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Sogefi — Interim / Quarterly Report 2017
May 5, 2017
4192_ir_2017-05-05_9813edd1-5a0a-4b3f-986d-292d01811c18.pdf
Interim / Quarterly Report
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INTERIM FINANCIAL REPORT AS AT MARCH 31, 2017
(Translation into English of the original Italian version)
JOINT-STOCK COMPANY - SHARE CAPITAL EURO 62,130,356.60 MANTOVA COMPANY REGISTER AND TAX CODE 00607460201 COMPANY SUBJECT TO THE DIRECTION AND COORDINATION OF CIR S.p.A. REGISTERED OFFICE: VIA ULISSE BARBIERI, 2 - 46100 MANTOVA (ITALY) - TEL. 0376.2031 OFFICES: GUYANCOURT (FRANCIA), PARC ARIANE IV - 7 AVENUE DU MAI 1945 – TEL. 0033 01 61374300 OFFICES: 20121 MILANO, VIA CIOVASSINO, 1/A - TEL. 02.467501 WEBSITE: WWW.SOGEFIGROUP.COM
BOARD OF DIRECTORS' REPORT ON OPERATIONS AS AT MARCH 31, 2017
In the first quarter of 2017 the global automotive market reported an increase in production of 5.8%, with steady growth in Asia (+6.8%) and in Europe (+4.2%), a more modest increase in North America (+2.5%) and a rebound in South America (+19.1%).
In this environment, Sogefi reported revenues of Euro 439.1 million, up 12.6% compared to Euro 390.1 million of the first quarter of 2016 (+11% at constant exchange rates).
All geographical areas contributed to the significant growth in sales in the quarter.
In Europe, revenues increased 8.2%, outperforming the reference market (+4.2%). Business continued to develop vigorously in North America (+15.4%) and in Asia (+26.4%) which together now represent 27.5% of total revenues. In South America, sales increased by 30.6%, reflecting the market rebound and the positive exchange rates (+14.1% at constant exchange rates).
All three business units reported significant growth: Air & Cooling +17.8% (+15.7% at constant exchange rates), Filtration +13.8% (+12.1% at constant exchange rates) and Suspensions +7.1% (+6% at constant exchange rates).
EBITDA, at Euro 45.1 million, increased 30.2% compared to Euro 34.6 million for the same period of 2016. The increase benefitted from the revenue growth and from the improvement in profitability, which increased from 8.9% to 10.3%.
The increase in profitability was due to a further improvement in the contribution margin and to the reduced impact of indirect costs. In particular, the ratio of total labour costs to revenues declined from 21.7% in first quarter 2016 to 20.5% in the same period of 2017.
EBIT, at Euro 26.8 million, increased by 67.5% compared to the first quarter of 2016 (Euro 16 million) and represents 6.1% of total sales.
The result before taxes and non-controlling interests was Euro 20.4 million (Euro 7.5 million in the first quarter of 2016), after financial expense of Euro 6.4 million, lower than the Euro 8.5 million in the same period of 2016.
The net result was Euro 11.6 million (Euro 2.9 million in the first quarter of 2016).
Free Cash Flow in first quarter of 2017 amounted to a positive Euro 6.9 million, compared to a cash flow breakeven in the same period of 2016 (Euro -0.2 million). The improvement is attributable to a better operating performance of the Group.
Net financial debt at March 31 2017 stood at Euro 291.4 million, showing an improvement of Euro 7.6 million versus December 31 2016 (Euro 299 million) and of Euro 31.2 million versus March 31 2016 (Euro 322.6 million).
Regarding the risks resulting from the claims made against Sogefi Air & Cooling S.A.S. (formerly Systèmes Moteurs S.A.S.), in the first quarter of 2017 there were no developments.
The Sogefi group had 6,815 employees at March 31 2017 compared to 6,801 at December 31 2016.
PERFORMANCE OF THE FILTRATION BUSINESS UNIT
In the first quarter of 2017, the Filtration business unit recorded revenues of Euro 149.2 million, up by 13.8% compared to Euro 131.1 million in the first quarter of 2016, thanks to a positive contribution from all geographical areas.
EBIT was Euro 9.4 million, up by 64.7% compared to Euro 5.7 million in the first three months of 2016, with a ratio to sales increasing to 6.3% from 4.4% in the first quarter of 2016.
Business unit employees at March 31, 2017 were 2,748 (2,735 at December 31, 2016).
PERFORMANCE OF THE SUSPENSIONS BUSINESS UNIT
In the first quarter of 2017, the Suspensions business unit recorded revenues of Euro 153.2 million, up 7.1% thanks to the positive trend in Europe (+4.3%) and the rebound in South America (+33.7%).
EBIT was Euro 10.2 million, up by 54.7% compared to Euro 6.6 million in the first three months of 2016, with a ratio to sales increasing to 6.7% from 4.6% in the first quarter of 2016.
Business Unit employees at March 31, 2017 were 2,617 (2,625 at December 31, 2016).
PERFORMANCE OF THE AIR & COOLING BUSINESS UNIT
In the first quarter of 2017, the Air & Cooling business unit recorded revenues of Euro 137.9 million, up 17.8% compared to the same period of the previous year benefiting from the positive contribution of Europe (+14.9%) and of North America (+16.8%).
EBIT totaled Euro 10.1 million compared to Euro 5.6 million in the first quarter of 2016, with a ratio to sales increasing from 4.8% to 7.3%.
Business unit employees at March 31, 2017 were 1,391 (1,381 at December 31, 2016).
PERFORMANCE OF THE HOLDING COMPANY SOGEFI S.p.A.
During the period, the Holding Company Sogefi S.p.A. recorded a net loss of Euro 4.3 million, (Euro -4.7 million posted in the first quarter of 2016). The change mainly comes from lower net financial expense.
OUTLOOK FOR THE YEAR
For the automotive market, after a first quarter of sustained growth, the outlook for 2017 shows a positive trend, albeit at a slower pace.
Concerning Sogefi, the positive performance recorded in the first quarter confirms the projected improvement in profitability for 2017.
SOGEFI GROUP
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(in millions of Euro)
| ASSETS | 03.31.2017 | 12.31.2016 |
|---|---|---|
| CURRENT ASSETS | ||
| Cash and cash equivalents | 76.1 | 93.7 |
| Other financial assets | 5.2 | 5.9 |
| Working capital | ||
| Inventories | 168.9 | 165.0 |
| Trade receivables | 204.7 | 158.5 |
| Other receivables | 8.1 | 6.8 |
| Tax receivables | 20.9 | 24.2 |
| Other assets | 5.9 | 3.6 |
| TOTAL WORKING CAPITAL | 408.5 | 358.1 |
| TOTAL CURRENT ASSETS | 489.8 | 457.7 |
| NON-CURRENT ASSETS | ||
| Fixed assets | ||
| Land | 12.8 | 12.8 |
| Property, plant and equipment | 242.5 | 243.3 |
| Other tangible fixed assets | 6.2 | 6.4 |
| Of wich: leases | 7.6 | 8.1 |
| Intangible assets | 280.4 | 281.7 |
| TOTAL FIXED ASSETS | 541.9 | 544.2 |
| OTHER NON-CURRENT ASSETS | ||
| Investments in joint ventures | - | - |
| Other financial assets available for sale | 0.1 | - |
| Non-current trade receivables | - | - |
| Financial receivables | 14.6 | 15.8 |
| Other receivables | 30.5 | 29.8 |
| Deferred tax assets | 54.1 | 56.8 |
| TOTAL OTHER NON-CURRENT ASSETS | 99.3 | 102.4 |
| TOTAL NON-CURRENT ASSETS | 641.2 | 646.6 |
| NON-CURRENT ASSETS HELD FOR SALE | 3.4 | 3.4 |
| TOTAL ASSETS | 1,134.4 | 1,107.7 |
| LIABILITIES | 03.31.2017 | 12.31.2016 |
|---|---|---|
| CURRENT LIABILITIES | ||
| Bank overdrafts and short-term loans | 22.3 | 11.0 |
| Current portion of medium/long-term financial debts and | ||
| other loans | 110.3 | 137.2 |
| Of which: leases | 1.7 | 1.7 |
| TOTAL SHORT-TERM FINANCIAL DEBTS | 132.6 | 148.2 |
| Other short-term liabilities for derivative financial instruments | 0.5 | 0.4 |
| TOTAL SHORT-TERM FINANCIAL DEBTS AND DERIVATIVE | ||
| FINANCIAL INSTRUMENTS | 133.1 | 148.6 |
| Trade and other payables | 370.9 | 339.1 |
| Tax payables | 10.9 | 8.7 |
| Other current liabilities | 9.8 | 8.2 |
| TOTAL CURRENT LIABILITIES | 524.7 | 504.6 |
| NON-CURRENT LIABILITIES | ||
| MEDIUM/LONG TERM FINANCIAL DEBTS AND | ||
| DERIVATIVE FINANCIAL INSTRUMENTS | ||
| Financial debts to bank | 39.1 | 48.3 |
| Other medium/long-term financial debts | 208.9 | 209.9 |
| Of which: leases | 8.5 | 9.0 |
| TOTAL MEDIUM/LONG-TERM FINANCIAL DEBTS | 248.0 | 258.2 |
| Other medium/long term financial liabilities for derivative financial | ||
| instruments | 6.3 | 7.6 |
| TOTAL MEDIUM/LONG-TERM FINANCIAL DEBTS AND DERIVATIVE | ||
| FINANCIAL INSTRUMENTS | 254.3 | 265.8 |
| OTHER LONG-TERM LIABILITIES | ||
| Long-term provisions | 91.3 | 89.3 |
| Other payables | 15.5 | 15.0 |
| Deferred tax liabilities | 44.8 | 44.0 |
| TOTAL OTHER LONG-TERM LIABILITIES | 151.6 | 148.3 |
| TOTAL NON-CURRENT LIABILITIES | 405.9 | 414.1 |
| SHAREHOLDERS' EQUITY | ||
| Share capital | 62.1 | 62.1 |
| Reserves and retained earnings (accumulated losses) | 112.8 | 101.5 |
| Group net result for the period | 11.6 | 9.3 |
| TOTAL SHAREHOLDERS' EQUITY ATTRIBUTABLE TO THE HOLDING | ||
| COMPANY | 186.5 | 172.9 |
| Non-controlling interests | 17.3 | 16.1 |
| TOTAL SHAREHOLDERS' EQUITY | 203.8 | 189.0 |
| TOTAL LIABILITIES AND EQUITY | 1,134.4 | 1,107.7 |
| (in millions of Euro) | Period | Period | ||||
|---|---|---|---|---|---|---|
| 01.01 – 03.31.2017 | 01.01 – 03.31.2016 | Change | ||||
| Amount | % | Amount | % | Amount | % | |
| Sales revenues | 439.1 | 100.0 | 390.1 | 100.0 | 49.0 | 12.6 |
| Variable cost of sales | 314.1 | 71.5 | 280.9 | 72.0 | 33.2 | 11.8 |
| CONTRIBUTION MARGIN | 125.0 | 28.5 | 109.2 | 28.0 | 15.8 | 14.5 |
| Manufacturing and R&D overheads | 39.9 | 9.1 | 36.3 | 9.3 | 3.6 | 10.0 |
| Depreciation and amortization | 17.9 | 4.1 | 16.6 | 4.3 | 1.3 | 7.9 |
| Distribution and sales fixed expenses | 11.2 | 2.5 | 11.5 | 2.9 | (0.3) | (2.6) |
| Administrative and general expenses | 19.1 | 4.3 | 18.1 | 4.7 | 1.0 | 5.2 |
| Restructuring costs | 4.6 | 1.1 | 1.9 | 0.5 | 2.7 | 147.0 |
| Losses (gains) on disposal | (0.1) | - | - | - | (0.1) | - |
| Exchange losses (gains) | (0.2) | - | 1.1 | 0.3 | (1.3) | (115.3) |
| Other non-operating expenses (income) | 5.8 | 1.3 | 7.7 | 1.9 | (1.9) | (24.8) |
| - of which not ordinary | 0.7 | 2.0 | (1.3) | |||
| EBIT | 26.8 | 6.1 | 16.0 | 4.1 | 10.8 | 67.5 |
| Financial expenses (income), net | 6.4 | 1.4 | 8.5 | 2.2 | (2.1) | (25.1) |
| Losses (gains) from equity investments | - | - | - | - | - | - |
| RESULT BEFORE TAXES AND NON | ||||||
| CONTROLLING INTERESTS | 20.4 | 4.7 | 7.5 | 1.9 | 12.9 | 171.4 |
| Income taxes | 7.7 | 1.8 | 3.4 | 0.9 | 4.3 | 129.5 |
| NET RESULT BEFORE NON | ||||||
| CONTROLLING INTERESTS | 12.7 | 2.9 | 4.1 | 1.0 | 8.6 | 205.2 |
| Loss (income) attributable to non | ||||||
| controlling interests | (1.1) | (0.3) | (1.2) | (0.3) | 0.1 | 10.4 |
| GROUP NET RESULT | 11.6 | 2.6 | 2.9 | 0.8 | 8.7 | 296.8 |
CONSOLIDATED INCOME STATEMENT FROM 1.1.2017 TO 3.31.2017
CONSOLIDATED NET FINANCIAL POSITION
| (in millions of Euro) | 03.31.2017 | 12.31.2016 | 03.31.2016 |
|---|---|---|---|
| A. Cash | 76.1 | 93.7 | 122.9 |
| B. Other cash at bank and on hand (held to maturity | |||
| investments) | 4.0 | 4.0 | 4.0 |
| C. Financial instruments held for trading | - | - | - |
| D. Liquid funds (A) + (B) + (C) | 80.1 | 97.7 | 126.9 |
| E. Current financial receivables | 1.2 | 1.9 | 1.1 |
| F. Current payables to banks | (22.3) | (11.0) | (25.3) |
| G. Current portion of non-current indebtedness | (110.3) | (137.2) | (101.1) |
| H. Other current financial debts | (0.5) | (0.4) | (0.3) |
| I. Current financial indebtedness (F) + (G) + (H) | (133.1) | (148.6) | (126.7) |
| J. Current financial indebtedness, net (I) + (E) + (D) | (51.8) | (49.0) | 1.3 |
| K. Non-current payables to banks | (39.1) | (48.3) | (107.6) |
| L. Bonds issued | (199.8) | (200.2) | (205.1) |
| M. Other non-current financial debts | (15.3) | (17.3) | (19.7) |
| N. Convertible bond embedded derivative liability | - | - | - |
| O. Non-current financial indebtedness (K) + (L) + (M) + (N) | (254.2) | (265.8) | (332.4) |
| P. Net indebtedness (J) + (O) | (306.0) | (314.8) | (331.1) |
| Non-current financial receivables | 14.6 | 15.8 | 8.5 |
| Financial indebtedness, net including non-current | |||
| financial receivables | (291.4) | (299.0) | (322.6) |
| CONSOLIDATED CASH FLOW STATEMENT |
|---|
| ---------------------------------- |
| (in millions of Euro) | March 31, 2017 |
December 31, 2016 |
March 31, 2016 |
|---|---|---|---|
| SELF-FINANCING | 36.4 | 109.1 | 21.2 |
| Change in net working capital | (14.1) | (2.1) | (7.0) |
| Other medium/long-term assets/liabilities | 0.4 | 17.5 | 1.9 |
| CASH FLOW GENERATED BY OPERATIONS | 22.7 | 124.5 | 16.1 |
| Net decrease from sale of fixed assets | 0.3 | 0.3 | - |
| TOTAL SOURCES | 23.0 | 124.8 | 16.1 |
| Increase in intangible assets | 6.8 | 30.3 | 7.4 |
| Purchase of tangible assets | 7.8 | 58.8 | 8.7 |
| TOTAL APPLICATION OF FUNDS | 14.6 | 89.1 | 16.1 |
| Exchange differences on assets/liabilities and equity | (1.5) | (4.5) | (0.2) |
| FREE CASH FLOW | 6.9 | 31.2 | (0.2) |
| Holding Company increases in capital | 0.3 | 0.8 | - |
| Increase in share capital of consolidated subsidiaries | - | 0.2 | 0.1 |
| Dividends paid by subsidiaries to non-controlling interests | - | (8.2) | - |
| Change in fair value of effective derivative instruments | 0.4 | (0.7) | (0.2) |
| CHANGES IN SHAREHOLDERS' EQUITY | 0.7 | (7.9) | (0.1) |
| Change in net financial position | 7.6 | 23.3 | (0.3) |
| Opening net financial position | (299.0) | (322.3) | (322.3) |
| CLOSING NET FINANCIAL POSITION | (291.4) | (299.0) | (322.6) |
CONTENT AND FORMAT OF THE CONSOLIDATED FINANCIAL STATEMENTS
1. INTRODUCTION
The consolidated Interim financial report as at March 31, 2017, which has not been externally audited, has been prepared in compliance with International Accounting Standards (IAS/IFRS) and to this end, the financial statements of consolidated investee companies have been appropriately reclassified and adjusted.
The interim financial report has been drawn up in accordance with the provisions of art. 154-ter, paragraph 5 of Legislative Decree no. 58 of 2/24/98 (Consolidated Law on Finance) and subsequent amendments. Therefore, the provisions of the international accounting standard regarding interim financial information (IAS 34 "Interim financial reporting") have not been adopted.
2. CONSOLIDATION PRINCIPLES
Consolidation is performed on a line-by-line basis. The criteria adopted for the application of this method have not changed with respect to those used as at December 31, 2016.
3. ACCOUNTING STANDARDS APPLIED
.
The accounting standards applied in the preparation of the financial statements as at March 31, 2017 are the same as those applied to the financial statements as at December 31, 2016.
COMMENTS ON THE FINANCIAL STATEMENTS
Changes in the Group's consolidated shareholders' equity and in total shareholders' equity during the first quarter of 2017 are as follows:
| (in millions of Euro) | Consolidated shareholders' equity - Group |
Capital and reserves pertaining to non-controlling interests |
Total Group and non-controlling shareholders' equity |
|---|---|---|---|
| Balance at December 31, 2016 | 172.9 | 16.1 | 189.0 |
| Paid share capital increase | 0.3 | - | 0.3 |
| Dividends | - | - | - |
| Currency translation differences and other changes |
1.7 | 0.1 | 1.8 |
| Net result for the period | 11.6 | 1.1 | 12.7 |
| Balance at March 31, 2017 | 186.5 | 17.3 | 203.8 |
At March 31 2017 shareholders' equity excluding minority interests amounted to Euro 186.5 million (Euro 172.9 million at December 31 2016).
REVENUE TREND
In the first quarter of 2017, Sogefi reported growth in revenues of 12.6% to Euro 439.1 million (+11% at constant exchange rates).
REVENUES BY BUSINESS UNIT
| (in millions of Euro) | 03.31.2017 | 03.31.2016 | Change | |||
|---|---|---|---|---|---|---|
| Amount | % | Amount | % | Amount | % | |
| Suspensions | 153.2 | 34.9 | 143.1 | 36.7 | 10.1 | 7.1 |
| Filtration | 149.2 | 34.0 | 131.1 | 33.6 | 18.1 | 13.8 |
| Air&Cooling | 137.9 | 31.4 | 117.0 | 30.0 | 20.9 | 17.8 |
| Intercompany eliminations | (1.2) | (0.3) | (1.1) | (0.3) | (0.1) | 9.1 |
| TOTAL | 439.1 | 100.0 | 390.1 | 100.0 | 49.0 | 12.6 |
In the first quarter of 2017 Suspensions sales increased by 7.1%, Air &Cooling by 17.8%, while Filtration sales registered a growth of 13.8%.
At constant exchange rates, all business units showed increasing revenues in the quarter: Suspensions sales rose by 6%, Filtration sales were up by 12.1% and Air & Cooling sales increased by 15.7%.
REVENUE BY GEOGRAPHICAL AREA
| (in millions of Euro) | 03.31.2017 | 03.31.2016 | Change | |||
|---|---|---|---|---|---|---|
| Amount | % | Amount | % | Amount | % | |
| Europe | 274.0 | 62.4 | 253.2 | 64.9 | 20.8 | 8.2 |
| South America | 48.9 | 11.1 | 37.5 | 9.6 | 11.4 | 30.6 |
| North America | 81.2 | 18.5 | 70.3 | 18.0 | 10.9 | 15.4 |
| Asia | 39.5 | 9.0 | 31.3 | 8.0 | 8.2 | 26.4 |
| Intercompany eliminations | (4.5) | (1.0) | (2.2) | (0.5) | - | - |
| TOTAL | 439.1 | 100.0 | 390.1 | 100.0 | 49.0 | 12.6 |
The breakdown of revenues by business area is as follows:
European markets account for 62.4% of Group revenues during the first three months of 2017. The weight of the North American and Asian markets increased by 0.5 and 1 percentage points respectively compared to the same period of 2016, representing now 27.5% of total revenues. South America in the first quarter of 2017 accounts for 11.1% of total sales.
EMPLOYEES
| 03.31.2017 | 12.31.2016 | 03.31.2016 | |
|---|---|---|---|
| Managers | 111 | 106 | 111 |
| Clerical staff | 1,861 | 1,874 | 1,877 |
| Blue collar workers | 4,843 | 4,821 | 4,793 |
| TOTAL | 6,815 | 6,801 | 6,781 |
The Sogefi group had 6,815 employees at March 31 2017 compared to 6,801 at December 31 2016.
Milan, April 26, 2017
THE BOARD OF DIRECTORS
DECLARATION PURSUANT TO ART. 154 BIS, PARAGRAPH 2, LEGISLATIVE DECREE NO. 58/1998
Subject: Interim financial report as at March 31, 2017
The undersigned, Mr. Yann Albrand - Manager responsible for preparing the Company's financial reports-
declares
pursuant to paragraph 2 of article 154-bis of the Consolidated Law on Finance that the accounting information contained in this document corresponds to the document results, books and accounting records.
Milan, April 26, 2017
SOGEFI S.p.A. (Yann Albrand)