Letter from the Chairman

Dear Shareholders,

After 2011, which had recorded a return to profit, rising from the tsunami that had negatively affected all our accounts starting from the third quarter of 2008, the financial statements of the year just ended record a loss of 15 million Euros. It should however be immediately pointed out that in the formation of this result expenses for extraordinary non-recurring events amounting to 7.7 million Euros and the negative trend in the target market of the subsidiary Elettronica Santerno have a significant contribution. On the traditional business front on the other hand, the results are much more satisfactory; Drive Tech as well as Gear World and Agritalia in fact reach revenue close to pre-crisis levels. Drive Tech, in particular, exceeds the sales volumes recorded in the record year, in spite of the market slowdowns, primarily in India, in the last quarter of the year. Also all the actions to recover marginality, which finally reaches substantially higher levels, are making steady progress in the mechanical sector, even if not yet in line with the potential that our Group can express.

But let's go back to Elettronica Santerno which, after the brilliant results of previous years, was the most negative area in 2012. The downturn in the renewable energy sector in much of the world, compounded by the sudden and drastic change of incentive models in the industry in Italy, has caused Santerno a decline in sales of 75 million Euros, 60% less than the previous year, bringing the company to a loss of 13 million Euros. The company has promptly implemented throughout 2012 major restructuring measures without which the result would certainly have been worse. The necessary write-downs of receivables and inventory (4.5 million Euros) have significantly contributed to the formation of this loss, but today free Elettronica Santerno from excess burden and prepare it to take advantage of new market opportunities that already in the current year are expected to bring the company back to breakeven. With the Italian PV market practically disappeared, awaiting a recovery that is still not on the horizon, Elettronica Santerno is focussing on international markets, also leveraging the skills and experience of the Group in internationalization processes, developing and certifying a wide range of products for the main application areas. United States, South Africa, China and India already ensure orders for over 50 million Euros in 2013.

The spirit with which we evaluate the activities of our main business, whose progress in the last three years confirms the soundness and validity of the actions taken, designed to adapt the company to the transformations the manufacturing sector is experiencing, is different; actions which, in the coming years, will produce even more important and evident results. Despite the difficulties experienced during the crisis, at the end of 2012 we find ourselves with stronger commercial relations also extended to new customers in all areas of the world. Not having renounced the development of new products, even in years in which investing in research and innovation had a significant impact on the income statement, now allows us to introduce a range of solutions and products that are absolutely innovative and able to respond to the new and specific needs of our customers, who, now more sensitive to Total Cost of Ownership, demand from suppliers of complex systems not only better quality, price and service, but also technical configurations that maximise fuel efficiency with particular attention to environmental sustainability. This alongside a specific offer with the local for local concept in a new perspective, which sees the Group's presence in emerging areas not only as lower-cost production bases, but rather as engineering and manufacturing competence centres for the development of the areas themselves through the supply of products adapted to the specific technical market requirements.

After having opened this first letter of mine to the shareholders on the unsatisfactory data of 2012, I would like to close it with a note of confidence and rational optimism on the ability of our company, starting right from 2013, to return to its positive path and the generation of value. The market visibility and that of the programmes of major customers today make it possible to be confident with regard to the sales forecast for the current year. The management is committed to complete, as scheduled, the announced restructuring operations, primarily the merger of Gear World with Drive Tech. An operation that will redesign our perimeter and facilitate concrete economies of scale through a rational unification of all the main operating functions of the various units. The Carraro Group is focussed, in a concrete manner, on economic recovery that must more strongly distinguish the coming years, with a return to certain financial stability, all in an indispensable perspective of searching for sustainable growth, which we must continue to aim for.

Enrico Carraro

‹ Previous article

Carraro Drive Tech launches the new e-learning platform "Carry4you Academy"

Technical know-how online, without any language or time barriers

Following article ›

Santerno Partners with the Largest Photovoltaic Facility in Southeast Asia

A new technical service center to be soon launched for the maintenance and service of the existing facilities in the country