Cembre — Interim / Quarterly Report 2015

Nov 13, 2015

C o s t r u z i o n i E l e t t r o m e c c a n i c h e B r e s c i a n e

I N T E R I M REPORT

THIRD QUARTER 2015

Cembre S.p.A.

Head Office: Via Serenissima 9, Brescia, Italy Share Capital: EUR 8,840,000 (fully paid-up). Registration no: 00541390175 (Commercial Register of Brescia)

This document contains translations of the quarterly report prepared in the Italian language for the purpose of the Italian law and of CONSOB regulations (CONSOB is the public authority responsible for regulating the Italian securities market)

Summary

Corporate Boards and Independent Auditors 2
Group Structure 3
Management Report 4
Events subsequent to September 30, 2015 7
Outlook 7
Comparative Consolidated Income Statement 9
Consolidated Financial Statements at September 30, 2015 10
Consolidated Comprehensive Income Statement 10
Consolidated Statement of Financial Position - Assets 11
Consolidated Statement of Financial Position – Liabilities and Shareholders' Equity 12
Consolidated Statement of Cash Flows 13
Statement of Changes in the Consolidated Shareholders' Equity 14
Notes to the accounts 15
Accounting principles, form and content of the Financial Statements, estimates 15
Conversion of financial statements of subsidiaries expressed in currencies other than
the euro 16

Corporate Boards and Independent Auditors

Board of Directors

Giovanni Rosani	Chairman and Managing Director
Anna Maria Onofri	Vice-Chairman
Sara Rosani	Director
Giovanni De Vecchi	Director
Aldo Bottini Bongrani	Director
Fabio Fada	Independent Director
Giancarlo Maccarini	Independent Director
Paolo Giuseppe La Pietra	Independent Director

Board of Statutory Auditors

Fabio Longhi	Chairman
Guido Astori	Permanent Auditor
Rosanna Angela Pilenga	Permanent Auditor

Maria Grazia Lizzini	Substitute Auditor

Gabriele Baschetti Substitute Auditor

Independent Auditors

PricewaterhouseCoopers S.p.A.

Group Structure

Management Report

In the first nine months of 2015 both domestic sales and exports of the Cembre Group registered an increase on the corresponding period in 2014. Consolidated sales grew by 9.1% from €83,664 thousand in the first nine months of 2014, to €91,278 thousand in the corresponding period in 2015. In the 3rd Quarter of 2015 revenues amounted to €28,241 thousand, up 4.4% on €27,051 thousand in the 3rd Quarter of 2014.

In the first nine months of the year sales of Group companies had varied performances, with the parent company and the Spanish subsidiary registering respectively a 15.1% and a 21.9% increase in turnover, and the UK and US subsidiaries registering instead respectively a 15.7% and a 14.4% decline in sales in the respective currency.

(euro '000)	First nine months 2015	First nine months 2014	Change	First nine months 2013	First nine months 2012	First nine months 2011	First nine months 2010	First nine months 2009	First nine months 2008
Parent company	49,924	43,371	15.1%	38,726	40,612	44,886	38,490	29,744	39,624
Cembre Ltd. (UK)	14,479	15,376	-5.8%	14,295	13,402	10,410	8,823	8,406	9,815
Cembre S.a.r.l. (F)	6,481	6,188	4.7%	5,853	5,759	5,597	4,638	4,628	4,888
Cembre España S.L. (E)	6,217	5,101	21.9%	4,622	4,548	5,442	6,101	5,504	9,326
Cembre GmbH (D)	5,869	5,706	2.9%	5,478	6,285	5,903	4,738	3,837	3,975
Cembre AS (NOR)	755	665	13.5%	582	774	624	806	501	607
Cembre Inc. (US)	7,553	7,257	4.1%	7,141	6,026	4,788	3,872	3,426	4,243
Total	91,278	83,664	9.1%	76,697	77,406	77,650	67,468	56,046	72,478

			Revenues by Group company (net of intragroup sales):
--	--	--	------------------------------------------------------	--

In the first nine months of 2015, 40.1% of Group sales were represented by Italy (as compared with 39.2% in the first nine months of 2014), 42.5% by the rest of Europe (45.4% in the first nine months of 2014), and the remaining 17.4% by the rest of the World (15.4% in the first nine months of 2014). In the first nine months of 2015, domestic sales grew by 11.8% while exports were up 7.4% on the corresponding period in 2014; European sales outside Italy increased by 2% on the first nine months of 2014, while sales to the rest of the world grew by 23%.

Revenues by geographical area

(euro '000)	First nine months 2015	First nine months 2014	Change	First nine months 2013	First nine months 2012	First nine months 2011	First nine months 2010	First nine months 2009	First nine months 2008
Italy	36,632	32,769	11.8%	28,499	30,549		34,591 29,252	22,053	31,705
Rest of Europe	38,750	37,972	2.0%	35,625	35,323		33,094 29,578	26,956	32,680
Rest of the World	15,896	12,923	23.0%	12,573	11,534	9,965	8,638	7,037	8,093
Total	91,278	83,664	9.1%	76,697	77,406		77,650 67,468	56,046	72,478

Revenues by Group company (net of intragroup sales)

		Sales
(euro '000)	First nine months 2015	First nine months 2014	Change	First nine months 2013	First nine months 2012	First nine months 2011	First nine months 2010	First nine months 2009	First nine months 2008
Cembre S.p.A.	70,016	63,408	10.4%	56,944	59,309	61,192	52,281	41,865	57,568
Cembre Ltd. (UK)	15,590	16,716	-6.7%	15,530	14,687	12,122	9,904	9,277	10,819
Cembre S.a.r.l. (F)	6,484	6,197	4.6%	5,903	5,767	5,615	4,643	4,645	4,910
Cembre España S.L. (E)	6,233	5,103	22.1%	4,623	4,910	5,444	6,102	5,506	9,327
Cembre GmbH (D)	5,978	5,748	4.0%	5,616	6,300	5,978	4,756	3,878	3,984
Cembre AS (NOR)	755	665	13.5%	582	774	629	806	502	613
Cembre Inc. (USA)	7,867	7,376	6.7%	7,167	6,076	4,795	3,897	3,486	4,250

					Pre-tax profit
(euro '000)	First nine months 2015	First nine months 2014	Change	First nine months 2013	First nine months 2012	First nine months 2011	First nine months 2010	First nine months 2009	First nine months 2008
Cembre S.p.A.	16,595	13,602	22.0%	8,400	10,775	12,684	10,994	4,976	9,973
Cembre Ltd. (UK)	2,022	2,416	-16.3%	2,100	1,936	1,513	955	1,104	993
Cembre S.a.r.l. (F)	438	278	57.6%	318	170	350	83	419	491
Cembre España S.L. (E)	479	246	94.7%	169	(234)	(162)	171	335	957
Cembre GmbH (D)	595	422	41.0%	433	736	660	420	316	291
Cembre AS (NOR)	66	76	-13.2%	12	119	30	240	108	164
Cembre Inc. (USA)	239	677	-64.7%	1,012	423	371	154	181	523

For a more direct evaluation of the effect of foreign exchange translations, we include below sales figures of companies operating outside the euro area in the respective currency.

	Currency		Sales
(euro '000)		First nine months 2015	First nine months 2014	Change	First nine months 2013	First nine months 2012	First nine months 2011	First nine months 2010	First nine months 2009	First nine months 2008
Cembre Ltd. (UK)	Gbp	11,337	13,570	-16.5%	13,234	11,926	10,563	8,491	8,221	8,471
Cembre AS (NOR)	Nok	6,654	5,504	20.9%	4,458	5,816	4,913	6,441	4,437	4,893
Cembre Inc. (USA)	US\$	8,767	9,994	-12.3%	9,440	7,782	6,745	5,122	4,764	6,468

	Currency		Pre-tax profit
(euro '000)		First nine months 2015	First nine months 2014	Change	First nine months 2013	First nine months 2012	First nine months 2011	First nine months 2010	First nine months 2009	First nine months 2008
Cembre Ltd. (UK)	Gbp	1,470	1,961	-25.0%	1,789	1,572	1,319	819	979	778
Cembre AS (NOR)	Nok	580	627	-7.5%	93	892	236	1,918	957	1,311
Cembre Inc. (USA)	Us\$	266	917	-71.0%	1,333	542	521	203	247	795

To provide a better understanding of the Company's financial performance for the first nine months of 2015, a Reclassified Consolidated Income Statement for the same period and the corresponding period in 2014 showing percentage changes is enclosed as Attachment 1.

Gross operating profit for the first nine months of 2015 amounted to €22,216 thousand, corresponding to a 24.3% margin on sales, up 22.2% on €18,186 thousand reported in the first nine months of 2014 (21.7% of sales). The cost of goods sold, services and personnel costs declined as a margin of sales despite the slight increase in the average number of employees from 618 in the first nine months of 2014 to 628 in the corresponding period in 2015.

Net operating profit for the first nine months of 2015 amounted to €17,975 thousand, corresponding to a 19.7% margin on sales, up 24.2% on €14,469 thousand reported in the first nine months of 2014 (17.3% of sales).

Profit before taxes for the first nine months of 2015 amounts to €18,092 thousand, representing a 19.8% margin on sales, up 23.3% on the profit before taxes reported in the first nine months of 2014, amounting to €14,672 thousand and corresponding to a 17.5% margin on sales.

Net profit for the first nine months of 2015 amounted to €12,928 thousand, representing a 14.2% margin on sales, up 31.3% on €9,847 thousand in the first nine months of 2014, when it represented an 11.8% margin on sales.

The consolidated net financial position at September 30, 2015 amounted to a surplus of €16.1 million, improving on December 31, 2014, when it amounted to a surplus of €11.7 million. The consolidated net financial position at September 30, 2014 amounted to a surplus of €8 million.

	(euro '000)	September 30, 2015	December 31, 2014	September 30, 2014
A	Cash	14	13	42
B	Bank deposits	16,118	11,646	8,474
C	Cash and cash equivalents (A+B)	16,132	11,659	8,516
D	Current bank debt	-	-	(546)
E	Current financial debt (D)	-	-	(546)
F	Net current financial position (C+E)	16,132	11,659	7,970
G	Non-current financial debt	-	-	-
H	Net financial position (F+G)	16,132	11,659	7,970

Capital expenditure made by the Group in the first nine months of 2015 amounted to €4.9 million, of which €2.3 million on plant, €0.4 million on buildings, and €0.7 million on equipment. In the first nine months of 2014, capital investment had amounted to €6.3 million.

Events subsequent to September 30, 2015

No event having significant effects on the Group's financial position or operating performance occurred after September 30, 2015.

Outlook

Cembre expects to close the 2015 financial year reporting an increase in sales over 2014 both in the domestic and foreign markets, thus achieving an increase in consolidated turnover and a positive consolidated profit.

The Group's activity is not subject to cyclical or seasonal factors except for the slowdown in activity in August for the summer holidays, and in December for the Christmas holidays.

Attachment 1

Comparative Consolidated Income Statement

	First nine months 2015	%	First nine months 2014	%	Change	rd Qtr. 3 2015	%	rd Qtr. 3 2014	%	Change
(€ '000)
Revenues from sales and services provided	91,278	100.0%	83,664	100.0%	9.1%	28,241	100.0%	27,051	100.0%	4.4%
Other revenues	478		772		-38.1%	118		469		-74.8%
Total Revenues	91,756		84,436		8.7%	28,359		27,520		3.0%
Cost of goods and merchandise	(32,249)	-35.3%	(31,149)	-37.2%	3.5%	(9,658)	-34.2%	(8,547)	-31.6%	13.0%
Change in inventories	1,350	1.5%	1,125	1.3%	20.0%	325	1.2%	(1,642)	-6.1%	-119.8%
Cost of services received	(11,192)	-12.3%	(10,749)	-12.8%	4.1%	(3,411)	-12.1%	(3,251)	-12.0%	4.9%
Lease and rental costs	(1,027)	-1.1%	(1,038)	-1.2%	-1.1%	(348)	-1.2%	(351)	-1.3%	-0.9%
Personnel costs	(25,663)	-28.1%	(23,855)	-28.5%	7.6%	(8,059)	-28.5%	(7,516)	-27.8%	7.2%
Other operating costs	(976)	-1.1%	(786)	-0.9%	24.2%	(284)	-1.0%	(206)	-0.8%	37.9%
Capitalized internal construction costs	548	0.6%	707	0.8%	-22.5%	126	0.4%	237	0.9%	-46.8%
Write-down of receivables	(280)	-0.3%	(498)	-0.6%	-43.8%	(80)	-0.3%	(109)	-0.4%	-26.6%
Accruals to provisions for risks and charges	(51)	-0.1%	(7)	0.0%	628.6%	(11)	0.0%	(2)	0.0%	450.0%
Gross Operating Profit	22,216	24.3%	18,186	21.7%	22.2%	6,959	24.6%	6,133	22.7%	13.5%
Property, plant and equipment depreciation	(3,889)	-4.3%	(3,289)	-3.9%	18.2%	(1,327)	-4.7%	(1,141)	-4.2%	16.3%
Intangible asset amortization	(352)	-0.4%	(302)	-0.4%	16.6%	(123)	-0.4%	(104)	-0.4%	18.3%
Write-down of assets	-	0.0%	(126)	-0.2%	-100.0%	-	0.0%	(126)	-0.5%	-100.0%
Operating Profit	17,975	19.7%	14,469	17.3%	24.2%	5,509	19.5%	4,762	17.6%	15.7%
Financial Income	23	0.0%	11	0.0%	109.1%	6	0.0%	4	0.0%	50.0%
Financial expenses	(1)	0.0%	(7)	0.0%	-85.7%	-	0.0%	(2)	0.0%	-100.0%
Foreign exchange gains (losses)	95	0.1%	199	0.2%	-52.3%	(112)	-0.4%	57	0.2%	-296.5%
Profit Before Taxes	18,092	19.8%	14,672	17.5%	23.3%	5,403	19.1%	4,821	17.8%	12.1%
Income taxes	(5,164)	-5.7%	(4,825)	-5.8%	7.0%	(1,427)	-5.1%	(1,787)	-6.6%	-20.1%
Net Profit	12,928	14.2%	9,847	11.8%	31.3%	3,976	14.1%	3,034	11.2%	31.0%

Consolidated Financial Statements at September 30, 2015

	First nine months 2015	First nine months 2014
(euro '000) Revenues from sales and services provided Other revenues	91,278 478	83,664 772
Total Revenues	91,756	84,436
Cost of goods and merchandise Change in inventories Cost of services received Lease and rental costs Personnel costs Other operating costs Capitalized internal construction costs Write-down of receivables Accruals to provisions for risks and charges	(32,249) 1,350 (11,192) (1,027) (25,663) (976) 548 (280) (51)	(31,149) 1,125 (10,749) (1,038) (23,855) (786) 707 (498) (7)
Gross Operating Profit	22,216	18,186
Property, plant and equipment depreciation Intangible asset amortization Write-down of assets	(3,889) (352) -	(3,289) (302) (126)
Operating Profit	17,975	14,469
Financial income Financial expenses Foreign exchange gains (losses)	23 (1) 95	11 (7) 199
Profit Before Taxes	18,092	14,672
Income taxes	(5,164)	(4,825)
Net Profit	12,928	9,847
Elements that could be charged to the income statement Conversion difference reserves	1,038	1,258
Comprehensive Income	13,966	11,105

Consolidated Comprehensive Income Statement

ASSETS	Sept. 30, 2015	Dec. 31, 2014
(euro '000)
NON-CURRENT ASSETS
Tangible assets	64,817	64,050
Investment property	1,732	1,796
Intangible assets	1,220	1,219
Other investments	10	10
Other non-current assets	50	9
Deferred tax assets	2,856	2,474
TOTAL NON-CURRENT ASSETS	70,685	69,558
CURRENT ASSETS
Inventories	40,423	38,291
Trade receivables	25,340	25,625
Tax receivables	761	847
Other receivables	435	537
Cash and cash equivalents	16,132	11,659
TOTAL CURRENT ASSETS	83,091	76,959
NON-CURRENT ASSETS HELD FOR DISPOSAL	-	-
	153,776	146,517
TOTAL ASSETS	153,776	146,517

Consolidated Statement of Financial Position - Assets

Consolidated Statement of Financial Position – Liabilities and

Shareholders' Equity

LIABILITIES AND SHAREHOLDERS' EQUITY	Sept. 30,	Dec. 31,
	2015	2014
(euro '000)
SHAREHOLDERS' EQUITY
Capital stock	8,840	8,840
Reserves	105,973	97,513
Net profit	12,928	13,542
TOTAL SHAREHOLDERS' EQUITY	127,741	119,895
NON-CURRENT LIABILITIES
Employee Severance Indemnity and other personnel benefits	2,547	2,554
Provisions for risks and charges	358	269
Deferred tax liabilities	2,481	2,439
TOTAL NON-CURRENT LIABILITIES	5,386	5,262
CURRENT LIABILITIES
Trade payables	9,917	13,219
Tax payables	2,799	1,744
Other payables	7,933	6,397
TOTAL CURRENT LIABILITIES	20,649	21,360
LIABILITIES ON ASSETS HELD FOR DISPOSAL	-	-
TOTAL LIABILITIES	26,035	26,622
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	153,776	146,517

Consolidated Statement of Cash Flows

(migliaia di euro) A) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 11,659 7,539 B) CASH FLOW FROM OPERATING ACTIVITIES Net profit (loss) for the period 12,928 13,542 Depreciation, amortization and write-downs 4,241 4,919 (Gains)/Losses on disposal of assets (51) 190 Net change in Employee Termination Indemnity (7) 116 Net change in provisions for risks and charges 89 190 Operating profit (loss) before change in working capital 17,200 18,957 (Increase) Decrease in trade receivables 285 (771) (Increase) Decrease in inventories (2,132) (1,533) (Increase) Decrease in other receivables and deferred tax assets (194) 264 Increase (Decrease) of trade payables (2,965) 390 Increase (Decrease) of other payables, deferred tax liabilities and tax payables 2,633 972 Change in working capital (2,373) (678) NET CASH FLOW (USED IN)/FROM OPERATING ACTIVITIES 14,827 18,279 C) CASH FLOW FROM INVESTING ACTIVITIES Capital expenditure on fixed assets: - intangible (359) (477) - tangible (4,587) (8,759) - financial - (5) Proceeds from disposal of tangible, intangible, available-for-sale financial assets: - intangible 9 - - tangible 335 142 Increase (Decrease) of trade payables for assets (337) 50 NET CASH FLOW (USED IN)/FROM INVESTING ACTIVITIES (4,939) (9,049) D) CASH FLOW FROM FINANCING ACTIVITIES (Increase) Decrease in other non current assets (41) 1 Increase (Decrease) in bank loans and borrowings - (1,647) Dividends distributed (6,120) (4,420) NET CASH FLOW (USED IN)/FROM FINANCING ACTIVITIES (6,161) (6,066) E) INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (B+C+D) 3,727 3,164 F) Foreign exchange conversion differences 746 1,047 G) Discounting of employee termination indemnities - (91) H) CASH AND CASH EQUIVALENTS AT END OF PERIOD (A+E+F) 16,132 11,659 CASH AND CASH EQUIVALENTS AT END OF THE PERIOD 16,132 11,659 Current financial liabilities - - NET CONSOLIDATED FINANCIAL POSITION 16,132 11,659 INTEREST EXPENSE FOR THE PERIOD (1) (6) BREAKDOWN OF CASH AND CASH EQUIVALENTS AT END OF THE PERIOD Cash 14 13 Current accounts 16,118 11,646 16,132 11,659		First Nine Months 2015	2014

(€'000)	Balance at December 31, 2014	Allocation of previous year's net profit	Other changes	Comprehensive Income for the period	Balance at September 30, 2015
Capital stock	8,840				8,840
Share premium reserve	12,245				12,245
Legal Reserve	1,768				1,768
Suspended-tax reserves	585				585
Other suspended-tax reserves	68				68
Other reserves	19,586	1,339		(15)	20,910
Conversion differences	(248)			1,053	805
Extraordinary reserve	55,286	6,083			61,369
First time application of IFRS reserve	3,715				3,715
Discounting of employee termination indemnities	111				111
Merger differences	4,397				4,397
Retained earnings	-				-
Net profit	13,542	(13,542)		12,928	12,928
Total Shareholders' Equity	119,895	(6,120)	-	13,966	127,741

Statement of Changes in the Consolidated Shareholders' Equity

(€'000)	Balance at December 31, 2013	Allocation of previous year's net profit	Other changes	Comprehensive Income for the period	Balance at December 31,2014
Capital stock	8,840				8,840
Share premium reserve	12,245				12,245
Legal Reserve	1,768				1,768
Suspended-tax reserves	585				585
Other suspended-tax reserves	68				68
Other reserves	17,758	1,827		1	19,586
Conversion differences	(1,619)			1,371	(248)
Extraordinary reserve	51,030	4,256			55,286
First time application of IFRS reserve	3,715				3,715
Discounting of employee termination indemnities	202			(91)	111
Merger differences	4,397				4,397
Retained earnings	-				-
Net profit	10,503	(10,503)		13,542	13,542
Total Shareholders' Equity	109,492	(4,420)	-	14,823	119,895

Notes to the accounts

Accounting principles, form and content of the Financial Statements, estimates

The present Interim Report at September 30, 2015 was prepared in accordance with Regulations for the implementation of Legislative Decree no. 58 dated February 24, 1998 of the Consolidated Law on Finance (Testo Unico), and with article 82 of the Listed Companies Code, adopted by Consob with Resolution no. 11971 and subsequent amendments. Disclosure required under IAS 34 is therefore not provided in the present document.

Principles of consolidation and valuation criteria adopted are consistent with international accounting principles (IAS/IFRS).

The Consolidated Financial Statements are based on the Statutory Accounts of Cembre S.p.A. (parent company) at September 30, 2015, and those of the following companies at the same date:

	Share owned by the Group September 30, 2015	Share owned by the Group September 30, 2014
Cembre Ltd. (UK)	100%	100%
Cembre Sarl* (France)	100%	100%
Cembre España SL* (Spain)	100%	100%
Cembre AS (Norway)	100%	100%
Cembre GmbH* (Germany)	100%	100%
Cembre Inc.**(US)	100%	100%

* 5% share held through Cembre Ltd.

** 29% share held through Cembre Ltd.

The parent company has control of the above companies pursuant to Article 2359 of the Italian Civil Code.

Criteria used in the preparation of the financial statements were applied consistently within the Group. Where necessary, financial data was adjusted and reclassified. In compliance with IAS 1, in the financial statements costs were classified by nature. The scope of the consolidation is unchanged from September 30, 2014 and December 31, 2014. Amounts are expressed in thousands of euro.

The present Quarterly Report was prepared in accordance with the "period separation criteria", based on which the period considered is treated as an independent financial period. The income statement for the quarter thus reflects the income components relating to the period based on the accrual method.

Year-end bonuses recognized to customers were estimated based on past sales and their expected future performance.

Conversion of financial statements of subsidiaries expressed in currencies other than the euro

The functional currency of the Group is the euro, in which its accounts are presented.

Exchange rates applied for the conversion of financial statements of subsidiaries expressed in currencies other than the euro are shown in the table below.

Currency	Exchange rate at September 30, 2015	Average exchange rate for 2015
British pound (£)	0.7385	0.7271
US dollar (US\$)	1.1203	1.1144
Norwegian kroner (NOK)	9.5245	8.8174

Brescia, November 13, 2015

The Chairman and Managing Director of Cembre S.p.A.

Giovanni Rosani

DECLARATION

pursuant to art 154-bis, Paragraph 2 of Legislative Decree 58 dated Feb. 24, 1998 "Consolidated Law on financial intermediation regulations" and subsequent integrations and updatings

Re: 2015 third Quarter Interim Report

The undersigned,

Claudio Bornati, Manager responsible for preparing the Cembre S.p.A. financial reports

DECLARES

pursuant to Paragraph 2 of Article 154-bis of the Consolidated Law on Finance, that the financial disclosure contained in the 2015 third Quarter Interim Report corresponds to the document results, books and accounting records.

Brescia, november 13, 2015

Signed by: Claudio Bornati Manager in charge of drafting the accounts of Cembre S.p.A.