Sogefi half-year results down due to decreased car production, revenues and operating results recover in the second quarter.

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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