BR

ITC

N

TR

INTERNATIONAL OPERATIONS

CO

RE M

ARK

ETS

2

The Sabaf Group is one of the world’s leading manufacturers of components for household gas cooking appliances, with a market share of around 50% in Europe and a global share of about 10%. Its core market consists of manufacturers of household appliances, particularly cookers, hobs, and ovens. The majority of Sabaf’s sales consist of the supply of original equipment, whereas sales of spare parts are negligible.

A market share of around 50% in Europe and a global share of about 10%

INTERNATIONAL PRESENCE

Main production lines

Valves and thermostatsThese components regulate the flow of gas to covered burners (in the oven or grill) or exposed burners; thermostats are characterised by the presence of a thermal regulator de-vice to maintain a constant pre-set temperature.

HingesThese are the components that allow a smooth and balanced movement of oven, washing-machine or dishwa-sher doors when they are opened or closed.

BurnersThese are the components that, via the mixing of gas with air and com-bustion of the gas used, produce one or more rings of flame.

AccessoriesThe Group also produces and mar-kets an extensive range of accessori-es, which supplement the offering of the main product lines.

SALES OFFICESSALES NETWORKMANAGEMENT

International operationsand core markets

30

€/000Sales by product line

0 20,00010,000 30,000 40,0005,000 25,00015,000 35,000 45,000year

2014

2013

2012

2011

2010

13,741

34,006

12,288

36,160

20,251

12,928

6,963

18,601

14,613

26,537

31,788

23,524

27,618

23,265

20,027

13,074

13,350

14,560

14,829

39,337

38,222

42,631

41,405

18,850

18,943

22,210

21,097

11,226

11,571

10,598

10,959

6,121

6,650

8,782

10,792

Hinges

Hinges

Hinges

Hinges

Hinges

Accessories and other revenues

Accessories and other revenues

Accessories and other revenues

Accessories and other revenues

Accessories and other revenues

Special burners

Special burners

Special burners

Special burners

Special burners

Standard burners

Standard burners

Standard burners

Standard burners

Standard burners

Termostati

Thermostats

Thermostats

Thermostats

Thermostats

Light alloy valves

Light alloy valves

Light alloy valves

Light alloy valves

Light alloy valves

Brass valves

Brass valves

Brass valves

Brass valves

Brass valves

136,337 130,967 148,583130,733 150,897T O T A L

SABAF - ANNUAL REPORT 2014 INTERNATIONAL OPERATIONS AND CORE MARKETS 31

32

36,198 | 26.6% 29,300 | 22.4% 33,236 | 25.4% 37,459 | 25.2% 32,553 | 21.6%

INTERNATIONAL DEVELOPMENT OF SABAF: CHALLENGES AND OPPORTUNITIES

Eastern Europe and Turkey

Western Europe

PERFORMANCE DATAANALYSIS OF SCENARIO

The production of household appliances has also been heavily cut in Western Europe in recent years: some ma-nufacturers have closed down, others have re-located (in particular in Poland and Turkey).

Production for the high-end segment remains in Western Europe, where Sabaf’s objective is to increase its market share signifi cantly.

Turkey is today the European country that produces the grea-test number of household appliances. In this regard, the ope-ning of a production facility in Turkey and the development of new trade relations are key to supporting the growth strategy. The Turkish domestic market is potentially of greater and grea-

ter importance: the average age of the population, the number of new families and the increase in incomes are converging indicators that point towards growing demand for consumer goods. The Group’s strategy includes further development in activities in Turkey in the coming years.

€/000Sales by geographical area

Key 2014 20122013 2011 2010

The crisis of recent years has signifi cantly transformed the household appliances sector in Italy. Today, the major Italian manufacturers of cooking appliances focus on the high-end segment of the market or on special products. With a strong emphasis on exports, they continue to achieve excellent results.Sabaf offers its Italian customers extremely high quality and a differentiated range of components that allow customers to

promote “Made in Italy” in international markets. The great majority (estimated to be around 80%) of Sabaf’s sales in Italy are, in fact, destined for our customers’ household appliances exports.Only a small proportion is destined for the Italian consumer market, which continues to be affected by the slump in the property market as well as negative demographic trends.

Italy

42,277 | 31.0% 42,662 | 32.6% 45,597 | 34.9% 56,321 | 37.9% 61,648 | 40.8%

8,716 | 6.4% 7,465 | 5.7% 7,337 | 5.6% 11,215 | 7.5% 11,561 | 7.6%

SABAF - ANNUAL REPORT 2014 INTERNATIONAL OPERATIONS AND CORE MARKETS 33

Central and South AmericaFor its future development Sabaf can rely on its solid pre-sence, including production facilities, (a plant in Brazil has been operational since 2001).

A major project is under consideration to start production in Brazil of special burners. The launch is expected in 2016.

Asia and OceaniaIn China, new standards come into force on 1 April 2015 in relation to gas hobs. The new standards introduce three different classes of energy effi ciency, and only 10-15% of gas hobs currently on the market are able to satisfy the highest level of effi ciency. Sabaf has developed a burner especially for the Chinese market, that guarantees the hi-ghest classifi cation to built-in hobs and ovens. Production of this burner is expected to begin at the start of 2015.

Sabaf has also developed a dedicated burner for the Indian market, which it successfully began to supply in 2014. The potential is huge, even if the time horizons are long, consi-dering how underdeveloped the market is.In the Middle East, Sabaf enjoys a solid presence and an excellent reputation. Access to these markets continues to depend on the political situation in the major markets of the region.

PERFORMANCE DATAANALYSIS OF SCENARIO

11,204 | 8.2% 11,864 | 9.1% 12,306 | 9.4% 13,328 | 9.0% 15,476 | 10.3%

18,324 | 13.4% 24,375 | 18.6% 21,895 | 16.8% 19,838 | 13.4% 17,467 | 11.6%

North America and MexicoIts wide range of innovative and effi cient products, together with relations with the main producers, and its good tech-nical reputation, provide the Group with new opportunities.

Sabaf’s market share is growing steadily in the premium segment.

7,044 | 5.2% 4,891 | 3.7% 3,412 | 2.6% 3,898 | 2.6% 5,136 | 3.4%

AfricaCapitalising on the solid reputation of its brand, its geo-graphical closeness and its long-term presence, Sabaf is increasing its presence in the region.The urban growth plans in northern Africa represent the

key to possible market opportunities, despite diffi culties relating to the current political situation in some of the major countries.

12,574 | 9.2% 10,410 | 7.9% 6,950 | 5.3% 6,524 | 4.4% 7,056 | 4.7%

TRENDS IN THE COOKING APPLIANCE MANUFACTURING SECTOR

In Western Europe, which accounts for about half of the end-user market for Sabaf products, the level of saturation reached by cooking appliances (i.e. the number of households owning such appliances) is close to 100%. Purchases of new appliances are therefore mainly replacement purchases. Moving house or the purchase or refurbishment of a home are often occasions for the purchase of a new cooking appliance.

The market trend is therefore directly influenced by the general economic trend and, in particular, by households’ disposable income, consumer confidence and

housing market trends. In this context, the household appliances sector has, for many years, been experiencing a situation where demand is stagnant, most notably in the peripheral countries.

Conversely, in other markets the saturation level is often much lower. Faster economic growth rates and a more favourable demographic trend than in We-stern Europe are creating huge opportunities for groups such as Sabaf that are able to work both with multinational household appliance manufacturers and with local manufacturers.

For years now the sector has tended to outsource component design and pro-duction to highly specialised suppliers that, like Sabaf, are active in the world’s main markets and are able to supply a range of products tailored to the specific requirements of individual markets.In addition, the trend to internationalise production is becoming more accen-tuated, with production increasingly shifting to countries with low-cost labour and lower levels of saturation.

Moreover, the emergence of new players at the international level is causing over-supply. This in turn is leading to pressure from competition and is brin-ging about greater concentration in the sector. However, this trend is less pro-nounced for kitchen ranges than for other household appliances: in the cooking segment, design and aesthetics on the one hand and less intensive investment on the other hand also permit the success of small, highly innovative producers.

A varied picture Manufacturers of gas cooking appliances – Sabaf’s core market – consist of:• large multinational groups with a well-established international presence in sales and production and possessing strong brands; • manufacturers located in countries with low-cost labour that aim both to exploit opportunities in their home markets and to grow fast globally; • manufacturers focused on specific markets in which they are the market leader; • manufacturers (mainly Italian export firms) occupying segments featuring greater product differentiation (built-in hobs and ovens, free-standing coo-

kers, for example).

CORE MARKETS

34