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Finmeccanica: the BoD approves the interim management report to 30 September 2011

Rome, Italy - And the guidelines of the plan to consolidate the operations and assets of the Group

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(WAPA) - The Finmeccanica Board of Directors, meeting on 14 November 2011 and adjourning in the late evening of the same day, examined and unanimously approved the interim management report to 30 September 2011 and the guidelines for the plan to consolidate the operations and assets of the Finmeccanica Group, for which all necessary powers were conferred on the Chief Executive Officer, Giuseppe Orsi.

The meeting of the Board of Directors was chaired by senior director Admiral Guido Venturoni in the absence of Group Chairman.

The results reported for the period were primarily influenced by the changing conditions of the broader economic scenario as well as adjustments to invested capital and risk provisions associated with the management of certain orders, particularly in the Aeronautics and Transport sectors, for which guidance was suspended in July.

The Group’s restructuring plan is based on the following objectives:
- Selective investments in innovation and the development of new products, thereby creating skilled and “sustainable” employment;
- Concentrating efforts in the strategic areas in which a position of leadership at the international level is achievable;
- positioning itself in those business areas that appear most resilient to the crisis and sustainable over the medium to long term, and which have an inherent capacity to be self-financing; and
- pursuing “structurally” higher- and better-quality margins, with greater and more stable cash-flow generation.

To achieve these objectives, it is necessary to set in motion a process based on a realignment of management and strategic priorities by putting in place specific initiatives that increase the focus of the Group's activities, while also ensuring that its finances are structurally sustainable over the medium to long term.

Main areas of action

The main areas of action essentially relate to the following:
- The restructuring of the Aeronautics and Transport sectors and the reorganisation of the Defence Electronics & Security business;
- The implementation of a streamlined investment plan that meets criteria for financial sustainability and return on capital;
- The definition of specific measures to reduce overhead expenses; and
- The sale of assets in line with the Group's strategic development, with the aim of significantly reducing debt levels.

Restructuring and reorganisation

Aeronautics: a plan has been approved and initiated that aims to redress the sector by reducing the work force (the agreement was signed by unions on 8 November), restructuring production and engineering activities, and streamlining the supply chain to reduce external costs.

Transport: a plan to restructure AnsaldoBreda has been defined with the aim of entering into a strategic industrial partnership to support the relaunch of the company and enable its gradual deconsolidation from the Group.

Defence Electronics & Security: the integration of the companies in this sector – with the exception of the US companies – will begin in 2012 with the aim of rationalising the technology portfolio, improving industrial and financial performance, increasing market share and reducing costs.

Investment

The Group's strategic repositioning involves measures to improve the Group's ability to generate cash flow from ordinary operations, including by setting investment priorities.

Overhead expenses

Targeted cost-containment measures will lead to a reduction in overhead expenses at both the Holding Company and individual business levels.

Restructuring of the asset portfolio and debt reduction

In order to enable the restructuring of the asset portfolio and to reduce debt, Finmeccanica intends – before the end of 2012 – to sell assets for a net sum of about EUR 1 billion.

Saleable assets have been identified:
- in the civil sector;
- in the foreign activities of the Defence Electronics & Security business; and
- in minority shareholdings.

In line with the above, the following should be noted:

- Total Group investments over the 2010-2012 period – previously set at about EUR 3.6 billion – will be reduced to about EUR 3.4 billion. With EUR 2.4 billion already invested in 2010-2011, the majority of the reduction will occur in 2012;
- Group general & administrative costs, including for the Parent Company, will be reduced by over EUR 40 million in 2012 and by over EUR 100 million in 2013, as compared to the G&A costs expected in 2011; and
- net cash proceeds of about €1 billion will be achieved from disposals by the end of 2012 and these will be used entirely to reduce net debt.

The Board of Directors also agreed to propose to the Shareholders Meeting that the Group pay no dividend related to the 2011 financial year (compared to a total dividend of about EUR 258 million paid for the 2010 financial year).

The BoD further agreed to book exceptional write-downs related to recent developments in the B-787 airplane programme of EUR 753 million in the nine-month results for the Aeronautics sector.

Commenting on the restructuring plan, Finmeccanica Group CEO, Giuseppe Orsi said: "These are uncertain times and they call for extraordinary measures. But I have no doubt that Finmeccanica’s future is a bright one, notwithstanding the extreme environment in which we find ourselves. Tough times also provide us with an opportunity to clarify our mission, our organisation and our ambitions. They help us to act more decisively to capitalize better on our strengths – and they are many – and to take a long hard look at our weaknesses – and this we are doing. We are committed to making Finmeccanica a more focused, more responsive business for the good of our customers, our employees and the wider community we serve, and a more profitable business for the good of our investors".

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(World Aeronautical Press Agency - )