Dürr business developments as of Sept. 30, 2002 - Incoming orders up sharply despite difficult business environment

11/20/2002

With an increase of consolidated incoming orders by 25% to EUR 1,775 million (PY: EUR 1,417 million), the Dürr technology group has held its own well in an economically difficult environment in the first nine months of 2002. At EUR 1,427 million, consolidated group sales almost reached the high previous-year level (PY: EUR 1,445 million). Consolidated orders on hand were up 21%, to EUR 1,515 million (PY: EUR 1,250 million). Important contributions toward this success were provided by major orders from automobile manufacturers in Europe, North America and China.

The operating income (EBITDA - earnings before interest expense, taxes, depreciation and amortization) improved significantly in the third quarter (EUR 28.1 million), bringing total EBITDA for the first nine months of the current year to EUR 50.0 million (PY: EUR 89.2 million). This figure has been influenced significantly by restructuring expenses of roughly EUR 22 million for German and American companies in the Group and by cyclically induced weakness of demand, especially in connection with high-margin short-term orders. Earnings before taxes (EBT) for the first three quarters were EUR -5.7 million (PY: EUR 20.1 million).

The Dürr Group's workforce was 7% smaller as of September 30, 2002, not counting new hires for specific projects in the Services business unit. All in all, the number of employees was down 1.7%, to 12,608 (PY: 12,823).

Capital expenditures for property, plant and equipment to the end of September amounted to EUR 12.8 million (PY: EUR 29.9 million). The emphasis here was on improving IT infrastructure and on acquisitions associated with incoming orders in the Services business unit.

Outlook: Since the situation in strategic large projects is predominantly stable, the Board of Management anticipates that for the entire year 2002 incoming orders and orders on hand will be above last year's, but with different levels of capacity utilization in the various business units. Dürr expects sales to be on the same order of magnitude as in the previous year. But with the world economy and automotive business still weak and competition still intense, total 2002 earnings before restructuring expenses will not match the previous-year figures. Dürr foresees good chances for improving earnings in 2003. Assistance here will come from the large volume of orders on hand, carefully focused restructuring programs to enhance profitability, and the unabated fast pace of innovation with corresponding R&D expenditures.

Report on the business units:

Paint Systems: Incoming orders up sharply

The Paint Systems business unit generated total sales of EUR 742.7 million in the first nine months of 2002 (PY: EUR 726.5 million) and total incoming orders of EUR 985.0 million (PY: EUR 673.8 million). EBITDA for the first nine months was EUR 24.7 million (PY: EUR 33.3 million).

The sharp gains in incoming orders were primarily a consequence of large systems orders for paint shops from automotive manufacturers in Europe, China and the USA. There was particularly strong demand for the innovative RoDip paint dipping system and robot application technology, which is now also coming into wider use with powder paints. The business unit achieved significant gains in market share in the segment of the automotive supply industry with several orders for paint systems. Orders in the niche market for aircraft painting totaled more than EUR 30 million in the first nine months, so that the orders picture here was also quite satisfactory. Earnings were adversely affected by restructuring expenses in the Environmental product line, where demand has dropped off drastically in the USA since September 11, 2001.

Final Assembly Systems: Market position expanded

Total sales for the Final Assembly Systems business unit amounted to EUR 250.0 million as of September 30, 2002 (PY: EUR 284.2 million), and total incoming orders rose steeply to EUR 345.1 million (PY: EUR 238.2 million). EBITDA was EUR 4.1 million (PY: EUR 8.4 million).

This new business unit, formed at the beginning of the year, took in major orders to build or update vehicle assembly lines for clients in Germany, the USA and Asia. The ACT product line, with several orders for conveyor systems in paint shops, has had a role in the Paint Systems business unit's success, but also attracted interesting orders in aircraft assembly. Sales and earnings performance has been significantly affected by client postponements of orders, and by restructuring expenses at American companies.

Ecoclean: Weak demand in the USA

The Ecoclean business unit generated total sales of EUR 146.8 million in the first three quarters of 2002 (PY: EUR 187.8 million) and total incoming orders of EUR 172.3 million (PY: EUR 189.2 million). EBITDA was EUR 7.8 million (PY: EUR 15.5 million).

The drop-off in key figures was primarily the result of the weak market in the USA. Demand in Europe was more stable, especially because of the trend toward lower-emission and more fuel-efficient generations of engines and transmissions. The new Ecoclean systems for intermediate cleaning - which offer better cleaning results at a lower cost - met with a very good market response. The world's leading supplier of cleaning and filtration systems expects its markets to recover in the second half of 2003, especially in the USA, and then to return to the growth path it has enjoyed for many years.

Measuring Systems: Restructuring efforts under way

The Measuring Systems business unit, which includes the operations of the Schenck Group in measurement technology, generated total sales of EUR 259.2 million in the first three quarters of 2002 (PY: EUR 269.6 million) and total incoming orders of EUR 292.7 million (PY: EUR 306.5 million). EBITDA was marked by restructuring expenses and amounted to EUR -7.9 million (PY: EUR 4.4 million).

Although businesses in the USA were disappointingly reluctant to invest in capital goods, the European markets remained relatively stable, albeit at low levels. Major projects generated satisfactory demand from China and Australia. But project volume was down overall, causing more intense competition and lower margins. Once the restructuring measures - which emphasize Schenck companies in Germany and the USA - have been completed, this business unit will be well positioned to improve earnings in 2003.

Services: New multi-year contracts

The Services business unit (the Premier Group) boosted total sales to EUR 107.5 million (PY: EUR 97.4 million) and total incoming orders to EUR 109.3 million (PY: EUR 102.4 million). EBITDA was up to EUR 7.5 million (PY: EUR 6.5 million).

Services continued to grow within its sector, signing multi-year service agreements in the USA, Central America, South America and Northern Europe. At the same time, a cost-cutting program improved profitability. Although competition in conventional cleaning services is still on the rise, the business unit's new offerings have preserved its good prospects for growth and earnings. Market opportunities have especially arisen in technical maintenance, production assistance and facilities management, and also in the new automotive plants being built by international automobile manufacturers in low-cost locations such as Eastern Europe and China. Here standardized services make a significant contribution toward meeting these companies' global quality standards faster and more consistently.