When one manages a manufacturing group confronted with a fourfold decrease in business volume in 12 months, the qualification that comes inevitably to mind is "Annus Horribilis". This extremely sharp decline is the result of the economic and financial crisis on activity and the capital investment plans of our main customers, equipment rental companies, particularly in Europe and the US.

 

In an environment that has become extremely challenging, Group results were inevitably impacted by the 55% drop in our sales. Despite this, we managed to maintain our market share in Europe while still making significant inroads in Asia and the Americas. We have also continued to develop outside Europe with the successful integration of the US company BilJax, acquired in July 2008 and the launch in mid-2009 of our first assembly plant on the Asian continent in Changzhou.

The impact of the crisis on our accounts has been significant. Following the sharp decline in revenue, operating results (-€63.4 million) were also adversely affected by

-          the significant negative volume effect on the gross margin;

-          the high level of provisions set aside for inventory and trade receivable losses;

-          the subnormal capacity usage costs for manufacturing facilities

Our rental business operations were also impacted by the economic crisis while services were affected by the reduced rate of equipment use for the fleets of our customer base of equipment rental companies.

 

In 2008 we already took measures to respond to the crisis and in 2009 these were further reinforced. Very significant efforts were undertaken to reduce fixed costs (-27% in relation to 2008 like-for-like). We have reduced working capital requirements and taken all measures to accelerate efforts to cut inventories. We have also reduced selling and marketing costs and overhead expenses, while maintaining efforts to support investments for research and development.

 

Despite weak market conditions in 2009, we successfully reduced net borrowings by more than €15 million through a significant decline in product volumes combined with a ten day reduction in our DSO (Days Sales Outstanding) or average collection period. At 31 December 2009, the Group had a cash balance of nearly €66 million.

 

At the level of Group financing, assured in large part by a syndicated loan with an available credit line at 31 December 2009 of €233.5 million, after a breach of debt covenants in the 2009 second half, we initiated negotiations with our banking partners and reached an agreement in early 2010 setting new conditions applicable to the loan agreement until its maturity in July 2013.

The flexibility of our business model has allowed us to adapt to a crisis of unprecedented severity. This in turn has enabled us to weather the storm. Our strategic choices have not changed and our priority is to be on the medium-term.

 

The Group's strategy that has always consisted on maintaining a strong focus on the needs of our customers through a network of directly owned subsidiaries and by proposing a complete range of products and services, will be strengthened by concentrating on two priorities.

 

- Local customer service: increased proximity to customers through a dedicated sales force and enhanced marketing structures and services.

- An innovative offering: Increased R&D expenditures accompanied by further acceleration in the pace of new product launches.

Our response to deliver specific customer value will increasingly involve proposing products conceived and developed with customer input.

 

In Europe, where we have maintained our position as market leader, the Group will focus its resources primarily on maintaining the level of customer satisfaction by strengthening our local presence and network of services. We will organise specific events for each country to meet customers and promote our products, in particular by proposing a number of comparative tests.

 

In Asia, North America and Australia, the Group will strengthen its presence and raise its name recognition through initiatives providing a maximum impact including professional trade fairs to optimize the promotion of our brand in target markets.

Today there are no concrete signs to suggest a significant rebound in 2010. In the absence of visibility, Haulotte Group has accordingly taken the actions required to prepare for economic conditions comparable to those in 2009.

 

Still, we remain fully confident in the Group's capacity to meet the challenges of an economic environment that has become increasingly complicated and difficult. Our strategic focus on delivering the benefits of innovation to our customers will be rewarded by the introduction in 2010 of new highly promising models such as the nacelle HA12CJ or HA12CJ+, compact articulating booms with a 12m reach, designed for all types of indoor work, or the further expansion of our telehandler offering with the introduction of a line of 10m machines.

 

In this uncertain environment, we will pursue our efforts to reduce WCR and maintain tight control of fixed costs, critical components to effectively manage for our future. More than ever we remain committed to maintaining the level of expertise of our teams to offer our customers consistent high quality innovative products and related services adapted to their specific needs.