This is a good achievement, but Saft is fully aware of the continuousneed to remain competitive and has announced today a set of measures aimed atensuring that the operations in our traditional business continue to reducecosts. These include a plan to merge our Industrial Battery Group andRechargeable Battery Systems Divisions to create one Division which willrepresent about 60% of the activity of Saft.
The merger which will be implemented during H1 2009 will enable furthersynergies to be achieved in the areas of operations, product development,purchasing, sales and marketing.
These changes will enable Saft to strengthen its resources supportingemerging applications, notably renewable energy storage.
The strong cash generation achieved in 2008 has enabled Saft tostrengthen its balance sheet whilst increasing R&D expenditure capitalinvestment and funding for our joint venture Johnson Controls-Saft.
This year, Johnson Controls-Saft has announced further productioncontract wins with Azure, a first success in the commercial vehicle segment,and with Ford for their first PHEV vehicle. We continue to see importantopportunities for our venture, supplying batteries for “clean vehicles” tothe automotive industry.
*** Net income benefited from a 16.9% effective tax rate in 2008 ascompared to a 29.6% tax rate in 2007.
There have been no changes of perimeter during 2008.
EBIT is defined as operating profit, before restructuring costs and otherincome and expenses.
EBITDA is defined as operating profit, before depreciation, amortisation,restructuring costs and other income and expenses.
All at actual exchange rates, except sales growth % which is at constantrates.
The “Other” cost centre includes central functions such as IT, researchand central management, finance and administration.
Industrial Battery Group (IBG)
The sales growth during 2008 was 6.8% at constant exchange rates. TheDivision saw stronger growth during H1, but a slowdown in the telecom and theaviation markets later in the year. The profitability recovered strongly witha full year EBITDA margin of 20.1%. A key driver of this profit growth waspricing, where the price adjustments implemented in 2007, lead to a strongrecovery in profit in H1. The unfavourable effects of currencies onprofitability were offset by tight control of costs during the year.
Speciality Battery Group (SBG)
The Division saw strong sales growth in H2 leading to full year growth of6.7% at constant exchange rates. There was a good performance in the civilmarket throughout the year, whilst the military activities had a strong YoYsales performance during H2.
The profitability of the Division remained stable with a full year EBITDAmargin of 21.4%. The benefits of increased volumes were offset by thenegative effect of currencies.
Rechargeable Battery Systems (RBS)
In contrast with 2007, when the nickel price surcharge increased sales,in 2008 a falling nickel price throughout the year had a negative impact onthe sales growth. Overall, the Division reported a 6.8% fall in sales in2008, with an estimated 80% of this reduction due to the nickel surcharge.The market for emergency lighting batteries was challenging but the marketshare loss in 2008 was limited.
Again the profitability of the Division remained in line with 2007 withan EBITDA margin of 3.1% of sales. Continual cost reduction efforts enabledthe Division to maintain its profit despite falling sales.
Raw material costs
The average LME cost of nickel during 2008 was $21k/t, having fallensharply during the second half of the year. This reduction had little impacton the 2008 result due to:
During Q3 2008, the hedging period was extended and the IBG Division nowhas 70% of the needs for 2009 hedged. Due to this and the surcharge in theRBS Division, Saft is much less sensitive to the cost of nickel in 2009compared with recent years.
Cost reduction and organisation
Saft has undertaken a review of its operations and cost base in thesearch of increased efficiencies and greater cost synergies. A number ofsavings have been identified and are in the process of being implementedincluding:
Saft will take advantage of this reorganisation to re-allocate some keytechnical and commercial resource to supporting emerging applications forhigh technology batteries.
Johnson Controls – Saft (“JC-S”)
The venture continued to make good progress during 2008 with theannouncement of a number of important developments:
Clean Energy Storage
Saft has announced during 2008 the initial development contractsassociated with an additional exciting opportunity: the storage of renewableenergy. The developments cover two complementary potential markets:
Saft believes this market can offer very significant potential for growthin the coming years.
At constant exchange rates, Saft anticipates sales growth in 2009 to bebetween -5% and 0%, a small reduction compared with 2008 sales (EUR/$ averageexchange rate 1.47).
It is anticipated that the SBG Division will continue to have salesgrowth this year supported by a stronger military market, whilst the otherDivisions will see a small reduction in sales, due to a combination of nickelsurcharge, price adjustment in IBG and continued weakness in the telecom andaviation markets as seen during Q4 2008.
The sensitivity of Saft sales to the US$/EUR rate remains unchanged.
Saft anticipates the profitability will be maintained with a minimumEBITDA margin of 18% of 2009 sales. Our objective is to refinance our bankdebt before the end of the year
Important Legal Information and Cautionary Statements
Certain statements contained herein are forward-looking statementsincluding, but not limited to, statements that are predictions of or indicatefuture events, trends, plans, objectives or results of operation. Unduereliance should not be placed on such statements because, by their nature,they are subject to known and unknown risks and uncertainties and can beaffected by other factors that could cause actual results and Saft’s plansand objectives to differ materially from those expressed or implied in theforward looking statements.
Saft (Euronext: Saft) is a world specialist in the design and manufactureof high-tech batteries for industry. Saft batteries are used in highperformance applications, such as industrial infrastructure and processes,transportation, space and defence. Saft is the world’s leading manufacturerof nickel-cadmium batteries for industrial applications and of primarylithium batteries for a wide range of end markets. The group is also theEuropean leader for specialised advanced technologies for the defence andspace industries. With approximately 4,000 employees worldwide, Saft ispresent in 18 countries. Its 15 manufacturing sites and extensive salesnetwork enable the group to serve its customers worldwide. Saft is listed inthe SBF 120 index on the Paris Stock Market.