Shareholders,
in 2011, the Sogefi Group achieved the highest revenue figure in its history in spite of a drop in demand recorded in many markets in the last part of the year as a result of economic and financial market conditions becoming uncertain again.
In 2011, the Sogefi Group realised revenues for Euro 1,158.4 million, which was 25.3% higher than the 924.7 million recorded in 2010. Such growth can be partly traced back to the activities of Systèmes Moteurs – the French group engaged in the manufacture of air intake and engine cooling systems purchased from American Group Mark IV – which were consolidated from August onwards. Such acquisition will enable Sogefi to expand its product lines, improve penetration of the North American, Chinese and Indian markets, and strengthen its presence among German manufacturers of top-end vehicles.
On a like-for-like basis, Group revenues improved over 2010 as well, with sales totalling Euro 1,021.2 million (+10.4% over the previous year).
Pro-forma revenues – including Systèmes Moteurs activities from January 1, 2011 onwards – amount to Euro 1,335 million.
Consolidated net profit also grew, namely to Euro 24.7 million, i.e. up 31.4% from the 18.8 million of the previous year.
Net financial indebtedness as of December 31, 2011 amounts to Euro 299.8 million, as compared to 164.9 million at the end of the year 2010. The increase is mainly connected with the Systèmes Moteurs acquisition mentioned above.
Renewed difficulties with the European financial markets adversely affected production volumes in the automotive industry, that kept growing during the first part of the year and then experienced yet another sluggish phase both for cars and industrial vehicles during the last months of the year.
In line with forecasts, Europe was the most problematic market in 2011, with new registrations dropping by 1.7% compared to the previous year. The South American, Chinese and Indian markets kept growing, though at lower rates than the previous three years. The Japanese market witnessed a substantial fall in production levels, also due to the catastrophic events occurred in March. Conversely, strong growth characterised the North American market, where major manufacturers improved their production and sales levels. In the automotive market, the General Motors Group regained its position as the world's leading manufacturer with over nine million cars sold, followed by European manufacturer Volkswagen (8.2 million) and Renault Nissan (8 million). Toyota recorded a 5.6% drop and ranks fourth among global manufacturers, followed by Korean manufacturer Hyundai Kia (+14.5%), that outranked Ford, Fiat Chrysler and PSA. Volumes kept growing for German premium segment manufacturers (Audi, BMW, Mercedes), that benefit from significant export volumes.
In the industrial vehicle sector, Sogefi's activity had a good recovery over the levels recorded during the low in 2009 in the first half of 2011, though they quickly slowed down in the last quarter.
Sogefi continued to pursue its strategy of strengthening its presence in non-European markets, with activities growing in Mercosur (+9.6%), North America (+266.1% including the strong contribution from Systèmes Moteurs S.A.S.; on a like-for-like basis, the increase would have been by 46.1%), China (+36.4%) and India (+37.6%).
(in millions of Euro) | 2011 | 2010 | ||
---|---|---|---|---|
Amount | % | Amount | % | |
France | 246.9 | 21.3 | 207.4 | 22.4 |
Germany | 158.3 | 13.7 | 119.9 | 13.0 |
Great Britain | 97.1 | 8.4 | 79.0 | 8.5 |
Italy | 79.4 | 6.9 | 71.6 | 7.7 |
Benelux | 59.9 | 5.2 | 47.4 | 5.1 |
Spain | 47.9 | 4.1 | 36.5 | 3.9 |
Russia | 4.5 | 0.4 | 3.3 | 0.4 |
Other European Countries | 110.9 | 9.5 | 94.2 | 10.3 |
Mercosur | 240.5 | 20.8 | 219.4 | 23.7 |
United States | 54.0 | 4.7 | 18.6 | 2.0 |
China | 17.2 | 1.5 | 12.6 | 1.4 |
India | 13.3 | 1.2 | 9.7 | 1.0 |
Mexico | 10.3 | 0.8 | 1.2 | 0.1 |
Canada | 8.2 | 0.7 | - | - |
Rest of the World | 10.0 | 0.8 | 3.9 | 0.5 |
TOTAL | 1,158.40 | 100.0 | 924.7 | 100.0 |
The less than impressive trend of filter sales in the European independent aftermarket (IAM) confirmed that the Group's main source of revenues is the original equipment sector (OE), that rose to 73.3% of total revenues, partly as a result of the acquisition of Systèmes Moteurs, that is primarily engaged in the OEM segment, as shown in detail in the table below.
(in millions of Euro) | 2011 | 2010 | ||
---|---|---|---|---|
Amount | % | Amount | % | |
Original Equipment (O.E.) | 848.9 | 73.3 | 610.4 | 66.0 |
Independent Aftermarket (I.A.M.) | 196.6 | 17.0 | 204.8 | 22.1 |
Original Equipment Spares (O.E.S.) | 112.9 | 9.7 | 109.5 | 11.9 |
TOTAL | 1.158.4 | 100.0 | 924.7 | 100.0 |
Activities in the suspension components sector rose by 18.6%, compared with a moderate increase (+2.3%) in filter systems activities net of the additional activities of Systèmes Moteurs. After the acquisition, the filter business unit was renamed Engine Systems Division, which includes the operations in existence before that Systèmes Moteurs was included in the scope of consolidation (actually named Fluid Filters) and the operations of the newly acquired company (named Air Intake and Cooling).
(in millions of Euro) | 2011 | 2010 | ||
---|---|---|---|---|
Amount | % | Amount | % | |
Engine systems | 611.5 | 52.8 | 465.1 | 50.3 |
Suspension components | 547.7 | 47.3 | 461.6 | 49.9 |
Intercompany eliminations | (0.8) | (0.1) | (2.0) | (0.2) |
TOTAL | 1,158.4 | 100.0 | 924.7 | 100.0 |
As usual, below is a breakdown of revenues by customers that shows how such customers as Ford, GM and BMW recorded a good growth (as percentage on total sales) thanks to the contribution of Systèmes Moteurs.
Sales to industrial customers DAF/Paccar and MAN also grew.
(in millions of Euro) | 2011 | 2010 | ||
---|---|---|---|---|
Group | Amount | % | Amount | % |
PSA | 154.3 | 13.3 | 121.1 | 13.1 |
Renault/Nissan | 131.0 | 11.3 | 105.3 | 11.4 |
Ford | 114.0 | 9.8 | 80.5 | 8.7 |
Fiat/Iveco/Chrysler | 85.3 | 7.4 | 76.8 | 8.3 |
Daimler | 85.1 | 7.3 | 64.3 | 7.0 |
GM | 73.8 | 6.4 | 32.4 | 3.5 |
Volkswagen/Audi | 65.2 | 5.6 | 55.2 | 6.0 |
Volvo | 32.19 | 2.8 | 22.0 | 2.4 |
DAF/Paccar | 31.5 | 2.7 | 18.7 | 2.0 |
Man | 27.2 | 2.3 | 14.9 | 1.6 |
BMW | 18.9 | 1.6 | 5.9 | 0.6 |
Toyota | 17.7 | 1.5 | 13.6 | 1.5 |
Caterpillar | 9.6 | 0.8 | 6.6 | 0.7 |
Honda | 5.9 | 0.5 | 8.1 | 0.9 |
Other | 306.8 | 26.7 | 299.3 | 32.3 |
TOTAL | 1,158.40 | 100.0 | 924.7 | 100.0 |
A breakdown of revenues by product line – reported below – shows an uptrend in revenues from suspension products and reports the data relating to Systèmes Moteurs product lines for the August-December period only.
(in millions of Euro) | 2011 | 2010 | ||
---|---|---|---|---|
Amount | % | Amount | % | |
Stabilizer bars | 225.9 | 19.5 | 190.8 | 20.6 |
Oil filters | 195.2 | 16.8 | 202.6 | 21.9 |
Coil springs | 158.9 | 13.7 | 137.2 | 14.8 |
Air filters | 116.1 | 10.0 | 116.9 | 12.6 |
Diesel filters | 106.4 | 9.2 | 90.5 | 9.8 |
Leaf springs | 86.5 | 7.5 | 65.8 | 7.1 |
Air intake manifold | 64.0 | 5.5 | - | 0.0 |
Cooling system | 30.6 | 2.6 | - | 0.0 |
Air duct | 25.5 | 2.2 | - | 0.0 |
Precision springs | 19.6 | 1.7 | 19.2 | 2.1 |
Stabilinks | 19.1 | 1.6 | 13.9 | 1.5 |
Petrol filters | 18.5 | 1.6 | 20.8 | 2.3 |
Cabin filters | 15.3 | 1.3 | 14.1 | 1.5 |
Torsion bars | 13.6 | 1.2 | 15.2 | 1.6 |
Railway | 11.5 | 1.0 | 9.6 | 1.1 |
Other | 51.7 | 4.6 | 28.1 | 3.1 |
TOTAL | 1,158.40 | 100.0 | 924.7 | 100.0 |
As a result of the consolidation of the newly purchased company, all consolidated results improved over the previous year, as shown in the following table.
(in millions of Euro) | 2011 | 2010 | ||
---|---|---|---|---|
Amount | % | Amount | % | |
Sales revenues | 1,158.4 | 100.0 | 924.7 | 100.0 |
Variable cost of sales | 805.9 | 69.6 | 622.9 | 67.4 |
CONTRIBUTION MARGIN | 352.5 | 30.4 | 301.8 | 32.6 |
Manufacturing and R&D overheads | 115.0 | 9.9 | 98.6 | 10.6 |
Depreciation and amortization | 48.8 | 4.2 | 44.9 | 4.9 |
Distribution and sales fixed expenses | 35.3 | 3.0 | 32.4 | 3.5 |
Administrative and general expenses | 64.3 | 5.6 | 58.4 | 6.3 |
OPERATING RESULT | 89.1 | 7.7 | 67.5 | 7.3 |
Restructuring costs | 8.8 | 0.8 | 12.0 | 1.3 |
Losses (gains) on disposal | 0.1 | - | (0.5) | - |
Exchange (gains) losses | 0.9 | 0.1 | 0.2 | - |
Other non-operating expenses (income) | 19.8 | 1.7 | 14.0 | 1.5 |
EBIT | 59.5 | 5.1 | 41.8 | 4.5 |
Financial expenses (income). net | 12.7 | 1.1 | 9.6 | 1.0 |
Losses (gains) from equity investments | - | - | (0.2) | - |
RESULT BEFORE TAXES AND NON-CONTROLLING INTERESTS | 46.8 | 4.0 | 32.4 | 3.5 |
Income taxes | 18.9 | 1.6 | 11.6 | 1.3 |
NET RESULT BEFORE NON-CONTROLLING INTERESTS | 27.9 | 2.4 | 20.8 | 2.2 |
Loss (income) attributable to non-controlling interests | (3.2) | (0.3) | (2.0) | (0.2) |
GROUP NET RESULT | 24.7 | 2.1 | 18.8 | 2.0 |
Consolidated contribution margin rose to Euro 352.5 million (30.4 % of revenues) from 301.8 million (32.6 % of revenues) in 2010.
The year was characterised by a rising impact of the cost of materials (mainly due to steel price trends), which grew from 46% to 49.8%, in spite of extra costs being nearly totally passed on to sales prices.
The impact of labour cost on total revenues dropped from 24.6% to 22.9% and employees (including temporary workers and excluding employees under labour flexibility schemes) increased from 5,841 units at December 31, 2010 to 6,954 units after the new consolidation perimeter.
As of December 31, 2011, the Group employed a workforce of 6,708 compared to 5,574 as of December 31, 2010. Breakdown by business sectors is as follows:
12.31.2011 | 12.31.2010 | |||
---|---|---|---|---|
Number | % | Number | % | |
Engine systems | 4,136 | 61.7 | 3,170 | 56.9 |
Suspension components | 2,508 | 37.4 | 2,347 | 42.1 |
Other | 64 | 0.9 | 57 | 1.0 |
TOTAL | 6,708 | 100.0 | 5,574 | 100.0 |
and breakdown by category is provided below:
2011 | 2010 | |||
---|---|---|---|---|
Number | % | Number | % | |
Managers | 108 | 1.6 | 87 | 1.6 |
Clerical staff | 1,774 | 26.4 | 1,304 | 23.4 |
Direct blue collar workers | 3,853 | 57.5 | 3,330 | 59.7 |
Indirect blue collar workers | 973 | 14.5 | 853 | 15.3 |
TOTAL |
6,708 | 100.0 | 5.574 | 100.0 |
Consolidated operating result amounts to Euro 89.1 million (7.7 % of revenues), 31.9% up from the 67.5 million (7.3% of revenues) in the previous year.
On a like-for-like basis, operating result would have been 78.6 million (7.7% of revenues), recording a 16.4% increase.
Reorganisation continued during the year, as the Llantrisant plant in Wales was strongly downsized and most subsidiaries implemented less extensive reorganisation plans in order to bring under control fixed costs. Overall, such plans cost Euro 8.8 million, compared to 12 million in 2010. Restructuring operations also include non-operating expenses for the amount of Euro 3.4 million in asset writedowns.
Non-operating expenses include Euro 4.4 million relating to consulting fees in connection with the acquisition of the Systèmes Moteurs Group and 0.8 million that reflect the margin included in the fair value of Systèmes Moteurs inventories at acquisition date recognised in the income statement.
Consolidated EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) for the year was Euro 108.3 million (9.3% of revenues), up 24.9% from 86.7 million (9.4% of revenues) in the previous year. On a like-for-like basis, it would have amounted to Euro 99.8 million (9.8% of revenues).
Pro-forma EBITDA for 2011 (including Systèmes Moteurs activities from January 1, 2011 onwards) amounts to Euro 123.1 million (9.2% of pro-forma revenues for the year 2011).
Consolidated EBIT (Earnings Before Interest and Tax) rose to Euro 59.5 million (5.1% of revenues) from 41.8 million (4.5% of revenues) in 2010. Excluding Systèmes Moteurs activities and acquisition costs, EBIT would amount to Euro 55.9 million (5.5% of revenues).
Consolidated result before taxes and non-controlling interests, which amounted to Euro 32.4 million in 2010, totalled Euro 46.8 million in 2011, ihigher interest cost due to increased indebtedness.
As mentioned earlier, consolidated net result increased by 31.4% over the previous year, namely to Euro 24.7 million compared to 18.8 million in 2010.
Cash outflows relating to the purchase of Systèmes Moteurs for the amount of Euro 138.2 million (see next page for breakdown) and dividends paid for the amount of Euro 16.1 million caused the Group's net indebtedness to rise to Euro 299.8 million as of December 31, 2011, compared with 164.9 million as of December 31, 2010.
The following table provides a breakdown of indebtedness as of December 31, 2011:
(in millions of Euro) | 12.31.2011 | 12.31.2010 |
---|---|---|
Cash, banks, financial receivables and securities held for trading | 104.4 | 67.0 |
Medium/long-term financial receivables | - | - |
Short-term financial debts (*) | (57.4) | (78.9) |
Medium/long-term financial debts | (346.8) | (153.0) |
NET FINANCIAL POSITION | (299.8) | (164.9) |
(*) including current portions of medium and long-term financial debts.
Changes in cash flows during the year are reported in the table below:
(in millions of Euro) | Note* | 2011 | 2010 |
---|---|---|---|
SELF-FINANCING | (f) | 70.9 | 55.3 |
Change in net working capital | 14.2 | (15.4) | |
Other medium/long-term assets/liabilities | (g) | (5.0) | 0.7 |
CASH FLOW GENERATED BY OPERATIONS | 80.1 | 40.6 | |
Sale of equity investments | (h) | - | 0.1 |
Net decrease from sale of fixed assets | (i) | 0.3 | 0.7 |
TOTAL SOURCES | 80.4 | 41.4 | |
Increase in intangible assets | 20.5 | 11.7 | |
Purchase of tangible assets | 36.3 | 24.3 | |
Purchase of equity investments (**) | 146.5 | - | |
TOTAL APPLICATION OF FUNDS | 203.3 | 36.0 | |
Net financial position of subsidiaries purchased/sold during the year (**) | 8.3 | - | |
Exchange differences on assets/liabilities and equity | (l) | (1.8) | 0.7 |
FREE CASH FLOW | (116.4) | 6.1 | |
Holding Company increases in capital | 0.3 | 0.3 | |
Net purchase of treasury share | (2.7) | - | |
Increases in share capital of consolidated subsidiaries | - | 0.9 | |
Dividends paid by the Holding Company to shareholders | (14.9) | - | |
Dividends paid by subsidiaries to non-controlling interests | (1.2) | (2.0) | |
CHANGES IN SHAREHOLDERS' EQUITY | (18.5) | (0.8) | |
Change in net financial position | (m) | (134.9) | 5.3 |
Opening net financial position | (m) | (164.9) | (170.2) |
CLOSING NET FINANCIAL POSITION | (m) | (299.8) | (164.9) |
(*) see the notes at the end of this report for a detailed explanation of the reasons for the reclassifications that we have made;
(**) total Euro 138.2 million: consolidated net cash outflow for the purchase of Systèmes Moteurs S.A.S..
As of December 31, 2011 consolidated capital structure reflects consolidated equity for the amount of Euro 195.9 million compared with 197.2 million as of December 31, 2010, as shown in the table below:
(in millions of Euro) | Note* | 12.31.2011 | 12.31.2010 | ||
---|---|---|---|---|---|
Amount | % | Amount | % | ||
Short-term operating assets | (a) | 363.7 | 262.2 | ||
Short-term operating liabilities | (b) | (299.4) | (218.4) | ||
Net working capital | 64.3 | 12.5 | 43.8 | 11.5 | |
Equity investments | (c) | 0.8 | 0.2 | 0.4 | 0.1 |
Intangible, tangible fixed assets and other medium and long-term assets | (d) | 527.0 | 102.3 | 409.8 | 108.1 |
CAPITAL INVESTED | 592.1 | 115.0 | 454.0 | 119.7 | |
Other medium and long-term liabilities | (e) | (77.4) | (15.0) | (74.7) | (19.7) |
NET CAPITAL INVESTED | 514.7 | 100.0 | 379.3 | 100.0 | |
Net financial indebtedness | 299.8 | 58.2 | 164.9 | 43.5 | |
Non-controlling interests | 19.0 | 3.7 | 17.2 | 4.5 | |
Consolidated equity of the Group | 195.9 | 38.1 | 197.2 | 52.0 | |
TOTAL | 514.7 | 100.0 | 379.3 | 100.0 |
(*) see the notes at the end of this report for a detailed explanation of the reasons for the reclassifications that we have made.
In 2011, gearing (net financial position/total equity ratio) stood at 1.4 (due to higher indebtedness after the acquisition) compared to 0.77 at the end of 2010.
Net financial position/normalised EBITDA (excluding costs and revenues from non-ordinary operations) ratio increased from 1.67 as of December 31, 2010 to 2.14.
ROI (return on investment) for the year 2011 was 13.3% (11.4% in 2010) and ROE (return on equity) was 12.6% (10.3% in 2010).
New technical investments during the year amounted to Euro 36.3 million and were aimed at upgrading production processes, developing products and increasing production capacity at non-European facilities.
Research and development expenses during the year amounted to Euro 26.1 million (Euro 20.2 million in the previous year), and were focused on product engineering activities to develop components for new car platforms as well as new products, including: coil springs in composite materials, the new aluminium-foam cooling system for filters and the innovative diesel particulate filter.