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5. Sogefi S.p.A. Business Report FY ended Dec. 2014

Sogefi S.p.A. Business Report FY ended Dec. 2014

Factors
1) Overall Sales
-FY ended Dec. 31, 2014, sales increased by 1.1% year-on-year. Assuming the exchange rates being equal, it increased by 4.7% year-on-year. The growth recorded in North America and Asia compensated for the downtrend in South America.

2) Overall EBIT
-FY ended Dec. 31, 2014, EBIT decreased by 30.1% year-on-year. Margins were negatively affected not only by the performance of South American markets, but also by restructuring under way - in Europe for the most part - and the resulting - temporary - productive inefficiency.

3) Sales for Engine Systems Business Unit
-FY ended Dec. 31, 2014, sales increased by 3.2% year-on-year. The business group benefited from business growth in non-European markets - in the USA, China and India.

Contracts

-In 2014, the Company's patented coil spring technology has been jointly developed together with Audi for market introduction before year-end. The Company has fitted with its new suspension springs for the Peugeot "208 Hybrid Air 2L" concept car, and also the Company will produce it for the new Audi "A6 Avant 2.0 TDI ultra" (140kW). The Company has patented this new type of coil spring made from glass fiber reinforced polymer (GFRP) which weighs between 40-70% less than the traditional steel springs. The new GFRP coil springs can be assembled on cars and light commercial vehicles without affecting the suspension system architecture allowing for a weight reduction of 4-6 kg per vehicle. The resulting benefits include lower consumption with consequent reduction in CO2 emissions (up to 0.5 g per km).

Contracted situation by geographic area

• Engine system parts: Adopted by 8 of the 10 most sold passenger cars in Europe in 2014.
• Suspension parts: Adopted by 6 of the top 10 vehicles in Europe in 2014.
• Leading player in suspensions.

• Engine system parts: Adopted by 8 of the 10 most sold passenger cars in Brazil & Argentina in 2014.
• Suspension parts: Adopted by 9 of the top 10 vehicles in Brazil & Argentina in 2014.
• Joint leader in air filtration.

• Well positioned to serve all major local manufacturers with 3 plants (Mexico, West Virginia, Canada).
• Key products (Air intake manifolds, Oil filtration modules, Diesel filtration modules) for the successful light truck market.
• Leader in air intake manifold: Strong presence in the V6 and V8 engines.

• Leverage on relationship with Western and selected local customers.
• Opened 2 plants in 2014 in Wujiang, Suzhou, Jiangsu, China.

• Positioned to serve all major local manufacturers with 3 plants (Pune, Bangalore, New Delhi).
• Single largest supplier of air filter to 2 wheelers and 3 wheelers.

Awards

-The Company was awarded by General Motors as supplier of the year 2013 in the category of air intake systems. The Company supplies General Motors with suspension components and more especially with engine systems in North and South America, Europe and in recent months also India and China. (From a press release on March 26, 2014)

Collaborative Development

-The Company and the Politecnico di Milano have signed an agreement to collaborate for 3 years on joint research and development initiatives in the automotive sector. The agreement has the aim of developing research and development projects in the two sectors in which the Sogefi group operates - engine systems and suspension components for motor vehicles. The joint research projects, in particular, will be in the areas of materials, processes, design and testing. (From a press release on April 28, 2014)

Product Development

Tube Stabilizer Bars with Variable Cross Section
-Steel tube stabilizer with locally variable internal and/or external diameters along the length of the piece. Weight reduction available up to 50% compared with the solid functionally equivalent part. It's of safer design through a more homogenous stress level distribution. The product is aiming at passenger cars, particularly premium segment.

Composite Coil Springs made of Fiber Glass reinforced plastic (GFRP)
-In 2014, the Company's patented coil spring technology has been jointly developed together with Audi for market introduction before year-end. The Company has fitted with its new suspension springs for the Peugeot "208 Hybrid Air 2L" concept car, and also the Company will produce it for the new Audi "A6 Avant 2.0 TDI ultra" (140kW). The Company has patented this new type of coil spring made from glass fiber reinforced polymer (GFRP) which weighs between 40-70% less than the traditional steel springs. The new GFRP coil springs can be assembled on cars and light commercial vehicles without affecting the suspension system architecture allowing for a weight reduction of 4-6 kg per vehicle. The resulting benefits include lower consumption with consequent reduction in CO2 emissions (up to 0.5 g per km).

Investments Outside Italy

-The Company has started up 2 new industrial sites, producing suspension components and engine system components respectively, in the Shanghai area of China. The first plant, which extends over an area of more than 15,000 square meters, is dedicated mainly for the development and production of suspension components for motor vehicles (tubular and solid stabilizer bars at the beginning) and will in the initial stages service mainly BMW, Daimler, Fiat/Chrysler, Ford, and PSA through their local partnerships. The Engine Systems Plant is designed for Air and Cooling Systems (at present a total of two major product lines - Air Intake Manifolds and Water Outlets - with more product lines to be added in the future), extends over 11,000 square meters and will initially be serving Daimler, SGM/SAIC, Ford and Jiangling Motors (JMC). When fully up and running the two plants will employ more than 500 people. The investment in the two factories will amount to approximately USD 40 million. (From a press release on January 16, 2014)

Data

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