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Dürr group on a growth track

05/18/1998

Fiscal year 1997

• Double-digit growth rates in sales, incoming orders, and earnings
• Jobs created in Germany and abroad
• Dürr Systems: Further expansion of global presence
• Dürr Ecoclean continues last year's success
• Dividend proposal: Increase dividend by DM 0.30 to DM 1.50 per DM 5 share

Fiscal year 1998:

• Further growth of sales and earnings in 1998

An excellent market position, technological leadership, and international presence were the keys to success that enabled the Dürr group to continue its growth again in the past fiscal year.

The economic environment continued to be positive for this supplier of painting finishing systems and industrial cleaning technology in 1997, as the Board of Management reported at the annual financial press conference. The upswing of the world economy, and particularly the stable business trend in the automobile industry, formed positive fundamental conditions for the Dürr group's development. As a part of the advancing globalization strategies of major automobile manufacturers, production facilities were built or modernized around the world.

Doule-digit growth of sales and incoming orders

Group sales increased in 1997 by 14.5 % to DM 1,878 million (preceding year: DM 1,640 million). Dürr grew primarily in Germany and Europe. In the Americas and Asia, the group registered sales declines compared with the preceding year as a result of invoicing fluctuations. About half of sales was attributable to systems orders, which, because about 20 % of their value is due to building construction, contributed below average to earnings, but which nevertheless constitute an important differentiating feature in competition.

The group's order intake reached a new record high in 1997. At DM 2,020 million, incoming orders exceeded the two-billion mark for the first time and rose by 13.1 % over 1996 (DM 1,786 million). Orders on hand stood at DM 1,692 million at the end of the year and thus 18.7 % higher than in the preceding year (DM 1,425 million). Utilization of the group's capacities is thus assured beyond 1998.

Earnings position further improved

The Dürr group's earnings before taxes increased by 74.3 % to DM 63.1 million (preceding year: DM 36.2 million).Eliminating the extraordinary charges due to Brazilian operations from the preceding year's result, the earnings improvement comes to 17.3 %. Net income amounted to DM 40.8 million, or 70.7 % more than in 1996 (DM 23.9 million), and cash flow, calculated according to DVFA/SG principles, totaled DM 70.9 million (preceding year: DM 48.7 million).The return on sales after taxes amounted to 2.2 % (preceding year: 1.5 %), and the return on equity after taxes to 10.6 % instead of 7.0 % in 1996. In view of the better earnings development, the Board of Management will propose at the shareholder's general meeting on July 1, 1998 an increase of the dividend by DM 0.30 from DM 1.20 in 1996 to DM 1.50 per DM 5 share.

All divisions reported positive results in the past fiscal year. The group subsidiary Dürr Brasil achieved the forecast turnaround, and according to Hans Dieter Pötsch, Chairman of the Board of Management of Dürr AG, the positive trend in Brazil is expected to continue.

Emphasis remains on systems business

High capital spending by the German automobile industry in 1997 led to a regional sales shift for Dürr. In the past fiscal year, Germany accounted for 27 % of total sales (1996: 20 %), while North America's share came to 29 % in contrast to 44 % in the preceding year. Business in Europe excluding Germany contributed altogether 30 % (preceding year: 23 %), while Asia and South America had a combined share of 14 % (preceding year: 13 %).

Since individual large orders, some far in excess of DM 100 million, are normally billed over a period of more than one year, however, statistics on the distribution of sales have only limited informative value.

The emphasis of activities continued to be on systems and general contracting orders, most of which involve all divisions of the Dürr Systems group (Paint Finishing Systems (Plant and Application Engineering), Automation and Conveyor Systems, and Environmental Systems). Such orders often include buildings and infrastructure in addition to turnkey paint finishing plants. Large orders from Audi and Daimler-Benz strengthened Dürr's position in the German market.

As a result of the acquisition of the Inlac group, the product range has been extended, particularly in the area of modern paint and PVC material supply systems. By acquiring a 51% interest in Hayes S.A., its longstanding distribution partner in France, Dürr has obtained good access to the French market. At the same time, Hayes has acquired the materials-handling product division of a leading French manufacturer of car body conveyor equipment.

Autonomous companies have been established in Shanghai, China and Chennai, India in order to provide better local service to customers in Asia.

Dürr Ecoclean continues preceding year's successes

Dürr Ecoclean GmbH, a company spun off in 1996 to comprise Dürr's activities in industrial parts cleaning, registered dynamic growth in the past year. Its sales rose by 46.6 % to DM 255 million and contributed 13.6 % of the Dürr group's sales. Integration of the Spanish Agullo group provided positive impetus. Thanks to a strong position and excellent reputation with US automobile manufacturers, the company's globalization efforts moved consistently forward.

More capital spending

Capital expenditures increased to DM 70.1 million. At DM 35.6 million, goodwill from the Inlac and Hayes/Sietam acquisitions accounted for the largest part of this. Capital expenditures on tangible assets amounted to DM 32.8 million, with equipment and fixtures accounting for DM 13.0 million and property and buildings for DM 10.7 million.

Employees

Due to the integration of new subsidiaries in Germany and abroad and the growing volume of business, the number of employees in the group at the end of the year was up by 10.5 % to 3,642 (preceding year: 3,295). In particular, about 100 new jobs were created at business locations in Germany.

Technology

One of the most important factors contributing to Dürr's success is technological leadership, which the company maintains by means of extensive research and development activities. Furthermore, Dürr is profiting increasingly from its systems supplier concept, linking its four areas of technology. The company can thus take an integrated view of tasks and achieve continuous improvement of quality, price, and function.

Cooperation with customers in the spirit of partnership is another key to Dürr's positive development. Innovative concepts for the application of powder paint and powder slurry, which were developed jointly with customers and the paint industry, as reported last year, have been introduced in serial production. Recently, the Federal Association of German Industry awarded Dürr, together with Daimler-Benz and BASF Coatings, its environmental protection prize for the pioneering paint finishing process used at the Daimler-Benz factory in Rastatt, Germany.

Strategy

The company combined its strategic plans last year and has formulated a long-term strategy. In the process, it has taken into account the fact that customers in all areas want not only complete plants but also an equally complete range of services. Dürr therefore intends to put a new service product on the market this year based on a combination of existing activities of its own and on cooperation with other companies.

It furthermore plans, as a consequence of dynamic growth, to give the Environmental Systems division autonomous corporate responsibility, entering the next phase of the process begun with the Industrial Cleaning Technology division.

Dürr expects continued dynamic growth on this basis that will again double group sales in the next five years. It intends to accomplish this in the framework of a system of financial and operating goals.

Outlook

The Board of Management expects a continuation of the upward trend in the current fiscal year. From January to April, the group realized sales of DM 410 million, or 46.4 % more than in the same period a year earlier. Dürr achieved incoming orders of DM 795 million, and hence 21 % more than in the first four months of 1997. Orders on hand also increased by 28.6 % to DM 2,380 million, and earnings before taxes rose to DM 9.8 million, or 50.8 % more than in the preceding year. Due to the influence of certain large orders, these figures may not be projected to the year as a whole.

For 1998, Dürr foresees continued positive development worldwide in all areas of business. In view of the good project situation and high order backlogs, the Board of Management expects further increases of sales and earnings.