969 196,047 499,764 6,705 506,469
Balance at December 31, 2006 102,232 204,900 2,005 195,335 504,472 5,715 510,187
Profit for the period 46,036 46,036 810 46,846
Profits/(losses) recorded dir. in
equity:
Effect of application of IAS 32-39 (11) (11) (11)
Effect of application of IAS 12-16 1,059 1,059 1,059
Effect of application of IFRS 2 850 850 850
Dividends distributed (23,514) (23,514) (23,514)
Translation reserve (8,937) (8,937) (125) (9,062)
Balance at September 30, 2007 102,232 227,422 (6,932) 197,233 519,955 6,400 526,355
Table 2.5
(Euro thousands) 9 months 2007 9 months 2006
CASH FLOW FROM OPERATIONS:
NET PROFIT 46,846 47,577
Adjustments to reconcile the net profit with the cash flow generated / (used) from
operations:
Amortisation & depreciation 40,501 40,962
Deferred taxes 2,224 (525)
Employee leaving indemnity provision 2,438 4,678
Inventory provision 1,023 1,679
Doubtful debt provision 407 990
ADDITIONAL INFORMATION:
Interest paid 8,026 10,477
Income taxes paid 18,007 24,814
Interest received 874 1,950
Dividends received 38 72
The accounts included in the financial statements and in these notes are presented in Euro
thousands. The Euro is the currency in which the Group principally operates.
The contents of the quarterly report, in line with CONSOB Resolution No. 14990 of April 14, 2006,
are in accordance with Attachment 3D to the Issuers’ Regulations (CONSOB Regulation No. 11971
of May 14, 1999 and subsequent amendments).
The income statement information refers to the third quarter of 2007 and 2006 and to the first nine
months of 2007 and 2006. The balance sheet information refers to September 30, 2007, June 30,
2007 and December 31, 2006.
As for the consolidated financial statements as of December 31, 2006, the consolidated quarterly
report as of September 30, 2007 has been drafted in compliance with the International Financial
Reporting Standards (hereinafter “IFRS” or “international accounting standards”) issued by the
“ ”
International Accounting Standards Board ( IASB ) and adopted by the European Commission under
the procedure as per art. 6 of (EC) Regulation no. 1606/2002 of the European Parliament and
Council dated July 19, 2002, also for the preparation of comparative data for the third quarter of
2006.
The preparation of the quarterly report requires that management make estimates and assumptions
on the values of the revenues, costs, assets and liabilities in the financial statements and on the
information disclosed relating to the assets and contingent liabilities at the balance sheet date.
Where future circumstances and events should differ from these estimates and assumptions, which
are based on the best valuations made by the Directors, they will be amended appropriately in the
period in which these circumstances arise.
Some valuation processes, in particular the most complex, such as the determination of any loss in
value of fixed assets, are generally made on a complete basis on the preparation of the annual
accounts, except where there are specific indications of impairment which require an immediate
valuation of any loss in value.
Similarly, the actuarial valuations necessary for the determination of the employee benefit provisions
are normally fully recalculated on the preparation of the annual accounts.
However, following the amendments to legislation in Italy in the first half of 2007 in relation to
employee leaving indemnity (pension reform), it is necessary to evaluate the impact of this reform on
the provision made based on IAS 19. In fact, the complementary pension reform modified the nature
of the leaving indemnity from a defined benefit plan to a defined contribution plan, transferring the
employee leaving indemnity matured to open pension funds or categories or, in any case, to the
National Social Pension Institute. This change resulted in a re-calculation of the employee leaving
indemnity matured as at December 31, 2006 and generated a reduction of the provision (so-called
curtailment) which was included in the provision for the first half-year.
Income taxes are recognised on the basis of the best estimate of the expected tax rates for the entire
year.
Compared to the consolidated financial statements at December 31, 2006, the share capital in
Ob’ediennie Keramicheskie Zavodi increased, equal to Rubles 949.47 million (Euro 27.3 million) fully
paid by the subsidiary Welor ZAO, the final part of the share capital increase following the resolution
of December 14, 2006, which provided for a total increase of Rubles 1,138 million (Euro 33 million).
This resolution obtained the necessary approval of the local Antitrust Committee on April 10, 2007.
Therefore, at September 30, 2007, the percentage held by Welor ZAO and by the Parent Company
was respectively 61.27% and 38.73%. This change in the holding structure, which did not change the
full control of Ob'ediennie Keramicheskie Zavodi by the Group, was considered appropriate in order
to amend the Group structure in line with the management of the Russian companies of the group
under the direction of a single management.
In September, a company was incorporated in China, MG Trading Shangai, wholly owned by the
Parent Company.
The formal procedures commenced for the merger of Marazzi Participations SA into CF Marazzi SA.
The operation is in line with the Group rationalisation process.
There were no significant changes in the consolidation scope compared to the consolidated financial
statements at December 31, 2006.
The exchange rates applied in the conversion of financial statements of companies prepared in a
currency other than the Euro were as follows:
Table 2.6
Exchange rates for the conversion of foreign financial statements
Europe
Russian Ruble 35.04 34.79 34.16 34.05
Ukrainian Uah 6.91 6.77 6.40 6.36
North America
US Dollar 1.37 1.34 1.27 1.24
Asia
Japanese Yen 161.88 160.39 143.07 144.13
Table 2.7
Cash and cash equivalents 30.09.2007 30.06.2007 31.12.2006
Bank and postal accounts 39,395 32,129 47,501
Cash from other financial institutions 5,668 16,072 1,381
Cheques 180 42 430
Cash in hand and similar 97 98 70
Total 45,340 48,341 49,382
The changes in liquidity are illustrated in the Cash Flow Statement attached and to which reference
should be made.
The movements in the account are principally due to the seasonal sales impact and growth in
revenues in the period.
The receivables from related parties are principally from the associated companies Tempini S.p.A.
and Tekma S.r.l. and relate to commercial transactions at market conditions.
2.3 Inventories
Table 2.9
Inventories 30.09.2007 30.06.2007 31.12.2006
Raw materials 61,306 58,482 56,645
Semi-finished 13,616 12,860 12,500
Finished products 204,644 212,181 199,822
Total 279,566 283,523 268,967
These amounts are net of provisions for inventory write-downs, which total Euro 15,740 and Euro
16,072 at September 30, 2007 and December 31, 2006 respectively.
Table 2.10
Other current assets 30.09.2007 30.06.2007 31.12.2006
VAT and other tax receivables 22,031 19,736 27,743
Receivable from holding for fiscal consolidation 247 182 0
Other current receivables 9,840 10,839 5,855
Advances to suppliers 2,375 2,819 2,527
Other 6,113 6,716 3,374
Total 40,606 40,292 39,499
The decrease in the account “VAT and other tax receivables” is largely attributable to the partial
utilisation of the tax credit for tax payments on account in the period.
The limited recourse secured junior notes were issued in the securitisation operation in 2005.
The financial receivables consist of loans granted by the Parent Company and by a subsidiary of the
Group to third parties.
The historic cost, accumulated depreciation and net book value of Property, plant and equipment as
of September 30, 2007 and December 31, 2006 are detailed below:
Table 2.12
Buildings Commercial Assets in
Other
PROPERTY, PLANT & and light Plant and and progress
Land Tangible TOTAL
EQUIPMENT construction machinery industrial and
assets
s equipment advances
Historic cost at 31/12/2006 143,165 243,692 697,107 38,055 6,465 18,121 1,146,605
Accumulated depreciation as of
(71,229) (528,467) (27,280) (5,187) (632,163)
31/12/2006
Net value at 31/12/2006 143,165 172,463 168,640 10,775 1,278 18,121 514,442
Historic cost at 30.06.2007 144,170 246,218 707,355 38,963 6,442 27,390 1,170,538
Accumulated depreciation as of
(75,314) (542,187) (28,448) (5,152) (651,101)
30/06/2007
Net value at 30/06/2007 144,170 170,904 165,168 10,515 1,290 27,390 519,438
Historic cost at 30/09/2007 144,127 244,613 706,917 39,987 6,751 35,808 1,178,203
Accumulated depreciation as of
(76,836) (547,708) (29,148) (5,235) (658,927)
30/09/2007
Net value at 30/09/2007 144,127 167,777 159,209 10,839 1,516 35,808 519,276
The principle capex investments, totalling Euro 54 million in the first nine months, related to the
completion of the upgrading of the factory at Casiglie (MO) in Italy, the investment for the production
line at Orel in Russia, and the expansion of the plant at Dallas (USA).
The historic cost, accumulated depreciation and the net book value of investment property at
September 30, 2007, June 30, 2007 and December 31, 2006 are detailed in the following table:
Table 2.13
Investment property
Historic cost at 31/12/2006 5,700
Accumulated depreciation as of 31/12/2006 (40)
Net value at 31/12/2006 5,660
Historic cost at 30.06.2007 5,700
Accumulated depreciation as of 30/06/2007 (49)
Net value at 30.06.2007 5,651
Historic cost at 30/09/2007 5,700
Accumulated depreciation as of 30/09/2007 (54)
Net value at 30/09/2007 5,646
The historic cost, accumulated amortisation and the net value of Other intangible assets as at
September 30, 2007, June 30, 2007 and December 31, 2006 are detailed in the following table:
Table 2.14
EDP and
OTHER INTANGIBLE ASSETS Brands Software Other TOTAL
programmes
Historic cost at 31/12/2006 31,059 4,635 396 36,090
Accumulated depreciation as of 31/12/2006 (22,378) (4,011) (374) (26,763)
Net value at 31/12/2006 8,681 624 22 9,327
Historic cost at 30/06/2007 31,025 5,224 1,287 37,536
Accumulated depreciation as of 30/06/2007 (22,621) (4,248) (427) (27,296)
Net value at 30.06.2007 8,404 976 860 10,240
Historic cost at 30/09/2007 30,889 5,357 4,247 40,493
Accumulated depreciation as of 30/09/2007 (22,728) (4,393) (433) (27,554)
Net value at 30/09/2007 8,161 964 3,814 12,939
From 2007, the new “Product Development” Department of the Parent Company was significantly
upgraded, which undertakes service activities also on behalf of overseas subsidiaries. The activities
of the new department are essential to the support of the Group strategies focused on the launch of
new product series featuring innovative technological and design content. In 2007, in fact, 259 new
product series were launched on the market: 36 in Italy, 8 in Spain (where studies are ongoing for
another 12 series to be launched in 2008), 136 in Russia, 51 in France and 28 in the United States.
In the first nine months of 2007, costs were capitalised of Euro 3,811 (in the account “Other”) related
to specific projects and for which the technical and commercial feasibility was determined as well as
the economic return on the investment.
2.9 Goodwill
The account relates only to goodwill, amounting to Euro 7,380 at September 30, 2007 of which Euro
5,210 relates to the gain attributed, on the acquisition of the 32% holding at the end of 2006, of the
excavation activities in a site with precious raw materials of the subsidiary DKPS, with a previous
holding of 50%.
Euro 2,170 derives from the higher value recognised on the acquisition (2000) of the company Mix
Ceramiche S.p.A., based on the competitive advantage guaranteed by this acquisition. Following this
acquisition, the Group was able to complete its product range with different formats, targeting a niche
market.
At September 30, 2007, no indications arose that the goodwill had incurred a loss in value.
The non-current financial assets, equal to Euro 389 at December 31, 2006, refers to a loan granted
by the Parent Company to the associated company Sunflower Ceramics Ltd., totally repaid in the
period.
The changes in the investments accounted for under the equity method in the first nine months of
2007 (compared to the first nine months of 2006) were as follows:
Table 2.15
The changes in the “Other investments” in the first six and nine months of 2007 and in the first nine
months 2006 were as follows:
Table 2.16
Other investments
Net value at 31/12/2005 3,350
Change in consolidation scope 320
Revaluations (Write-downs) 212
Currency changes (12)
Net value at 30/09/2006 3,870
Table 2.17
Other non-current assets 30.09.2007 30.06.2007 31.12.2006
Deposits and other assets 3,569 3,447 4,105
VAT and tax receivables 4 58 58
Non-current receivables 219 218 204
Total 3,792 3,723 4,367
Table 2.14
Short-term loans 30.09.2007 30.06.2007 31.12.2006
Payables to banks 25,424 45,829 30,966
Funding from other financial institutions 0 0 2,747
Other financial payables 0 43 0
Total 25,424 45,872 33,713
Amounts due to other financial institutions at December 31, 2006 relate to the payables with these
banks for receivables transferred as part of the securitisation operation.
Table 2.19
Short term debt 30.09.2007 30.06.2007 31.12.2006
Foreign exchange hedging derivatives 49 29 20
Total 49 29 20
Foreign exchange hedging derivatives relate exclusively to the relative fair value of a purchase/sales
option of US Dollars at specified exchange rates at a pre-arranged date.
Table 2.20
Trade payables 30.09.2007 30.06.2007 31.12.2006
Trade payables to associated companies and related parties 1,255 1,124 1,740
Trade payables – third parties 184,006 196,712 176,210
Total 185,261 197,836 177,950
Trade payables to associated companies and related parties principally relate to Ceramiche Buran
S.p.A. and Immobiliare Regina Pacis and relate to commercial transactions at market conditions.
Table 2.21
Income taxes 30.09.2007 30.06.2007 31.12.2006
Income taxes 5,472 3,581 2,710
Due to holding company for income taxes 3,837 1,201 488
Total 9,309 4,782 3,198
The payable to the parent company Finceramica Spa relates to income tax of the Group’s Italian
companies following the decision to adhere to the national tax consolidation.
Table 2.22
Other current liabilities 30.09.2007 30.06.2007 31.12.2006
Other payables 6,868 7,819 5,388
Employee payables 33,208 33,818 26,484
Social security institutions 6,093 7,210 8,660
Current taxes (excluding corporation tax) 8,790 7,484 8,617
Total 54,959 56,331 49,149
The decrease in the payables to social security institutions derives from the provisions made on the
13th month at December 31, 2006 and paid in 2007.
Table 2.23
Provisions for risks and charges 30.09.2007 30.06.2007 31.12.2006
Provisions for risks and charges 2,864 4,846 6,516
Total 2,864 4,846 6,516
The short-term provision for risks and charges includes the charges, principally made in the previous
year, against the restructuring process of the French companies. The decrease in the period is
principally due to the utilisations made against the costs in the first nine months in the year.
The residual charges will, presumably, be incurred in the short-term period.
Provisions include reserves made by some of the companies in the Group against existing litigation
arising from disputes with clients for presumed damages caused by some products sold. These
provisions have been made in compliance with the ten-year constructor’s liability.
Table 2.24
Long-term loans 30.09.2007 30.06.2007 31.12.2006
Loans in Euro:
Loans with variable and fixed interest rates 224,717 210,985 179,772
Loans in Yen:
Shareholder loans 24 7 12
Loans with fixed annual interest rates 20 21 26
Total 44 28 38
Loans in US Dollars:
Loans of a revolving nature with annual variable interest rates 1,411 2,962 0
Loans repayable from 2007 to 2010, with annual variable interest rates 40 47 57
Total 40 47 57
Total long-term payables 262,797 250,903 224,505
Less current portion (29,416) (30,571) (31,143)
Long-term portion 233,381 220,332 193,362
Among the largest loans at September 30, 2007 is a loan of the Parent Company with a leading
Italian bank, divided into two technical forms. a bullet credit line, of Euro 100,000, and a revolving
credit line of Euro 100,000, which at September 30 was utilised for Euro 50,000.
The expiry date of the loan was recently extended by 5 years from December 2009 to December
2014. Interest matures semi-annually.
An agreement was also signed in July 2007 by the Parent Company of a loan for a resolving stand-by
credit line of Euro 50,000, which at September 30 was utilised for Euro 30,000. This loan is for a
duration of 60 months, with an extension on the request of the Parent Company for a further 24
months.
The changes in the period are illustrated in the Cash Flow Statement attached.
The variable reference rate for financing in Euro is the EURIBOR and in the US Dollar is the LIBOR
USD.
The table below shows the composition of the employee benefits at September 30, 2007, June 30,
2007 and December 31, 2006.
Table 2.25
Employee leaving indemnity and other personnel related
30.09.2007 30.06.2007 31.12.2006
liabilities
Employee leaving indemnity (Italy) 25,934 26,375 29,813
Pension and service bonus (France) 3,010 3,062 2,981
Total 28,944 29,437 32,794
The entry into force of Law No. 296/2006 determined changes in the regulations resulted in
variations in the actuarial assumptions utilised for the valuation of the liability relating to the liability
matured up to December 31, 2006. These variations resulted in the recording of a benefit (so-called
curtailment effect) amounting to Euro 2,725.
No benefit was recorded for the third quarter 2007.
The average number of employees per category is shown in the following table:
Table 2.26
Category 9 months 2007 9 months 2006
Executives 101 93
Managers & white-collar 2,164 2,061
Blue-collar 4,207 4,082
Total 6,472 6,236
Table 2.27
Other non-current liabilities 30.09.2007 30.06.2007 31.12.2006
Payables for asset purchases 3,061 2,604 4,009
Other liabilities 266 301 352
Total 3,327 2,905 4,361
Amounts due for asset purchases relate to capital expenditure made in 2004 by some Group
companies to increase production capacity, which involve an extended payment plan over 3 to 5
years. The decrease in the period is due to the short-term reclassification and to the payments made
in line with the plan. The repayment plan, based on the necessary installation time period, was
extended beyond June 30, 2007. Consequently the long-term portion of these payables were
reclassified.
Table 2.28
Provisions for risks and charges 30.09.2007 30.06.2007 31.12.2006
Provision for agents leaving indemnity 2,312 2,269 2,455
Provision for other risks 2,043 2,042 1,692
Provision for taxes 589 735 741
Restoration provision 787 779 670
Total 5,731 5,825 5,558
The Group recognises costs related to potential liabilities when the loss is considered probable.
The account “Provision for other risks” primarily relates to liabilities deriving from pending disputes
initiated by social security institutions for worker’s compensation.
The “Restoration” provision relates to the company Donkerampromsiryo and refers to future charges
for the restoration of excavation sites.
The share capital amounts to Euro 102,232 and consists of 102,232,000 ordinary shares with a par
value of Euro 1 each and there are no changes compared to December 31, 2006.
The changes in the composition of shareholders’ equity in the first nine months of 2007 and 2006 are
shown in the relative attachment, to which reference should be made.
On April 27, 2007, the Shareholders’ Meeting, after the approval of the annual accounts of the Parent
Company as at December 31, 2006, approved the distribution of dividends amounting to Euro 0.23
per share, which totalled Euro 23.5 million with dividend coupon on May 7, 2007.
2.25 Revenues
In the first nine months of 2007 and 2006 net sales totalled Euro 756,170 and Euro 727,812
respectively, and can be broken down as follows:
Table 2.29
9 months 9 months
Revenues Q3 2007 Q3 2006 Cge % Cge %
2007 2006
Tile sales 218,143 205,197 6.3% 656,608 631,298 4.0%
Semi-finished and raw materials
18,217 20,809 -12.5% 63,423 61,426 3.3%
sales
Sanitary sales 7,989 7,746 3.1% 25,704 24,431 5.2%
Revenues for services and other 3,348 3,593 -6.8% 10,435 10,657 -2.1%
Total 247,697 237,345 4.4% 756,170 727,812 3.9%
The Group operates in one business segment, i.e. the design, development, production and
marketing of tiles, semi-finished products and ancillary products.
Marazzi is a multi-national group with 5 Business Units in Italy, France, Spain, Russia and the US.
The US business unit completely controls the operations of the Chinese trading company Marazzi
China Ltd.
For simplicity of presentation, the data of MG China Trading Ltd is normally included in the US
business unit, where not directly indicated.
The Group’s primary reporting is therefore based on geographic areas.
The Group geographic sectors are defined by the geographic area in which products are produced and
through exports broken down by country of origin.
The table below shows a geographic breakdown of Group sales for the third quarter of 2007
compared to the third quarter of 2006 and for the first nine months of 2007 compared to the same
period in 2006.
Third quarter:
Table 2.30
United Eliminatio Consolidate
Q3 2007 Italy Spain France Russia
States ns d
Net sales to third parties 122,519 22,295 20,301 38,838 43,744 0 247,697
Total net sales 134,985 25,512 20,435 38,893 45,438 (17,566) 247,697
Table 2.31
United Eliminatio Consolidate
Q3 2006 Italy Spain France Russia
States ns d
Net sales to third parties 119,858 20,313 20,414 31,582 45,178 237,345
Total net sales 126,204 20,642 22,474 31,611 46,676 (10,262) 237,345
Table 2.32
United Elimination Consolidate
9 months 2007 Italy Spain France Russia
States s d
Net sales to third parties 397,208 71,773 64,726 94,072 128,391 756,170
Infragroup sales 28,339 5,237 2,762 155 4,574 (41,067) 0
Total net sales 425,547 77,010 67,488 94,227 132,965 (41,067) 756,170
Table 2.33
United Eliminatio Consolidate
9 months 2006 Italy Spain France Russia
States ns d
Net sales to third parties 376,553 66,188 68,041 72,511 144,519 727,812
Infragroup sales 17,092 1,274 5,837 167 2,800 (27,170) 0
Total net sales 393,645 67,462 73,878 72,678 147,319 (27,170) 727,812
The table below shows the Group exports to third parties in the third quarter and in the first nine
months of 2007 and in the third quarter and in the first nine months of 2006.
Group exports in the third quarter of 2007 and in the third quarter of 2006:
Table 2.34
Europe
Germany France Others United States Others Total
Q3 2007 11,188 10,221 33,376 26 23,030 77,841
Q3 2006 8,744 9,988 32,200 308 20,451 71,691
Table 2.35
Europe
Germany France Others United States Others Total
Q3 2007 10,405 7,782 25,896 0 12,358 56,441
Q3 2006 7,965 8,090 25,950 298 12,116 54,419
Table 2.36
Europe
Germany France Others United States Others Total
Q3 2007 538 2.439 5.266 26 1.089 9.358
Q3 2006 384 1.878 4.466 4 974 7.706
Table 2.37
Europe
Germany France Others United States Others Total
Q3 2007 245 0 1,929 0 583 2,757
Q3 2006 370 1,689 1,937 3,996
Table 2.38
Europe
Germany France Others United States Others Total
Q3 2007 0 0 7 0 6,305 6,312
Q3 2006 3,322 3,322
Table 2.39
Europe
Germany France Others United States Others Total
Q3 2007 0 0 278 0 2,464 2,742
Q3 2006 25 20 95 6 1,936 2,082
Table 2.40
Europe
Germany France Others United States Others Total
Q3 2007 0 0 0 0 231 231
Q3 2006 166 166
Table 2.41
Europe
Germany France Others United States Others Total
9 months 2007 27,435 34,399 104,691 287 59,715 226,527
Table 2.42
Europe
Germany France Others United States Others Total
9 months 2007 24,801 26,207 81,065 200 35,601 167,874
9 months 2006 21,193 28,351 77,075 1,047 35,583 163,249
Table 2.43
Europe
Germany France Others United States Others Total
9 months 2007 1,824 8,164 17,011 65 3,115 30,179
9 months 2006 1,277 7,319 15,211 26 2,993 26,826
Table 2.44
Europe
Germany France Others United States Others Total
9 months 2007 790 5,960 1,510 8,260
9 months 2006 1,489 6,113 5,281 12,883
Table 2.45
Europe
Germany France Others United States Others Total
9 months 2007 16 13,640 13,656
9 months 2006 8,396 8,396
Table 2.46
Europe
Germany France Others United States Others Total
9 months 2007 20 28 639 22 5,367 6,076
9 months 2006 173 20 388 6 4,508 5,095
Table 2.47
Europe
Germany France Others United States Others Total
9 months 2007 482 482
9 months 2006 215 215
Table 2.49
9 months 9 months
Selling expenses Q3 2007 Q3 2006 Cge % Cge %
2007 2006
Labour costs and related charges 12,530 11,869 5.6% 38,828 38,205 1.6%
Promotions and advertising 12,433 11,088 12.1% 38,326 35,436 8.2%
Transport on sales 7,085 6,737 5.2% 20,098 19,913 0.9%
Amortisation & depreciation 630 611 3.1% 1,836 1,888 -2.8%
Losses on receivables 517 (143) -461.5% 1,460 1,876 -22.2%
Other selling costs 5,393 4,929 9.4% 17,440 16,211 7.6%
Total 38,588 35,091 10.0% 117,988 113,529 3.9%
Table 2.50
General and administrative 9 months 9 months
Q3 2007 Q3 2006 Cge % Cge %
expenses 2007 2006
Labour costs and related charges 6,236 6,384 -2.3% 19,725 17,222 14.5%
Duties and taxes (excluding
1,470 1,525 -3.6% 4,563 4,819 -5.3%
corporation tax)
Legal and administrative services 877 1,108 -20.8% 3,631 3,111 16.7%
Directors’ and auditors’ fees 643 727 -11.6% 2,815 2,379 18.3%
Amortisation/Depreciation 592 562 5.3% 1,771 1,743 1.6%
General and administrative
496 430 15.3% 1,570 1,430 9.8%
insurances
IT Expenses 728 626 16.3% 2,080 2,043 1.8%
Telephone and postal expenses 481 497 -3.2% 1,512 1,465 3.2%
Other general and administration
1,500 1,571 -4.5% 4,993 5,088 -1.9%
costs
Total 13,023 13,430 -3.0% 42,660 39,300 8.5%
The increase in personnel costs is principally due to the significant changes in the organisational
structure of the Parent Company over the past two years..
Table 2.51
Restructuring charges and 9 months 9 months
Q3 2007 Q3 2006 Cge % Cge %
asset write-downs 2007 2006
Restructuring charges and asset
35 99 -64.6% 285 2.964 -90.4%
write-downs
Total 35 99 -64.6% 285 2.964 -90.4%
Table 2.52
9 months 9 months
Other income Q3 2007 Q3 2006 Cge % Cge %
2007 2006
Revenues from recharge of
2,415 2,506 -3.6% 7,721 7,970 -3.1%
transport costs
Prior year income 1,440 124 1061.3% 2,570 1,162 121.2%
Revenues from samples and
160 266 -39.8% 821 1,273 -35.5%
displays
Gains on sale of assets 33 13 153.8% 678 868 -21.9%
Others 3,497 11 31690.9% 3,914 77 4983%
Total 7,545 2,920 158.4% 15,704 11,350 38.4%
From 2007, the new “Product Development” Department of the Parent Company was significantly
upgraded, which undertakes service activities also on behalf of overseas subsidiaries. The activities
of the new department are essential to the support of the Group strategies focused on the launch of
new product series featuring innovative technological and design content. In 2007, in fact, 259 new
product series were launched on the market: 36 in Italy, 8 in Spain where studies are ongoing for
another 12 series to be launched in 2008, 136 in Russia, 51 in France and 28 in the United States.
In the first nine months of 2007 costs were capitalised of Euro 3,811 (in the account “Other Income”)
related to specific projects and for which the technical and commercial feasibility was determined as
well as the economic return on the investment.
Table 2.53
9 months 9 months
Other charges Q3 2007 Q3 2006 Cge % Cge %
2007 2006
Provisions for various risks 108 234 -53.8% 712 317 124.6%
Prior period charges 886 106 735.8% 1.709 879 94.4%
Other non-recurring charges 160 142 12.7% 240 235 2.1%
Loss on sale of assets 96 13 638.5% 581 152 282.2%
Total 1,250 495 152.5% 3,242 1,583 104.8%
Table 2.54
9 months 9 months
Expenses by nature Q3 2007 Q3 2006 Cge % Cge %
2007 2006
Amortisation/Depreciation 13,142 13,459 -2.4% 40,501 40,962 -1.1%
Personnel costs 50,898 50,482 0.8% 161,858 158,277 2.3%
Change in inventory 1,131 550 105.6% (14,613) (7,353) 98.7%
Purchases 88,309 79,452 11.1% 283,853 259,607 9.3%
Transport 18,620 18,009 3.4% 52,849 58,438 -9.6%
Promotional and advertising 6,189 5,168 19.8% 19,805 17,161 15.4%
Commissions 6,244 5,920 5.5% 18,521 18,275 1.3%
Other costs 36,927 36,639 0.8% 110,788 99,458 11.4%
Total 221,460 209,679 5.6% 673,562 644,825 4.5%
Classified as:
Table 2.55
9 months 9 months
Expense category Q3 2007 Q3 2006 Cge % Cge %
2007 2006
Cost of sales 168,599 160,663 4.9% 509,672 490,413 3.9%
Selling expenses 38,588 35,091 10.0% 117,988 113,529 3.9%
General and administrative
13,023 13,430 -3.0% 42,660 39,300 8.5%
expenses
Other charges 1,250 495 152.5% 3,242 1,583 104.8%
Total 221,460 209,679 5.6% 673,562 644,825 4.5%
The increase in the account financial charges (income) in the third quarter 2007 is principally due to
the result from currency management, in addition to an increase in interest rates applied to a higher
average debt in the period.
Table 2.57
9 months 9 months
Share of income and charges Q3 2007 Q3 2006 Cge % Cge %
2007 2006
Share of income (157) (189) -16.9% (364) (331) 10.0%
Share of charges 66 (70) -194.3% 96 242 -60.3%
Total (91) (259) -64.9% (268) (89) 201.1%
Income taxes for the third quarter and for the first nine months of 2007 and for the same periods in
2006 are summarised below:
Table 2.58
9 months 9 months
Income taxes Q3 2007 Q3 2006 Cge % Cge %
2007 2006
Current taxes 10,539 8,941 17.9% 29,691 27,025 9.9%
Deferred tax charge (income) (1,858) 1,384 -234.2% 2,224 (525) -523.6%
Total 8,681 10,325 -15.9% 31,915 26,500 20.4%
The following table shows the deferred tax assets and liabilities at September 30, 2007, June 30,
2007 and December 31, 2006:
Table 2.59
The accounting of deferred taxes in the financial statements was made in consideration of the
possible recoverability of the deferred tax assets.
For the period ended September 30, 2007, the principal French companies of the Group
demonstrated the ability to realise assessable income already from 2007. The structural changes in
the French BU will probably result in assessable income in the coming years for which the fiscal
losses carried forward can be utilised. Therefore, an estimate was made of the deferred taxes which
can reasonably be recovered in the next year and a decrease of the write down provision of the
deferred tax assets by Euro 1 million. This amount may be reviewed in light of the full year results for
2007 and on the basis of the forecasts for the 2008 results.
The following table reports the result and the number of ordinary shares used for the calculation of
the basic earnings per share, determined in accordance with IAS 33.
Table 2.60
Q3 2007 Q3 2006 9 months 2007 9 months 2006
Net profit attributed to the shareholders of the
16,624,000 15,685,000 46,036,000 46,608,000
parent company
Weighted average number of ordinary shares to
102,232,000 101,021,846 102,232,000 101,021,846
calculate basic earnings per share
Weighted average number of ordinary shares to
106,074,600 101,679,148 105,061,841 101,679,148
calculate diluted earnings per share
Basic earnings per share – Euro 0.163 0.153 0.450 0.461
Diluted earnings per Share – Euro 0.157 0.152 0.438 0.458
Although not of an extraordinary nature, in accordance with Consob Resolution No. 15519 of July 27,
2006, a summary is provided below of non-recurring events and operations which the Group had
already undertaken in the period ending at June 30, 2007:
• recalculation of the employee leaving indemnity value as at December 31, 2006 on the basis of
the new provisions introduced by the pension reform (curtailment).
The executive responsible for the preparation of the corporate accounting documents Mr. Alessandro
Poletto declares in accordance with article 154 bis, paragraph 2, of the Consolidated Finance Act,
that the accounting information contained in the present document corresponds to the underlying
accounting documents, records and accounting entries.