CONSOLIDATED FINANCIAL RESULTS 9M 2009

In 9M 2009 consolidated turnover declined by 16.89% reaching €158.50 mil. from €190.70 mil. the comparable prior-year period. The drop in the Group’s consolidated turnover reflects the reduced consumer spending and the continuing adverse macroeconomic environment as well as the negative impact from currency movements. Excluding the FX translation effect, Group sales reduced by c. 8%.

Gross profit reduced by 19.23% to €79.05 mil. in 9M 2009 from €97.87 mil. Gross profit margin settled at 49.87% versus 51.32%, largely affected by the adverse currency movements. Nevertheless, the negative impact was partly offset by the high participation of the own brands portfolio as well as more competitive raw material prices.

Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA) posted a decrease of 35.90% to €18.80 mil. in 9M 2009 from €29.34 mil. in 9M 2008, while the EBITDA margin stood at 11.86% from 15.38% in the respective prior-year period.

Earnings before Interest and Tax (EBΙΤ) reached €16.05 mil. from €26.41 mil., reduced by 39.23% and EBIT margin was reduced from 13.85% in 9M 2008 to 10.13% in 9M 2009.

Earnings before taxes (EBT) settled at €14.56 mil. from €26.89 mil. in 9M 2008, a reduction of 45.88% compared to the respective period of last year.

Earnings after taxes and minorities reached €11.58, reduced by 46.24% compared to the comparable prior-year period and the EATAM margin settled at 7.30% from 11.29%.

Despite the challenging macroeconomic environment Sarantis Group has successfully continued to generate solid cashflows, a fact attributed largely to cost saving initiatives already implemented as well as the efficient working capital management. More specifically, the Group’s operating working capital settled at €76.50 mil. in 9M 2009, improved compared to €81.45 mil. during H1 2009. Operating working capital requirements over sales settled at 33.68% vs 33.82% in H1 2009.

At the same time the Group benefits from a healthy capital structure and low leverage. During 9M 2009, total Group’s bank debt reached €59.65 mil. from €64.92 mil. in FY 2008, further reduced (compared to H1 2009) by 8.12%. The Group’s net debt further reduced to €24.68 mil. from €35.19 mil. in H1 2009 and €29.31 mil. in FY 2008.

It should be mentioned that the adverse conditions in the consumer sector as well as the unfavorable foreign exchange rates in the Group’s foreign markets, continued to have a negative effect on all the business categories of the Group during the third quarter of 2009.

During 9M 2009 the Household Products turnover declined by 14.54%, reaching €70.56 mil. from €82.56 mil. in the respective period last year. Own brands within this SBU reduced by 10.82% while their participation to the SBU’s turnover increased to 99.18% from 95.04%.

During 9M 2009 Fragrances and Cosmetics recorded a sales decline of 17.87% amounting to €68.03 mil. from €82.83 mil. in the comparable prior-year period. In this SBU, own brands demonstrate a decline of 21.34% and their contribution to total turnover also dropped to 67.53% from 70.51%.

The contraction in the category of Other Sales is largely attributed to the weakness in the Selective Products subcategory which has been significantly affected by the consumption slowdown. A recovery in the turnover of this subcategory is expected in the fourth quarter of 2009 both as a result of the expected increased demand and due to the low base effect of the fourth quarter of 2008.

In terms of the Group’s operating profit, the positive impact of the cost control initiatives on the core business categories during the third quarter of 2009 should be stressed.

Fragrances & Cosmetics EBIT decreased in 9M 2009 by 65.94% compared to 9M 2008, while in Q3 2009 F&C EBIT dropped by 43.17%, improved over the 87.62% reduction of Q2 2009. The fragrances & cosmetics EBIT margin during Q3 2009 settled at 8.50% vs 1.90% in Q2 2009. The operating profits of own brands within this category stood at €1.39 mil. during Q3 2009 from -€0.05 mil. in Q2 2009.

Household Products EBIT was reduced in 9M 2009 by 3.41% to €8.17 mil. from €8.46 mil., while in Q3 2009 it was up by 7.94% vs the respective previous year quarter. Their contribution to total EBIT increased from 32.04% in 9M 2008 to 50.92% in 9M 2009, while their EBIT margin reached 11.58% from 10.25%. Own brands of this category posted an EBIT growth of 7.43% during Q3 2009, reaching €3.92mil.

The Estee Lauder JV income is affected by the consumption slowdown and is expected to recover during the fourth quarter of 2009.

Looking at the geographical analysis, the weakening in the Group’s sales across all regions reflects the adverse impact of lower consumer spending and the unfavorable macroeconomic environment as well as the negative FX translation impact in the Group’s foreign markets.

In terms of the Greek market, the first two quarters of 2009 were characterized by intense sales fluctuations as a result of the unbalanced inventory management in the retail sector. Following the end of the retailers’ inventory reduction policy, the management believes that the drop in Sarantis Greek operations during Q3 2009 reflects the market’s drop in the categories of our operation, which is largely affected by the lower consumption spending.

More specifically, sales in the Greek market dropped by 17.48% during 9M 2009 reaching €68.03 mil. from €82.44 mil. in 9M 2008. However, it is worth to note that the reduction in Greek sales during the third quarter is largely driven by the drop in the Selective Products subcategory rather than Sarantis core business categories of fragrances & cosmetics and household products.

As far as the Old Countries turnover is concerned, we observe a similar to the first half of 2009 pattern, with the 9M 2009 turnover posting a decline of 16.08% to €90.37 mil. from €107.69 mil. Excluding the foreign exchange translation impact, the Old Countries turnover during 9M 2009 posted a c. 1% drop versus the comparable prior-year period. The old countries contribution to total Group sales increased to 57.01% from 56.47%.

As far as EBIT is concerned, the old counties of operation recorded an EBIT reduction of 57.64% to €4.66 mil. in 9M 2009 from €11 mil in 9M 2008. However, the old countries’ Q3 2009 EBIT is improved over Q2 2009, as EBIT reduction during Q3 2009 amounts to 34.78% while Q2 2009 the EBIT reduction was equal to 96.12%. The old countries EBIT margin settled at 5.15% in 9M 2009 vs 1.98% in H1 2009 and 10.21% in 9M 2008.

Τhe Greek EBIT margin reached 11.49% compared to 13.03% the same period last year.

Sarantis Group 9M 2009 financial results follow a trend similar to the H1 2009 financial results with the performance having been influenced by the consumption slowdown and the unfavorable currency movements in the Group’s foreign countries. However, cost saving initiatives and more rational operating expenses have helped to mitigate the negative impact of the adverse economic environment. Moreover, the Group’s increased cashflow and its low leverage continue to constitute two of the most beneficial factors of the Group’s financial position.

The management expects the difficult trading conditions will persist in the fourth quarter of 2009. However, the expectation is that the fourth quarter’s weakness will be of less magnitude than the first three quarters of 2009 mostly due to the completion of the key accounts destocking, the softer currency devaluation and the low base effect.

Consequently, based on the Group’s performance so far and given no sudden changes occur in the economic environment, the management reiterates its FY 2009 guidance.

The Group remains focused on its strategic pillars of growth that consist of organic growth of the core business activities and emphasis on Sarantis own brands portfolio, increase of the existing market shares of own brands in the EE region, continuous examination of the situation in the economies of the Group’s foreign countries and modification of the business where deemed necessary according to the new market conditions and focus on the successful implementation of SAP and “go live” on 1/1/2010 in Poland and Romania. Finally, the Group places emphasis on the examination of possible acquisition targets in the old countries of operation, as long as market share, profitability and cost structure allow for synergies. The implementation of this project, which is of great strategic importance to the Group, had been postponed since the beginning of 2009 as a result of the global economic crisis on the basis that during the financial crisis acquisition opportunities with better valuations would appear in the broader region of Eastern and South Eastern Europe. The management considers the time is now appropriate to re-examine possible acquisition targets.