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Marzotto to Spin Off Apparel Unit

MILAN — Marzotto more than doubled its 2004 net profit as its board approved a plan to spin off its fashion operations into a new company, to be called Valentino Fashion Group SpA.<BR><BR>Marzotto’s net profit for the year doubled to 40...

MILAN — Marzotto more than doubled its 2004 net profit as its board approved a plan to spin off its fashion operations into a new company, to be called Valentino Fashion Group SpA.

Marzotto’s net profit for the year doubled to 40 million euros, or $49.6 million at average exchange, for the 12-month period. Revenue grew 5 percent to 1.82 billion euros, or $2.26 billion, on double-digit sales increases at Hugo Boss and Valentino.

Marzotto’s operating profit rose 30 percent to 172 million euros, or $213.3 million, on improving margins at Valentino and Hugo Boss.

Meanwhile, Marzotto is planning to spin off its more profitable fashion operations, including fashion house Valentino, a majority stake in Hugo Boss AG and its licenses for Marlboro Classics and M Missoni, into a newly created subsidiary, which is currently named Italfashion SpA but will eventually be called Valentino Fashion Group.

A Marzotto spokesman said the transactions required for the spin-off will be completed by the end of July.

Marzotto shareholders will receive one share in Valentino Fashion Group for each Marzotto share held. Both companies will be traded on the Milan stock exchange.

Marzotto has said fashion is the way forward for the company. It’s been diversifying out of the less lucrative textile industry and shifting production of some fabrics out of Italy and to countries with cheaper labor such as those in Eastern Europe. Marzotto SpA will retain these textile operations as well as noncore assets such as real estate and equity stakes in other companies.

“The [spin-off] allows for better visibility of the two businesses on the financial markets,” Marzotto president Antonio Favrin said in a statement.

He said that Valentino Fashion Group’s brand portfolio and logistical synergies will make it “one of the few global protagonists in fashion and luxury.”

Based on 2004 numbers, Marzotto said Valentino Fashion Group’s sales would have risen 5 percent to 1.55 billion euros, or $1.92 billion. The unit would have posted a gross operating profit of 237 million euros, or $293.9 million, and would have net debts of 423 million euros, or $524.5 million.

Specifically, Valentino’s 2004 sales rose 13 percent to 170 million euros, or $210.8 million. Hugo Boss AG, listed on the Frankfurt stock exchange, released its 2004 figures earlier this month, showing profitability and sales growth. Net income rose 7 percent to 88.2 million euros, or $109.4 million, while sales advanced 11 percent to 1.17 billion euros, or $1.45 billion. The company sighted continued growth for Boss Woman, reporting a 36 percent sales increase.