Pfleiderer announces earnings
Neumarkt, August 19, 2010 – With the presentation of the second-quarter results for 2010, SDAX-listed Pfleiderer AG (ISIN DE 996764749) is able to confirm the positive trends already documented in the first quarter of the year. Revenue rose by 7.3 percent to 381.4 million euros from the first to the second quarter. Revenue posted for the first half of this year of 737.0 million euros is 6.4 percent higher than in the same period of 2009. Half of this increase resulted from exchange-rate effects and the other half was caused by increased unit sales and higher prices. The proportion of revenue generated outside Germany was 71.8 percent, compared with 71.5 percent in the first half of last year.

Due to the increase in material expenses in relation to revenue by 5.2 percentage points to 56.8 percent, first-half gross profit decreased from 181.7 million euros to 157.8 million euros. Compared with the first half of last year, he gross margin fell to 21.4 percent. Comparing the second quarter of 2010 with the first, however, Pfleiderer improved its gross margin by one percentage point, confirming the positive trend. Other operating income of 6.3 million
euros includes insurance compensation, share-price gains and the reversal of impairments of trade receivables.

EBITDA for the first half of 2010 decreased to 53.7 million euros, from 79.1 million euros for the first half of last year. The EBITDA margin for the reporting period was thus 7.2 percent, compared with 11.4 percent a year ago. Positive exchange-rate effects, in particular relating to the Polish zloty and the Canadian dollar, accounted for 4.1 million euros of EBITDA. EBIT of minus 6.5 million euros was lower than the prior-year figure (22.6 million
euros). Depreciation and amortization amounted to 60.2 million euros (H1 2009: 56.5 million euros).

Quarterly development demonstrates upward trend

The comparison of second-quarter results is much more positive and provides more evidence of the generally positive trend. In the second quarter of 2010, the Pfleiderer Group achieved a strong 16.1% increase in EBITDA to 31.5 million euros, compared with 26.4 million euros in the prior-year quarter.
Second-quarter EBIT of minus 0.4 million euros is the same as the prior-year level.

The net financial expense for the first half of 2010 amounts to minus 14.5 million euros, compared with minus 26.3 million euros in the prior-year period.
This year’s figure includes interest expense of 6.1 million euros for the recognition of accrued transaction costs for the Group’s refinancing. Other
financial income of 24.7 million euros primarily comprises income from the translation into euros on the balance sheet date of financial items denominated
in foreign currencies.

The result of continuing operations before taxes amounts to a loss of 21.0 million euros, compared with a loss of 3.7 million euros for the first half of
last year. In the first half of the year, a deferred tax asset was recognized, which led to an overall tax benefit of 3.1 million euros. Due to payments of
taxes for prior periods, discontinued operations contributed a loss of 1.0 million euros to the overall loss for the period of 18.9 million euros. Of that
amount, 1.0 million euros is attributable to minority interests. The statement of income also includes the claims of hybrid bondholders of 9.2 million euros; this amount was not paid out but was recognized as a liability in the balance sheet.

A loss of 27.1 million euros is therefore attributable to the shareholders of Pfleiderer AG, compared with a loss of 2.8 million euros for the second quarter of 2009. This results in a basic loss per share from continuing activities of 45 euro cents, compared with a loss of 5 euro cents for the prior-year period.

“In all our markets, except for the laminate business in North America, we can see an upward trend. The continuation of this positive development
should indicate that we have broken the downward trend. This is the result of the joint efforts of our entire staff, to whom I am very grateful. As previously announced, our prime goal now is to further improve our gross margin and reduce our debt substantially by 350 million euros in the coming years.
In order to compensate for the high raw material costs, we will continue working to improve our cost structures and increase our production efficiency.
There is still some work ahead of us in this regard,” commented Hans H. Overdiek, Chairman of the Executive Board (CEO) of Pfleiderer AG, on the company’s latest figures.

Western and Eastern Europe with positive developments

The development of the regions in which Pfleiderer operates – Western Europe, Eastern Europe and North America – mainly reflects the economic situation of the various markets. In Eastern Europe, both unit sales and prices increased significantly, so the earnings situation turned positive in the second quarter. In Western Europe, prices of raw panels increased but there is still scope to catch up for surface-finished panels. However, prices of surface-finished panels had fallen to a much lower extent during the recession.

Volume growth in Western Europe was concentrated mainly on surface-finished panels. The development in North America was more disparate: Whereas panel volumes increased significantly, unit sales of laminate flooring declined. Both product groups had to contend with falling prices, partially offset by falling raw-material costs.

Cash flow positive once again

In the first half of 2010, the net cash inflow from operating activities amounted to 9.2 million euros, compared with a net cash outflow of 54.0 million euros in the first half of last year. This cash inflow is mainly due to depreciation of 57.2 million euros and the increase in current liabilities of 40.6 million euros. There were opposing effects primarily from the negative EBIT and the increases in inventories and receivables. The Group’s net debt increased compared with the end of 2009 by 109.2 million euros to 963.4 million euros, primarily due to exchange-rate effects and investments.

The ratio of net debt to equity (gearing) increased from 135.2 percent to 140.2 percent. Capital expenditure including advance payments in the first half of 2010 fell compared with the prior-year period by 26.1 percent to 45.7 million euros. Of that total, 9.0 million euros was invested in the Western Europe region. In North America, 29.2 million euros was invested, most of which was for the completion of the MDF plant in Moncure, North Carolina. A total of 7.3
million euros was invested in Eastern Europe.

At the end of the reporting period the number of employees amounted to 5,579 as compared to 5.620 a year earlier. While the number of employees in North America increased by 7.9% due to the start of production of the MDF plant transferred to Moncure, there was a reduction of 2.0 percent in Eastern Europe as a result of cost-cutting actions and the number of employees in Western Europe decreased by 3.2 percent.

For July and August, Pfleiderer anticipates somewhat weaker business for seasonal reasons, before the typical autumn revival commences in September.
Pfleiderer assumes that the second half of the year will be generally stronger than the first half. It is anticipated that the Group will post full-year
revenue of just below 1.5 billion euros. Notwithstanding the overall positive development, the Company still expects a net loss. A further sustained improvement of the earnings situation is expected for 2011.

About Pfleiderer:

SDAX-listed Pfleiderer AG (ISIN DE 0006764749) is one of the world’s leading producers of engineered wood. The company employs approximately 5,600 people
and operates 22 sites in North America, Western and Eastern Europe producing engineered wood, surface finished products and laminate flooring. Pfleiderer is a preferred partner of the furniture industry, specialist and home improvement stores, and interior design suppliers. In fiscal year 2009, the Group generated consolidated revenues of approximately €1.4 billion and EBITDA after restructuring costs of approximately €100 million.

Source: Pfleiderer AG
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