Sogefi (Cir group): profit margins hold up and result positive (€7 mn) despite crisis of car sector in Europe

Growth in Nord America, Asia and Mercosur contains sharp fall in European market:
share of total revenues from non-European countries rises to 34.7% from 29.8% in Q1 2012

With the same exchange rates revenues down by 2.3%. The group protects its profitability
(EBITDA margin at 9.7% versus 9.9% in Q1 2012) despite contraction in revenues

Consolidated results of Q1 2013

Revenues: € 329.2 million (€ 346.9 million in Q1 2012)
Operating result: € 22.1 million, 6.7% of revenues (€ 24.6 million in Q1 2012, 7.1%)
EBITDA: € 32.1 million, 9.7% of revenues (€ 34.5 million in Q1 2012, 9.9%)
Net income: € 7 million (€ 9 million in Q1 2012)
Net debt: € 311.9 million (€ 295.8 million at 31/12/2012)

Milan, April 19 2013 – The Board of Directors of Sogefi SpA, which met today under the chairmanship of Rodolfo De Benedetti, has approved the Interim Financial Report of the group for the first quarter of 2013.

Sogefi, the automotive components company of the CIR group, is one of the main world producers of engine systems and suspension components with 43 production plants and 18 commercial offices in 21 countries.

Performance of operations

In a difficult market environment due to the continuing weakness of the European car sector, Sogefi reported profitability that was substantially unchanged partly thanks to an improvement in its geographical mix. Indeed the impact on revenues of non-European countries rose by almost 5 percentage points compared to the first quarter of 2012 (from 29.8% of the total to 34.7%).

As for the overall performance of the car market in the first quarter, the rise in production levels in non-European countries, particularly Brazil, China and to a lesser extent North America, partly offset the decline in car sales reported in Europe (-10.2% on 2012).

Consolidated results

Sogefi closed the first quarter with consolidated revenues of € 329.2 million, down from € 346.9 million in the first quarter of 2012 (-5.1%). At the same exchange rates revenues would have come to € 338.9 million with a small decline of 2.3%.

The Engine Systems Division reported revenues of € 201.9 million, down from € 208.3 million in the first quarter of 2012 (-3.1%), while the Suspension Components Division reported revenues of € 127.9 million from € 139.3 million in the same period of 2012 (-8.2%).

The most significant figure was the process of continuing growth in North America, which thanks to revenues of € 45.2 million (+22.7%) now accounts for 13.7% of the total sales revenues of the group (10.6% in first quarter 2012). Growth is also continuing in Asia with revenues up by +35.7% compared to first quarter 2012 and in the Mercosur area (+2.5%), which benefited from the good performance of the market but which suffered the effect of unfavourable exchange rates. In Europe Sogefi reported revenues of € 214.8 million, which were down 11.8% on last year as a result of the weakness of demand in the market.

In the period there was an overall alignment of the commodity costs of the main components compared to the first quarter of last year. The 30% contribution margin was substantially unchanged from the first quarter of 2012, confirming the group’s ability to guarantee a good level of profitability levels even in the presence of a contraction in revenues.

The consolidated operating result came in at € 22.1 million, down from € 24.6 million in the first quarter of  2012 with a ratio to sales of 6.7%, down slightly from 7.1% in Q1 2012.

Consolidated EBITDA (earnings before interest, taxes, depreciation and amortization) came to € 32.1 million in the first three months of the year  versus € 34.5 million in the same period of 2012 (-7.0%) with a ratio to sales of 9.7%, which was substantially a confirmation of the 9.9% of Q1 2012.

EBIT was € 18.2 million, down from € 20.3 million in 2012 (-9.6%), with a ratio of 5.5% to sales, which was slightly down from 5.9% in first quarter 2012.

The result before taxes and minority interests came in at € 12.6 million compared to € 15.6 million in the first quarter of last year, affected by higher financial expense following the recent process of refinancing the debt which led to the replacement of credit facilities in place since before 2008 with new facilities at current market rates.

Consolidated net income for the period came to € 7 million (€ 9 million in Q1 2012) with a ratio to sales of 2.1%, down from 2.6% in the first three months of last year.

Net debt stood at € 311.9 million at March 31 2013, up from € 295.8 million at December 31 2012.  The rise was due to the cash disbursement for restructuring costs recorded in the last quarter of 2012 for the closure of the plant in Wales and to seasonal factors typical of the automotive sector.

At March 31 2013 consolidated equity including minority interests stood at € 212 million and was up from € 200.2 million at December 31 2012, while the consolidated equity figure at March 31 2013 was € 191.1 million which compares to € 180.4 million at December 31 2012. Both figures were affected by the introduction of new international accounting standards (IAS 19).

The Sogefi group had 6,678 employees at the end of the first quarter of 2013 (6,735 at December 31 2012).

Outlook for the year

The performance of the car industry at global level is expected to show slight growth in 2013, with declining volumes in Europe, a confirmed rise in Asia and more moderate progress in Latin American and North America. In this environment the Sogefi group expects to:
–       Continue to grow in non-European markets;
–       Have cost stability in the main commodities;
–       Continue to implement efficiency enhancing measures.

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