LISI AUTOMOTIVE’s strong 29.3% growth in sales revenue took totals to €401.3m, close to the 2007 record (€407.1m), and is down to two factors:

• changes in consolidation scope as of April 1, 2010 with the inclusion of the two newly-acquired Acument Group sites. These two factories contributed up to €34.6m, i.e. 8% of growth;
• the right level of divisional customer production. Business activity showed similar growth rates of +49.7% in China, +25.8% in Germany, +18.2% including international parts manufacturers, and +16.9% in France.

With stable scope and exchange rates, sales were up 21.2% on the year, whereas for 2009 they fell almost 15% in comparison with 2008.

Contrary to market forecasts, the financial year 2010 showed evidence of a solid performance throughout, with growth actually up +9% in the final quarter with stable scope and currency rates.

Outside of Western Europe, the markets are looking bullish with a new record year for China, which saw sales of 18.1m vehicles. European vehicle registrations for the 27 EU member states+ EFTA¹ are down -4.9% compared with the-9% forecast at the start of the year, largely due to a 23.4% drop in the German market. Falling sales were palliated by the residual effect of car scrappage schemes, particularly in France (-2.2%). On the other hand the division estimates that customer manufacturing was up 10.6% (sustained by the substantial upturn in German manufacturing (export) and French manufacturing (increased European market share). The Group therefore notes that its business activity levels are linked less to European vehicle registrations, and more to its customers’ global manufacturing.

Manufacturing customers are showing a clear trend towards developing their manufacturing bases in areas with strong market growth such as Russia, China and South America. Similarly, the highest-ranking parts manufacturers, who account for more than 25% of LISI AUTOMOTIVE’s sales revenue, are strengthening their positions following manufacturers going into these areas.

In terms of business development, orders taken for new products in 2010 were fairly high at 13.4% (annualized sales revenue for new products/sales revenue 2010). Such developments were especially prevalent amongst German manufacturers, international parts manufacturers and in China.

After the very tricky financial year 2009, the 2010 upturn was remarkable, with over €40m variance of the current operating profit level, reflecting the following major trends:

• a significant volume effect (+€25.2m);
• increased production (+€7m);
• increased productivity (+€11m).

They have largely compensated for the negative effect of absorbing costs of up to €-5.5m in order not to pass on to customers the cost of inflation in commodities prices seen from the second quarter of 2010 onwards, just after sales prices started falling to catch up with purchase costs in 2009.

Revenue from new sites at Ferté-Fresnel (Orne) and, to a lesser extent, Bonneuil-sur-Marne (Val-de-Marne) brought in an additional €1.6m, almost entirely offset by heavy maintenance works on a heat treatment furnace (-€1.1m). The remainder is attributable to the improved provisions and depreciation balance.

An analysis of fixed and variable costs shows that the adjustment of the variable cost margin exceeded 40%. There was also a focus on managing fixed costs, which only increased by +5% on a like-for-like basis for a production increase of +32.8%. The financial year therefore reaped the benefits of 2009’s reduced costs, without however attaining the operating revenue levels seen in 2007.

At almost €43m (as compared with €9m in 2009), operating cash flow reached 10.7% of sales revenue. Working capital requirements were down by €13.9m, despite the managed increased in inventory (€7.3m) of which €4m was attributable to commodities. As of December 31, 2010, inventory represented 66 days of sales revenue as compared with 68 in 2009, despite the inclusion of acquisitions and increased business activity. This management performance was made possible due to the ACE productivity initiative, the Lean Manufacturing system and production streamlining.

Recorded investments in 2010 reached €29.6m (€20.4m in 2009), including:

• the acquisition of the Puiseux (Val-d’Oise) site building for around €5m;
• the construction of the Delle II logistics infrastructure for €2.4m;
• the development of new products for parts manufacturers for €3.6m;
• the extension of capacity in Germany for €5.1m and in China for €1.6m;
• the continued Movex ERP deployment exercise for €4.2m.

Having taken into account all of these elements, free cash flow reached a record high of €27.3m and return on capital employed was up on 2009.

Staffing levels increased by 13.4% to 3,200 workers (2,821 in 2009), i.e. 3,171 full-time equivalents (including temporary employment agency staff), whereas in 2009, after resorting to short-time working, the division adjusted its staffing levels to 2,533. Flexibility therefore reached 25.2% over 12 months.

JD Power predicts that with the end of the vehicle scrappage scheme, the European market in 2011 (27 member states plus EFTA) will be slightly down, but with a level of uncertainty that remains high. Conversely, the US markets will bounce back (up by as much as 10% according to the same sources). The Brazilian (+11%), Indian (+15%) and Russian (+17%) markets should also sustain demand. The overall situation should therefore ensure that LISI AUTOMOTIVE customers maintain comparable or higher performances to those in 2010.