Sogefi (Cir group): Board of Directors approves results as of June 30 2014


SOGEFI (CIR GROUP): REVENUES STABLE AT € 683 MLN
(+5.9% AT SAME EXCHANGE RATES)

MARGINS AND NET RESULT AFFECTED BY NON-RECURRING CHARGES
OF € 17.4 MLN, EXCHANGE RATES AND BRAZIL

Strong growth in North America is confirmed (revenues at € 103 million, +15.5%; at same exchange rates +27.5%) and in Asia (revenues at € 37.3 million, +32.4%; at same exchange rates +42.5%). In South America (revenues at € 89.2 million, -24.7%) there was a decline in local currency (-2%) less than the -16% of the market


Net result at -€ 7.3 million after non-recurring items of € 17.4 million (restructuring and financial expense). EBITDA and EBIT were also affected significantly by the restructuring charges. EBIT before restructuring came to € 36.2 million (€ 44.7 million in H1 2013)


Consolidated results for H1 2014

Revenues: € 683 million (unchanged from € 681.7 million in H1 2013; +5.9% at same exchange rates)
Operating result: € 45.4 million, 6.6% of revenues (€ 51.3 million in H1 2013, 7.5% of revenues)
EBITDA before restructuring: 65.8 million (-9.4% from € 72.6 million in H1 2013)

Net result: -€ 7.3 million (€ 16.2 million in H1 2013)
Net debt: € 340.8 million (€ 322.5 million at 31/3/2014)


Milan, July 22 2014 – The Board of Directors of Sogefi SpA, which met today under the chairmanship of Rodolfo De Benedetti, has approved the Semi-Annual Financial Report of the group for the first half of 2014. Sogefi, the automotive components company of the CIR group, is one of the main world producers of engine systems and suspension components with 42 production plants in 21 countries and 17 commercial offices.

Performance of operations


In the first half of the year the car market performed well in North America and Asia, with growth in production volumes compared to the first half of 2013 of 4.2% and 7.5% respectively. By contrast, in South America, especially in Brazil, the market suffered a sharp slowdown which led to a decline in the production of passenger cars and light commercial vehicles of 16% in the half year and of 24% just in the second quarter compared to the same periods of 2013. In Europe the market continued to be stable with production of passenger cars up by 5.7% on the first half of 2013 (+1.5% in the second quarter), mainly as a result of the recovery from the low volumes of last year.

In this context for the first half Sogefi reported revenues unchanged at € 683 million (+5.9% at the same exchange rates), despite the extremely unfavourable impact of the strong euro especially against the South American currencies.

This result was obtained thanks to the strategy of focusing on markets outside Europe, particularly in North America, China and India, where Sogefi’s revenues are continuing to grow significantly, but also to the positive performance of aftermarket activities (at the same exchange rates) and engine cooling systems. EBITDA and EBIT were negatively affected by the significant concentration in the period of restructuring charges in Europe (€ 14.4 million in the first half of 2014) and by the lower contribution of countries outside the euro area, especially Mercosur, partly because of the unfavourable impact of exchange rates.

The net result of -€ 7,3 million was affected by non-recurring expense of € 17.4 million: in addition to the already mentioned restructuring charges in Europe, there were also € 3 million of costs resulting from the repayment of bank loans with the liquidity from the issuance of the convertible bond.


Consolidated results


Sogefi closed the first half year with consolidated revenues of € 683 million, unchanged from the first half of 2013 (+5.9% at the same exchange rates). This figure benefited from the positive performance of markets in North America and Asia, which, despite the unfavourable exchange rates, reported growth in revenues of 15.5% (€ 103 million; +27.5% at the same exchange rates) and 32.4% (€ 37.3 million; +42.5% at the same exchange rates) respectively compared to the first half of 2013. Revenues in Europe were also higher (+1.9% at € 451.6 million) thanks to the positive contribution of aftermarket activities and engine cooling systems. Revenues in South America, in the local currencies, posted a decline limited to 2%, with a performance better than the market in general (-16%) which was affected by the sharp contraction in production (revenues converted into euro fell by 24.7% to € 89.2 million due to the unfavourable exchange rates).

The Engine Systems Business Unit reported revenue growth of 2.3% to € 426.2 million (+7.7% at the same exchange rates) up from € 416.7 million in the first half of 2013, while the Suspension Components Business Unit reported revenues of € 258 million versus € 266.2 million in the same period of 2013 (-3.1%; +3% at the same exchange rates).

The consolidated operating result was € 45.4 million, down from € 51.3 million in the first half of 2013, with a ratio to revenues of 6.6% (7.5% in the first half of 2013). In the first half of the year restructuring charges were recognized for € 14.4 million, of which € 10.2 million relating to the rationalization of production capacity and € 4.2 million linked to the write-down of assets and sundry costs relating to the restructuring. In particular, in the first quarter in the Suspension Components Business Unit, the group announced the plan for the closure of a factory in France. In the first half of 2013 restructuring charges had amounted to € 1.4 million.

Consolidated EBITDA came to € 51.7 million (€ 71.2 million in the first half of 2013); net of restructuring costs it came to € 65.8 million (€ 72.6 million in the first half of 2013; -9.4%) with a ratio to sales of 9.6% from 10.7%.

Consolidated EBIT amounted to € 21.8 million (€ 43.2 million in the first half of 2013); net of restructuring it came to € 36.2 million (€ 44.7 million in the first half of 2013; -18.9%) with a ratio to sales of 5.3% from 6.6% in the first half of 2013.

Net financial expense for the half year amounted to € 21 million. This item includes financial expense of € 14.9 million (€ 12.7 million in the first half of 2013) and other expenses of € 6.1 million, of which € 3 million were non-recurring and referred to the already mentioned repayment of bank loans, and € 3.1 million was the impact of the fair value measurement of interest rate hedging transactions (non-cash).

This all led to a positive result before taxes and minority interests of € 0.8 million (€ 30.5 million in the first half of 2013).

The consolidated net result, after the already cited non-recurring charges totalling € 17.4 million, was –€ 7.3 million (earnings of € 16.2 million in the first half of last year).
Net debt stood at € 340.8 million at June 30 2014 which compares with € 322.5 million at March 31 2014 and € 341.1 million at June 30 2013. The rise in the second quarter was the effect of the result for the period, the expected absorption of working capital and the cash outlay for part of the restructuring costs recorded in 2013.

Shareholders’ equity at the same date was € 187.5 million (€ 188.9 million at December 31 2013). The Sogefi group had 6,744 employees at the end of the first half of 2014 (6,834 at December 31 2013).
Results of the parent company Sogefi S.p.A.

The parent company Sogefi S.p.A. reported a net result of € 0.2 million in the first half year compared to € 26.7 million in the same period of 2013. The decline was caused by the lower dividend flow from the subsidiaries (€ 18.6 million) and by the higher net financial expense (€ 8.2 million) than in the first half of  2013.
Net debt stood at € 309.9 million at June 30 2014, which was substantially unchanged from the figure of  € 304.9 million at December 31 2013.

The shareholders’ equity of the company amounted to € 158.1 million at June 30 2014 (€ 155.8 million at December 31 2013).

Bonds

In May 2014 a placement was launched of “€ 100,000,000 2.00% Equity Linked Bonds due 2021” for a nominal amount of € 100 million maturing May 21 2021. The bonds, which were placed exclusively with institutional investors, have a principal amount of € 100,000 each and pay a semi-annual coupon at a fixed rate of 2% per year. The bonds were admitted to listing on the Third Market (MTF) of the Vienna Stock Exchange on June 13 2014. The company has no bonds maturing in the eighteen months following June 30 2014.

General Meeting of the Shareholders

The Board of Directors adopted a resolution to submit to the approval of the Extraordinary General Meeting of the Shareholders a proposed share capital increase in cash, against payment and in tranches, excluding shareholder pre-emption rights pursuant to Art. 2441, paragraph 5 of the Civil Code, for a maximum total nominal amount of Euro 9,657,528.92 that will  be released once or more than once, through the issuance of a maximum of 18,572,171 ordinary Sogefi shares to be reserved exclusively for servicing the conversion of the “€ 100,000,000 2.00% Equity Linked Bonds due 2021”. The Board of Directors voted to call the Extraordinary General Meeting of the Shareholders for September 26 2014 at the first call and, if necessary, for September 29 2014 at the second call.

OUTLOOK FOR THE YEAR

For 2014 the performance of the car market at global level is expected to show growth, driven particularly by Asian markets, mainly China and India, and the North American market, with confirmation of the stable trend in Europe. However, the phase of weakness in South American markets is expected to continue.


In this context Sogefi plans to:
–        Continue to increase the group’s presence outside Europe, leveraging its competitive positioning in the various geographical areas;

–        Continue its focus on innovation;
–        Boost the integration of the group even with efficiency actions in Europe.

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