Net Financial (Liquidity)/Debt Position

The Group’s net borrowings totalled euro 737.1 million at December 31, 2011, compared with net borrowings of euro 455.6 million at December 31, 2010.

(in millions of euro)
  12/31/2011 12/31/2010
Current borrowings from banks and other financial institution 369.5 247.5
Non-current borrowings from banks and other financial institution 1,408.6 899.5
Total gross debt 1,778.1 1,147.0
Cash on hand (557.0) (244.7)
Securities held for trading (160.5) (209.8)
Current financial receivables (72.8) (14.2)
Non-current financial receivables (250.7) (222.8)
of which Prelios (160.0) (140.4)
Total financial receivables, cash and cash equivalents (1,041.0) (691.4)
Net financial (liquidity)/debt position 737.1 455.6

The operating cash flow was a positive euro 156.4 million, with a significant increase in the last quarter, in spite of capital expenditure of euro 626.2 million (nearly three times depreciation and amortisation), earmarked mainly for supporting growth in the premium segment.

The net cash flow was a negative euro 281.5 million, which includes euro 55.0 million as the first instalment on payment for acquisition of the two production units in Russia and the payment of euro 83.5 million in dividends (including euro 81.1 million by the parent company). Other transactions that impacted net cash flow during the period included, on the one hand, the acquisition of an additional 15.0% equity interest in the Chinese subsidiary Pire lli Tyre Co Ltd. (now 90% owned by the Group) for euro 28.0 million, the investment by Pire lli Ambiente S.p.A. in GWM RE II S.p.A. for euro 19.9 million, and the acquisition of 49% of the environmental products and services business units (Pire lli & C. Ambiente S.p.A. and Pire lli & C. Eco Technology S.p.A.) from the Camfin Group for euro 6.8 million. On the other hand, they included disposal in the first quarter of the equity investments owned in CyOptics Inc. and Gruppo Banca Leonardo S.p.A. for euro 23.5 million in proceeds.

The following table summarises the changes in cash flow during 2011:

(in millions of euro)
 
 
Q1 Q2 Q3 Q4 TOTAL
2011 2010 2011 2010 2011 2010 2011 2010 2011 2010
Operating income (EBIT) before restructuring expenses 146.5 90.2 151.3 109.6 163.3 119.9 148.6 112.8 609.7 432.5
Amortisation and depreciation 56.9 51.7 56.2 53.7 56.9 55.0 54.9 60.8 224.9 221.2
Capital expenditures of property, plant and equipment and intangible assets (96.9) (50.2) (137.2) (85.2) (162.1) (91.5) (230.0) (211.7) (626.2) (438.6)
Change in working capital/ other (313.5) (143.2) 18.1 42.2 (100.6) (18.0) 344.0 214.2 (52.0) 95.2
Operating cash flow (207.0) 51.5 88.4 120.3 (42.5) 65.4 317.5 176.1 156.4 310.3
Financial income/(expenses) (14.8) (17.6) (29.9) (23.0) (19.4) (14.0) (25.4) (11.2) (89.5) (65.8)
Income tax (47.9) (30.4) (39.6) (39.9) (51.3) (40.2) (23.7) (26.9) (162.5) (137.4)
Net operating cash flow (269.7) (99.5) 18.9 57.4 (113.2) 11.2 268.4 138.0 (95.6) 107.1
Financial investments/ disinvestments 24.4 - - - (16.4) 9.8 (7.0) 21.9 1.0 31.7
Acquisition of non-controlling interests (China) - - - - (28.0) - - - (28.0) -
Russia investment - - - - - - (55.0) - (55.0) -
Dividend paid by Pirelli & C. S.p.A. - - (81.1) (81.1) - - - - (81.1) (81.1)
Dividends paid to non-controlling interests (0.7) - (1.7) (4.0) - - - - (2.4) (4.0)
Cash Out for restructuring expenses (2.8) (34.0) (5.7) (9.9) (1.9) (7.4) (6.5) (2.0) (16.9) (53.3)
Net cash flow of discontinued operations - (26.1) - (5.8) - (37.9) - 75.4 - 5.6
Foreign exchange differences/other (8.4) 10.0 3.5 24.9 0.1 16.3 1.3 16.0 (3.5) 67.2
Net cash flow (257.2) (149.6) (66.1) (18.5) (159.4) (8.0) 201.2 249.3 (281.5) 73.2

The following table breaks down the net financial (liquidity)/debt position by business segment:

(in millions of euro)

TYRE OTHER BUSINESS CORPORATE TOTAL
12/31/2011 12/31/2010 12/31/2011 12/31/2010 12/31/2011 12/31/2010 12/31/2011 12/31/2010
Gross debt 1,798.2 1,613.6 130.7 83.3 641.3 123.0 1,778.1 1,147.0
of wich due to Corporate 669.5 589.6 113.7 83.3        
Financial receivables (161.2) (98.3) (7.3) (4.8) (947.1) (806.7) (323.5) (236.9)
of wich from Prelios S.p.A.         (160.0) (140.4) (160.0) (140.4)
Cash, cash equivalents, securities held for trading (674.7) (405.4) (4.2) (6.6) (38.6) (42.5) (717.5) (454.5)
Net financial (liquidity)/ debt position 962.3 1,109.9 119.2 71.9 (344.4) (726.2) 737.1 455.6
The column “Other business” includes Pirelli & C. Eco Technology, Pirelli & C. Ambiente and PZero

The structure of gross debt, which has an average maturity of about four years and of which more than 65% falls due beginning in 2015, is shown as follows:

(in millions of euro)       
 
 
FINANCIAL STATEMENTS 12/31/2011   MATURITY DATE     
2012 2013 2014 2015 2016 and beyond
Use of committed credit facilities 360.0 - - - 360.0 -
P.O. 5.125% - 2011/2016 500.0 - - - - 500.0
EIB Loans 390.0 125.0 25.0 - 100.0 140.0
Other financing 528.1 250.6 75.0 126.1 22.2 54.2
Total gross debt 1,778,1 375,6 100,0 126,1 482,2 694,2
    21.1% 5.6% 7.1% 27.1% 39.1%

At December 31, 2011 the Group has euro 840 million as unused portion of committed credit facilities.