2009 1st Half Report - Indesit

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Half-year report at 30 June 2009 Report on Corporate Governance, which provides a complete description of the governance model adopted by the Company and reports on the implementation of the Code. The Parent Company has adopted the ordinary model of administration and control (envisaged under Italian law), including a Board of Directors, a Board of Statutory Auditors and Independent Auditors. The company bodies are appointed at the Shareholders' Meeting and remain in office for a period of three years. The significant presence of Independent Directors, as defined in the Code, and the important role they play on both the Board and Board Committees (Human Resources Committee, Audit Committee and Innovation and Technology Committee), ensures that the interests of all shareholders are appropriately balanced and guarantees a high level of discussion at Board meetings. Further information is available in the Annual Report on Corporate Governance (available on the Company's website: www.indesitcompany.com). Forecast for operations The forecast falls in GDP 8 during 2009 in the principal geographical areas in which the Group operates, being the UK (-4.2%), the Euro area (-4.8%) and Russia (-6.5%), has been revised downwards with respect to the previous quarter. It is likely that demand for durable goods, including household appliances, during the second half of the year will remain affected by the currently difficult economic conditions. Demand for household appliances and trends in the three main currencies that influence the Group's results (British pound, Russian rouble and Polish zloty) will, remain decisive factors for the achievement of the Group's economic and financial objectives also in the second half year. In this context, the greatest concerns continue to be the situation in Russia and the East European markets. Demand in Russia contracted even further during the second quarter, almost halving in certain months with respect to the comparative period of the prior year. Growing unemployment and the continuing credit squeeze do not allow the coming months to be viewed with optimism; expectations for the second half year suggest that a slight improvement might emerge, but only towards the end of the fourth quarter. The pressure on the rouble, which struggles to maintain a rate of 44/45 to the euro, represents an additional risk, since it would be hard to pass on further depreciation in the form of higher selling prices. As mentioned in the last quarter, despite the expected, significant further reduction in sales and profitability, Russia will still remain one of the most important areas for the Group. Sales and profitability also fell in Eastern Europe, and this is likely to continue. Demand in the region remains poor (down about 24 % in the first half) and the weakness of the local currencies (PLN, HUF, CZK) continues with respect to the euro. The Group's priority in this area is to recoup profitability in order to offset the effects of currency depreciation and the possible loss of market share. Performance during the second quarter and current forecasts suggest that the following areas can be viewed with confidence: a) UK. The price adjustments made to cover the depreciation of the GBP, together with the cost containment measures taken, should mean – in the absence of a further significant decline in Uk pounds – that the UK will close the year with lower sales but higher profitability, despite an expected contraction of the market by at least 10% over the whole of 2009. 8 International Monetary Fund forecasts from World Economic Outlook July 2009 17
Half-year report at 30 June 2009 b) Italy and other West European countries. Italy too, despite a likely contraction in the market, is expected to close the year with profitability in line with or better than in the prior year. Similar results are expected from the other markets in Western Europe. c) Cost of purchasing raw materials and components. The stabilisation of the oil price at around 60-70 USD and the steel price at current levels will enable the Group to achieve considerable savings on procurement costs. d) Service and warranty costs. Consistently with the performance in recent years, service costs are expected to fall further in 2009 due to the significant improvements made to the product/ process quality and the efficiency of the Service area. The results for 2009 will be burdened by substantial restructuring costs (recorded during the first half) associated, in large measure, with the closure of the Kinmel Park factory (UK) and the reorganisation of production at the None factory (Italy). The outlook on the second half of the year remains hazy, especially in relation to Russia and Eastern Europe, making it difficult to develop forecasts with a low margin of error. At this time, the best expectations for market performance are based more on favourable comparisons with the prior period than on an actual upturn in consumption. Nevertheless in this difficult context, the Group believes that given: 1) Stable exchange rates 2) Lower market demand during the second half year in line with the second quarter trend - 10% and -15%. 2009 sales should be between 2.5 and 2.6 billion euro, and operating profit (EBIT) should be between 60 and 70 million euro; net financial position at 31 December 2009 is expected to be essentially in line with the situation at 31 December 2008. Milan, 30 July 2009 On behalf of the Board of Directors The Vice Chairman Andrea Merloni 18
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2009 1st Half Report - Indesit

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