INTERNATIONAL OPERATIONS AND CORE MARKETS

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

HEAD OFFICE PrODuCTIvE unITSSAlES DEPT.

In THOuSAnDS OF EurO

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

Main production lines

Valves and thermostats These 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 device to maintain a constant pre-set temperature.

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

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

accessoriesThe Group also produces and markets an extensive range of accessories, which supplement the offering of the main pro-duct lines.

sales by product line

in thousands of euro 2012 2011 2010

Brass valves 18,601 26,537 31,788

light alloy valves 23,524 23,265 20,027

Thermostats 13,074 14,560 14,829

Standard burners 39,337 42,631 41,405

Special burners 18,850 22,210 21,097

Accessories and other revenues 11,226 10,598 10,959

Hinges 6,121 8,782 10,792

total 130,733 148,583 150,897

2012

2011

2010

INTERNATIONAL OPERATIONS AND CORE MARKETS 31SABAF - ANNUAL REPORT 2012

saBaf’s InternatIonal growtH:cHallenges and opportunItIes Sales by geographical area

asia and oceania

34.9%

Italy – traditionally the main producer of appliances in Europe – is losing its position.Some customers have limited their business in Italy; others have completely abandoned the country or have interrupted their business due to financial problems.Sabaf – which has a consolidated presence on the Italian market – is focusing on differentiating its products and increasing its attention on energy efficiency to deal with a market that is facing structural problems.

2012 2011 2010

37.9% 40.8%45,597 56,321 61,648

Asian markets are marked by the emergence of consumption patterns similar to those of the West. The expansion of the gas cooking appliance industry, together with the possible tightening of safety standards, represents a growth opportunity for Sabaf, which can count on the strength of its brand and the “made in Italy” reputation.

2012 2011 2010

9.4% 9% 10.3%12,306 13,328 15,476

eastern europe and turkey

western europe

Italy

2012

5.6%7,337

In line with the trends on the Italian market, Western European countries present risks relating to the emergence of competitors from low-cost countries. Also in this case, Sabaf intends to focus on the quality and innovation of its products in order to consolidate its customer base.

2011 2010

7.5% 7.6%11,215 11,561

Sabaf is at the high end of the market, and intends to reap opportunities for expansion emerging in Eastern European countries, particularly Turkey. In this regard, the forthcoming opening of a production facility in turkey during 2012 and the development of new trade relations are key to growth.

2012 2011 2010

25.4% 25.2% 21.6%33,236 37,459 32,553

Revenue (in thousands of Euro)and incidence% of the total

32

trends In tHe cookIng applIance manufacturIng sector

central and south america africa us, canada & mexico

Sabaf now has a consolidated presence, also in production, on which to base future growth. Growth possibilities in Brazil, South America and Central America are related to the large size of the market and sustained growth trends. The potential raising of regulatory standards in some countries of the area represents a significant opportunity.

Sabaf intends to increase its presence in the area by leveraging its brand reputation, geographical proximity and long-term presence.city expansion plans in north Africa and the Middle East represent a driver for possible market opportunities despite the difficulties related to the current situation in some of the main countries.

Its wide range of innovative and efficient products, together with relations with the main producers and its good technical reputation, provide the Group with new opportunities.Sabaf’s market share is constantly growing for the built-in segment. growing security needs have emerged in different market sectors.

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 hou-se 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. There-fore, the appliances sector has been particularly hit by the progressive wor-sening of the macroeconomic situation in Europe.

Conversely, in other markets the saturation level is often much lower. Faster economic growth rates and a more favourable demographic trend than in Western Europe create 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, who, 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 leads to pressure from competition and will probably bring about greater concentration in the sector. However, this trend is less evi-dent in cooking appliances than for other domestic appliances: in the cooking segment, design and aesthetics on the one hand and less intensive investment on the other mean that small, highly innovative producers can also prosper.

A varied pictureManufacturers of gas cooking appliances – Sabaf’s core market – consist of:• large multinational groups with a well-established international pre-

sence 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 fe-aturing greater product differentiation (built-in hobs and ovens or large free-standing kitchens for example).

2012 2012 20122011 2011 20112010 2010 2010

16.8% 5.3% 2.6%13.4% 4.4% 2.6%11.6% 4.7% 3.4%21,895 6,950 3,41219,838 6,524 3,89817,467 7,056 5,136

core markets

INTERNATIONAL OPERATIONS AND CORE MARKETS 33SABAF - ANNUAL REPORT 2012