Dębica, 1st August 2008 – Tire Company Dębica S.A. generated PLN 363.8 M of sales revenues in Q2 2008. It was possible to attain this result in the environment of significant decline in demand for tires in European markets mainly thanks to benefits from commercial cooperation within the Goodyear Group. Warm reception by the Polish customers of Passio 2 tire led to a 15 percent increase of sales in the domestic tire replacement market in H1 of the current year.

„The last half a year was for Tire Company Dębica a period of major challenges caused by a tough market environment, but also by the launch of long-term investment plan. The financial performance achieved under such circumstances gives grounds for optimism and confirms added value for Dębica being part the Goodyear Group” – said Jacek Pryczek, President of the Management Board of Tire Company Dębica S.A. „Strong sales growth rate of Passio 2 tire is a proof of non-declining trust of customers and their loyalty to the Dębica brand. We are also proud of Company strengthening in the position of regional business leader and higher grade in the ranking of best employers” – emphasized Jacek Pryczek.

Compared to the same period in the previous year the sales revenues were down by 3.8 percent, which was mainly influenced by more than 10 percent depreciation of euro against Polish currency. Additionally the demand for tires in European markets shrank significantly, which was the reason why export sales in value terms amounted to PLN 272.4 M and was down by 1,7% on a y/y basis. The value of domestic sales reached PLN 91.4 M (down by 9,6%).

The prices in euros used for transactions with related entities rose by 10.6 percent due to significant euro depreciation. Euro exchange rate in Q2 of this year was at the level of 3.3978 of the Polish currency against 3.7909 of the Polish currency in the same period of 2007.

The positive impact of euro and US dollar depreciation were falling costs of raw material purchases. Consequently despite an increase of domestic manufacturing costs, the unit production costs were down by 0.9 percent against the same quarter of the previous year.

Gross sales profit amounted to PLN 49 M and was up by 14% on a y/y basis. In Q2 2008 the gross profit from sales to related entities amounted to PLN 34.3 M including PLN 19.7 M of annual margin level adjustment. Compared to Q2 of the previous year the gross profit was up by 40.9 percent, whereas gross margin on export sales rose from 7.8 to 11.2 percent. Gross profit from sales to non-related entities amounted to PLN 14.8 M and was by 21 percent smaller than in Q2 of the previous year. The reason for the decline was the sales in value terms lower by 10.1 percent and lower margin by 3.5 percent. This is a result of tough situation in the Polish retail market and lower demand on the part of end-users.

The costs of sales and general management amounted to 24 M. The 9% increase compared to Q2 of the previous year was driven by a fee higher by PLN 1.1 M to support the activities of Goodyear’s Regional Service Center and higher by PLN 0.8 M costs of distribution related in particular to reduced turnover of finished goods. Tougher competition in tire market required an increase of marketing support by PLN 1 M.

Despite deteriorating business environment the Company generated higher operating profit (EBIT), which reached PLN 22.8 M, and was up by 2.8 percent compared to Q2 2007.The improvement of EBIT despite pressure on generated revenues was only possible thanks to the application of a principle of leveling off margin on sales to related entities within Goodyear Group.

Other operating profit in Q2 2008 was down by PLN 2.6 M than in the same period of previous year. It was driven by higher by PLN 1.5 M restructuring costs as well as loss generated from liquidation of fixed assets amounting to PLN 0.7 M and higher by PLN 0.4 M costs of inventory revaluation.

Foreign exchange losses amounting to PLN 2.9 M reduced the financial gains of the Company by PLN 2.1 M in Q2 of the current year. The revaluation of embedded derivatives pricing generated revenues amounting to PLN 3.4 M, which was up by PLN 1.3 M compared to the same quarter of the previous year. The loan interest amounted to PLN 2.2 M, and were up by 1.4 M than in Q2 of the previous year.

In Q2 2008 net profit amounted to PLN 16.3 M and was down by 6.9 percent compared to the same period of the previous year, which was primarily driven by lower income from financial transactions.

In Q2 Company assets rose by PLN 44.6 M. The fixed assets rose by PLN 15.6 M, whereas circulating assets rose by PLN 29.1 M.

Company receivables were down by PLN 21.7 M, whereas inventory of raw materials and goods were up by PLN 24.4 M. The cash balance was up by PLN 2.8 M. The second quarter saw a decrease in equity by PLN 29.0 M in relation to the dividend payment, and equity increase by PLN 16.3 M in relation to generated net profit. Liabilities and provisions for liabilities were up by PLN 57.3 M.

The operational activities generated negative cash flows amounting to PLN 5.6 M, whereas fixed assets were purchased for PLN 16.8, then interest expense amounted to PLN 2.3 M, whereas lease installment repayment amounted to PLN 0.3 M. The total negative cash flows amounted to PLN 25.0 M. They were financed with higher loan amounting to PLN 27.8 M. Cash balance was up by PLN 2.8 M.