Act NINE MONTHS REPORT AS OF SEPTEMBER 30, 2010

Transcription

1 Act NINE MONTHS REPORT AS OF SEPTEMBER 30, 2010

2 02 Overview Key Figures EUR million Q1 Q3/2010 Q1 Q3/ 2009 Q3/2010 Q3/ 2009 Sales Cost of sales Gross profit Adjusted result for the period Adjusted EPS in EUR 1) Adjusted EBITDA Adjusted EBIT Operating cash flow 2) Sales by Region 1) Adjusted net profit of the year/weighted average number of ordinary shares outstanding as of the reporting day. 2) The operating cash flow is the cash flow from operating activities before income tax payments. EUR million Q1 Q3/2010 Q1 Q3/ 2009 Q3/2010 Q3/ 2009 Europe North America Other Total Sales by Business Unit EUR million Q1 Q3/2010 Q1 Q3/ 2009 Q3/2010 Q3/ 2009 Trailer Systems Powered Vehicle Systems Aftermarket Total Other Financial Information 09/30/ /30/ /31/ /31/2009 Total assets (EUR million) Equity ratio (%) Q1 Q3/2010 Q1 Q3/2009 Employees (average) 2,567 2,316 Sales per employee (keur) SAF-HOLLAND 08 Interim Management Report 20 Interim Financial Statements 36 Additional Information

3 03 Table of Contents 04 FOREWORD FROM THE MANAGEMENT BOARD 06 Q1 Q AT A GLANCE 07 THE SHARE 08 GROUP INTERIM MANAGEMENT REPORT 09 I Business and Framework Conditions 09 II Overview of Business Development 17 III Events After the Balance Sheet Date 18 IV Risk Report 18 V Outlook 20 CONSOLIDATED INTERIM FINANCIAL STATEMENTS 21 Consolidated Statement of Comprehensive Income 22 Consolidated Balance Sheet 23 Consolidated Statement of Changes in Equity 24 Consolidated Cash Flow Statement 25 Notes to the Consolidated Interim Financial Statements 36 FINANCIAL GLOSSARY 38 TECHNICAL GLOSSARY 40 FINANCIAL CALENDAR AND CONTACT INFORMATION 41 IMPRINT

4 04 Foreword Foreword from the Management Board Dear shareholders, business associates, and employees, SAF-HOLLAND Group made significant progress in the third quarter of the current fiscal year, backed by increasing global demand for commercial vehicles. And as we expected even at the end of last year, our lean, strong positioning has helped us to benefit extensively from the market development. There was good news in particular from our largest business unit Trailer Systems, where sales increased from January to September this year by 74.6% to EUR million compared to the same period in the previous year. As a result, the operating segment result also improved considerably and almost reached the break-even point in the third quarter. The Aftermarket business unit has continued to grow and has also expanded its service and distribution network via a new cooperative agreement in certain markets with IVECO. And in the Powered Vehicle Systems Business Unit, despite a slight decrease in sales in the third quarter due to the vacation schedules, a continuous upward trend is visible for the full year. Overall, sales achieved by the SAF-HOLLAND Group in the first three quarters increased by 45.1% over the previous year to EUR million. All regions in which we are active Europe, North and South America and Asia contributed to this growth. Adjusted operating earnings saw further improvement, increasing to EUR 26.0 million. With sales now climbing, our numerous individual restructuring measures can take full effect. For example, in inventory management, we have now achieved our target of 45 days inventory outstanding. Just as encouraging is the fact that we have hired again new employees in order to meet the growing order volumes. This is the case for both Germany and the USA, mainly in the production area. We are expecting a further boost from the product innovations we presented at the IAA Commercial Vehicles trade fair in Hanover at the end of the third quarter. Having promptly recognized the importance of truck and trailer efficiency in our sector, we steered our research and development in this direction. As a result, we were able to present several weight-reducing products, which enable freight forwarders to reduce fuel consumption or increase payloads with either option resulting in better revenue. 02 SAF-HOLLAND 08 Interim Management Report 20 Interim Financial Statements 36 Additional Information

5 05 Our internationalization program is also progressing rapidly. We intend to use our location in Xiamen, China, not only for competitive production of components but also to develop as a central hub for all of Asia. Our business in Brazil is also picking up speed. Here we are predominantly active in the trailer market and intend to quickly move to also supplying truck manufacturers. In October, we set up a distribution subsidiary in Turkey, strengthening our presence in that country and increasing our proximity to our customers. The opening of two new distribution sites in Russia serves the same purpose. Even with globalized logistics, our customers can rely on our promise to have both "a global reach and a local touch". The capital markets have also increasingly recognized our efforts. SAF-HOLLAND's share price increased from its lowest value of EUR 1.97 in March 2010 to EUR 6.28 and was EUR 5.84 at the end of the quarter. At the same time, we won the confidence of numerous new investors, after our longstanding major shareholder Pamplona Capital Partners sold its 34.5% share. We are confident that our work will result, as forecast, in significantly improved business figures by the end of the year. We expect sales of between EUR 590 and 610 million for the full year and an adjusted EBIT margin of 5.5% to 5.8%. After the deep crisis, SAF-HOLLAND is back on track. Our actions have been verified, the market is providing a good tailwind and the reaction from our customers to our new products has been extremely positive. We intend to continue to make progress along this successful path to success. Rudi Ludwig Chief Executive Officer (CEO)

6 06 At a Glance/The Share Q1 Q at a Glance Group sales increase to EUR million Trailer Systems Business Unit sees significant sales growth Powered Vehicle Systems Business Unit benefits from good market development Aftermarket Business Unit launches cooperation in certain markets with truck manufacturer IVECO Operating result improves further Adjusted result for the period returns to profit Gross margin sees gain over previous year Trailer Systems Business Unit close to break-even point for adjusted operating earnings in the third quarter Outstanding response at IAA Commercial Vehicles Trade Fair Presentation of new products for weight reduction SAF-HOLLAND's products widely used among vehicles on exhibit Additional employees hired thanks to strong demand In Germany the number of employees rose by 86 in the first nine months In North America, the number has increased by 234 since the beginning of the year 02 SAF-HOLLAND 08 Interim Management Report 20 Interim Financial Statements 36 Additional Information

7 07 The Share Shareholder Structure Figures in % Non-free float 14.6 Free float 85.4 As of 09/30/2010 SAF-HOLLAND stocks continue good performance The price of SAF-HOLLAND's shares recorded another increase in the third quarter of Starting at EUR 4.95 on July 1, 2010, it peaked on August 4 at EUR 6.28 (Xetra) and closed out the quarter on September 30, 2010 at EUR Compared to the stock's lowest level of EUR 1.97 on March 31 of the current year, the peak value of SAF-HOLLAND's stock is an increase of more than three-fold. Positive momentum in commercial vehicle markets and a change in shareholder structure in May, 2010 have contributed to the Company's share price development. In May 2010, the former major shareholder, Pamplona Capital Partners I, LP, London, sold its 34.5% stake in the Company to 14 institutional investors from Ger many, the United Kingdom and the USA. The free float of SAF-HOLLAND's stock currently stands at 85.4%. Currently, five shareholders, including two members of SAF-HOLLAND's management, hold more than 5.0% of voting shares each. In total, members of the Management Board and Board of Directors hold a total of 20.2% of voting shares.

8 08 Group Interim Management Report Group Interim Management Report 09 I BUSINESS AND FRAMEWORK CONDITIONS 09 II OVERVIEW OF BUSINESS DEVELOPMENT 09 II.1 Overall Economic Environment 09 II.2 Significant Events in the Third Quarter of II.3 Sales Development 13 II.4 Earnings Development 14 II.5 Development in the Business Units 15 II.6 Financing 15 II.7 Investments 15 II.8 Liquidity 16 II.9 Assets 16 II.10 Employees 16 II.11 Research and Development 17 III EVENTS AFTER THE BALANCE SHEET DATE 18 IV RISK REPORT 18 V OUTLOOK 02 SAF-HOLLAND 08 Interim Management Report 20 Interim Financial Statements 36 Additional Information

9 09 Group Interim Management Report for the Third Quarter of 2010 of SAF-HOLLAND S.A. I BUSINESS AND FRAMEWORK CONDITIONS SAF-HOLLAND S.A., hereinafter also referred to as SAF-HOLLAND, the Group, or the Company, is one of the world s leading manufacturers and providers of premium systems and components for commercial vehicles (trucks and trailers) as well as buses and recre - ational vehicles. The product range encompasses axle and suspension systems, fifth wheels, coupling devices, kingpins, and landing legs. The Group, with its three Business Units Trailer Systems, Powered Vehicle Systems, and Aftermarket currently utilizes 18 production sites in Europe, North and South America, Australia, China, and India. In addition, the Company benefits from a worldwide service and distribution network. II OVERVIEW OF BUSINESS DEVELOPMENT II.1 Overall Economic Environment While the world economy continues to recover, Germany has benefited from the upturn more than most other western industrialized nations. Expectations for the USA, however, have dropped slightly. According to figures from the International Monetary Fund (IMF) from October 2010, world markets are now expected to expand by 4.8%, an improvement over the 4.6% calculated in July. Germany is now expected to grow by 3.3% whereas the original prognosis was 1.4%. Predictions for the Euro zone have been adjusted upwards to 1.7%. The IMF reduced its original forecast of 3.3% for the USA down to 2.6%. Growth levels remain high for emerging markets. China's economy is predicted to grow by 10.5%, India's by 9.7%, Brazil by 7.5%, and Russia's by 4.0%. Global trading volume is also growing faster than originally assumed and is expected to increase by 11.4%. In 2011, growth is expected to decelerate modestly: the IMF now predicts a rise of 4.2% as opposed to 4.3%. 1) ACEA, October ) ACT, September 2010 The commercial vehicles sector continued to record overall positive development. In Sep - tember, the number of registered trucks (over 16 tons) rose by 20.0% in Europe, and by 29.6% in Germany. During the period from January to August, the number of registered vehicles Europe-wide remained on the decline at minus 6.0%, whereas the figure grew again in Germany at plus 7.3% 1). In addition to the Börsen-Zeitung (German financial newspaper) where a headline recently claimed: "Forecasts for the Truck Industry Brighten", analysts from J. P. Morgan Cazenove also view market developments more optimistically than previously indicated. In North America, truck production (class 8) increased by 19%, and trailer production grew by 13% 2). II.2 Significant Events in the Third Quarter of 2010 SAF-HOLLAND continued its positive business development in the third quarter of Despite seasonal plant closures from clients in summer months, we were able to slightly increase sales volumes and once again improve Group results. The Trailer Systems Business Unit, in particular, showed a significant increase in sales and earnings as compared to the second quarter of The business unit approached close to the break-even point for adjusted operating earnings before interest and taxes (EBIT) earlier than expected in the third quarter of 2010.

10 10 Group Interim Management Report In the first nine months of 2010, Group sales were EUR million (previous year: EUR million). Accumulated adjusted EBIT at SAF-HOLLAND Group rose to EUR 26.0 million (previous year: EUR 1.2 million). SAF-HOLLAND is maintaining its focus on the optimization of inventory management at its production plants worldwide. The figure for days inventory outstanding is key to monitoring the effectiveness of our measures, and this figure improved significantly by 19 days to 45 days as compared to the same period of the previous year. We thus achieved our target earlier than expected. A greater need for inventory stemming from increased sales is so offset by a reduction in days inventory outstanding, which limits the need for increased liquidity. As a consequence, SAF-HOLLAND showed stable development in liquidity and cash flow in the third quarter. At the largest international fair for commercial vehicles, the IAA in Hanover, SAF-HOLLAND confirmed its pioneering position in innovative weight reduction solutions for components used in truck and trailer combinations. Products such as the new wheel end system "SAF 60 ONE", our new tire inflation system "Tire Pilot", and the disc brake with weight-reduced, "SAF-HOLLAND brake caliper" were all very well received by vehicle manufacturers and consumers. The combined use of the new brake caliper and wheel end system alone succeeded in reducing the weight of a European three-axle trailer by 96 kilograms. The use of aluminum instead of steel rims can reduce the weight of a trailer by a total of more than 200 kilograms. Our clients can now benefit from a greater load capacity in their trailers or from lower operating costs. The environment also benefits significantly. Lighter truck and trailer combinations on the streets contribute to a reduction in CO ² emissions. Two years after the takeover of the former Georg Fischer Verkehrstechnik GmbH, customer reaction at the IAA provided confirmation that the products and brands integrated into the SAF-HOLLAND Group have been welcomed by the market. This was in part indicated by the widespread use of our products in the trucks and trailers on display at the fair. The establishment and expansion of activities in the growth markets of China and Brazil were also the focus of our attention in the third quarter. The consolidation of the two existing locations in China into an Asian headquarter is proceeding as planned. Due to its modern facilities and logistically advantageous location, we plan to expand the Xiamen location into a central hub for our Asian business. We will equip the location for delivery to Asian markets as well as for export to other markets. The Xiamen location currently produces and distributes landing legs and axle systems for the trailer business. 02 SAF-HOLLAND 08 Interim Management Report 20 Interim Financial Statements 36 Additional Information

11 11 We deliver axle systems and fifth wheels to trailer producers in the dynamically expanding Brazilian market. We are currently setting up production in Brazil for SAF-HOLLAND products for the truck industry. Our goal is to soon deliver our components to the truck industry as well. In a market influenced by European producers, we particularly benefit from our European know-how and strong contacts to producers. Turkey counts among regions with a high level of representation in the commercial vehicles industry. This applies to vehicle producers as well as to consumers. In order to further expand our business activities in this market, we founded our own distribution company in Turkey in October. In Russia, SAF-HOLLAND has opened two distribution sites in Moscow and Chelyabinsk. A third location in the vicinity of St. Petersburg is currently being investigated. The distri - bution sites ensure improved and quicker availability of products for customers in the region. North American axle production has been steadily increasing in volume since it began in February, Compared to the previous year, the volume of axle production and distri - bution will more than triple in the current year. II.3 Sales Development Positive sales development of the second quarter continued into the third quarter. Despite lower sales due to the yearly effects of the summer vacation season, we moderately in - creased sales by 5.9% as compared to the second quarter. The Trailer Systems Business Unit made a particularly strong contribution to this positive development. In total, we generated sales in the third quarter of EUR million (previous year: EUR million), adjus - ted for exchange rate effects, sales were EUR million. For the first nine months of 2010, sales rose to EUR million (previous year: EUR million). Adjusted for ex - change rate effects, this figure was EUR million. Consistent with positive influences from European markets, the share of our European business grew by 47.6% to EUR million (previous year: EUR million) in the first nine months compared to the previous year. This represents a share of 48.1% (previous year: 47.2%) of the Group's total sales. In the North American region, we generated EUR million (previous year: EUR million), which corresponds to a 45.4% share (previous year: 47.3%) of Group sales. With a volume of EUR 30.1 million (previous year: EUR 17.3 million), other regions increased to 6.5% of Group sales (previous year: 5.5%) in the same period of January to September 2010.

12 12 Group Interim Management Report Sales Development by Region (First to Third Quarter) Q1 Q3/2010 (exchange rate- EUR million Q1 Q3/2010 adjusted) Q1 Q3/2009 Europe % % % North America % % % Other % % % Total % % % Sales Development by Region (Third Quarter) Q3/2010 (exchange rate- EUR million Q3/2010 adjusted) Q3/2009 Europe % % % North America % % % Other % % % Total % % % Sales Development by Business Unit (First to Third Quarter) Q1 Q3/2010 (exchange rate- EUR million Q1 Q3/2010 adjusted) Q1 Q3/2009 Trailer Systems % % % Powered Vehicle Systems % % % Aftermarket % % % Total % % % Sales Development by Business Unit (Third Quarter) Q3/2010 (exchange rate- EUR million Q3/2010 adjusted) Q3/2009 Trailer Systems % % % Powered Vehicle Systems % % % Aftermarket % % % Total % % % 02 SAF-HOLLAND 08 Interim Management Report 20 Interim Financial Statements 36 Additional Information

13 13 II.4 Earnings Development SAF-HOLLAND continued its improvement of earnings in the third quarter of The adjusted EBIT increased from EUR 4.8 million in the first quarter and EUR 9.8 million in the second quarter by another 16.3% to EUR 11.4 million (previous year: EUR 2.5 million) in the third quarter of In the Trailer Systems Business Unit, the adjusted EBIT improved to EUR -0.1 million in the third quarter and thus almost reached break-even. Most importantly, SAF-HOLLAND Group once again reached break-even for the accumulated adjusted result for the period. It climbed from EUR -0.6 million in the second quarter to EUR 1.8 million in the third quarter (previous year: EUR million). For the third quarter, the adjusted result for the period amounted to EUR 2.4 million (previous year: EUR -2.1 million). Sales growth in the Trailer Systems Business Unit and the cost-cutting measures made a substantial contribution to the improved results compared to the second quarter. In com - parison to the same period of the previous year, the gross margin rose by 2.3 percentage points to 19.1% (previous year: 16.8%); however, this amounts to a slight decline compared to the second quarter. This is primarily due to increases in the cost of procuring material in North America and Europe. In this case, immediate compensation was not possible. Adjusted earnings per share improved to EUR 0.09 (previous year: EUR -0.58). Reconciliation Statement for Adjusted Figures EUR million Q1 Q3/2010 Q1 Q3/2009 Q3/2010 Q3/2009 Result for the period Taxes on income Finance result ) Purchase price allocation (PPA) from the acquisition of the SAF Group and Holland Group in 2006 as well as Austin-Westran Machinery Co., Ltd. and the current SAF-HOLLAND Verkehrstechnik GmbH in ) A uniform rate of 30.80% (previous year: 28.59%) was assumed for the adjusted net result for the period. Depreciation and amortization from PPA 1) Impairment goodwill and intangible assets Restructuring and integration costs Adjusted EBIT as a percentage of sales Depreciation and amortization Adjusted EBITDA as a percentage of sales Depreciation and amortization Finance result Restructuring and integration costs 2.4 Adjusted result before taxes Taxes on income 2) Adjusted result for the period as a percentage of sales ) Weighted average number of shares outstanding as of reporting day. Number of shares 3) 20,702,275 20,702,275 20,702,275 20,702,275 Adjusted earnings per share in EUR

14 14 Group Interim Management Report II.5 Development in the Business Units Trailer Systems The Trailer Systems Business Unit again recorded significant sales growth in the third quarter of The positive trend toward recovery, which began early this year, is thus continuing. Overall, sales in the third quarter improved by 15.9% over the second quarter of The positive development is noticeable in both North America and Europe. As al - ready reported in the second quarter, business development has mirrored the trend in the trailer markets and is directly related to increasing transport volumes worldwide. Trailer markets, which absorbed the most serious sales declines in the crisis period of 2008 and 2009, are currently recording the most rapid recovery trend in our core markets. Despite this, the sales level is still comparably low and flexible cost structures therefore remain important for us. In total, the Trailer Systems Business Unit generated sales of EUR million (previous year: EUR million) in the first nine months of This represents an increase of 74.6% compared to the same period in the previous year. Adjusted for exchange rate effects, sales reached EUR million. The gross margin improved to 5.7% (previous year: -3.6%). The Business Unit s share of Group sales rose to 49.6% (previous year: 41.2%). Powered Vehicle Systems The Powered Vehicle Systems Business Unit had a slight decrease in sales in the third quarter of 2010 compared to the second quarter. This was due to the usual July plant closures by several major customers. Apart from this effect, a steady upward trend is visible in both North America and Europe. This development, however, is also accompanied by a shift in the product mix in favor of standard products over specialty products. With sales of EUR 93.6 million in the first nine months of 2010 (previous year: EUR 73.0 million), the Business Unit achieved a sales increase of 28.2% compared to the same period in the previous year. Adjusted for exchange rate effects, sales stood at EUR 90.6 million. The gross margin reached 24.3% (previous year: 22.1%). Overall, the Business Unit s share of the Company s total sales volume amounted to 20.4% (previous year: 23.1%). Aftermarket At EUR 47.7 million, sales in the Aftermarket Business Unit were largely stable in the third quarter compared to the second quarter of In addition to expanding its international service and distribution network, the business unit is focusing on continually improving product availability. Warehouse locations continue to be set up and expanded for this purpose. We opened new logistic sites at two locations in Russia in the third quarter. In North America, we are reviewing the possibility of establishing an independent warehouse for replacement parts. SAF-HOLLAND is planning to set up a subsidiary in the Middle East in order to improve access of our customers in this area to replacement parts. We also reached a cooperative agreement with truck manufacturer IVECO to sell SAF-HOLLAND products via its distribution network. This will further strengthen our market position, particularly in North Africa and Italy. The first step will involve marketing primarily replacement parts for axle systems. 02 SAF-HOLLAND 08 Interim Management Report 20 Interim Financial Statements 36 Additional Information

15 15 In the first nine months of the year, the Business Unit generated sales totaling EUR million (previous year: EUR million) or EUR million when adjusted for exchange rate effects. The gross margin reached 37.8% (previous year: 37.6%). After the significant recovery in the truck and trailer markets, the share of the replacement part business in total Company sales decreased as expected to 30.0% (previous year: 35.7%). With the increasing number of installed axles in the market, this segment will continue to grow, particularly in Europe, and gain importance for the Group as a stabilizing factor on sales and earnings. Overview of the Business Units Business Business Adjust- Unit Unit Business ments/ Trailer Powered Vehicle Unit elimini- Systems Systems Aftermarket nations Total Q1 Q3/ Q1 Q3/ Q1 Q3/ Q1 Q3/ Q1 Q3/ Q1 Q3/ Q1 Q3/ Q1 Q3/ Q1 Q3/ Q1 Q3/ EUR million Sales Cost of sales Gross operating result as a percentage of sales II.6 Financing At the end of the reporting period, interest bearing collateralized bank loans amounted to EUR million (December 31, 2009: EUR million). As previously reported, SAF-HOLLAND has access to secured financing until September Over the course of the year to date, the Group made interest payments with a margin of 1.6%, which will rise to 3.0% as of October The remaining margins of 4.35% and 2.95% respectively are deferred over the course of the year and fall due at the end of the financing period. As of the reporting date on September 30, 2010, accrued interest totaled EUR 10.1 million (December 31, 2009: EUR 0.1 million). II.7 Investments For the full year 2010, investments are expected to reach a maximum of EUR 7.9 million. As previously announced, SAF-HOLLAND is focusing its investments in the current year on the dynamic markets in Brazil and China. This includes, for example, setting up axle production in China, which started in the third quarter of 2010, serving both the domestic and international markets. II.8 Liquidity Cash flow from operating activities before income tax payments totaled EUR 34.2 million in the reporting period (previous year: EUR 29.1 million). Cash flow from investing activities amounted to EUR -4.8 million (previous year: EUR -5.2 million). Cash flow from financing activities totaled EUR million (previous year: EUR million). Net working capital

16 16 Group Interim Management Report reached EUR 55.0 million (December 31, 2009: EUR 52.7 million), corresponding to 8.0% of sales (December 31, 2009: 12.8%). II.9 Assets With the improvement in sales, total assets rose to EUR million (December 31, 2009: EUR million). In particular, inventories increased to EUR 69.7 million (December 31, 2009: EUR 55.5 million). Despite this, we succeeded in improving the turnover period to 45 days in the third quarter of Trade receivables increased by EUR 29.8 million to EUR 87.0 million (previous year: EUR 57.2 million). Trade payables amounted to EUR 76.6 million (December 31, 2009: EUR 40.9 million). We have given high priority to consistently monitoring and improving our net working capital management. In addition to continuously improving the inventory turnover period, we ensure balanced management of payables and receivables. Equity decreased to EUR 18.2 million (December 31, 2009: EUR 23.8 million). As of the reporting date, the equity ratio was 3.7% (December 31, 2009: 5.2%). Non-current liabilities amounted to EUR million (December 31, 2009: EUR million). Current liabilities totaled EUR million (December 31, 2009: EUR 69.6 million). II.10 Employees Thanks to increasing demand in the commercial vehicles market, SAF-HOLLAND was able to hire new employees again. As of the reporting date of September 30, 2010, the Group employed 2,742 people worldwide including temporary staff (December 31, 2009: 2,331). In Germany, for example, 86 employees were hired in production during the summer months, primarily for dual-shift operations in one of our locations near Aschaffenburg. In North America, thanks to good demand, the number of industrial employees alone rose by 234 in the first nine months. In addition, the Group hired 20 new trainees in Germany. In total, there are 67 young people in training at SAF-HOLLAND, this represents an outstanding training rate in Germany of 7.8%. On completion of their training, all trainees were hired as employees. II.11 Research and Development The most important issue for freight forwarders and fleet operators is the improvement of efficiency in their fleets, as even after the crisis, price pressure and intensity of competition remain high. Since vehicle manufacturers focus on fuel efficiency, weight reduction is at the top of SAF-HOLLAND s agenda. The positive reception at the IAA Commercial Vehicles Trade Fair in September 2010 demonstrated that this is exactly what our customers need. Our products help end users to be more efficient. With lighter trucks and trailers, they can either increase load capacities or reduce their operational costs. Our new wheel end system was met with particular interest due to its lighter weight achieved by means of a reduced diameter that does not compromise performance or stability. SAF-HOLLAND's new brake caliper, developed in cooperation with Haldex, was also well received. SAF-HOLLAND has always aimed to be a driving force and trendsetter in the development of new products. We want to continue to meet this goal. In the context of growing business volumes and the expansion of our international activities, we will therefore gradually expand our commitment to research and development in the coming months and years. 02 SAF-HOLLAND 08 Interim Management Report 20 Interim Financial Statements 36 Additional Information

17 17 Expenditure for research and development amounted to EUR 10.7 million in the first three quarters (previous year: EUR 9.1 million); of that amount, EUR 0.5 million was capitalized as development costs (previous year: EUR 0.7 million). III EVENTS AFTER THE BALANCE SHEET DATE SAF-HOLLAND announced the following information on November 16, 2010: Change of management maintains continuity Sam Martin (65), COO of SAF-HOLLAND Group and President of the American subsidiary SAF-HOLLAND Inc., will resign from his operating activities at the end of 2010 at his own request. He will remain available to the Company. He is expected to be nominated to join the Board of Directors at the Annual General Meeting on April 28, His responsibilities in the Management Board will be re-distributed. Jack Gisinger (62) will succeed him as President of the American subsidiary SAF-HOLLAND Inc. effective January 2, At the same time, Detlef Borghardt (48) will assume the position of Deputy CEO of the entire Group and will take over the responsibility for the strategic planning. The COO function will therefore be dropped in the future. Mr. Borghardt and Mr. Gisinger have been members of the Management Board of SAF-HOLLAND since June Mr. Gisinger is Head of the Powered Vehicle Systems business unit and Mr. Borghardt is responsible for the Trailer Systems Unit. A further change to the Management Board of SAF-HOLLAND involves the resignation of Dr. Martin Kleinschmitt (50) as Chief Restructuring Officer (CRO). Consistent with the completion of the Company s restructuring program that was introduced two years ago, he has concluded his function of CRO as planned. Dr. Martin Kleinschmitt was appointed as an additional member of the Management Board on August 1, 2009 and played a crucial role in securing the Group s financing at the end of last year. He is also a member of the Executive Board of Noerr Consulting AG, Berlin, and will continue to act as a consultant to SAF-HOLLAND on a selective basis. Convening an Extraordinary General Meeting At its regular meeting on November 16, 2010, the Board of Directors of SAF-HOLLAND S.A., Luxembourg, decided to convene an Extraordinary General Meeting for December 14, The Board of Directors will use the opportunity to propose to the Company's shareholders increasing the SAF-HOLLAND S.A.'s authorized share capital from its current amount of EUR 112,000.- to EUR 224,000.- consisting of 22,400,000 shares having a par value of EUR 0.01 each (of which EUR 18,649.- represented by 1,864,900 shares have been used on September 4, 2008). The decision was made in order to provide the Company with more flexibility and the ability to react swiftly when the market conditions are favourable to the issue of new shares. The Board of Directors will further propose to the General Meeting that it authorizes the Board of Directors to limit and/or suppress all or any preferential subscription rights of existing shareholders when the Board uses the authorized share capital. This is to be able to attract new and to motivate existing investors and to strengthen the Company s equity base. SAF-HOLLAND S.A. currently holds 20,702,275 ordinary shares with a subscribed share capital of EUR 207, Invitations to the Extraordinary General Meeting will be made available to the shareholders in accordance with applicable laws.

18 18 Group Interim Management Report IV RISK REPORT Compared with the risk profile at the end of fiscal year 2009, as outlined in the annual report, the Group has recorded no changes. Overall, the risks are manageable and sufficient provisions have been made for known risks. V OUTLOOK Recovery in the commercial vehicles industry is continuing as expected. The year saw a small increase in the number of newly registered vehicles in Germany. Standard trailer producers in particular are once again showing good growth rates. In Germany, the current recovery trend is more pronounced in the trailer industry than in the truck industry. Production levels continue to rise in North America, too. Market research institute ACT expects (according to October estimates) production increases in the truck segment (class 8) of 26.0% for the full year The number of deliveries in the USA are expected to increase by 46.2% in the trailer segment. SAF-HOLLAND will continue to participate in the positive market developments. In the wake of increasing international transport volumes, the demand for vehicles such as trucks and trailers can only grow. At the same time, the need for increasingly efficient and environmentally-sound transport solutions also continues to grow. Our new products take advan - tage of the current trends, and we believe in their potential for further development and expansion. SAF-HOLLAND also sees important growth opportunities for the coming years in the BRIC countries. For this reason, we are investing in particular in the markets of China and Brazil. The requirements for successful business in these regions include locally producing and marketing products that are relevant for these markets. We have made good progress towards this objective. In summary, the recovery of our core markets continues. Against this background, we be - lieve that sales in fiscal year 2010 will reach EUR 590 to 610 million. We expect the adjusted EBIT margin will fall between 5.5% and 5.8%. It is our mid-term goal to achieve sales of EUR 1 billion while generating an adjusted EBIT margin of 10%. In addition, we will align our net working capital to under 10% of sales. We are well equipped to continue on our growth path. SAF-HOLLAND is highly efficient and able to react flexibly to increasing demand. 02 SAF-HOLLAND 08 Interim Management Report 20 Interim Financial Statements 36 Additional Information

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20 20 Consolidated Interim Financial Statements Consolidated Interim Financial Statements 21 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 22 CONSOLIDATED BALANCE SHEET 23 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 24 CONSOLIDATED CASH FLOW STATEMENT 25 NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS 25 1 CORPORATE INFORMATION 25 2 SIGNIFICANT ACCOUNTING POLICIES 25 3 SEASONAL EFFECTS 26 4 SCOPE OF CONSOLIDATION 26 5 SEGMENT INFORMATION 27 6 FINANCE EXPENSES 28 7 INCOME TAXES 28 8 CASH AND CASH EQUIVALENTS 28 9 EQUITY EARNINGS PER SHARE INTEREST BEARING LOANS AND BORROWINGS FINANCIAL ASSETS AND OTHER FINANCIAL LIABILITIES RELATED PARTY DISCLOSURES CASH FLOW STATEMENT EVENTS AFTER THE BALANCE SHEET DATE 02 SAF-HOLLAND 08 Interim Management Report 20 Interim Financial Statements 36 Additional Information

21 21 Consolidated Statement of Comprehensive Income keur Notes Q1 Q3/2010 Q1 Q3/2009 Q3/2010 Q3/2009 Result for the period Sales (5) 459, , , ,083 Cost of sales -371, , ,357-84,449 Gross profit 87,528 53,269 32,360 18,634 Other income 1, Selling expenses -31,493-28,283-10,965-9,127 Administrative expenses -27,029-25,400-8,875-7,452 Research and development costs -10,232-8,402-3,678-2,597 Impairment goodwill and intangible assets -16,903-16,903 Operating result (5) 19,915-24,806 9,088-17,404 Finance income 666 2, ,364 Finance expenses (6) -26,513-20,584-8,236-6,865 Share of net profit of investments accounted for using the equity method Result before tax -5,956-42,864 1,064-23,153 Income tax (7) -3,551 4,222-1,652 1,415 Result for the period -9,507-38, ,738 Other comprehensive income Exchange differences on translation of foreign operations 8, ,979-1,260 Changes in fair values of derivatives designated as hedges, recognized in equity (12) -5,965 1, Income tax effects on items recognized directly in other comprehensive income (9) 1,769-4, Other comprehensive income 3,943-2,373-8, Comprehensive income for the period -5,564-41,015-9,000-22,402 Attributable to equity holders of the parent -5,564-41,015-9,000-22,402 Basic and diluted earnings per share in EUR (10)

22 22 Consolidated Interim Financial Statements Consolidated Balance Sheet keur Notes 09/30/ /31/2009 Assets Non-current assets 313, ,096 Goodwill 45,670 44,251 Intangible assets 135, ,651 Property, plant, and equipment 104, ,625 Investments accounted for using the equity method 6,994 6,804 Financial assets (12) 24 Other non-current assets 4,430 4,079 Deferred tax assets 16,773 16,686 Current assets 174, ,002 Inventories 69,718 55,508 Trade receivables 86,962 57,210 Income tax assets Other current assets 5,733 5,721 Cash and cash equivalents (8) 11,506 20,742 Total assets 487, ,098 Equity and liabilities Equity attributable to equity holders of the parent (9) 18,192 23,756 Subscribed share capital Share premium 106, ,454 Legal reserve Retained earnings -79,108-69,601 Accumulated other comprehensive income -9,382-13,325 Non-current liabilities 363, ,732 Pensions and other similar benefits 12,497 12,364 Other provisions 4,700 4,736 Interest bearing loans and borrowings (11) 309, ,500 Finance lease liabilities Other financial liabilities (12) 8,848 9,006 Other liabilities Deferred tax liabilities 27,019 33,695 Current liabilities 106,662 69,610 Pensions and other similar benefits 1,996 1,914 Other provisions 6,422 8,156 Interest bearing loans and borrowings (11) 1,526 5,530 Finance lease liabilities Trade payables 76,570 40,874 Income tax liabilities 4,579 3,129 Other liabilities 15,416 9,671 Total equity and liabilities 487, , SAF-HOLLAND 08 Interim Management Report 20 Interim Financial Statements 36 Additional Information

23 23 Consolidated Statement of Changes in Equity Attributable to equity holders of the parent Accumulated other com- Retained prehensive Subscribed Share Legal earnings income Total keur share capital premium reserve (Note 9) (Note 9) equity 2010 As of 01/01/ , ,601-13,325 23,756 Comprehensive income for the period -9,507 3,943-5,564 As of 09/30/ , ,108-9,382 18,192 Attributable to equity holders of the parent Accumulated other com- Retained prehensive Subscribed Share Legal earnings income Total keur share capital premium reserve (Note 9) (Note 9) equity 2009 As of 01/01/ , ,686-13,924 72,070 Comprehensive income for the period -38,642-2,373-41,015 Appropriation to legal reserve 2-2 As of 09/30/ , ,330-16,297 31,055

24 24 Consolidated Interim Financial Statements Consolidated Cash Flow Statement keur Notes Q1-Q3/2010 Q1-Q3/2009 Cash flow from operating activities Result before tax -5,956-42,864 - Finance income ,543 + Finance expenses 26,513 20,584 + Share of net profit of investments accounted for using the equity method Amortization, depreciation, impairment of intangible assets and property, plant, and equipment 16,663 33,397 + Allowance of current assets Loss on disposal of property, plant, and equipment Dividends from investments accounted for using the equity method Result before change of net working capital 37,269 10,209 - Change in other provisions and pensions -2,722-4,758 -/+ Change in inventories -12,054 27,837 -/+ Change in trade receivables and other assets -28,669 8,541 +/- Change in trade payables and other liabilities 40,378-12,740 Cash flow from operating activities before income tax paid 34,202 29,089 -/+ Income tax paid/received (7) -5, Net cash flow from operating activities 28,604 29,340 Cash flow from investing activities + Acquisition of subsidiaries net of cash acquired 757 1) - Purchase of property, plant, and equipment -4,334-6,189 - Purchase of intangible assets Purchase of investments accounted for using the equity method Proceeds from sales of property, plant, and equipment Net cash flow from investing activities -4,794-5,253 Cash flow from financing activities + Proceeds from Management and Board of Directors loan 1,244 - Repayments of Management and Board of Directors loan (11) Payments for finance lease Interest paid -10,027-18,430 - Reduction of current and non-current financial liabilities (11) -23,498-12,385 + Proceeds from current and non-current financial liabilities (11) ,516 Net cash flow from financing activities -33,666-19,361 1) Cash inflow in the amount of keur 1,103 generated from the Jinan SAF AL-KO Axle Co., Ltd. and SAF AL-KO Vehicle Technology Yantai Co., Ltd. share swap. Also included are payments in the amount of keur 346 in connection with the purchase of SAF-HOLLAND Verkehrstechnik GmbH in Net decrease/increase in cash and cash equivalents -9,856 4,726 Net foreign exchange difference Cash and cash equivalents at the beginning of the period (8) 20,742 8,557 Cash and cash equivalents at the end of the period (8) 11,506 13, SAF-HOLLAND 08 Interim Management Report 20 Interim Financial Statements 36 Additional Information

25 25 Notes to the Consolidated Interim Financial Statements For the period January 1 to September 30, CORPORATE INFORMATION SAF-HOLLAND S.A. (the Company ) was incorporated on December 21, 2005 under the legal form of a Société Anonyme according to Luxembourg law. The registered office of the Company is in Luxembourg. The shares of the Company are listed in the Prime Standard of the Frankfurt Stock Exchange. 2 SIGNIFICANT ACCOUNTING POLICIES The consolidated financial statements of SAF-HOLLAND S.A. and its subsidiaries (the Group ) have been prepared in accordance with the International Financial Reporting Standards (IFRS), as adopted by the European Union and in effect as of the closing date. The consolidated interim financial statements for the third quarter of 2010 have been prepared in accordance with IAS 34 Interim Financial Reporting. As a rule, the same accounting policies and consolidation methods were applied as in the Group s annual financial statements for the fiscal year Therefore, the consolidated interim financial statements should be read in conjunction with the Group s annual financial statements as of December 31, Exceptions to the accounting principles stated there are new or revised standards and interpretations, whose application is required beginning in fiscal year 2010 and which have not been adopted early (see annual report 2009). The new regulations, however, have no significant impact on the consolidated interim financial statements. During the preparation of the consolidated interim financial statements, management must make assumptions and estimates which affect the reported amounts of assets, liabilities, income, expenses, and contingent liabilities as of the reporting date. In certain cases, actual amounts may deviate from these estimates. Expenses and income incurred irregularly during the fiscal year were brought forward or deferred if it would also be appropriate to do so at the end of the fiscal year. The consolidated interim financial statements and the Group Interim Management Report have neither been audited nor reviewed by an auditing firm. 3 SEASONAL EFFECTS Seasonal effects during the year can result in variations in sales and the resulting profits. Please see the Group Interim Management Report for further details regarding earnings development.

26 26 Consolidated Interim Financial Statements SCOPE OF CONSOLIDATION SAF-HOLLAND Slovakia s.r.o., Slovakia, was liquidated and has therefore been deconsolidated as of April 1, The profit from deconsolidation in the amount of keur 149 is reported under other income. 5 SEGMENT INFORMATION For management purposes, the Group is organized into customer-oriented Business Units based on their products and services. The three reportable operating segments are the Business Units Trailer Systems, Powered Vehicle Systems, and Aftermarket. There has been no change in the division of operating segments since December 31, For more information, please see the notes of the 2009 annual report. Management assesses the performance of the operating segments based on adjusted EBIT. A reconciliation from operating result to adjusted EBIT is provided as follows: keur Q1 Q3/2010 Q1 Q3/2009 Operating result 19,915-24,806 Share of net profit of investments accounted for using the equity method EBIT 19,891-24,823 Additional depreciation and amortization on PPA 5,006 5,127 Impairment 16,903 Restructuring and integration costs 1,064 4,005 Adjusted EBIT 25,961 1,212 Information on segment sales and earnings for the period from January 1 to September 30: Business Units Powered Trailer Vehicle Adjustments/ keur Systems Systems Aftermarket eliminations Consolidated 2010 Sales 227,913 93, , ,241 Adjusted EBIT -9,514 17,025 20,646-2,196 25, SAF-HOLLAND 08 Interim Management Report 20 Interim Financial Statements 36 Additional Information

27 Business Units Powered Trailer Vehicle Adjustments/ keur Systems Systems Aftermarket eliminations Consolidated Sales 130,503 72, , ,363 1) Internal allocations between the Business Units were adjusted in December, 2009, due to changes in the market situation. To allow a better comparison to the current reporting period, the comparative figures for the adjusted EBIT of each Business Unit have been adjusted accordingly. Adjusted EBIT 1) -22,204 11,588 14,677-2,849 1,212 Adjustments and eliminations include expenses of the parent company as well as other expenses and income which are not allocated to any Business Unit. Please see the Group Interim Management Report regarding earnings development. 6 FINANCE EXPENSES Finance expenses consist of the following: keur Q1 Q3/2010 Q1 Q3/2009 Interest expenses due to interest bearing loans and borrowings -20,164-15,974 Transaction costs -589 Amortization financing costs -1, Finance expenses due to pensions and similar benefits Finance expenses due to derivatives -3,037-1,862 Other -1, Total -26,513-20,584 The increase in interest expenses and in amortization of financing costs results from the refinancing agreement newly concluded on November 29, 2009 (see Note 11). Finance expenses relating to derivative financial instruments include EUR 2.4 million from the change in the market values of the prolongation options for the old swaps for the period of January 1 to the day of termination, March 19, 2010, as well as EUR 0.6 million from the ineffective share of the swaps (see Note 12).

28 28 Consolidated Interim Financial Statements INCOME TAXES The major components of income taxes are as follows: keur Q1 Q3/2010 Q1 Q3/2009 Current income taxes -7, Deferred income taxes 4,221 4,713 Income tax reported in the result for the period -3,551 4,222 The effective tax rate in the third quarter of 2010 was %, compared to 9.85% in the corresponding period in the previous year. 8 CASH AND CASH EQUIVALENTS keur 09/30/ /31/2009 Cash at banks and on hand 10,566 7,387 Short-term deposits ,355 Total 11,506 20,742 9 EQUITY Subscribed share capital On May 12, 2010, Pamplona Capital Partners I, LP, sold its 34.5% of voting shares, or 7,149,958 shares, to 14 institutional investors from the United Kingdom, Germany and the USA. The free float of SAF-HOLLAND's stock currently stands at 85.4%. Currently, five shareholders, including two members of SAF-HOLLAND's management, hold more than 5% of voting shares each. At the same time, members of the Management Board and Board of Directors hold a total of 20.2% of voting shares. Dividend No dividend payment was approved for SAF-HOLLAND 08 Interim Management Report 20 Interim Financial Statements 36 Additional Information