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Dürr continues positive development

05/19/1999

• Double-digit growth in sales and earnings; higher dividend
• All-time high for incoming orders and orders on hand
• Acquisitions strengthen core areas of business and expand systems range
• Business year 1999: growth through new services business unit /persistent pressure from competitors due to differentiated economic situation in the automotive industry

Dürr AG, Stuttgart, has continued its growth trend in the business year 1998. The leading international manufacturer of paint finishing systems for the automotive industry and of industrial cleaning systems was again able to increase sales and earnings at a double-digit rate, and also achieved an all-time high in incoming orders. With several international acquisitions, Dürr has once again expanded its range of products and services in the core areas of business, and has thus created the basis for continuing growth and a further expansion of its leading position. Thanks to the high order backlog and the stable economic situation in the automotive industry in Europe and the USA, Dürr is again expecting an increase in sales in 1999. In spite of high pressure from competitors and increasing risks due to the crises persisting in Asia, South America and Russia, Dürr intends to achieve the same high levels of the previous year during the current business year.

The Dürr Group's sales in 1998 rose by 12.2 % to DM 2,108 m (previous year: DM 1,878 m). Incoming orders went up by 5.3 % to DM 2,128 m (previous year: DM 2,020 m). Orders on hand grew by 2.4 % to an all-time high of DM 1,733 m (previous year.: DM 1,692 m). Capacities will therefore be well utilized until well into the year 1999.

Dürr has been able to improve earnings before taxes by 15.3 % to DM 72.8 m (previous year: DM 63.1 m). The net profit for the year was at DM 42.2 m (previous year DM 40.8 m), and is burdened by the results of an audit finalized in 1998.Due to the positive development of earnings, the Board of Management will propose a dividend increase by 0.30 DM to 1.80 DM per share at the shareholders' meeting on June 30. DVFA/SG cash flow was at DM 80.7 m (previous year: DM 70.9 m). Return on sales before taxes reached 3.5 %. Return on sales after taxes remained largely unchanged at 2.0 % (previous year: 2.2 %), whereas return on equity after taxes rose slightly to 10.7 % (previous year: 10.6%).

Sales were up in nearly all areas of business. The business unit Paint Finishing Systems accounted for DM 1,050 m (previous year: DM 979 m) of Group sales, Application Techniques achieved DM 435 m (previous year: DM 395 m), Conveyor Systems achieved DM 228 m (previous year: DM 127 m), Environmental Systems DM 109 m (previous year: DM 122 m), and Industrial Cleaning Techniques DM 286 m (previous year: DM 255 m). The regional focus for sales was in Germany with 39% (previous year: 27 %), the rest of Europe accounted for 23 % (previous year: 30 %), North America for 25 % (previous year: 29 %), South America for 9 % (previous year: 6 %), and Asia for 4 % (previous year: 8 %). The changes in the regional percentages were due to the billing of major projects and to acquisitions.

Higher capital investments, more employeesIn 1998 Dürr increased capital spending substantially to DM 106 m (previous year: DM 70.1 m). DM 53 m were invested in property, plant and equipment, DM 51.7 m were invested in immaterial assets - mainly acquired goodwill. Due to the integration of subsidiaries and the growing business volume, the number of employees in the Group rose by 480 or 13.2 % to 4,122 (previous year: 3,642). 350 employees are included in this figure who were taken over from acquired companies. Apart from this, 130 new jobs were created. The employee share program that was launched in 1998 for the first time will be continued.

Successful systems range in Paint Finishing SystemsThe Dürr Systems Group achieved a growth in sales of 12.3 % to DM 1,822 m (previous year: DM 1,623 m).

The paint finishing business in the automotive industry was again characterized in 1998 by large system contracts.Order intake showed a positive development especially in Europe and North America, whereas demand in Asia, South America and Russia was strongly in decline.

In early 1998 Dürr received an order from Audi AG for a new paint shop in Neckarsulm. In a completion period of only 13 months, Dürr as systems supplier not only provided advanced paint shop equipment, but also the building and the infrastructure. In Neckarsulm all-aluminium bodies are being painted in mass production for the first time. Dürr is building a complete paint shop for VW in Slovakia that is trendsetting in Eastern Europe. A major contract is being handled by Dürr as general contractor for Ford Dearborn, USA, which includes the relocation and modernization of the paint shop to enhance paint quality and introduce environmentally friendly water-borne paints. In China Dürr commissioned the most modern paint shop in the country for a joint venture between General Motors and a Chinese partner. Complete paint shops were also installed for Jinbei, a Chinese manufacturer, and for VW China.

In Application Techniques Dürr was very successful in the market with the Ecopaint robot, and was thus able to strengthen its leading international position. Together with the range of coating machines, Dürr has a unique modular range of paint application systems featuring high performance levels, simple maintenance and programming and low operating costs.

Inroads made into new market segments of automobile manufactureThanks to specific acquisitions in the business year 1998 Dürr was able to round off its range of products and to improve its market presence regionally. For the business unit Automation and Conveyor Systems Dürr acquired Acco Systems Inc., Warren/Michigan (USA), and also took a 50 % stake in CPM S.p.A., Turin (Italy). Both companies have developed new conveyor systems allowing Dürr to move into new market segments, and opening up new opportunities in the body shops and final assembly shops of car manufacturing plants.

In Environmental Systems Dürr has improved its leading edge in air purification by taking over the air purification technology sector of Engelhard Corp., South Lyon/ Michigan (USA), and through the acquisition of Reeco (Regenerative Environmental Equipment Co. Inc.), Branchburg/New Jersey (USA).

New dimensions in the systems business through move into services sector Dürr sees good opportunities for further growth in the services sector. For this reason, in April 1999 Dürr acquired Premier Manufacturing Support Services, Cincinnati/Ohio (USA), an international specialist for manufacturing support services in automobile factories. "Premier paves the way for Dürr to move quickly into a growing market segment. We want to achieve about DM 500 m of our sales in this new business area on a medium-term basis", said Dürr's Chairman of the Board of Management, Hans Dieter Pötsch at the financial press conference.

Premier is active outside the USA in nine other countries - also in Germany - and achieved sales amounting to US dollars 90 m in the last business year with about 2,500 employees.

With this service program Dürr complies with the demands of a growing number of customers, who not only want to buy the paint shop equipment, but also want our support when production is running. Dürr is one of the first suppliers to offer such a vast service package, and has thus entered a new dimension in systems competence.

Cleaning Techniques with a new business areaThe Dürr Ecoclean Group has again held its leading international position as supplier of industrial cleaning systems in 1998. Sales grew by 12.2 % to DM 286 m (previous year: DM 255 m). By acquiring Henry Filters Inc., Bowling Green/Ohio (USA), the leading American supplier of emulsion treatment and filtration systems, the Dürr Ecoclean Group has been able to move into a new market segment, and intends to market these products intensely at an international level. Dürr was able to score a success with the first major contract for GM Europe.

Outlook 1999Dürr had a good start into the business year 1999. The latest figures for the first four months are actually slightly below the levels of the same period last year. Due to the weak first months that are typical for the plant engineering sector, and also due to the special circumstances of an important order in the first quarter of 1998, a direct comparison with last year's figures presents a somewhat distorted picture. In the first four months of the business year 1999, Dürr achieved Group sales of DM 391 m. This was 4.6% lower than in the same period last year due to the billing situation (previous year: DM 410 m). Accordingly, the situation was similar with earnings before taxes of DM 9.2 m (previous year: DM 9.8 m; - 6.1 %). Incoming orders reached DM 565 m DM, which is 28.9 % below last year's level (previous year: DM 795 m).However, in the coming months, Dürr is expecting decisions on several major projects. With an order backlog of DM 1,907 m (previous year: DM 2,380 m; - 19.9 %) the capacities of the Dürr Group are well utilized in the current business year.

Against the background of the incessant crises in Asia and Russia, and a concentration of project activities in Europe and the USA the pressure from competitors, accompanied by the related risks, is persistent in 1999. In spite of the differentiated economic surroundings, Dürr has set a demanding goal, to achieve the same high levels of last year for sales, earnings and incoming orders over the whole year.

"By expanding our systems competences, especially our new services business unit, through stronger presence in international markets and competitive technologies, Dürr has created major essentials for continuing the company's trend in earnings growth", says Pötsch.