Milan, 26 February 2009 – The Board of Directors of Sogefi SpA, chaired by Mr. Rodolfo De Benedetti, met today to approve the proposed statutory accounts and the consolidated financial statements of the Group for financial year 2008.
Business trends
Over the course of 2008 the global financial crisis has provoked a sharp slowdown in the economy and a steep falloff in consumption. One of the sectors worst hit was the auto industry, above all in Europe and the United States. Since September vehicle demand and production has declined steadily in every major market, falling by around 20% from the same period of 2007. In Europe alone, Sogefi Group’s most important market, new car sales have seen the biggest slide in the last 15 years.
Despite this dramatic scenario, the company closed the financial year in the black with net profit of Euro 28.5 million, though lower than 2007. Revenues, of over Euro 1 billion, remained substantially unchanged on the previous year, above all in the Suspension Components Division, while profitability was further weakened by the forex effect and unfavourable extraordinary postings compared with 2007.
During 2008 Sogefi also introduced restructuring and cost cutting measures to confront the worsening business cycle and entered the promising Indian market with the Filtration Division. In the Suspension Components Division Sogefi launched a new manufacturing initiative in 2008 adopt alternative non-steel materials for lighter weight components and therefore less polluting vehicles.
Consolidated results
Consolidated revenues came to Euro 1,017.5 million, down 5.1% from 1,071.8 million in 2007. The variation is largely explained by the significant slowdown in business in the fourth quarter. Europe and the United States were worst hit, while Latin America recorded double-digit sales growth
(+17.9%). Falling revenues affected mainly the Filtration Division (-9.3%), while the Suspension Components Division remained substantially unchanged (-0.5%) thanks to higher sales prices. Overall revenues were also affected by the devaluation of Sterling against the Euro (consolidation currency) so that excluding the forex effect revenues would amount to Euro 1,039.9 million, down just 3% on 2007.
Profitability for the FY was weakened by lower sales, foreign exchange effects and unfavourable extraordinary gains compared with the previous year. Consolidated operating profit came to Euro 87.6 million (8.6% of revenues), down from 113.6 million (10.6%) in 2007, despite a general rise in costs of materials and energy. Steel prices rose by 25% and the increase was largely passed onto the sales price with a time lag of few months.
Consolidated EBITDA fell to Euro 104.9 million (10.3% of revenues) from 134.6 million (12.6%) in 2007, while consolidated EBIT amounted to Euro 62.4 million (6.1% of revenues) compared with 89.9 million in 2007 (8.4%). EBITDA and EBIT were affected by lower operating profits, higher restructuring charges (Euro 11.5 million against 7.6 million in the previous year) and the absence in FY 2008 of positive extraordinary gains which amounted in 2007 to Euro 9 million.
Profit before taxes and minority interests amounted to Euro 48.2 million, compared with 80.6 million in 2007. This is due to higher debt financing costs following the distribution of dividends (Euro 159.5 million) during the year.
Consolidated net profit amounted to Euro 28.5 million (2.8% of revenues), down 45.4% from Euro 52.2 million (4.9%) in 2007.
Net indebtedness at year-end stood at Euro 257.2 million, up from 92.4 million at the end of 2007 due to the aforementioned dividend distribution. This is somewhat lower than the figure for 30 September 2008 (Euro 263.3 million).
Consolidated equity at 31 December 2008 stood at Euro 160.9 million compared with 310.9 million at the end of 2007. Return on equity (ROE) was 12.1% (17.7% for FY 2007), while Return on Investment (ROI) fell to 14.6% from 21.4% in 2007.
The workforce of Sogefi Group at 31 December 2008 numbered 6,100, including the 155 employees at the new Indian company (6,208 at the end of 2007). Active employees at the end of 2008, taking into account the temporary closure of plants to combat falling demand, amounted to 5,831.
Filtration Division
Revenues for the Filtration Division came to Euro 497.5 million, down 9.3% from Euro 548.2 million at the end of 2007.
This reflects the weaker demand in the European parts market, despite the positive performance achieved in the Mercosur region (+13.9%). Profitability fell, partly due to the costs of two plant closures (in Italy and Spain), with EBITDA standing at Euro 44 million (67.8 million in the previous 12-months’ period) and EBIT at Euro 26.6 million (49.1 million in 2007).
In November Sogefi entered the Indian filters market with the acquisition, for Euro 4.7 million, of 60% of M.N.Ramarao Filters Private Co. Ltd and EMW Environmental Technologies Private Co. Ltd, makers of filters for two, three and four-wheel vehicles as well as industrial filters. It is hoped the contribution of Sogefi technology will help the companies boost their competitiveness and increase their business volume.
Suspension Components Division
Revenue growth in Brazil and higher sales prices enabled the Suspension Components Division to achieve consolidated revenues of Euro 521.9 million, substantially in line with the 524.6 million of 2007. Consolidated EBITDA thus stood at Euro 64.5 million from 75.8 million in 2007, while EBIT came to Euro 40.2 million (50.3 million in 2007). These figures were not affected by the fire that destroyed the Welsh plant at Clydach, since the damage will be entirely covered by insurance and supplies were made up by other production sites.
The financial year also saw the establishment of an equal joint-venture with the French company Sardou SA for the development, manufacture and medium-term marketing of products in nonsteel materials for the components market designed to reduce the weight and polluting effects of motor vehicles.
The Parent Company
The Parent Company Sogefi SpA generated net profit of Euro 29.2 million, an improvement of 12.2% compared with 26 million in the previous year, thanks to the higher dividends received from the subsidiaries and the absence of extraordinary costs for unrealised acquisitions, which in 2007 amounted to Euro 5.3 million.
The shareholders’ equity of Sogefi SpA at 31 December 2008 stood at Euro 130.3 million, down from 258.2 million in 2007 following the aforementioned payment of dividends.
Outlook for the whole of FY 2009
The crisis in the auto industry will continue in 2009 and is likely to deepen. Moreover, all mature markets will see a sizeable fall in vehicle demand and production compared with 2008, despite substantial state intervention. Sogefi therefore sees revenues and rofitability lower than 2008, despite lower commodity and energy costs. In response to the crisis, the Group will be taking further drastic steps to cut all cost factors, in particular structural costs.
Shareholders’ Meeting
The Sogefi Shareholders’ Meeting was held in first convening on 23 April 2009 and in second sitting on 24 April 2009. Given the current economic climate and conditions in the car market, the Board of Directors proposes not to distribute dividends for FY 2008.
The Board also voted:
- – to put to the Shareholders’ Meeting for approval a 2009 management stock options plan for a maximum 2,400,000 options, reserved for beneficiaries of the 2007 and 2008 phantom stock options plans who are still employed by the Company or its subsidiaries. This will replace the existing phantom plans;
- – to put to the Shareholders’ Meeting a proposal to revoke and renew, for a period of 18 months, the Board’s powers to purchase a maximum 4 million own shares, (including the 1,956,000 shares currently held, representing 1.68% of ordinary share capital) within a 10% price band above and below the quoted stock price at the close of trading immediately prior to each purchase. The principle motive behind this proposal is to enable investment in Company shares at prices below their effective value based on the real size of the Company’s assets and earnings potential;
- – to put to the Extraordinary Shareholders’ Meeting a proposal to revoke and renew the Board’s powers to increase capital by a maximum Euro 250 million, to increase employees share capital by a maximum Euro 5.2 million, and to issue convertible bonds within the limits of the law.
New CFO and Investor Relator
Finally, the Board of Directors appointed Mr. Giancarlo COPPA as Chief Financial Officer and Investor Relator with all necessary powers to prepare the Group accounts under article 154-(ii) of Leg. Dec 58 of 24 February 1998.
The manager responsible for preparing the Company’s financial statements, Alberto Marastoni, declares under comma 2 of Article 154-(ii) of the Finance Consolidation Act that the information presented in this press release corresponds to the results documented in the Company accounts and balance sheets.
