Amtel-Vredestein 2007 Financial Highlights Reveal Sales Growth

Full year 2007 financial highlights for Amtel-Vredestein have been made public and show a 22 per cent increase in net sales to US$997.4 million. This sales growth, says the company, can be primarily attributed to increased production and growing demand for Amtel-Vredestein tyres in both the OE and replacement tyres markets, as well as higher sales of the Company’s AV-TO unit due to the acquisitions of the autoparts and tyre wholesale businesses Pigma and Megashina in 2006, and the increased number of retail stores in the latest consolidated results.

Sales from the company’s Russian manufacturing operations, excluding the AV-TO unit, grew 14 per cent in the 2007 financial year, to $442 million, and sales from the European Vredestein Banden B.V. operations grew 18 per cent to $403 million. The company reports that its core passenger car tyre business is driving much of this growth: Net revenue from passenger car tyres grew 21 per cent to $615.8 million, and represented 62 per cent of total sales during the period. The company reports peak demand for its Vredestein and Amtel brands plus additional sales volume via its retail and wholesale channels.

A total of 14.2 million passenger car tyres were sold in 2007, 9.3 per cent more than the previous year. This figure can be broken down into 4.9 million premium ‘A’ segment tyres, 6.5 million value ‘B’ segment tyres and 2.7 million budget ‘C’ segment tyres. In terms of volume, ‘A’ segment tyre sales grew 6 per cent (261,900 tyres), ‘B’ segment sales grew 5 per cent (288,800 tyres) and ‘C’ segment tyre sales grew 32 per cent (661,500 tyres). The “C” segment increase was a result of integration of Moscow Tyre Plant and its Taganca brand, which represents this segment.

The 2007 results exceeded the company’s projections for annual sales: $997.4 million versus $980.0 million projected, and was operationally profitable for the full financial year, subject to any potential asset impairments charges and provisions as may be required under IFRS attributed to certain acquisitions and disposals made in 2006; however, the company expects to continue to show losses on a consolidated basis for the full year due to negative contributions by its AV-TO business and high interest expenses.

Amtel-Vredestein’s total amount of loans and borrowings (excluding leasing) as of 31 December 2007 was $756.4 million, up 16 per cent from the $652.3 million reported as of 31 December 2006, primarily due to forex losses on the debt portfolio. Despite the company’s operational results, interest on its debt burden has placed a strain on the company’s liquidity, reports Amtel-Vredestein, and much of its debt matures in the coming 12-24 months.

In its last results statement on 29 January 2008, the company stated that it was in ongoing negotiations over interim financing and had appointed Rothschild to assist in the development of its plans to reorganise a substantial part of its debt. These negotiations resulted in the provision of interim financing facilities with the help of one of the key shareholders in the amount of $45 million. Further interim financing may be needed in May to maintain continuity of raw material supply. At present, raw materials are continuing to be supplied, the company stated. Amtel-Vredestein is also in active discussions with its financing banks and, as previously disclosed, has presented a debt restructuring proposal to the majority of the banks with a view to addressing the debt burden in the longer term. Rothschild is also assisting the company in assessing its broader strategic options, which include a possible business combination with SIBUR-Russian Tyres, among other options.