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Letter to the shareholders - Preliminary report by Dürr AG on fiscal 1998

01/27/1999

• Double-digit sales and earnings increases
• New record high for incoming orders
• Systems supply strategically broadened

Dear Shareholders,

The year 1998 was a good year for Dürr. Against the background of worldwide record sales in the automobile industry, we registered lively demand for paint finishing and industrial cleaning systems. On the basis of these favorable conditions, your company continued to develop positively in the past fiscal year.

Consolidated group sales rose in 1998 by 10.1 % to DM 2,068 million (preceding year: DM 1,878 million), crossing the two-billion threshold for the first time. Incoming orders amounted to DM 2,125 million and thus surpassed the preceding year's very high level (DM 2,020 million) by 5.2 %. Assuring utilization of group capacities to a large extent beyond the current year, orders on hand stood at DM 1,770 million at the end of the year, or 4.6 % above their year-earlier level (DM 1,692 million).

More than proportionate earnings growthEarnings before taxes increased more than proportionately relative to sales growth. The return on sales for 1998 is higher than the preceding year's rate (3.4 %). All major group companies ended the fiscal year with positive earnings contributions.

The Board of Management will therefore again propose a dividend increase to the Supervisory Board and the shareholders' general meeting.

Higher number of employeesThe Dürr group had 4,121 employees at year's end (preceding year: 3,642). This number includes 350 employees at newly acquired companies, which means that the personnel increase on a comparable basis comes to 3.5 % compared to last year.

Capital spendingThe Dürr group made capital expenditures on financial assets of DM 94 million last year. Acquisitions were made in several business areas. The major acquisitions were:

Acco Systems, Warren, Michigan (USA), Conveyor systems Product groups of Engelhard Corp., South Lyon, Michigan (USA), Environmental systems Henry Filters Inc., Bowling Green, Ohio (USA), Cleaning systems

Group capital expenditures on tangible assets came to about DM 35 million in 1998 (preceding year: DM 32 million). The points of emphasis were construction of a new site for the Environmental Systems division in the USA and our Technology Center in Bietigheim-Bissingen, Germany. The installation at the Center of a paint finishing booth equipped with innovative Dürr robots offers the possibility for the first time of testing alternative paint finishing approaches with machines and robots and thus of directly comparing their efficiency.

Dürr Systems group The Dürr Systems group achieved sales of DM 1,782 million in its business areas of paint finishing, application, conveyor, and environmental systems.

Good market situationThe continuing good sales and model innovations of automobile manufacturers led to a gratifying order situation in the Paint Finishing Systems division. This was the case particularly in Europe, North America, and China. A market consolidation was registered in Central and South America, and generally unfavorable conditions resulted in significant ordering restraint in Russia and Southeast Asia.

Strategic goals realizedDürr achieved important strategic goals in the past fiscal year through further innovations, intensified efforts to develop markets, and targeted acquisitions.

The Conveyor Systems division steadily expanded in the period under review. With the acquisition of the American Acco Systems, market presence in the USA has been strengthened and the product range supplemented with custom overhead conveyors. By cooperating with the Italian firm CPM S.p.A., Turin, in which a 50 % stake has been acquired effective January 1, 1999, we have rounded out the product range with a new kind of universal overhead and floor conveyor system. Dürr is thus able to offer warehousing and conveyor systems for the entire automobile production process.

By acquiring an operating unit of Engelhard Corp., the Environmental Systems division has expanded its product range with additional technologies for waste gas purification.

Furthermore, the range of services offered by the Paint Finishing Systems division has been consistently broadened. With orders from several large automobile manufacturers, the innovative Ecopaint Robot achieved international market acceptance in 1998.

Dürr Ecoclean group The Dürr Ecoclean group continued its success story in 1998. Including Henry Filters, which joined the group in June, its sales rose to DM 286 million. The acquisition has expanded the range of emulsion processing and filtration equipment. Enlarging its range has improved the competitive position of Dürr Ecoclean, because the group is now in a position to put complete systems on the market.

OutlookHigh orders on hand and a good project situation, especially in Europe and the USA, assure a good start into 1999.From the standpoint of environmental protection, quality, and costs, we see further potential in automotive paint finishing and industrial cleaning systems.

With a more extensive product range and the companies acquired in 1998, Dürr significantly strengthened its position in the divisions of Paint Finishing Systems and Industrial Cleaning Systems in 1998 and will continue to develop positively in 1999. We will again considerably broaden our range of services in line with the strategy of an integrated systems supplier. We see good growth opportunities for the entire year, which we will promote by internal and external measures.

The present situation indicates a positive development of incoming orders and sales. As for earnings, we expect a further increase in the current fiscal year.

Stuttgart, January 1999

Hans Dieter PötschChairman of the Board of Management