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Letter to shareholders - Preliminary report of the Dürr AG for 1997

01/28/1998

• Two-digit increases in incoming orders and sales
• Improvement of earnings by more than 60
• Product innovations give a strong stimulus to growth for Dürr Ecoclean
• Further increases in sales and earnings expected for 1998

Dear Shareholders,

Your company continued to develop well in 1997. The year was characterized by rising demand in the

automobile industry, resulting in increased capital investment. The number of orders issued in this connection for

general contracting and product systems also grew more strongly.

Dürr achieved increases in 1997 both for group sales and for incoming orders. Group revenue rose by 13 % to DM 1,845 million, compared with DM 1,640 million in the preceding year. Amounting to DM 2,020 million (preceding year: DM 1,786 million), order intake exceeded the two-billion mark in 1997 for the first time and thus also increased by 13 %.

Significantly higher orders on hand stood at DM 1,704 million at the end of 1997 (preceding year: DM 1,425 million), thus already ensuring utilization of group capacities beyond the end of 1998.

Earnings significantly higher Our pre-tax return on sales reached a value above 3 % in 1997 (1996: 2.2 %), which represents an improvement of earnings by more than 60 %.

All group companies ended the year with positive earnings contributions. Our South American subsidiary, Dürr Brasil Ltda. Also achieved a turnaround, as forecast, finishing 1997 with a slightly positive result. This trend will continue.

On this basis, the Board of Management regards a higher dividend as possible.

Dürr Systems group The business area of automotive Paint Finishing accounts for over three-fourths of group revenue. Filling orders for product systems again increased in importance in 1997. The same is true of orders for general contracting, which integrate all product lines (Paint Finishing, Plant and Application; Automation and Conveyor Systems; Environmental Systems) and often include building engineering and infrastructure services.

In Europe, good access to the French market was gained through the acquisition of Hayes S.A. and its subsidiary Sietam Automotion S.A., a company specializing in conveyor systems.

Dürr strengthened its market position in Germany by obtaining major contracts from Audi and Daimler Benz. Through the acquisition of the Inlac group, the product range was extended by the addition, among other things, of modern paint supply systems. The Environmental Systems division also made inroads into non-automotive sectors with orders from the chemical and semiconductor industries.

In North America, our activities remained constant at a high level. In South America, large orders for product systems were obtained from Chrysler, Daimler Benz, and VW/Audi accompanied by generally more lively demand. This has given Dürr an excellent starting position in 1998.

In Asia, Dürr established new companies in China (Shanghai) and India (Chennai). Dürr is unaffected to a very large extent by the current economic turmoil in Asia. All orders that we execute are firmly hedged on a contractual basis, and all transactions are secured in D-marks or US dollars. In line with expectations, the demand for a high proportion of local value addition will continue to grow in Asia. Dürr has created optimal conditions by joining with partners and establishing its own business locations and thus ensured its competitiveness in this region.

Dürr Ecoclean

The Dürr Ecoclean group, world market leader in industrial cleaning systems also registered dynamic growth in the past year. Group sales increased by 25 % in 1997 to DM 217 million, compared with DM 174 million in the preceding year. Integrating the Spanish Agullo group has given positive impetus to the activities of Dürr Ecoclean. The automobile industry continued to be ist largest source of revenue worldwide, but a business upturn in the machine tool industry, however, also contributed to higher sales volume.

The Dürr Ecoclean group ensured its technological leadership in the past year by developing new products that will also meet the future demands of customers. These include an ultramodern generation of flexible robot cells for washing and burring work pieces. The automobile industry is planning a large number of engine and transmission plants; this means that favorable conditions continue to exist for future growth of the Dürr Ecoclean group.

Workforce has increased by 10 %

At the end of 1997, the Dürr group had 3,619 employees, 324 more than a year earlier. This increase is a result of integrating some new subsidiaries at home and abroad, on the one hand, and of growing business volume, on the other. Sales per employee continued to rise

Capital investment in fixed assets Dürr invested about DM 32 million in property, plant, and equipment in 1997 (preceding year: DM 30 million). The main emphasis of capital investment was our technology center near Stuttgart (Germany), where product innovations are directly realized and made available to customers for development and testing purposes.

Outlook With high orders on hand and a continuing good project situation in the core business areas of automotive paint finishing and industrial cleaning systems, Dürr has started the year 1998 under favorable conditions. In the framework of further developing the Dürr strategy, a global orientation of all product lines is being sought in order to achieve maximum proximity to our customers. In the process, the already extensive range of goods supplied by the divisions of paint finishing systems, automation and conveyor systems, and industrial cleaning systems is to be extended further by the addition of specific services. We will further strengthen our market position by means of continuing product innovations. We have already obtained two contracts from Audi for its plant in Neckarsulm (Germany) for painting all-aluminum automobile bodies.

From today's point of view, order intake will also develop positively in 1998; the Board of Management expects further improvements of sales and earnings in the current year. Stuttgart, January 1998

Hans Dieter Pötsch Chairman of the Board of Management

Financial calendar for 1998

May 18 Financial press conference May 20 Meeting with DVFA analysts July 01 Annual General Meeting in Stuttgart August 11 Publication of interim report on first half of 1998 October 13 Publication of nine-month figures