RECTiCEL Business Report FY2007

Business Highlights

Financial overview

(in millions of euro) FY2007 FY2006 Rate of change(%) Factors
Sales 1,611.8 1,474.4 9.3 -
EBITDA 122.0 106.0 15.1
Operating Income 63.2 16.0 295
Net Income 36.5 (8.7) -
Sales 490.4 426.9 14.9 (See factor 1 below)
EBITDA 40.6 26.0 56.1

Automotive Division

-In 2007, sales of the Automotive business line rose by 14.9% in a sluggish worldwide car market.
This growth was achieved by the launch of new projects in Interior solutions (EUR 221.1 million, +5.6%). In 2007, the new Mercedes C-class was launched simultaneously from three plants. At the same time, new projects were awarded for Volvo, Saab, Peugeot and Scania. These contracts will be started in the course of 2008-2010.
However, the main contribution to the rise in sales came from Seating (Proseat) (EUR 225.1 million, +31.7%, of which 11.7% in internal growth) through the integration of the Woodbridge activities in the United Kingdom in Proseat (51/49), the joint venture between Recticel and Woodbridge, Canada. In addition, Proseat also increased its volumes from the Czech Republic and Germany.
Within the Exteriors' segment (EUR 44.2 million, -4.2%), activities developed in Asia and more specifically China. The overall sales were however negatively influenced by the dollar rate.

-The EBITDA of the Automotive business line rose by 56.1% to EUR 40.6 million (including net non-recurring elements amounting to EUR 1.0 million), which is EUR 14.6 million better than in 2006.
Within the Interior solutions segment, the 2006 results in Europe were confirmed in 2007, with better profitability in all European plants as a result.
In the United States, the Fountain Inn factory was closed.
The production activities of Fountain Inn were transferred to Clarkston. This transfer and the start-up of the Buick Enclave project (General Motors) resulted in stabilisation and improvement in the performance of the Clarkston plant.
After the very negative USA results in 2006, the EBITDA from USA operations remains negative in 2007, although significant improvements were realised.
Within the Seating division (Proseat), profitability fell compared to 2006. The result was negatively influenced by the production line closure costs in the Wetteren plant (Belgium).
The profitability of the Exteriors’ segment was satisfactory, but in 2007 had to contend with the negative impact of the dollar rate.

Joint Venture
-In May 2007, Johnson Controls has joined with Proseat (joint venture between Recticel and Canadian company Woodbridge) to set up a new manufacturing joint venture for the production of molded foam seating cushions in Slovakia and Poland. The two plants are located in located in Lucenec, Slovakia and Zory, Poland. Johnson Controls will hold a majority 65% stake in the joint venture with Proseat holding the remaining 35%. The cooperation enables both companies to meet the rising demand in Eastern Europe in the future by producing close to the customer and cost-efficiently. In Slovakia, the joint venture will use the existing manufacturing capacity at the Johnson Controls plant in Lucenec. The new plant in Poland will be operational in November 2007 and will employ around 130 people. Proseat, which currently has 13 production sites in nine countries, is one of the main producers of polyurethane moulded foam for automotive seating in Europe. Johnson Controls has been continually expanding its presence in the new Eastern Europe since the early 1990s. (From a press release on May 29)

-In May 2007, Proseat and Foamline of Russia announced their plans for cooperation in the production of moulded foam seat cushions for the
automotive sector in Russia, thereby allowing Proseat to take an important new step in the automotive industry market.

-The Fountain Inn plant (South Carolina) was closed down definitively and the entire production was transferred to the Clarkston plant (Michigan).

-At the beginning of 2007, Proseat decided to combine all its establishments
in Belgium within the Hulshout plant (Belgium). Asa result of the falling capacity utilisation rate in its Belgian plants (Wetteren and Hulshout), Proseat was forced to carry out this reorganisation in order to avoid shortly having two loss-making establishments in Belgium.


R&D Expenditure
(in millions of euro) FY2007 FY2006 FY2005

R&D Expenditure

15.2 18.2 16.4
% of Sales 0.9% 1.4% 1.1%

R&D Structure
-The Company has an International Development Center (IDC) in Watteren, Belgium.
-EURO 15.2 million was invested in R&D in 2007
-64% was allocated to research in the automotive sector.

New Product Developments
Colo-Sense(R) dashboard skins
-The new generation of Colo-Sense(R)dashboard skins was launched. These new patented skins combine better touch and feel (haptic) properties with competitive pricing. On the basis of their better quality and the character of these products, various new contracts were concluded during the past year which will be started up in the course of 2008-2009-2010.

-Proseat launched compact.foam, which enables it to reduce the cushion height to 20%. With this new compact foam, seat cushions weigh significantly less, but nevertheless retain all their upholstery properties.

Comfort.sense foam
-It has the distinguishing feature that the moulded seat is also given a special surface structure. As a result, the additional intermediate layer in the seat covering can be dispensed with, thereby significantly improving the breathability. The surface structure of these components is designed in such a way that functional components, such as for example heating for seats, can easily be integrated.

Technological partnership
-As regards the design of the rear seats, there are increasing efforts to replace heavy metal components with lightweight plastic components in expanded polypropylene (EPP). These PU/EPP modules supplied by Proseat not only save weight, but also achieve a so-called anti-submarine effect, which prevents passengers from slipping out from under their seatbelts in the event of a collision. In this context, in mid-2007, Proseat forged a strategic alliance with Storopack. This family-run firm, established in 1874 and currently employing 2,632 people, is a major producer of custom-made technical moulded parts made of expandable foams. With the combined expertise in polyurethane (Proseat) and EPP (Storopack), Proseat has created a product mix which will give it a significant lead in its market.