Increase in turnover for 3rd quarter : + 19.6 %

Amplification of raw material price rises issue over the third quarter

The upwards movement we saw in raw materials prices in the first half-year accelerated over the third quarter with increases of over 50% for wheat, notably during September. The current economic situation linked to unpredictable climatic conditions, such as the poor weather in France, caused a major price rise in wheat, but there are many worldwide and structural underlying reasons for this: food needs linked to growing demographic rates and increased purchasing power, exacerbated by the bio-fuels issue and the interventions of a number of speculators. These events combined have brought about dizzying price rises and have impacted the «stock to use» ratio which has been steadily falling over the past 5 years.

These increases are illustrated by the increase in turnover across the animal feed industry, even if it was not possible to entirely pass these increases over to the stockbreeders and distributors. All the same, using hedging contracts on the futures markets and researching substitution raw materials remain ways of limiting the level of impact and smoothing out the negatives consequences on profit margins.

Nutrition - Compound Feed

Good resistance for French Nutrition activity

Within the « Nutrition France » division, turnover for the 3rd quarter 2007 amounted to €115 M, an increase of 17% over the same period in 2006. This is mainly as a result of price increases, as volumes remained stable, with a drop off on the porcine market due to low meat prices, and a revival of poultry activity following the avian flu virus in 2006. The absence of the traditional post-harvest drop in raw material prices led all operators to react by introducing price increases over the period, thus supporting margins.Over the 9 month period, turnover for this division was €333 M.

Confirmation of good performances in International Nutrition

The « International Nutrition» division noted a 25% increase in its turnover over the 3rd quarter. It amounted to €38.3 M and €39.1 M on a like-for-like basis. These good figures reflect the effects of raw material price increases but also a progression in retailed volumes. Vietnam continued to develop with some 45 Kt of feed sold over the quarter, representing a 40% increase over the 3rd quarter of 2006.The acquisition of ZOOFORT in Brazil will add to these good performances in the 2007 reporting period. On a cumulated basis, turnover was €107.6 M for the first 9 months, an increase of 20% over the same period in 2006. With sales of almost 430 Kt over these first 9 months, the objective to sell 600 Kt of feed (a 17% increase for this division during 2007) should be achieved.

Premix Specialties

Development of Specialties to respond th stretched market conditions

In France as in the international subsidiaries, market conditions remain affected by the price increases in vitamins, which are essential raw materials forming part of the premix formulae, and the on-farm mixing activity which meets with competition from the compound feed sector, allowing raw material costs to be optimized. The enhancement of our specialties range allows us to contain these adverse elements and to develop high added value products.

Pursual of French integration program

The Premix Specialties France division, which integrated the activities bought from Nutreco at the beginning of the year is pursuing its consolidation process in order to become one of the market leaders in the Premix sector offering specialized products and services to industrial customers and on-farm mixers. Turnover for the 3rd quarter for these activities amounted to €9.6 M and a cumulated total of €29.5 M, a 66% progression compared with the first 9 months of 2006.

Sustained International activity

Over the 3rd quarter, turnover from the international activities amounted to €12.5 M, an increase of 36%. The Russian subsidiary, ROSSOVIT which was acquired in January, made a €2.4M contribution, plus the good performances of the export teams made up the main sources of this growth. The new industrial bases in Romania and China are on schedule regarding their construction programs and make good progress in the first quarter of 2008.

Health

Restablished energy for development in the Health sector

Faced with a market which is also affected by the sharp rises in raw materials (antibiotics, wheat derived products, lactose), all operators answered in the same way by increasing sales prices. For Franvet, which now gathers under one umbrella all the commercial activities in the French health sector, the development of international patents and regulated products, as well as back-up operations (communication, team-building) have paid off on volumes and the product-mix. Turnover for the quarter amounts to €6.4 M and  €18.9M for the cumulated first 9 months.

Outlook

The third quarter 2007 was marked by an acceleration in raw material price increases but also by a prick of consciousness on the part of agro-food industry players and public bodies, concerning the consequences of price increases foodstuffs for humans. The repercussions of these price increases on the finished products should permit the « food chain » to relax and also the animal feed industry to progressively regain their profit margins.

Looking at volumes, the French market, in spite of a post 2006 avian flu adjustment remains tense, and structurally positioned downwards. On the other hand, important development opportunities are to be seen in the emerging markets, as confirmed by the good performances of our international activities.

Given the activity levels for the first 9 months, the Group maintains its objective of the same net annual result as last year.

The contrasting market conditions combined with the long-lasting and structural nature of high raw material prices reaffirms the Group’s profound convictions and strategic choices based on :

• Innovation, offering the stockbreeders optimal nutritional and economical solutions.
• Internationalization through organic or external growth, to capture growth where the markets are making strong progress.
• Optimization of the French base to capitalize on a market demanding excellence.

EVIALIS WILL ANNOUNCE ITS ANNUAL TURNOVER ON 15 FEBRUARY 2008