Eurotech: Consolidated Interim Management Statement at 30 September 2012

EBITDA up by 32.8% year-to-date due largely to cost cutting.

Amaro (UD), 14 November 2012
- Consolidated revenues: from EUR 66.20 million to EUR 64.26 million
- Consolidated gross profit: from EUR 34.16 million to EUR 33.37 million
- Consolidated EBITDA: from EUR 1.84 million to EURO 2.44 million, +32.8%
- Consolidated EBIT: from EUR -3.75 million to EUR -3.42 million
- Consolidated pre-tax loss: from EUR -5.27 million to EUR -4.46 million
- Net debt: EUR 16.5 million
- Group shareholders’ equity: EUR 129.8 million


The Board of Directors of Eurotech SpA reviewed and approved the results relating to the first nine months and the third quarter of 2012 in today’s meeting.

FIRST NINE MONTHS OF 2012
In the first nine months of 2012, Group revenues totalled EUR 64.26 million vs. EUR 66.20 million in the first nine months of 2011.
Revenue performance in the first nine months continued to be affected by the uncertain global economic climate. The global situation affected the countries in which the Group is present in different ways and to varying degrees: the US and Japan showed positive signs of improvement, mainly in the order intake for US, while uncertainty persisted in Europe, with little visibility on the future outlook, in line with the trend already tracking in the first six months.
The gross profit margin came in at 51.9%, just over the figure registered for the first nine months of 2011 and higher than the 49.6% reported at year-end 2011. Over the third quarter, the Group registered a recovery in profit margins that had temporarily fallen in the second quarter - mainly owing to a product sales mix that was less profitable than usual - thus affecting the interim first-half results.
Management is also continuing to put great attention on cost performance, particularly in fixed costs. All the necessary measures are still being taken to curb spending, while still protecting the investment needed to sustain Group competitiveness, including new product development.
In the nine months in question, gross of adjustments, operating costs were reduced by EUR 1.29 million, decreasing from EUR 34.08 million (accounting for 51.5% of revenue) in the first nine months of 2011 to EUR 32.79 million (accounting for 51.0% of revenue) in the first nine months of 2012.
In absolute values, and due to the negative influence of exchange rates, the costs expressed in Euro do not convey the great effort made to curb fixed costs. If we consider the amounts in local currencies, significant savings can be seen from one period to the next achieved by the actions undertaken in 2011 and in the first months of 2012 to make the structure more efficient and lower the activation threshold for operating leverage. These actions can be seen more clearly in the reduction of the number of employees, which were 470 as at 30 September 2011 fell to 423 as at 30 September 2012.
Curbing fixed costs and streamlining existing resources are a priority of management, in order to achieve the profit objectives set for the current year.
Cost reduction has also impacted the EBITDA results of the Group, boosting it by 32.8% with a positive trend that shows how the results expected from the efficiency improvement measures put in place to date are bearing fruit.
EBIT came in at EUR -3.42 million, and was -5.3% as a percentage of revenues. This was an improvement versus the first nine months of 2011, when the figure was EUR -3.75 million and -5.7% as a percentage of revenues. EBIT as a percentage of revenue in the nine months was affected by higher gross profit and operating cost savings, in addition to the amortisation charged to the income statement in the first nine months of 2012, which derive on one side from the operating assets that began to be amortised in the first nine months of the year, and on the other side from the non monetary effects of “price allocation”, which came to EUR 2.86 million in the first nine months of 2012 (compared to EUR 2.44 million in the same period in 2011).
Year-to-date 2012, there was a pre-tax loss of EUR -4.46 million (vs. a loss of EUR -5.27 million in the first nine months of 2011). This performance was impacted by the items discussed above and by the results of financial operations – which in turn were affected by the trend in net financial position, as well as foreign exchange differences caused by trends in foreign currencies.
The Group net loss decreased from EUR -6.44 million in the first three quarters of 2011 to EUR -5.44 million in the same period of 2012. Price allocation had an impact of EUR 1.68 million on the Group net loss in 2012 (vs. EUR 1.43 million in 2011).
At 30 September 2012, the Group reported net financial debt of EUR 16.5 million, compared to net financial debt of EUR 14.33 million at 31 December 2011 and liquidities at month-end September 2012 amounted to EUR 10.71 million. It should be noted that operational management in the first nine months of 2012 have had a positive cash flow of EUR 0.2 million, improving greatly compared to the negative cash flow of EUR 1.23 million reported in the first nine months of 2011.
Also as at 30 September 2012, net working capital amounted to EUR 28.4 million, showing improvement compared to the EUR 30.14 reported at 31 December 2011 and EUR 31.41 million reported at 30 September 2011, due primarily to efficiencies in managing inventories.

THIRD QUARTER 2012
The Group registered third quarter sales of EUR 22.09 million, accounting for 34.4% of total January to September sales, while the same quarter of 2011 showed sales of EUR 25.03 million, accounting for 37.8% of total sales in the first nine months. This different distribution of the revenue is related largely to delivery in the third quarter 2011 of a significant portion of a large order in transportation, already mentioned in recent reports, handled by the British subsidiary.
In the third quarter of 2012, the different sales mix led to a net increase in the gross profit margin: 57.2% as a percentage of sales in 2012, versus 51.8% in the third quarter of 2011. This trend confirms the comments made regarding the previous quarters, namely, that in a given quarter, the sales mix can temporarily generate a different margin, whose effect is reduced when considered in the course of an entire year. Gross profit in the first three quarters of 2012 came in at just over 50%, in line with the management's target based on the business model adopted.
The interim results are influenced by the trend in operating costs and in depreciation and amortisation charged in the quarter. EBITDA was 17.6% higher in the third quarter of 2012 than in the same period of 2011. It was positive to the tune of EUR 2.86 million, with a 13.0% margin on the quarter’s sales, while in the same quarter in 2011 EBITDA totalled EUR 2.43 million, with a 9.7% margin on the quarter’s sales.
EBIT improved in the third quarter of 2012, rising to EUR 784 thousand (3.5% as a percentage of revenues) from EUR 579 thousand (2.3% of revenues) in the same period of 2011. Price allocation had a negative effect on EBIT of EUR 984 thousand in the third quarter of 2012 and EUR 814 thousand in the same period a year earlier.
The pre-tax profit was EUR 0.3 million, compared with EUR 0.1 million in the third quarter 2011, owing to the effect of EBIT described above, combined with the currency exchange trend and the consequent exchange rate differences booked.
In the third quarter 2012, the net loss of the Group came to less than EUR 1.0 million, in line with the same period a year earlier.

We advise the public that, as required by the CONSOB (Italian securities & exchange commission), the Consolidated Interim Management Statement at 30 September 2012 is available to anyone who requests it at the Company's registered headquarters as well as on Eurotech’s website, www.eurotech.com

Pursuant to article154-bis, paragraph 2, of the Italian Consolidated Finance Act, the Financial Reporting Manager of Eurotech SpA, Sandro Barazza, hereby declares that the financial disclosure contained in this press release corresponds to the Company’s documentary evidence, corporate books and accounting records.


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