Sogefi revenues and margins hit by sharp fall in world vehicle production, new measures announced to combat the crisis in the industry

Milan, 23 April 2009 – The Board of Directors of Sogefi SpA, chaired by Mr. Rodolfo De Benedetti, met today in Milan to examine the consolidated group results for the first quarter of 2009.
Business trends
Following an already critical situation  in  the  last quarter of 2008, Q1 2009 saw a  further contraction  in world vehicle production due to a slump in consumer demand and the attempts by car makers to reduce the backlog of unsold vehicles at dealerships. 
The incentives to buy new and cleaner vehicles announced by many governments focused mainly on the auto segment, and took effect only from the second half of February. Without similar support sales and output of industrial vehicles collapsed. 
This  situation  hit  Sogefi  group  revenues  and  margins  with  a  sharp  contraction  in  sales  of  original equipment,  but  also  in  the  smaller  spare  parts  business  in  Europe where  dealers  are  having  difficulty obtaining finance. 
 In this extraordinarily difficult climate, the company has taken further steps to combat the effects of the crisis throughout the sector. In particular:
  Structural  reduction  of  all major  costs,  variable  and  fixed,  assisted  by  the  drop  in  commodity prices. Compared with Q1 2008, structural costs have been cut by 17.1% and the headcount by14.2%.
  Acceleration of existing plans to rationalise the manufacturing structure in view of the dramatic  scenario. We  therefore  plan  to  close  one  plant  in  France  and  cease  production  of  suspension components in the United States by the end of 2009.
  Intensified  research  and  innovation  efforts,  particularly  in  suspensions  in  composite materials, and business development in Asia, especially India, in the filtration segment.
Consolidated results
In the period under examination Sogefi group’s consolidated revenues came to Euro 174.9 million, down 35.6%  from 271.7 million  in  the  first quarter of 2008. Revenues  for  the  Filtration Division amounted  to Euro  90.2  million  (32.2%),  while  those  of  the  Suspension  Components  Division  came  to  84.9 million (-39%).
Sales  fell 37.5%  in Europe  (Euro 138.2 million against  the previous 221.2 million) and by 27.8%  in  LatinAmerica  (Euro 29.7 million compared with 41.1 million  in Q1 2008). The worst performance was seen  in Europe in suspension components for industrial vehicles (-44.4%) and precision springs (-45.6%).
Beginning in the final months of 2008 the group has taken extraordinary steps to reduce all the main cost factors, variable and fixed, and contain the impact of the rapid fall in revenues on earnings.   Comparison between  the  first quarters  of  2009  and  2008  reveals  a  reduction  in  the workforce  (including  part-time workers but excluding those covered by flexible employment schemes, such as ordinary and extraordinary “cassa integrazione” in Italy or similar arrangements in other countries) by 977 units (-14.2%) and a cut in structural costs of Euro 11.5 million (-17.1%), besides the favourable trend in the cost of raw materials.
Profits for the period nevertheless fell sharply due to lower sales volumes: 
  Consolidated  EBITDA  amounted  to  Euro  2.2 million  (29.1 million  in Q1  2008).  Euro  2.3 million were  generated  by  the  Filtration  Division  and  Euro  0.5 million  by  the  Suspension  Components Division.
  Consolidated EBIT was a negative Euro 8.4 million, against a positive result of 17.9 million.
  Result before taxes and minority interests came to a negative Euro 11.6 million, compared with a profit of 15.7 million in 2008.
  The consolidated net result was also negative by Euro 8.8 million against a profit of 9 million  in first three months of last year.
Despite the difficult economic climate, we were able to avoid a worsening of the net financial position, so that net indebtedness at 31 March 2009 remained substantially in line with the figure for year-end 2008 (Euro 260.9 million compared with 257.2 million at 31 December 2008). 
Total consolidated shareholders’ equity including minority interests amounted to Euro 173 million at the end of  the quarter  (178.3 million at  the end of 2008), while consolidated net equity  for  the group was Euro 155.5 million (160.9 million at 31 December 2008).
Outlook for the whole of FY 2009
While  we  can  expect  some  pickup  in  demand  over  the  coming months  as  the  new  vehicle  purchase incentives take effect, it is clear that sales for the whole year will be significantly lower than those of 2008. 
As mentioned above, the group has taken further steps to contain costs as far as possible, bringing them into line with the new revenue levels, and to speed up planned rationalisation measures at its production plants. However,  lower  revenues and  the extraordinary  reorganisation  costs make  the  forecast of a net loss for the financial year unavoidable. 
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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