Sorin: Preliminary Results for 2011: Net Profit Increases by 48.5%

Sorin (MIL:SRN):

Consolidated results for the fourth quarter of 2011:

• Revenues of €197.9 million, a 0.8%¹ increase (+1.2% as reported) over the fourth quarter of 2010;
• Gross profit of €120.3 million, 60.8% of revenues (59.2% in the fourth quarter of 2010);
• EBITDA of €38.2 million, 19.3% of revenues (19.2% in the fourth quarter of 2010);
• Net profit up 23.8% to €16.0 million, 8.1% of revenues (6.6% in the fourth quarter of 2010).

Preliminary consolidated results for 2011:

• Revenues of €743.4 million, a 1.0%* increase (-0.3% as reported) over 2010;
• Gross profit of €447.6 million, 60.2% of revenues (58.9% in 2010);
• EBITDA of €128.7 million, 17.3% of revenues (16.1% in 2010);
• Net profit up 48.5% to €58.0 million, 7.8% of revenues (5.2% in 2010).

Net financial debt down to €105.9 million as of December 31, 2011, compared to €128.8 million as of December 31, 2010 and €122.4 million as of September 30, 2011.

For 2012, the Company forecasts consolidated revenue growth of 2-4%* and a net profit increase of 5–10% over 2011. For the first quarter of 2012, the Company forecasts revenue growth of 1 –2%* over the same period last year.

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Not yet audited data

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At a meeting held today and chaired by Rosario Bifulco, the Sorin S.p.A. Board of Directors analyzed the results for the fourth quarter of 2011 and the preliminary consolidated results for the full year of 2011. The final draft of the financial statements for the year of 2011 will be approved by the Board of Directors at a meeting to be held on March 15, 2012.

"2011 was a challenging year for the top line, particularly in CRM, where market conditions have deteriorated over the year. In contrast, the Company strengthened its global leadership position in Cardiopulmonary and was able to significantly grow its net profit by around 50%, thanks to a rigorous operational and financial discipline. In 2012 we expect a favourable impact of the launch of key new products. We are committed to continue sustaining our longer-term growth strategy with further geographic expansion initiatives and additional investments in innovation”, stated Sorin Group's Chief Executive Officer André-Michel Ballester.

CONSOLIDATED REVENUES FOR THE FOURTH QUARTER OF 2011

In the fourth quarter of 2011, Sorin Group posted revenues of €197.9 million, a 0.8%^* increase (+1.2% as reported) over the fourth quarter of 2010.

• The Cardiopulmonary Business Unit (heart-lung machines, extra-corporeal and autotransfusion blood circulation systems) reported revenues of €96.6 million, representing a 3.0%* increase over the fourth quarter 2010. The growth was led by the heart-lung machines segment which had outstanding performance in all of the main markets and by the autotransfusion business, thanks to the commercial success of Xtra^TM. The oxygenator segment posted a slight decrease in revenues, due to a challenging quarter-over-quarter comparison. The Company obtained CE mark for the first Inspire^TM adult model in December 2011.

(Euro million)
		Q4 11 Revenues		Underlying growth %
Heart-lung machines		28.7		21.6%
Oxygenators		50.1		-6.2%
Autotransfusion machines and devices		16.8		8.2%
Other		1.1		n.m.
Total Cardiopulmonary		96.6		3.0%

• The Cardiac Rhythm Management Business Unit (implantable devices to manage cardiac rhythm disorders) reported revenues of €70.4 million, a 2.7%* decrease over the fourth quarter 2010. With the commercial launch in October of SonR, an innovative system for cardiac resynchronization therapy (CRT), the Company regained market share in key European countries. The recovery, however, was not sufficient to counterbalance the global slowdown of the entire high-voltage segment. The pacemaker segment grew modestly during the quarter, mainly led by the strong performance in Japan.

(Euro million)
		Q4 11 Revenues		Underlying growth %
High Voltage (defibrillators and CRT-D)		23.1		-5.5%
Low Voltage (pacemakers)		44.8		0.8%
Other		2.6		n.m.
Total Cardiac Rhythm Management		70.4		-2.7%

• The Heart Valves Business Unit (mechanical, tissue heart valves and valve-repair products) reported revenues of €30.4 million, an increase of 2.7%* over the same period of 2010. The quarter was marked by a positive trend of the mechanical heart valves segment, with solid performance by the US and emerging markets. Tissue heart valves reported modest growth mainly thanks to the positive contribution of the new Perceval^TM sutureless valve and the Company’s positive trend in the United States, more than offsetting the weak performance in the European market.

(Euro million)
		Q4 11 Revenues		Underlying growth %
Mechanical Heart Valves		14.4		1.2%
Tissue Heart Valves		13.9		0.2%
Other		2.1		n.m.
Total Heart Valves		30.4		2.7%

PRELIMINARY CONSOLIDATED RESULTS FOR 2011

In 2011, Sorin Group reported revenues of €743.4 million, up 1.0%^* (-0.3% as reported) compared to 2010.

• The Cardiopulmonary Business Unit posted revenues of €344.9 million, a 4.2%* increase over 2010. This performance, the highest revenue growth of the past five years, reflects, in particular, the strong contribution of the emerging markets. The Group believes that emerging markets will continue to drive the business unit’s growth in 2012.

(Euro million)
		2011 Revenues		Underlying growth %
Heart-lung machines		78.1		14.2%
Oxygenators		200.1		0.6%
Autotransfusion machines and devices		61.9		6.3%
Other		4.8		n.m.
Total Cardiopulmonary		344.9		4.2%

The heart-lung machines segment realized record revenues for the third consecutive year, further reinforcing the Company’s leadership position in every major market.

The oxygenator segment performed well, mainly in the emerging markets and in the United States, where it benefitted from the integration of Gish Biomedical during the first part of the year. In 2011, the Company continued to focus on the development and manufacturing start-up of the new family of oxygenators Inspire. This new product family will allow Sorin to offer clinicians a wider range of solutions, enhanced performance and greater flexibility compared to the oxygenator systems currently available on the market. Inspire will also allow Sorin to improve in the medium term its manufacturing efficiency. In 2012 Sorin will roll-out this new and innovative range of oxygenators on a global basis.

In 2011 Sorin also reinforced its product offering in the cannulae segment through the acquisition of the Estech product line and the distribution agreement for the US and Europe of the Calmed product portfolio.

The autotransfusion system segment reported a strong performance, particularly in Europe, Japan and the emerging markets. Sorin believes it can further strengthen its international presence in 2012 by leveraging on the global success of Xtra. The Company plans to launch Xtra in the first quarter 2012 in Japan and in the fourth quarter 2012 in China.

• The Cardiac Rhythm Management Business Unit reported revenues of €277.5 million, a 2.9%^* decrease compared to 2010.

(Euro million)
		2011 Revenues		Underlying growth %
High Voltage (defibrillators and CRT-D)		90.4		-4.3%
Low Voltage (pacemakers)		177.0		-1.9%
Other		10.1		n.m.
Total Cardiac Rhythm Management		277.5		-2.9%

The high-voltage segment reported a revenue decline mainly due to a global market slowdown and the absence in the first nine months of significant new product launches for the Company in the cardiac resynchronization therapy (CRT) segment. With the European commercial launch of the innovative SonR system in October, Sorin stopped its share erosion in the CRT segment. The Company expects to further gain share in this segment in 2012.

In the low voltage segment Sorin posted a slight decrease, with a sluggish market trend in the United States and Europe only partially offset by share gains in Japan and in emerging markets.

During 2011 Sorin focused on a number of innovative projects, including the SonR CRT system. SonR is the first and only system to provide weekly automatic optimization with the potential to improve CRT responder rates, representing a significant alternative - in terms of time and costs - to manual in-clinic optimization. Further development of the Remote Monitoring system also took place during the year: the Company obtained CE Mark approval for the new PARADYM^TM RF line of implantable defibrillators and CRT devices and started the Remote Monitoring clinical evaluation and pilot phase, with the commercial launch planned in mid-2012. In October 2011, patient enrollment was also initiated for the ISIS-ICD clinical study aimed at evaluating the effectiveness of the PARAD+™ algorithm in minimizing inappropriate defibrillator shocks.

Finally, in January 2012, the Company obtained CE Mark approval and initiated commercial launch of a comprehensive new lead portfolio (pacing, defibrillation and left ventricular leads).

• The Heart Valves Business Unit reported revenues of €119.0 million, a 1.5%^* increase compared to 2010.

(Euro million)
		2011 Revenues		Underlying growth %
Mechanical Heart Valves		56.5		-1.3%
Tissue Heart Valves		55.8		1.9%
Other		6.8		n.m.
Total Heart Valves		119.0		1.5%

The mechanical valves segment experienced a slight decrease in revenues in line with the expected and continued shift of the market to tissue values.

Traditional tissue valves performed positively thanks to the penetration in emerging markets and the United States, which more than offset the slowdown in tissue valves in the European market.

The innovative Perceval sutureless valve, which received CE mark for the 21mm and 23mm sizes in January and for the 25mm size in October 2011, received excellent clinical acceptance from physicians. The Company is currently proceeding on schedule the commercial launch for targeted customers, progressing on country-specific reimbursement plans and widening Perceval product range. In particular, Sorin expects to receive CE mark approvals in the first half of 2012 for (i) its proprietary MIS introducer (a unique holder to allow minimally invasive procedures); (ii) its next generation kit of accessories and (iii) extended indications (from patients over the age of 75 to patients over 65).

In the second half of 2011, the Company launched the next generation of the Mitroflow valve with Phospholipid Reduction Treatment, to mitigate potential calcification and possibly further improve the tissue valve’s durability. The Company also obtained IDE approval required to initiate its clinical study for the Freedom Solo valve in the United States.

The growth of the segment "Other” was driven by sales of annuloplasty rings, including the innovative Memo 3D mitral repair ring, launched in Japan in the fourth quarter of 2011, and other accessories for heart valve cardiac surgery.

Gross profit rose to €447.6 million, or 60.2% of revenues, compared to 58.9% of revenues in 2010, representing the first year in the Company's history in which gross margin resulted above 60%. The improvement is attributable to the ongoing manufacturing cost reduction programs.

Selling, General and Administrative (SG&A) expenses were €289.7 million, or 39.0% of revenues, compared to 39.4% of revenues in 2010. Net of the impact of hedge accounting, SG&A amounted to 38.8% of revenues compared to 38.0% in 2010. The difference is attributable to a slight increase in selling and marketing expenses for the commercial launch of new products and for geographic expansion initiatives.

Research and Development (R&D) expenses increased by 4.7% to €70.1 million, or 9.4% of revenues, compared to 9.0% in 2010. R&D activity was focused on new product releases including SonR and Remote Monitoring systems, clinical studies for the Perceval and Freedom Solo valves and the Inspire manufacturing start-up.

EBITDA in 2011 rose by 7.1% to €128.7 million, or 17.3% of revenues, compared to 16.1% of revenues in 2010.

EBIT grew by 22.7% to €87.7 million, or 11.8% of revenues, compared to 9.6% in 2010. EBIT before special items was €87.8 million in 2011 (€78.4 million in 2010).

Net financial charges decreased to €7.6 million from €11.6 million in 2010. On a run rate basis, net financial charges decreased by €1.9 million as a result of lower average debt for the period and a lower spread applied to medium/long-term debt. The European Investment Bank (EIB) has financed €95.9 million of Sorin’s medium/long-term debt, which is due in June 2014.

Net profit rose by 48.5% to €58.0 million, or 7.8% of revenues, compared to 5.2% of revenues in 2010.

Net financial debt as of December 31, 2011 is down to €105.9 million, compared to €128.8 million as of December 31, 2010 and €122.4 million as of September 30, 2011. Free cash flow^° generated in 2011, equal to €37.7 million, is mainly the result of increased profitability, despite significant deterioration of payment terms in Southern Europe.

2011 net debt position was negatively impacted by €14.8 million of special items, including the effect of the difference in fair value of hedging portfolio and business development investments (see attached table for details). Major investments included the acquisition of the Estech cannulae portfolio, the minority investments in MD Start (incubator in the European med-tech sector) and Enopace Biomedical (start-up focused on innovative solutions for heart failure patients) and a partnership for the development of a new lead portfolio.

Guidance for the current fiscal year

For fiscal year 2012, the Company expects consolidated revenue growth of 2-4%^* and net profit growth of 5–10%.

In 2012 the Company will focus on accelerating long-term growth through the launch of new products, the continued roll-out of recently launched technologies, ongoing investments in innovation and geographic expansion initiatives in emerging markets. These objectives will be pursued while maintaining strong focus on the continuous improvement of the Company’s profitability and cash flow. Sorin will also dedicate additional resources in the area of Health Technology Assessments and in the development of medical devices which help reduce the overall costs of medical care and improve patients outcomes.

The main strategic drivers by business unit are:

• Cardiopulmonary: Sorin expects to strengthen its global leadership pursuing geographic expansion in fast-growing emerging markets, expanding in the autotransfusion systems segment leveraging on the global launch of Xtra and entering attractive adjacent segments. This year will also be dedicated to the commercial roll-out of Inspire, the next generation of oxygenators with innovations in design and manufacturing.
• Cardiac Rhythm Management: revenue growth will accelerate in the second half of the year, driven by new product launches and roll-outs (SonR, Remote Monitoring and the new lead portfolio) and by a greater penetration in emerging markets.
• Heart Valves: growth will be driven by Perceval, which is expected to generate €7-9 million of sales in 2012, and by the ongoing penetration in emerging markets.

For the first quarter of 2012, the Company expects revenues to grow by 1-2%* over the same period of 2011.

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The Corporate Officer responsible for the company’s financial reports, Demetrio Mauro, declares, pursuant to paragraph 2 of Article 154 bis of the Consolidated Law on Finance, that the accounting information contained in this press release corresponds to the document results, books and accounting records.

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In addition to the conventional indicators recommended by the IFRS, this press release provides alternative performance indicators. These indicators should not be considered as replacements for the conventional indicators recommended by the IFRS, but rather as additional source of information, representative of the income statement, balance sheet and financial position parameters used internally in the decision-making process. An explanation of the meaning and structure of these alternative performance indicators is provided in the Interim Report on Operations at June 30, 2011.

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This press release contains forward-looking statements. These statements are based on the Company’s current expectations and projections about future events and, by their nature, are subject to inherent risks and uncertainties. They relate to events and depend on circumstances that may or may not occur or exist in the future, and, as such, undue reliance should not be placed on them. Actual results may differ materially from those expressed in such statements as a result of a variety of factors, including: continued volatility and further deterioration of capital and financial markets, changes in commodity prices, changes in general economic conditions, economic growth and other changes in business conditions, changes in government regulation (both in Italy and abroad), and many other factors, most of which are outside of the Company’s control.

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About Sorin Group

Sorin Group (www.sorin.com) is a global company and a leader in the treatment of cardiovascular diseases. The company develops, manufactures and markets medical technologies and innovative therapies for cardiac surgery and for the treatment of cardiac rhythm disorders. With 3,700 employees worldwide, the Company focuses on three major therapeutic areas: cardiopulmonary bypass (extra-corporeal circulation and autotransfusion systems), cardiac rhythm management, and repair and substitution of heart valves. Each year, over one million patients are treated with the devices of Sorin Group in more than 80 countries.

For further information, visit: www.sorin.com2011 preliminary not yet audited results

¹ At comparable exchange rates and perimeter

^* At comparable exchange rates and perimeter

^° Free cash flow: net profit + depreciation, amortization and writedowns ± ? working capital – investments. This account is net of the impact of special items.