Sogefi: net loss for 2009 7.6 million, return to profit expected in 2010

The net loss was due mainly to the impact of restructuring costs, which amounted to 17.2 million euro. The results were penalized by the sharp fall in vehicle production in Europe  

Thanks to the action taken, the company’s revenues and profitability recovered during the year, returning to profit in the third quarter. Structure costs down by 30.7 million euro in 2009  

In view of the result for the period and in order to strengthen the equity structure of the company, the Board of Directors will propose to the Shareholders that no dividends be distributed  

Consolidated results for financial year 2009  
Revenues: € 781 million (-23.2% from € 1,017.5 million in 2008) Operating result: € 33.7 million (€ 87.6 million in 2008)
EBITDA: € 47.2 million (€ 104.9 million in 2008)
Net result: a loss of € 7.6 million (net income of € 28.5 million in 2008)
Net debt: € 170.2 million (€ 257.2 million at December 31 2008)  

Milan, February 23 2010 – The Board of Directors of Sogefi SpA, which met today under the chairmanship of Rodolfo De Benedetti, has approved the proposed financial statements and the consolidated financial statements for financial year 2009.  

Performance of operations  
In 2009 the automotive industry worldwide suffered an unprecedented contraction in production levels in the mature markets, especially in Europe. The crisis in the financial markets and the resulting slowdown of the world economy particularly dampened demand for new vehicles. In the car sector, although the decline in demand was limited by the incentive plans put in place by the various countries, production levels declined significantly because manufacturers needed to reduce their stocks of unsold vehicles.   In Europe, the main market of the Sogefi group, the decline in production was 18% for cars and over 60% for industrial vehicles, which did not benefit from incentives. North America reported the lowest production levels for the last 50 years (-30% on 2008) with important manufacturers in crisis. As far as emerging markets are concerned, Brazil substantially confirmed its 2008 production volumes thanks to a cut in taxes. In China new car sales rose by over 40%, partly as a result of its public support plan. Lastly, India confirmed its growth trend of the last few years.  
The difficulties of the market had a negative impact on the results of the Sogefi group, which in 2009 reported a net loss (-7.6 million euro) after the restructuring costs incurred during the year. Without these costs, the company would have closed the most difficult year in its history with a profit.  
From the beginning of the crisis in the sector, Sogefi has acted rapidly and effectively to limit its impact, starting during the year a series of actions which enabled the company to recover profitability and post a positive net income figure already in the third quarter. The actions undertaken were the following: –        
A structural reduction of cost factors;
–         The reorganization of production facilities;
–         The enhancement of centres of competence and service (research and development and purchasing);
–         Product and process innovation;
–         Cash flow generation by managing working capital and focusing investments.  

Consolidated results  
In 2009 consolidated revenues came in at 781 million euro, down by 23.2% from 1,017.5 million in 2008. The Suspension Components Division, which operates almost exclusively in the original equipment market and is most present in the industrial vehicle segment, posted a decline of 29.5%, which was significantly higher than that of the Filter Division (-16.6%), which benefited from the stable performance of the after-market/replacement segment. France and Germany confirmed their status as the company’s main markets, while Britain and Spain declined in importance. The relative weighting of business in South America rose, accounting for 19.6% of sales, as did that of China, while the United States remained stable. The Indian market, in Sogefi’s first year of business there, achieved a 0.8% share of the sales revenues of the group.   The decline in sales had a significant impact on consolidated earnings, especially in the first half of the year. The action taken by the company did, however, enable profitability to recover during the year, thanks also to the improvement of revenues in the second half of the year.  
Structure costs fell by 30.7 million euro compared to 2008, 14 million of which relating to staff. Total labour costs were cut by 37.4 million euro compared to 2008.  
Consolidated operating result came in at 33.7 million euro (4.3% of sales) and was down by 61.6% from 87.6 million in 2008 (8.6% of sales). Restructuring costs incurred during the year amounted to 17.2 million euro, up sharply from 11.5 million in 2008. These outlays, which were essential to bring structure costs into line with the lower levels of activity, affected the gross operating margin (EBITDA), which at 47.2 million euro (6% of sales) was down by 55% from 104.9 million in 2008 (10.3% of sales). Consolidated EBIT (earnings before interest and taxes) behaved in a similar way coming in at 5.1 million euro (0.6% of sales), down from 62.4 million (6.1% of sales) in 2008.   The consolidated net result was a loss of 7.6 million euro which compares with net income of 28.5 million euro reported in the previous year.  
At balance sheet level, the action taken during the year made it possible to reduce the net debt figure by 87 million euro (from 257.2 million euro at December 31 2008 to 170.2 million euro at the close of 2009).  
Consolidated shareholders’ equity stood at 166.8 million euro at December 31 2009, up from 160.9 million euro in the previous year.  
The Sogefi group had 5,770 employees on its books at December 31 2009 compared to 6,100 at the end of 2008.  

Filter Division  
The Filter Division managed to contain its decline in sales revenues to 16.6% (414.8 million euro, down from 497.5 million in 2008), with a larger decline in Europe (-20.8%) than in South America (-8.7%). The contraction came mainly from the original equipment sector. Earnings were also down because of the reduced volumes of activity and the high costs incurred for reorganization. EBITDA came in at 27.1 million euro (6.5% of sales) and was down by 38.6% from the figure of 44 million (8.9% of sales) reported in the previous twelve months. EBIT declined to 9.7 million euro (2.3% of sales), compared to 26.6 million (5.3% of sales) in 2008.  

Suspension Components Division  
The presence of the Division in the industrial vehicle sector and the absence of any significant activity in the aftermarket caused a decline in the consolidated revenues of the Suspension Components Division of 29.5% (368 million euro versus 521.9 million in 2008). The highest decline was in Europe (-23.1%), in industrial vehicles (-51.6%) and in precision springs (-37.3%). The drastic reduction in costs and the positive effect of steel prices were not sufficient to offset the strong fall in demand, which led to a decline in profitability. The EBITDA of the division was 24 million euro (6.5% of sales), versus 64.5 million (12.4% of sales) in the previous year. Consolidated EBIT was a loss of 0.1 million euro (earnings of 40.2 million in 2008).  

Results of the parent company Sogefi SpA  
The parent company of the group Sogefi SpA closed 2009 with net income of 33.4 million euro, up by 14.3% from 29.2 million euro in the previous year thanks to a stable flow of dividends and to the fact that there were no write-downs of its investees, which had an impact of 4.6 million euro in 2008. Net financial debt, which stood at 136.1 million euro, improved by 26.8 million compared to the end of 2008. Shareholders’ equity amounted to 163.7 million euro at December 31 2009, posting a significant rise compared to the figure of 130.3 million euro at the end of 2008. This was due to the earnings for the period together with the fact that the earnings of the previous year were not distributed as dividends.  

Outlook for the year 2010  
The evolution of demand for vehicles in 2010 will depend on whether government incentives are renewed for 2010 in the various markets and if they are renewed how long they are renewed for and the amounts involved. Production levels should benefit from the end of destocking by manufacturers and the distribution network. The drastic reduction in the structure costs of the group in 2009 and the forecast growth of business in emerging markets should in any case improve profitability and enable the group to return to profit.  

Shareholders’ Meeting
The Meeting of the Shareholders of Sogefi has been convened for April 20 2010 at the first call with the second call on April 21 2010. In the light of the consolidated result for the period and with the aim of further strengthening the equity structure of the group, the Board of Directors of the company has decided to submit the proposal that no dividends be distributed for financial year 2009.  
The Board also voted:   
–      To propose that the Shareholders’ Meeting cancel and renew the authorization of the Board of Directors for a period of 18 months to buy back a maximum of 4 million of the company’s own shares (including the 1,956,000 own shares held as of today, corresponding to 1.68% of the ordinary share capital) at a price per share that may not be more than 10% above or below the benchmark price recorded by the shares on regulated markets on the trading day preceding each single buyback transaction. The main reason why this authorization is being renewed is the possibility of investing in shares of the company at prices below their actual value based on the real economic value of its equity and its income generating prospects; 
–      To submit to the approval of the Shareholders’ Meeting a stock option plan for 2010 aimed at employees of the company and its subsidiaries and the Chief Executive Officer of the company for a maximum of 2,500,000 options; 
–      To submit to the extraordinary session of the Shareholders’ Meeting a share capital increase, excluding option rights as per the provisions of  Article 2441, paragraphs 5 and 8, of the Civil Code and Article 134, paragraph 2 of D. Lgs. No. 58 of 24.2.1998, of a maximum of nominal euro 1,300,000 (before the share premium), to be effected by September 30 2020 at the latest, through the issuance of a maximum of 2,500,000 ordinary Sogefi shares, aimed exclusively and irrevocably at servicing Stock Option Plan 2010. The issuance price of the shares will be established by the Board of Directors as the arithmetic average of the official prices recorded by Sogefi shares on the Mercato Telematico Azionario (MTA market) in the month preceding the grant date;  –      To submit to the extraordinary session of the Shareholders’ Meeting the proposal that an amendment be made to the authorization given by the Shareholders’ Meeting held on April 23 2009 to the Board of Directors for capital increases in favour of employees for a maximum amount of 5.2 million euro to include the right to increase the capital even in favour of directors so that future stock option awards may be made in their favour too.  
The Shareholders’ Meeting will also be called upon, at the ordinary session, to vote on the renewal of the Board of Directors for the three years 2010-2012 and to assign a mandate to the firm of auditors.

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