Saft Groupe SA Reports Fourth Quarter and Full Year 2007 Sal(2)

IBG''s volume growth was approximately 17% in Q4 2007, bringing the full year volume growth to approximately 15%. Approximately half of this full year volume growth was due to the market share gains in the Telecom segment which have been reported previously. Saft is supplying Ni-Cd batteries, providing back-up power for AT&T''s remote terminals in its fixed wireline network. Saft continues to expect that the rollout of this programme will extend beyond 2008. However, as previously disclosed, the margins on Telecom projects such as this are lower than in the rest of IBG''s businesses, due to the higher volumes.

All segments performed well in Q4 and each achieved double-digit sales growth for the full year, at constant rates.

Saft estimates that nickel-related price increases accounted for c. 14% of the sales increase in Q4, demonstrating that the price increase on new orders from 1 April 2007 has been effective. Nickel-related price increases represented approximately 6-7% of the sales increase for the full year.

Specialty Battery Group

In the fourth quarter, SBG sales decreased by 5.2% as reported to EUR 61.8m, and by 0.2% at constant exchange rates, compared with Q4 2006.

For the full year 2007, SBG sales decreased by 2.4% as reported to EUR 234.7m, but increased by 1.5% at constant exchange rates, compared with 2006. This year to date growth rate at constant exchange rates rises to 2.2% if the sales of Air Depolarised batteries are excluded from 2006 (EUR 1.6m). This small activity was discontinued at the end of 2006 and the business was sold.

SBG sales in Q4 were good, in particular in Civil Lithium, but suffered in comparison with Q4 2006 due to:

- The project oriented businesses, Satellites and New Defence Systems had a strong Q4 2007, but this compared with an exceptional Q4 2006.

- A poor performance in Military Lithium, mainly due to the expiry of the main US Army contract, which has still yet to be re-bid.

- The small fire at SBG''s Poitiers plant in late September, which disrupted both Q3 and Q4 sales (as forewarned in Saft''s Q3 2007 sales press release). However, production and sales at Poitiers are now fully back to normal, and Saft expects that the ultimate losses arising from the fire should be largely covered by insurance.

For the full year, SBG had good growth in Civil Lithium and Satellites, but military sales fell.

Rechargeable Battery Systems

In the fourth quarter, RBS sales fell by 5.6% as reported to EUR 20.2m, and by 3.2% at constant exchange rates, compared with Q4 2006.

For the full year 2007, RBS sales increased by 3.0% as reported to EUR 83.4m, and by 5.2% at constant exchange rates, compared with 2006.

For the full year, Saft estimates that approximately 16% of this sales increase is due to pricing, offset by approximately 11% volume losses. In arriving at the group sales guidance for 2007, the assumption was for no sales growth for RBS, on the basis that sales value growth from price increases would be offset by volume losses. This has been exceeded, partly due to a strong performance by the Professional Electronics segment.

Whilst there was some recovery in demand in Q4, following a weak Q3 (partly due to a peak nickel surcharge), the Emergency Lighting market remains challenging in the context of an economic slowdown.

Nickel costs

In 2007, the LME cash nickel price per tonne averaged $37.2k, with the following quarterly averages:

- $41.4k in Q1 - $48.0k in Q2 - $30.2k in Q3 - $29.2k in Q4

Saft''s average nickel cost over the year was slightly below $40k per tonne, as the group did not fully benefit from the H2 price fall, having taken out derivative contracts to cap a proportion of H2 purchases with a cap of $35k per tonne, as previously advised.

RBS was able to recover the full incremental nickel cost in 2007 due to the surcharge mechanism. However, IBG was unable to recover the full incremental cost until Q4 2007 as the price increases made did not apply to the existing order backlog. However, the price increase applied to new orders from 1 April 2007 now brings IBG''s pricing for 2008 sales, broadly in line with current nickel costs.

Therefore, in order to protect the profitability of the majority of IBG''s order backlog, Saft has entered into a number of derivative contracts to ensure that IBG''s purchase price cannot exceed $35k per tonne on approximately 60% of its nickel purchases for the first half of 2008.

Saft has not yet undertaken any hedging beyond June 2008. RBS will continue to apply the nickel surcharge. Where possible, Saft will continue to follow the strategy of buying forward a proportion of IBG''s needs, at costs in line with the pricing inherent in IBG''s order backlog.

Johnson Controls-Saft ("JC-S")

In January 2008, JC-S announced 3 further contract wins:

- A production contract for Chery Automobile, a major Chinese auto manufacturer, which has chosen nickel metal hydride batteries for its A5 ISG hybrid saloon. The cells for these batteries will be manufactured at Saft''s RBS Nersac plant in France.

- A development contract for SAIC in China to supply lithium-ion batteries for a demonstration fleet of new energy vehicles.

- A production contract for Li-ion batteries for a hybrid vehicle for a European car manufacturer.