Milan, 24 July 2009 – The Board of Directors of Sogefi SpA, chaired by Mr. Rodolfo De Benedetti, has examined and approved the half-year financial report at 30 June 2009. Business trends In the first six months of 2009 Sogefi Group’s results have been hit by the sharp contraction in vehicle production worldwide since Q4 2008. Despite an upturn in consumer demand thanks to ongoing incentives, especially in the second quarter, production levels remain below those of 2008 partly due to efforts by manufacturers to bring down inventories of unsold vehicles. Purchase incentives are focused on the low end market, while demand for mid-range and high end vehicles is only beginning to show signs of recovery. Meanwhile the industrial vehicle market continues to slide. Falling volumes in spare parts are due to the destocking by the distribution channel under financial pressure. In Europe, North America and Japan output fell by more than 30%, while in South America the sharp drop in exports was partially offset by the more modest slowing of local demand. Growth continues in India and China. The market for industrial vehicles, earth moving and agricultural machinery has suffered an abrupt collapse: without the benefit of government incentives, investments fell in Europe by 65%. Despite the global scenario, thanks to measures taken at the start of the market crisis, Sogefi Group results for Q2 2009, while lower than a year ago, show significant recovery from the January-March period 2009. These measures include: • Structural reduction of fixed and variable costs. Structural costs fell by 18.6% with labour cost down 23.1% against the first six months of 2008.
• Rationalisation of production facilities aiming at an essential organization.
• Improvement of the financial position. Net indebtedness at 30 June 2009 stood at Euro 212.6 million down from 260.9 million at 31 March 2009.
• Intensified innovation efforts, both in products and new markets.
Consolidated results
Consolidated sales for the first half come to Euro 374.5 million, down 32.7% from Euro 556.3 million for the year-ago period (-30.7% at equal exchange rates). Second quarter revenues, amounting to Euro 199.6 million, though down from 284.6 million in Q2 2008 (-29.8%), grew significantly from Euro 174.9 million in Q1 2009.
Q1 revenues had fallen by 35.6% from 2008.
The biggest decline in revenues over the six months was seen in Europe (-35.1%), with Euro 293.1 million compared with 451.6 million for the first six months of 2008. In Latin America sales fell by 21.8% to Euro 67.4 million from 86.2 million in the first half of last year.
Sales for the Suspension Components Division, almost exclusively destined for original equipment and with a strong presence in industrial vehicles, fell by 37.9% on the previous period, recording revenues of Euro 177.7 million against 286.2 million for the first six months of 2008. The Filtration Division, which benefits from significant sales in the spare parts market, saw its revenues decline by 27.2% to Euro 197.6 million from 271.3 million in the first half of 2008.
Group profitability has been inevitably affected by the sharp falloff in revenues. To counter the situation the company has taken drastic measures to contain all cost factors through the following actions:
• cheaper prices paid for key raw materials, while maintaining sales prices substantially unchanged;
• overall reduction in labour costs of 30.7 million on the first six months 2008 (-23.1%), achieved by reducing the workforce (1,193 fewer employees than on 30 June 2008, 183 less than 31 December 2008);
• structural costs cut by 24.9 million (-18.6%), of which 10.9 million for personnel, compared with the first six months of 2008.
These measures have enabled Sogefi to show a consolidated operating profit of Euro 8 million (2.1% of revenues), down from 53.8 million (9.7%) in H1 2008. The cost cutting measures were particularly effective in the second quarter, which generated a profit of Euro 11.9 million (6% of revenues), compared with a loss of
3.9 million in Q1 2009 and earnings of 30.3 million (10.6%) in Q2 2008.
Non-recurring restructuring costs over the six months came to Euro 9.9 million (6.9 million in the first half of last year).
EBITDA and EBIT for the half, after the non-operational items described above, amounted to a positive Euro 14.2 million (3.8% of revenues) and a negative 7.1 million respectively. These figures were in strong improvement in the second quarter, where EBITDA and EBIT were both positive, respectively Euro 11.9 million (6% of revenues) and 1.3 million (0.6%), notwithstanding restructuring charges of 8.6 million. In the
first half of 2008 EBITDA and EBIT amounted to Euro 61 million (11% of revenues) and 38.7 million (7%). In Q2 2008 EBITDA stood at Euro 31.9 million (11.2% of revenues), while EBIT was 20.7 million (7.3%).
Financial costs remained unchanged compared with the first half of 2008 at Euro 5.7 million, in line with trends in interest rates and the average indebtedness for the period.
The result before tax and minority interests was negative by Euro 12.7 million (compared with profits of 32.7 million in the first six months of 2008).
Consolidated net result was negative for Euro 10.6 million, of which only 1.8 million was generated in the second quarter. Over the first six months of 2008 net profits came to Euro 20.2 million.
Consolidated shareholders’ equity at 30 June 2009, including minority interests, came to Euro 174.8 million (178.3 million at 31 December 2008).
The company has vigorously pursued and achieved its goal of preventing a deterioration of the net financial position: at 30 June 2009 net indebtedness stood at Euro 212.6 million, following the non recourse sale of customer receivables worth 28.2 million. This compares with net indebtedness of Euro 260.9 million at 31 March 2009 and 257.2 million of 31 December 2008.
The parent company Sogefi SpA realised net profits of Euro 32.8 million in the first six months of 2009, down from 35 million in the same period of 2008, mainly due to lower dividends from the subsidiaries.
Outlook for the whole of FY 2009
The second half should see a slow but steady recovery in demand, though much lower over the year than 2008.
Since it is unlikely that there will be a return to record 2007 sales levels in the next two years, Sogefi Group will continue over the coming months its reorganisation efforts aimed at achieving increased efficiency,
cutting surplus capacity in Europe, containing all variable and structural costs and improving the net financial position. Such operations will incur further extraordinary costs, that do not allow to predict a net positive
result for entire financial year.
The manager responsible for preparing the company’s financial statements, Giancarlo Coppa, declares under comma 2 of Article 154-(ii) of the Consolidated Law on Finance that the information presented in this press release corresponds to the results documented in the company accounts and balance sheets.
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