Dębica, 14th February 2008 – In Q4 2007 Tire Company Dębica S.A., the largest Polish tire producer, generated sales revenues of PLN 362.5 million. They were up by 6.3 percent compared to that in Q4 of 2006. The comparison of the fourth quarters of 2006 and 2007 shows that operating profit (EBIT) was up by 0.4 percent and amounted to PLN 18.4 million. This result was achieved in an environment of growing prices of raw materials globally, and the strengthening of the Polish zloty, which had an impact on the performance of exports. It should be noted that in Q4 2007 the Company’s operating profit (excluding costs of changes in the Management Board) was up by 18 percent compared to the same period of 2006.

In Q4 of 2007 the Company recorded a higher sales volume, improved price level and lower production costs, which generated a 37 percent growth in gross sales profit.

The Company’s financial income in Q4 was down by PLN 6 million compared to Q4 2006. The loss amounting to PLN 4.9 million was mainly due to the revaluation of embedded derivatives.

Net profit in the last quarter of the previous year amounted to PLN 14.5 million and it was down by 25 percent as opposed to Q4 of 2006, primarily due to the worsening financial income performance.

Net profit on a year-to-date basis amounting to PLN 57.1 million was down by 6.4 percent compared to the 2006 net profit, with revenues amounting to PLN 1.546 million that were up PLN 20.7 compared to 2006, and an operating profit EBIT amounting to PLN 73.3 million, which was down 4.1%.

“Though operating in a tougher environment, we have generated higher operating profits than those in 2006, which was a good year for us, and we have constantly been looking for opportunities to enhance the Company’s competitiveness,” said Jacek Pryczek, President of the Management Board of Tire Company Dębica S.A.
In Q4 of last year the Company’s sales amounted to PLN 362.5 million and was up 6.3 percent compared to Q4 of 2006. The Company’s sales to Goodyear related entities was up by 8.2 percent, and to non-related entities it was down by 5.1 percent. Export sales, which is 99.6 percent based on the sales to related entities, amounted to PLN 288.4 million and accounted for 79.6 percent of the total sales in value terms. Domestic sales amounted to PLN 74.1 million, of which 41 percent were sales to Goodyear Dunlop Tires Polska. In total, the sales to Goodyear related entities accounted for 87.6 percent of sales in value terms and 89.7 percent of sales in tonnage terms. In Q4 of 2006 it was 86.1 and 89.4 percent respectively. Overall in 2007 sales to related entities was up by 5 percent, and to the non-related entities it was down by 15.4 percent compared to 2006, which was due to the withdrawal from a non-profitable business (sales of tires to OEM car producers).

The costs of sales and general management were up by PLN 9 million compared to the last quarter of 2006. They include service fees, driven by business growth and up by PLN 3.7 million and accounted for in the fourth quarter of the last year, higher commissions for the dealers by PLN 1 million, advertising revenues up by PLN 700 thousand, distribution costs up by PLN 600 thousand, and costs related to the change in the composition of the company authorities that amounted to PLN 3.2 million.

In the last quarter of 2007 gross sales income from related entities amounted to PLN 34.4 million, including PLN 16.8 million of annual margin adjustment. Thus, it was up by PLN 12.8 million, i.e. by 59 percent compared to Q4 of 2006. Gross sales income from non-related entities amounted to PLN 13.2 million, i.e. it was up by 1.3 percent compared to Q4 of 2006. Total gross sales income amounted to PLN 47.7 million, and was up by PLN 3 million, i.e. by 37.4 percent compared to the last quarter of 2006.

Net income from other operating activities in the Q4 of 2007 was a loss amounting to PLN 2.9 million, and was down by PLN 3.9 million compared to Q4 of 2006, mainly due to an increase in restructuring costs that, in the last quarter of the previous year, amounted to PLN 2.1 million and were up PLN 0.9 million more than in 2006. The inferior performance as compared to 2006 was also driven by the disposal of fixed assets left after the liquidation of bicycle tire and traction inner tubes production department. Then, the sale proceeds amounted to PLN 3.1 million.

The higher costs of sales and general management and the higher costs of other operating activities were covered by an increase in sales income from Goodyear’s related and non-related entities.

The euro prices applied in the transactions with related entities were up in Q4 of 2007 compared to Q4 of last year by 2.5 percent, whereas the sales in terms of volume were up by 4.9 percent. The EUR/PLN exchange rate was at 3.6131 as against 3.8450 in Q4 of 2006, which means that Polish currency depreciated by 6 percent.

The lower EUR/PLN, as well as USD/PLN, exchange rates led to a reduction in the unit production costs, despite an increase in global prices of the raw materials that are used in the manufacturing process. The production costs in Q4 were down by 4.9 percent compared to the last quarter of 2006.

The revaluation of the embedded derivatives generated gains amounting to PLN 5 million, whereas in the same period last year the same revaluation exercise generated gains amounting to PLN 7.4 million. The foreign exchange losses amounted to PLN 1 million. The Company revaluated, on a monthly basis, the embedded derivatives that cover the euro and US dollar exchange rates applied in long-term lease contracts for machinery and equipment, as well as for real estate. In Q4 the Company’s assets were up by PLN 21.9 million, mainly due to an increase in fixed assets in connection with the implementation of a large-scale investment plan.

The major shareholders of Tire Company Dębica S.A., holding more than 5 percent of shareholders’ equity, include Goodyear S.A., based in Luxemburg and holding 8,264,092 shares that account for 59.87 percent of the shareholding in the shareholders’ equity, and for 59.87 percent of the votes at the General Meeting of Shareholders, the “Złota Jesień [Golden Fall]” Open End Pension Fund PZU S.A. with its headquarters in Warsaw, holding 740,474 shares accounting for 5.36 percent of the Company’s shareholders’ equity and 5.36 percent of the total votes at the Company’s General Meeting of Shareholders, and PZU Życie S.A., also with its headquarters in Warsaw, holding 739,000 shares, and accounting for 5.35 percent of the Company’s shareholders’ equity and 5.35 percent of the total number of votes at the Company’s General Meeting of Shareholders. Additionally, the total number of shares held by other entities (including entities owned by PZU Życie S.A.), whose investment portfolios are under the management of PZU Asset Management S.A., amounts to 2,009,883, which accounts for 14.55 percent of the Company’s shareholders’ equity, and 14.55 percent of the total number of votes at the Company’s General Meeting of Shareholders. The said entities registered such shareholdings at the Extraordinary General Meeting of Shareholders of Tire Company Dębica S.A. that was held on 14th February 2008. The Company is not in possession of information about any subsequent changes on the list of shareholders holding at least 5 percent of Company shares.