Sogefi S p A : Interim Financial Report as at March 31, 2020

INTERIM FINANCIAL REPORT

AS AT MARCH 31, 2020

(Translation into English of the original Italian version)

JOINT-STOCK COMPANY - SHARE CAPITAL EURO 62,461,355.84

MILANO MONZA-BRIANZA LODI COMPANY REGISTER AND TAX CODE N. 00607460201

COMPANY SUBJECT TO THE DIRECTION AND COORDINATION OF CIR S.p.A.

REGISTERED OFFICE: 20121 MILANO, VIA CIOVASSINO, 1/A - TEL. 02.467501

OFFICES: 78286 GUYANCOURT (FRANCIA), PARC ARIANE IV- 7 AVENUE DU 8 MAI 1945 TEL. 0033 01 61374300

WEBSITE:WWW.SOGEFIGROUP.COM

BOARD OF DIRECTORS' REPORT

ON OPERATIONS

AS AT MARCH 31, 2020

In the first quarter of 2020, the world car market has reported rates of decline previously seen only during the crisis of 2009. World production fell by 24.4% compared to the first quarter of 2019: -21.3% in Europe, -10.8% in North America, -44.7% in Asia and -16.3% in South America. In March the decline was -38.2%, with Europe posting -48.3%.

The exceptional performance described reflects the impact of the spread, first in China and then in the rest of the world, of the Covid-19 pandemic and the consequent and necessary restrictive measures adopted by local governments or independently by businesses with the aim of protecting their workers and the population at large. These measures led to an almost total suspension of non-essential production activities and in particular of automotive production. This shutdown took place first of all in China and subsequently in the remaining geographical areas during the month of March. Currently, business resumed in China in the middle of March, with reduced volumes, while shutdown continues in the remaining areas with the timing and methods of reopening remaining totally uncertain. It should also be noted that the automotive market, even before the spread of the pandemic, had already proved to be in a period of weakness after the inversion of the trend that took place in mid-2018, with world production decreasing by 5.8% in 2019 and still declining at the beginning of 2020.

In this context Sogefi suspended production first in China and then, in the second half of March, in all of its facilities except for those in the USA, which remained partially active. At the present time production in China has started up again, after almost all of its main customers had also opened up for business.

During the first quarter, the priority of the company was the safety of its workforce. From the moment in which news of the Covid-19 phenomenon in China was received, action was taken immediately to reduce the risk of contagion from relations with China, and to encourage smart- working. Subsequently all the health and safety precautions defined and required by the various local authorities were implemented.

Moreover, the company is doing all it can to manage the crisis and protect the company, focusing on continuing operations, through an assessment of liquidity, disbursement-reducing plans, cost cutting and reducing investments that are not strictly necessary.

In the first quarter of 2020 Sogefi reported revenuesof Euro 350.2 million, which were down by 10.2% at historical exchange rates and by 8.8% at constant exchange rates compared to the first quarter of 2019. In the first two months of the year revenues at constant exchange rates had shown growth of 1.0% thanks to the good performance of all geographical areas except for China. In March, given the situation caused by the Covid-19 pandemic, sales contracted by 30% and the decline affected all geographical areas and all divisions.

The decline in the quarter (-8.8% at constant exchange rates) was overall much less than that reported by the market (-24.4%).

By geographical area, revenues at constant exchange rates were down by 9.0% in Europe, versus the market's 21.3%, thanks partly to the resilience of After Market sales, and by 4.0% in North America, compared to the market's -10.8%, thanks to the new production sites started up in the first two months of the year.

The following table analyzes the evolution of sales in the main markets.

(in millions of Euro)	Q1 2020	Q1 2019	reported	constant	reference	weight
			change	exchange	market	based on
				rates	production	Q1 2020
	Amount	Amount	%	%	%	%
Europe	222.4	244.3	(9.0)	(9.0)	(21.3)	63.5
North America	72.7	74.1	(1.9)	(4.0)	(10.8)	20.8
South America	29.0	37.6	(22.8)	(3.1)	(16.3)	8.3
Asia	27.9	36.1	(22.7)	(22.8)	(44.7)	8.0
- of which China	11.8	17.2	(31.2)	(30.9)	(49.5)	3.4
Intercompany eliminations	(1.8)	(2.2)	-	-	-	-
TOTAL	350.2	389.9	(10.2)	(8.8)	(24.4)	100.0
Source: Sogefi and IHS data

By business sector, Filtration reported growth of 1.8% at constant exchange rates, bucking the market trend thanks to the contribution of the new production site in Morocco and the fact that Aftermarket and OES sales held up until March. Air and Cooling reported a more modest decline than the market (-8.2% at current exchange rates and -8.7% at constant exchange rates), with revenues underpinned by the new contracts acquired in North America, while the revenues of Suspensions reported a decline of 18.5% (-20.9% at constant exchange rates), affected mainly by the market difficulties in China and the suspension of production in Europe a few days earlier than suspension of the production of engine components.

The following table analyzes the evolution of sales of the group's three product divisions.

(in millions of Euro)	Q1 2020	Q1 2019	reported	constant
			change	exchange
				rates
	Amount	Amount	%	%
Suspensions	116.3	147.0	(20.9)	(18.5)
Filtration	134.7	134.8	-	1.8
Air&Cooling	100.0	108.9	(8.2)	(8.7)
Intercompany eliminations	(0.8)	(0.8)	-	-
TOTAL	350.2	389.9	(10.2)	(8.8)
Source: Sogefi

EBITDA1for the first quarter of 2020 came in at Euro 34.9 million, versus Euro 41.3 million in the corresponding period of 2019; profitability (EBITDA/Revenues %) was 10.0% and was lower than the 10.6% reported in the same period of the previous year. The performance of the first two months showed an improvement in profitability but the dramatic fall in volumes in March, following suspension of production activities, had a significant impact partly due to the time required to implement the cost-cutting measures. The evolution of EBITDA in the first quarter included an overall result that held up well in Europe thanks to the first two months of the year whereas evolution was negative in China due to the collapse of business, in South America due to the economic situation particularly in Argentina and the impact of exchange rates against the local currencies, and in North America mainly because of exchange rates.

EBITcame to Euro 3.7 million, down from Euro 11.3 million in the first quarter of 2019. The reduction in EBIT came in March with the collapse of volumes and included the negative effect of exchange rates for Euro 5.3 million reported by the group's businesses in North and South America.

The net resultwas a negative Euro 5.6 million versus net income of Euro +1.6 million in the first quarter of 2019, after tax expense of Euro 2.5 million, compared to Euro 3.6 million in the previous year.

1EBITDA is calculated by adding to "EBIT", the item "Depreciation and amortization" and the amount of write downs of tangible and intangible assets posted in "Other non-operating expenses (income)" for Euro 0.9 million in the first quarter of 2020 (Euro 0.1 million in the corresponding period of the previous year).

Free Cash Flowwas positive for Euro 5.4 million in the first quarter of 2020 compared to Euro -9.1 million in the first quarter of 2019, thanks to a decidedly more favorable performance of working capital.

Net financial debtbefore IFRS 16 stood at Euro 256.7 million at March 31, 2020 and was substantially unchanged from Euro 256.2 million at the end of 2019 and lower than the Euro 262.1 million reported at March 31, 2019. Including the amount of Euro 56.7 million resulting from the application of IFRS 16, the net debt figure at March 31, 2020 amounted to Euro 313.4 million, down from Euro 318.9 million at December 31, 2019.

At March 31, 2020 the Group had committed credit lines of Euro 298.0 million in excess of its net debt figure.

Equity, excluding minority shareholder interests, amounted to Euro 181.1 million at March 31, 2020 (Euro 188.7 million at December 31, 2019).

The Sogefi Group had 6,807 employeesat March 31, 2020, down from 6,818 at December 31, 2019.

PERFORMANCE OF THE AIR & COOLING BUSINESS UNIT

In the first quarter of 2020, the Air & Cooling business unit obtained revenues of Euro 100 million, down 8.2% (-8.7% at constant exchange rates), compared to the corresponding period of the previous year. The decline was particularly pronounced in China.

EBIT amounted to Euro 2.0 million compared to Euro 5.6 million in the first quarter of 2019 with a ratio to sales at 2.0% compared to 5.1% in the first quarter of 2019. The lower profitability is mainly due to the negative effect of exchange rates for Euro 3.3 million recorded by North American activities, which were affected by the exchange rate trend between the Canadian dollar and the US dollar.

The business unit had 1,239 employees at March 31, 2020 (1,231 at December 31, 2019).

PERFORMANCE OF THE FILTRATION BUSINESS UNIT

In the first quarter of 2020, the revenues of the Filtration business unit amounted to Euro 134.7 million, substantially stable compared to the corresponding period of the previous year and at constant exchange rates up by 1.8%. In Europe, growth of 4.8% was recorded.

EBIT was negative for Euro 0.3 million, compared to Euro +4.5 million in the first three months of 2019. The significant reduction in the result is mainly due to the worsening of the situation in India and Mercosur, which was affected by a negative exchange rate effect for Euro 2.0 million, linked to the devaluation of the Brazilian currency against the dollar.

The business unit had 3,130 employees at March 31, 2020 (3,132 at December 31, 2019).

PERFORMANCE OF THE SUSPENSIONS BUSINESS UNIT

In the first quarter of 2020, the revenues of the Suspensions business unit amounted to Euro

116.3 million, down to 20.9% (-18.5% at constant exchange rates). Among the divisions of the group, Suspensions is the one most present in China, where, due to the exceptional circumstances that occurred during the first quarter, was recorded a drop of 38.7%.

EBIT amounted to Euro 1.9 million down compared to Euro 2.6 in the first quarter of 2019 with a ratio to sales substantially stable (1.7% compared to 1.8% in the first quarter of 2019).

The lower profitability is mainly due to China.

The business unit had 2,381 employees at March 31, 2020 (2,400 at December 31, 2019).

PERFORMANCE OF THE HOLDING COMPANY SOGEFI S.p.A.

The parent company Sogefi S.p.A. reported a net loss of Euro 2.8 million in the first quarter of 2020 (Euro -3.2 million in the same period of the previous year).

OUTLOOK FOR OPERATIONS

In an environment with extremely limited visibility, the most recent sector sources are estimating that world car production may fall by between 20% and 25% in 2020 according to different scenarios as to the effects of Covid-19.

Indeed at present all the elements that contribute to the formulation of forecasts for the year remain totally uncertain: the evolution of the pandemic, the decisions to be made by the authorities on the subject of resuming production activity, today in lockdown, and lastly, following the possible startup of activity, the reaction of parts of the world. At present the circumstances described above make any forecast that the company could make highly uncertain.

The group is focused on doing all it can to manage the crisis: it has put in place actions to reduce costs and limit as far as possible current costs and investments that are not strictly necessary, it regularly assesses liquidity positions, keeping the Board of Directors informed, liaising with its financial partners, and is preparing to start operating again, introducing higher safety standards for personnel and cost flexibility in relation to volumes that will be affected by circumstances for a certain period of time.

However, both for the period of closure and the first months after business starts up again there will be significant economic losses that will also be reflected in an increase in net debt.

SOGEFI GROUP

CONSOLIDATED STATEMENT OF FINANCIAL POSITION(in millions of Euro)

ASSETS	03.31.2020	12.31.2019
CURRENT ASSETS
Cash and cash equivalents	174.1	165.2
Other financial assets	3.2	3.3
Inventories	120.4	115.5
Trade receivables	117.4	130.4
Other receivables	14.5	9.8
Tax receivables	30.1	28.6
Other assets	3.9	2.1
TOTAL CURRENT ASSETS	463.6	454.9
NON-CURRENT ASSETS
Land	12.9	13.0
Property, plant and equipment	371.0	382.1
Other tangible fixed assets	4.6	4.6
Right of use	55.9	61.3
Intangible assets	267.7	272.6
Other financial assets	-	-
Financial receivables	8.3	6.8
Other receivables	33.9	33.5
Deferred tax assets	36.3	37.0
TOTAL NON-CURRENT ASSETS	790.6	810.9
TOTAL ASSETS	1,254.2	1,265.8

LIABILITIES	03.31.2020	12.31.2019
CURRENT LIABILITIES
Bank overdrafts and short-term loans	4.0	1.9
Current portion of medium/long-term financial debts and other loans	85.8	78.8
Short-term financial debts for right of use	16.5	15.1
Trade and other payables	344.1	342.3
Tax payables	4.7	9.2
Other current liabilities	34.7	39.0
TOTAL CURRENT LIABILITIES	489.8	486.3
NON-CURRENT LIABILITIES
Financial debts to bank	131.6	131.9
Other medium/long-term financial debts	215.9	213.7
Medium/long-term financial debts for right of use	45.1	52.8
Long-term provisions	73.7	76.3
Other payables	60.7	59.5
Deferred tax liabilities	37.3	37.6
TOTAL NON-CURRENT LIABILITIES	564.3	571.8
SHAREHOLDERS' EQUITY
Share capital	62.5	62.5
Reserves and retained earnings (accumulated losses)	124.2	123.0
Group net result for the period	(5.6)	3.2
TOTAL SHAREHOLDERS' EQUITY ATTRIBUTABLE TO THE HOLDING
COMPANY	181.1	188.7
Non-controlling interests	19.0	19.0
TOTAL SHAREHOLDERS' EQUITY	200.1	207.7
TOTAL LIABILITIES AND EQUITY	1,254.2	1,265.8

CONSOLIDATED INCOME STATEMENT

(in millions of Euro)	Period		Period
	01.01 - 03.31.2020	01.01 - 03.31.2019	Change
	Amount	%	Amount	%	Amount	%
Sales revenues	350.2	100.0	389.9	100.0	(39.7)	(10.2)
Variable cost of sales	245.1	70.0	277.2	71.1	(32.1)	(11.6)
CONTRIBUTION MARGIN	105.1	30.0	112.7	28.9	(7.6)	(6.7)
Manufacturing and R&D overheads	34.2	9.8	38.3	9.8	(4.1)	(10.6)
Depreciation and amortization	30.3	8.7	29.9	7.7	0.4	1.5
Distribution and sales fixed expenses	9.8	2.8	10.4	2.7	(0.6)	(5.3)
Administrative and general expenses	19.8	5.6	21.6	5.5	(1.8)	(8.1)
Restructuring costs	2.8	0.8	2.0	0.5	0.8	45.0
Losses (gains) on disposal	-	(0.0)	(0.1)	-	0.1	19.5
Exchange losses (gains)	5.3	1.5	1.0	0.3	4.3	414.3
Other non-operating expenses (income)	(0.8)	(0.3)	(1.7)	(0.5)	0.9	51.0
EBIT	3.7	1.1	11.3	2.9	(7.6)	(67.2)
Financial expenses (income), net	6.8	1.9	6.2	1.6	0.6	7.8
Losses (gains) from equity investments	-	-	-	-	-	-
RESULT BEFORE TAXES	(3.1)	(0.8)	5.1	1.3	(8.2)	(160.2)
Income taxes	2.5	0.8	3.6	0.9	(1.1)	(30.2)
NET INCOME (LOSS) OF OPERATING
ACTIVITIES	(5.6)	(1.6)	1.5	0.4	(7.1)	(469.1)
Net income (loss) from discountinued
operations	-	-	1.3	0.3	(1.3)	(100.0)
NET RESULT BEFORE NON-
CONTROLLING INTERESTS	(5.6)	(1.6)	2.8	0.7	(8.4)	(298.7)
Loss (income) attributable to non-
controlling interests	-	-	(1.2)	(0.3)	1.2	97.9
GROUP NET RESULT	(5.6)	(1.6)	1.6	0.4	(7.2)	(446.2)

CONSOLIDATED NET FINANCIAL POSITION

(in millions of Euro)	03.31.2020	12.31.2019	03.31.2019
A. Cash	174.1	165.2	121.7
B. Other cash at bank and on hand (held to maturity
investments)	-	-	-
C. Financial instruments held for trading	-	-	-
D. Liquid funds (A) + (B) + (C)	174.1	165.2	121.7
E. Current financial receivables	3.2	3.3	1.4
F. Current payables to banks	(4.0)	(1.9)	(5.9)
G. Current portion of non-current indebtedness	(85.8)	(78.8)	(60.4)
H. Other current financial debts	(16.6)	(15.1)	(14.5)
I. Current financial indebtedness (F) + (G) + (H)	(106.4)	(95.8)	(80.8)
J. Current financial indebtedness, net (I) + (E) + (D)	70.9	72.7	42.3
K. Non-current payables to banks	(131.6)	(131.9)	(142.3)
L. Bonds issued	(214.3)	(212.1)	(173.9)
M. Other non-current financial debts	(46.7)	(54.4)	(63.9)
N. Non-current financial indebtedness (K) + (L) + (M)	(392.6)	(398.4)	(380.1)
O. Net indebtedness (J) + (N)	(321.7)	(325.7)	(337.8)
Non-current financial receivables	8.3	6.8	6.5
Financial indebtedness, net including non-current financial
receivables	(313.4)	(318.9)	(331.3)

CONSOLIDATED CASH FLOW STATEMENT

(in millions of Euro)	03.31.2020	12.31.2019	03.31.2019
SELF-FINANCING	25.2	145.3	33.8
Change in net working capital	(2.0)	(2.1)	(10.6)
Other medium/long-term assets/liabilities	2.8	(0.9)	2.8
CASH FLOW GENERATED BY OPERATIONS	26.0	142.3	26.0

Net decrease from sale of fixed assets	0.3	4.3	0.1
TOTAL SOURCES	26.3	146.6	26.1
Increase in intangible assets	6.9	32.2	7.6
Purchase of tangible assets	11.1	60.2	8.9
Purchase of tooling	7.4	35.3	9.9
Increase in tangible assets for right of use	0.7	9.5	8.3
TOTAL APPLICATION OF FUNDS	26.1	137.2	34.7
Exchange differences on assets/liabilities and equity	5.2	(1.0)	(0.5)
FREE CASH FLOW	5.4	8.4	(9.1)
Holding Company increases in capital	-	-	-
Increase in share capital of consolidated subsidiaries	-	-	-
Dividends paid by subsidiaries to non-controlling interests	-	(5.0)	-
Change in fair value of effective derivative instruments	-	-	-
CHANGES IN SHAREHOLDERS' EQUITY	-	(5.0)	-
Change in net financial position	5.4	3.4	(9.1)
Opening net financial position	(318.9)	(260.5)	(260.5)
Financial debts for right of use at January 1°, 2019	-	(61.8)	(61.8)
CLOSING NET FINANCIAL POSITION	(313.4)	(318.9)	(331.3)

CONTENT AND FORMAT OF THE CONSOLIDATED FINANCIAL STATEMENTS

1. INTRODUCTION

The consolidated Interim financial report as at March 31, 2020, 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, 2019.

3. ACCOUNTING STANDARDS APPLIED

The accounting standards applied in the preparation of the financial statements as at March 31, 2020 are the same as those applied to the financial statements as at December 31, 2019.

COMMENTS ON THE FINANCIAL STATEMENTS

SHAREHOLDERS' EQUITY

Changes in the Group's consolidated shareholders' equity and in total shareholders' equity during

the first quarter of 2020 are as follows:

(in millions of Euro)	Consolidated	Capital and	Total Group and
	shareholders'	reserves	non-controlling
	equity - Group	pertaining to	shareholders'
		non-controlling	equity
		interests
Balance at December 31, 2019	188.7	19.0	207.7
Dividends	-	-	-
Currency translation differences and other
changes	(2.0)	-	(2.0)
Net result for the period	(5.6)	-	(5.6)
Balance at March 31, 2020	181.1	19.0	200.1

At March 31, 2020 shareholders' equityexcluding minority interests amounted to Euro 181.1 million (Euro 188.7 million at December 31, 2019).

REVENUE TREND

Sogefi reported revenues of Euro 350.2 million, down by 10.2% at historical exchange rates and by 8.8% at constant exchange rates compared to the same period of 2019, obtaining a better performance than that of the market in which it operates.

REVENUES BY BUSINESS UNIT (*)

(in millions of Euro)	03.31.2020	03.31.2019	Change

	Amount	%	Amount	%	Amount	%
Suspensions	116.3	33.2	147.0	37.7	(30.7)	(20.9)
Filtration	134.7	38.5	134.8	34.6	(0.1)	(0.0)
Air&Cooling	100.0	28.6	108.9	27.9	(8.9)	(8.2)
Intercompany eliminations	(0.8)	(0.3)	(0.8)	(0.2)	-	23.9
TOTAL	350.2	100.0	389.9	100.0	(39.7)	(10.2)

In 2020 the management redefined the perimeter of the Filtration and Air and Cooling Business Unit. For comparative reasons, the 2019 values have been reclassified based on the new perimeter.

By Business Units, at constant exchange rates, Suspensions reported a decline of 18.5% (-20.9% at current exchange rates), Filtration was down by 1.8% (0.0% at current exchange rates) and lastly, Air and Cooling declined by 8.7% (-8.2% at current exchange rates).

REVENUES BY GEOGRAPHICAL AREA

By geographical areas revenues at constant exchange rates were down in Europe by 9.0%, in North America by 4.0% and by 22.8% in Asia, while in Sud America the drop was limited to -3.1% The breakdown of revenues by geographical area is as follows:

(in millions of Euro)	03.31.2020	03.31.2019	Change
	Amount	%	Amount	%	Amount	%
Europe	222.4	63.5	244.3	62.7	(21.9)	(9.0)
South America	29.0	8.3	37.6	9.6	(8.6)	(22.8)
North America	72.7	20.7	74.1	19.0	(1.4)	(1.9)
Asia	27.9	8.0	36.1	9.3	(8.2)	(22.8)
Intercompany eliminations	(1.8)	(0.5)	(2.2)	(0.6)	0.4	23.3
TOTAL	350.2	100.0	389.9	100.0	(39.7)	(10.2)

EMPLOYEES

The Sogefi Group had 6,807 employees at March 31, 2020, in comparison with 6,818 at December 31, 2019.

	03.31.2020	12.31.2019	03.31.2019
Managers	87	91	107
Clerical staff	1,846	1,830	1,941
Blue collar workers	4,874	4,897	4,858
TOTAL	6,807	6,818	6,906

Milan, April 20, 2020

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, 2020

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 20, 2020

SOGEFI S.p.A

(Yann Albrand)

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Sogefi S.p.A. published this content on 05 May 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 08 May 2020 09:48:07 UTC

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SOGEFI S.P.A.

Sogefi S p A : Interim Financial Report as at March 31, 2020

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