Business Report - First nine months of Fiscal Year 2001 - Dürr maintains position despite difficult environment

10/24/2001

Despite a difficult environment the Dürr Technology Group reports that sales, in comparison to previous year's figures, increased by approximately 22 % and EBITDA by 49 % in the first three quarters of fiscal year 2001. As a result of weaknesses in key markets, particularly in the USA, incoming orders were just under 7 % less than in the previous year. Further large orders were received after the period under report, including those for China, details of which were the subject of a recent press release.

Judging the situation as it appears today Dürr expects double digit percentage growth in sales and earnings, with proportionally greater growth in the latter, for the year as a whole. Forecasts are subject to considerable uncertainty however as a result of the economic consequences of the terrorist attacks on 11 September. Should world and automobile economies weaken beyond expectations, the effects may also be felt in the current business year.

However, despite this more difficult environment Dürr considers that, with the broad strategic base offered by its position as a supplier of both manufacturing systems for substantial value-adding operations within the automobile manufacturing process and of associated manufacturing support services, the prospects for continuing successfully on its earnings-oriented growth course remain good.

Double digit increases in sales and EBITDA

The sales volume of 1,445 million euros for the first nine months of 2001 represented an increase, in comparison to the previous year (1,183 million euros), of 22 %. The increase in earnings before interest, taxes, depreciation and amortisation (EBITDA) of 49 % to 89.2 million euros was proportionally greater (previous year 59.8 million euros).Earnings before taxes for the first three quarters were 20.1 million euros representing an increase of 2.6 % on the previous year's figures (19.6 million euros). This figure reflects the influence of goodwill amortisation for acquisitions and financing and integration costs.

Incoming orders at 1,417 million euros were 6.8 % lower than in the previous year (1,519 million euros) as a result of weaknesses in the economies of the USA, South America and parts of Asia. Orders on hand at 30.9.2001 amounted to 1,250 million euros (previous year 1,397 million euros; -10.5 %) and represent a work load for the Dürr Group extending well into 2002. The number of employees worldwide rose by 14 % to 12,823 (previous year 11,247), mainly as a result of first-time consolidation of figures for companies within the Group. Investment in tangible assets for the period under report, including additions to tangible fixed assets resulting from acquisitions, totalled 29.9 million euros.

Paint Systems business unit: Brisk order intake

Paint Systems business unit achieved total sales of 681.8 million euros and total incoming orders of 618.1 million euros. EBITDA was 33.4 million euros.Despite varying, indeed in the USA much weaker, market conditions Paint Systems business unit was able to secure large contracts in Western Europe, Asia and the USA and with its technological edge to maintain its position as the leading supplier of automobile paint finishing systems on world markets. Dürr is confident that its success in selling the first RoDip plant to China will encourage interest in the innovative dip painting method in other Asian markets. Dürr has increased its share of the market in the automobile supply industry. Although at present only a relatively small number of strategically important investments are being made in the USA, the project situation in Europe and China remains good.

Automotion business unit: Growth market Engineering

Total sales for the Automotion business unit reached 340.6 million euros, total incoming orders 304.9 million euros and EBITDA 7.9 million euros.Demand in Germany and Europe was lively. In the automobile industry requirements centred mainly on material management and final assembly systems. DS Engineering GmbH, which offers planning of individual manufacturing stages through to concepts for vehicle development centres and automobile factories, found their services much in demand. The Schenck Test and Automation Systems division received orders, mainly from Europe and Asia, for its chassis, brake and transmission test lines. The slowdown in investment in the USA is also leading to increasing competition in European markets.

Ecoclean business unit: Diesel engine boom increases demand

In the first three quarters of 2001 the Ecoclean business unit achieved total sales of 187.8 million euros and total incoming orders of 189.2 million euros. EBITDA amounted to 15.5 million euros.As the world's leading supplier of industrial cleaning and filtration systems, this business unit with its innovative solutions was able to profit from continuing large scale investments in production lines for a new generation of diesel and petrol engines and transmission units. Large contracts were placed mainly by customers in Western Europe and the USA. As market acceptance of the Ecoclean technologies is excellent, a large volume of orders is expected for the full business year even though some projects, especially in the USA, have recently been postponed or cancelled.

Environmental business unit: Investment curtailed in USA

Against total sales of 44.7 million euros and total incoming orders of 55.6 million euros, EBITDA for the Environmental business unit was -0.1 million euros.Dürr Environmental describes demand for air purification systems, particularly in the targetted markets for the pharmaceutical and chemical industries, as satisfactory in Europe. In the difficult economic circumstances in the USA investment in environmental protection has less priority. As a result a series of planned projects have been put on hold. Dürr has already taken structural measures to minimise the impact on results.

Services business unit: Expansion continues

Sales for the Services business unit, represented by the Premier Group, totalled 97.4 million euros, and incoming orders 102.4 million euros. EBITDA amounted to 8.9 million euros.In Europe Premier profited from increased interest in Facility Management solutions for the automobile industry. Market share in Poland and Great Britain has been increased by extending the spectrum of support services offered. Further expansion is focused on South Korea and Brazil where prospects look promising. Premier is combatting increasing competition on the US market by developing new business fields, e.g. technical operation of plant and equipment and Fleet Management, for which the first large contract has just been signed.

Measuring Systems business unit: Complex markets

Measuring Systems business unit, which combines the two Schenck divisions Balancing and Diagnostic Systems and Measuring and Process Systems with Schenck Fertigungs- und Service GmbH, has achieved sales totalling 213.1 million euros and incoming orders of 239.8 million euros since the beginning of the fiscal year. EBITDA amounted to 4.8 million euros.

European markets were relatively stable, bringing a healthy volume of incoming orders from the automobile and automobile supply industries, in particular for balancing and diagnostic systems. Contracts from China and Australia compensated only partially for less than satisfactory demand in North America. In many markets the uncertain economic situation is leading to a reluctance to go ahead with projects. Dürr is applying structural flexibility to meet these challenges.

INTX business unit: Holdings reinforce innovative competence

Corporate venture capital company, INTX AG, made its first investment in the software specialist, Netcoach GmbH, Berlin. Now it has also acquired a share in Fludicon GmbH, a spin-off of Schenck Pegasus GmbH, Darmstadt.Fludicon markets and develops uses for so-called electro-rheological fluids, which can change their viscosity both accurately and extremely rapidly. Completely new fields of application are foreseen in the fields of vehicle manufacture, control and automation technologies and test technologies.

Outlook for full fiscal year: Forecasts confirmed - growing uncertainty

Judging the situation as it appears today Dürr expects double digit percentage growth in sales and earnings, with proportionally greater growth in the latter, for the year as a whole. In efforts to meet the increasing need to lower costs, Dürr is intensifying programmes to improve profitability and taking a flexible approach to structures and resources to suit changed circumstances.

A reluctance to go ahead with investments in the USA in view of the current economic environment has become more marked in the new general situation and the mood is spreading increasingly to other regions. Currently the project position on European markets and in China remains stable at a high level. However, recent forecasts now expect lower growth rates for the European economy.

"At present with the greatly increased risk environment it is virtually impossible to make dependable statements in relation to economic development. Should world and automobile economies weaken beyond expectations, it may mean that in addition to needing to revise targets and plans for fiscal year 2002, the effects may also be felt in the current business year," commented Hans Dieter Pötsch, Chairman of the Board of Management of Dürr AG.

Despite the uncertain economic situation Dürr remains confident and sees opportunities for continuing growth in business and profits in the medium term. As a global partner of the automobile industry, Dürr, with its broad spectrum of systems and services, profits from the phased investment cycles in the diverse value-adding stages of vehicle manufacture. Compensating fluctuations in demand in individual sectors and regions also assure continuity in the medium term growth curve. Past experience adds to the Group's confidence as, in the words of Dürr Chairman, Mr. Pötsch, "in the face of such immense competition in the automobile industry, there has to be a call for investment in even more economical manufacturing systems."

Notes on figures quoted:The Dürr Group accounts are presented in accordance with US-GAAP guidelines. The German company, Dürr-AIS GmbH, which includes the paint finishing activities taken over from the ABB Group, has been included in the Group figures since 1 January 2001. All companies acquired with the take over of Alstom Automation have been fully consolidated since 1 May 2001. Carl Schenck AG has been included in consolidated figures since 3 April 2000. The figures relating to the Schenck Test and Automation Systems division are included in those for the Dürr Automotion business unit. Schenck divisions, Measuring and Process Systems and Balancing and Diagnostic Systems, together with Schenck Fertigungs- & Service GmbH have been combined retroactively with effect from 1 January 2001 in the new Measuring Systems business unit. The figures quoted relating to sales and incoming orders for business units are total figures and include inter-divisional business with other Group business units, whereas the Group figures represent consolidated values.The consolidated balance sheet, the consolidated statement of income and the consolidated statement of cash flows for Dürr AG for the first nine months of fiscal year 2001 will be available via the 'Investor Relations' link at our web site, www.durr.com, as from mid November.