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Figures for fiscal 2002 - Dürr focuses on increasing profitability

04/10/2003

Despite the weakness of the world economy and of business in the automotive industry, the Dürr Technology Group managed to increase incoming orders in fiscal 2002 by about 14%. Group sales were down slightly mainly as a result of currency influences. But earnings developed unsatisfactorily chiefly due to restructuring expense, margin pressure, and lower sales. Against that background, Dürr CEO Stephan Rojahn has announced a systematic earnings enhancement strategy at the financial press conference in Stuttgart. Dürr does not expect the adverse economic environment to improve in 2003.

The Dürr Group, a leading supplier of production systems and services for the automotive industry, achieved an operating income (EBITDA - earnings before interest expense, taxes, depreciation and amortization) in fiscal 2002 of EUR 89.1 million (2001: EUR 127.8 m) and earnings before taxes of EUR 22.6 million (2001: EUR 39.8 m). At a tax rate of 41.3% (2001: 49.5%), group net income amounted to EUR 12.0 million (2001: EUR 20.0 m), and earnings per share to EUR 0.84 (2001: EUR 1.40). Due to restatements of order-related receivables and project-related accruals in connection with the transfer of a group company, earnings figures for fiscal 2001 were retroactively restated.

Restructuring expenses of about EUR 20 million, as already announced, were the greatest burden on earnings in fiscal 2002. They were mainly due to the Measuring Systems business unit, which comprises the measuring technology operations of the Schenck Group, and to the Environmental Systems product line (in the Paint Systems business unit). The cost base has been significantly reduced in the context of restructuring measures, particularly by adjusting capacities, cutting personnel, and combining business locations. Besides restructuring expenses, the reasons for the decline of group earnings include cyclically induced shortfalls especially in high-margin product business, lower sales, and changes in currency relations. In particular, the euro's strength against the US dollar contributed to a currency-driven decline of earnings before taxes by about EUR 3 million.

Through improved prepayment and working capital management, Dürr was able to reduce net debt by more than half as of December 31, 2002 compared with the year-earlier date (EUR 123.1 m; 2001: EUR 289.8 m).

The Board of Management and the Supervisory Board will propose to the shareholders at their annual meeting on May 28, 2003 that a dividend be paid of EUR 0.80 per share (2001: EUR 1.10). That implies a dividend yield of 5.0% based on the year's closing share price in 2002 (EUR 16.00).

Group sales slightly below the preceding year's

At EUR 2,082.1 million, the Dürr Group's consolidated sales were only about 5% below the year-earlier amount (EUR 2,196.2 m) despite the difficult overall economic environment. Adjusted for exchange rate effects on the order of EUR 60 million, the sales decline amounted to 2.5%. The Dürr business units achieved the following total sales in 2002: Paint Systems EUR 1,054.3 million (2001: EUR 1,094.5 m), Final Assembly Systems EUR 404.7 million (2001: EUR 425.2 m), Services EUR 143.9 million (2001: EUR 134.0 m), Ecoclean EUR 221.9 million (2001: EUR 277.3 m), and Measuring Systems EUR 385.9 million (2001: EUR 428.9 m).

Incoming orders increased despite weak economic trend

The Group's consolidated incoming orders rose in fiscal 2002 by about 14% to EUR 2,346.7 million (2001: EUR 2,063.2 m). In the process, Dürr was able to post gains both in Europe and in North America and China, the most important Asian growth market. The most decisive factor for the increase was a number of large orders from automobile manufacturers that invested in new Dürr production systems under the influence of stiffening competition worldwide, in order to be able to produce more flexibly and efficiently. With a share of 51%, the Paint Systems business unit contributed most strongly to the Group's high order intake. Besides receiving several large systems orders for complete automobile paint shops, Paint Systems registered a continuing rise of demand for the Dürr Ecopaint painting robot, of which over 300 units were delivered in fiscal 2002.

The Dürr Group's consolidated orders on hand rose by about 18% to EUR 1,381.4 million at the end of 2002 (2001: EUR 1,171.6 m), but with significant differ-ences among the individual business units. Large-scale orders received by the Paint Systems business unit extend over several years, whereas the order pro-cessing time in other business units is, in some cases, only three to four months. The number of employees in the Group grew to 12,902 as of December 31, 2002 (2001: 12,675). Adjusted for the Services business unit, however, which hired 545 employees for its personnel-intensive operations, the number of employees in the Group fell by 318 (-3.6%), mainly due to restructuring measures.

The Dürr Group's capital expenditures amounted to EUR 27.7 million in the past fiscal year (2001: EUR 35.9 m). With an R&D spending ratio of slightly more than 6% of sales including project-related R&D expenses, Dürr was able to strengthen its leading technological positions further. The main emphases in development activities included standardization and modularization of Dürr product families in addition to increased automation of products.

Preliminary figures for the first quarter of 2003: Above-average incoming orders

According to preliminary figures, the Dürr Group achieved above-average incoming orders worth EUR 1,124 million in the first quarter of 2003, after EUR 486.3 million in the first quarter of 2002. The main factor responsible for that sharp increase was a large project from General Motors (GM). In the framework of the largest single order received in Dürr's history, GM has purchased several painting systems for various North American production sites.

At EUR 396 million in the first three months of 2003, sales were at their year-earlier level (1Q 2002: EUR 395.0 m). Orders on hand rose to EUR 2,097 million as of March 31, 2003 (1Q 2002: EUR 1,258.2 m) due to the high incoming orders. The Paint Systems business unit accounts for the majority of orders on hand, some of which extend as far as fiscal 2006. The number of persons employed in the Group at the end of the quarter stood at 12,878 (1Q 2002: 12,410). But adjusted for the Services business unit, the number of employees fell to 8,589 (1Q 2002: 8,863).

EBITDA for the period from January to March 2003 reached EUR 10 million, after EUR 2.6 million in the year-earlier period. Earnings before taxes stood at EUR -5 million, after having amounted under restructuring influences to EUR -14.8 million in the first quarter of 2002. The result in the first quarter of 2003 was shaped by increased margin pressure since the end of 2002 and regional differences in the utilization situation of the individual business units.

Key goal: Earnings enhancement through SPRINT SQUARED

Because of the unsatisfactory earnings development and growing margin pressure, Dürr is intensifying its measures to significantly improve profitability on a lasting basis. "After years of expansion and in view of the continuing difficult business environment, we are focusing all our energy on improving our cost and income position," stressed Stephan Rojahn, Dürr AG CEO since January 1, 2003, at the financial press conference. With the SPRINT SQUARED earnings enhancement pro-gram adopted at the beginning of this year, Dürr intends to make the company more robust, and to achieve a pretax return on sales of 5% for the Group. The main points of the program are to lower purchasing costs, optimize design, project development, and production processes, reduce risks in order processing, and streamline business locations and the portfolio of products and services. Moreover, Dürr is countering the competition and margin pressure with strengthened innovation management throughout the Group. "New products and solutions that make higher productivity and flexibility in production possible for our customers are an important contribution to ensuring our competitive position," according to Mr. Rojahn.

2003: Stabilization of sales and earnings situation expected

Dürr expects no great impetus for the world economy in 2003, not least because of the political imponderables that continue to exist. The capital spending behavior of the automotive industry will therefore be guided by caution, in the estimation of Dürr's Board of Management.

Against that background, Dürr has not assumed any improvement of the business environment in its planning for fiscal 2003. Due to the high level of orders on hand, mainly in the Paint Systems business unit, and the implemented restructuring measures, the company's management expects the sales and earnings situation to stabilize in fiscal 2003. Reliable forecasts are currently not possible, however, in view of the economic and political uncertainties. But with the SPRINT SQUARED program, Dürr is reacting consistently to the business environment and fulfilling all the prerequisites in order to overcome the economic doldrums and to be able to profit above average in an economic upswing.