ANNUAL REPORT 2011 REGISTRATION DOCUMENT - Saft

5 Earnings
COMMENTS ON THE 2011 FINANCIAL YEAR
by division
On the back of record high order levels in 2010 and a strong
order intake in 2011, sales in the space market grew very
strongly in 2011. The long-standing European leader in the
fi eld of geostationary satellites and launchers, the Group has
over the past number of years considerably strengthened its
position in the US and Russia, but also in the Low Earth orbit
satellite sector. The 2011 commercial successes detailed below
reaffi rm Saft’s outstanding performance in the space market.
Civil markets accounted for 70% of 2011 revenue at the SBG
division, compared to 63% in 2010 and 56% in 2009.
In line with expectations, the improvement in sales in military
activities in the second half of the year made it possible to
curb the decline in defence sales in 2011 to 12% at constant
exchange rates. This overall performance masks higher sales
of batteries used in portable equipment such as radios, night
vision goggles and positioning systems, and a decline in
project activities. Overall, defence activities accounted for
30% of the SBG division’s revenue in 2011, compared to 37%
of sales in 2010.
The SBG division also recorded some signifi cant commercial
successes in 2011, including:
� a multi-annual contract with Orbital Sciences Corporation
to supply lithium-ion batteries for the STAR-2 geostationary
satellite platform;
� a contract with General Atomics Aeronautical Systems Inc.
to supply a high-power lithium-ion battery system for a laser
application;
� a contract with Thales Alenia Space to supply 81 battery
systems for the Iridium NEXT low orbit satellite constellation;
� a four-year and up to US$20 million contract with the
United States Marine Corps (USMC) to supply advanced
lithium-ion energy storage systems for its Improved Battery
System programme (IBS), batteries potentially being for
use in applications to start future ground defence vehicles,
but also for electric mode traction during reconnaissance
missions.
The growth in sales at the SBG division was accompanied by
an increase in its profi tability. The EBITDA margin was 23.8%
of revenue in 2011, compared to 22.8% in 2010. This
improvement in operating profi tability stemmed from a higher
gross margin driven by higher volumes twinned with strong cost
control efforts.
Total investments and capitalised Research and Development
expenditures at the SBG division amounted to €11.2 million
versus €9.3 million in 2010 and €8.0 million in 2009.
(1) After tax.
114 / SAFT - ANNUAL REPORT 2011
5.2.3 JOINT VENTURES
ASB
ASB, a group that manufactures and sells thermal batteries
for the defence market, reported revenue of €28.0 million in
2011, an annual growth of 9.2% at constant exchange rates.
All ASB Group markets grew in 2011, with the strongest growth
being seen in the US and the UK. On the back of a large
number of commercial successes, the Group saw very high
order levels in 2011. Net profi t for the 2011 fi nancial year
totalled €3.6 million, compared to a net profi t of €3.2 million
in 2010, representing a very good performance in what is a
competitive market.
The Group’s share of this profi t, namely €1.8 million for
the 2011 fi nancial year, was recognised in the Group’s
consolidated income statement under “Share of profi t of
associates”.
Saft plans to retain its 50% interest in the ASB joint venture.
Johnson Controls–Saft (JC-S)
During the 2011 fi nancial year, Saft disposed of its 49%
interest in the Johnson Controls-Saft joint venture to Johnson
Controls Inc.
This disposal followed an agreement between Saft and Johnson
Controls Inc. to end this joint venture, as a result of a dispute
between the partners regarding the future of this company,
which was established in 2006, to develop and manufacture
lithium-ion batteries for the automotive sector.
Under this agreement, on September 30, 2011, Johnson
Controls acquired Saft’s interest in Johnson Controls-Saft for
US$145 million in cash. This agreement also provides for:
� an upfront royalty payment of US$10 million (i.e.
€7.4 million) by Johnson Controls to Saft in consideration for
a license extension allowing Johnson Controls to use certain
Saft Li-ion technologies beyond the automotive sector;
� the transfer to Saft, from the end of 2012, of the Nersac
production facility in France for US$10 million.
This agreement also brought an end to all outstanding legal
proceedings and all cooperation between Saft and Johnson
Controls Inc. Saft has since been free to follow its own strategy
and now has additional resources with which to meet the
needs of the markets in the future.
From a fi nancial perspective, the Saft Group’s share of the
joint venture’s net loss up to the date of disposal, together with
the impact of the actual disposal itself, were included on a
separate line of the Group income statement “Net profi t (loss)
from discontinued activities”. This represented a profi t after tax
of €23.9 million, compared to net losses (1) of €11.8 million
in 2010 and €9.5 million in 2009. The analysis of this
comprehensive income can be found in Note 30 of the
Group’s Consolidated Financial Statements.