Strong international market position expanded

Pfleiderer continues growth path in Q1 2008 – one-time factors impact earnings by around €6 million – full-year guidance confirmed unchanged

Neumarkt, May 8, 2008 – MDAX-listed Pfleiderer AG, ISIN DE0006764749, has published its figures for the first three months of 2008 (January 1 to March 31) reporting revenue growth of 9.4%. Despite a weaker economy in the European markets of Poland, the U.K., and Spain, as well as fewer production days due to the Easter holidays in March, the internationally leading manufacturer of engineered wood products increased consolidated revenues in Q1 2008 to €467.7 million (Q1 2007: €427.6 million).

“In the first three months of the current fiscal year, the Pfleiderer Group continued on its growth path despite poorer economic conditions in a number of areas. We generated good revenue growth in all regions and maintained our market-leading position. In spite of disap-pointing earnings in Poland, we are reiterating our full-year targets,” said Pfleiderer AG’s CEO Hans H. Overdiek, commenting on the Company’s current business performance.

Revenues up in all segments

In the Western Europe region, revenues in Q1 2008 rose by 8.7% to €260.2 million (€239.3 million). Group revenues in Eastern Europe outstripped the market, growing by 12.9% to €105.3 million (€93.3 million). In North America, Pfleiderer bucked the market trend and increased revenues by 9.8% to €110.9 million (€101.0 million), thus successfully positioning itself as the market-leading manufacturer of laminate flooring. Overall, the international share of revenues in the Pfleiderer Group increased from 68.1% to 72.2%.

Seasonal factors impact earnings

However, as a result of weaker growth in Poland in the first quarter, consolidated earnings before interest, taxes, depreciation, and amortization (EBITDA) rose by only 7.1% to €60.4 million (€56.4 million), thus falling short of the Company’s forecast by €3.1 million. The consolidated EBITDA margin reached 12.9% (13.2%). Due to seasonal factors, the first quarter is always the weakest quarter of the fiscal year. Equally, the lower number of production days compared with last year as a result of the Easter holidays in March had a negative impact this year. At the same time, temporary cost increases for raw materials, higher administrative expenses, and a weaker contribution to earnings by Eastern Europe were responsible for the lower rate of earnings growth. There are already signs of a significant improvement in consolidated EBITDA in the current second quarter, including as against the comparable prior-year period.

Sustainably strong growth in Western Europe

The Western Europe region again performed particularly well, with EBITDA rising faster than revenues by 33.5% to €44.6 million (€33.4 million). This strong business development is due to the continued growth of high-margin products and higher efficiency. The EBITDA margin in the region improved from 14.0% to 17.1%. EBIT increased by 41.2% to €32.0 million (€22.7 million). This underscores Western Europe’s ability to generate sustainably strong earnings. Pfleiderer expects this positive business development will continue and is forecasting a further increase in productivity over the course of the fiscal year.

Performance in Eastern Europe dips temporarily

The commissioning of the new MDF plant in Grajewo and the uninterrupted high demand in Russia led to an increase in revenues in the Eastern Europe region. However, particularly in Poland, earnings did not meet expectations due to cost and price pressure. Muted demand for raw particleboard and MDF boards in Poland, temporary cost increases for wood and glue, and the appreciation of the Polish zloty had a negative effect on the results of operations in the first quarter. EBITDA fell to €13.3 million (€17.8 million), corresponding to a margin of 12.6% (19.1%), while EBIT in Eastern Europe amounted to €5.3 million (€12.3 million).

On the raw materials side, however, costs have started to ease significantly since April – for both glue and wood. Pfleiderer initiated an extensive cost-cutting program with a volume of over €20 million, which will significantly improve the margin quality in this region again over the course of the fiscal year.

“The cost-cutting program initiated in Poland will ensure a clear improvement in the earnings trend in Eastern Europe in the current year. This means that we are expecting a significant recovery on a twelve-month basis compared with the first quarter,” said Hans H. Overdiek.

Strong business development in North America

Despite the challenging market situation in North America, Pfleiderer achieved its growth targets, lifting revenues by 9.8%. Excluding negative exchange rate effects, revenue growth for the region would have reached almost 16%. Against the backdrop of a declining market, Pfleiderer gained additional market share in the laminate flooring segment and increased its sales volume. In Q1 2008, board manufacturing in North America also ran at close to full capacity. Only at the Canadian MDF plant La Baie production was temporarily halted for cost reasons.

“We are extremely pleased with business developments in North America. Despite the ongoing difficult market conditions, we achieved our growth targets in full by gaining market share,” said Hans H. Overdiek, commenting on Pfleiderer’s performance in North America.

In North America, EBITDA increased to €8.8 million (€7.8 million), while the EBITDA margin improved to 7.9% (7.7%). EBIT amounted to €1.0 million (€1.8 million). The restructuring measures implemented last year led as planned to cost reductions of approximately €5 million in the period under review. However, higher marketing and ramp-up costs were incurred in the first quarter for the major order from The Home Depot. As of the second quarter, branches of the home improvement chain in the U.S.A. will be supplied with the new Pergo Prestige collection. Over the course of the year, Pfleiderer is expecting a further moderate increase in its business volume and an increase in market share in North America. Optimized cost structures will contribute to a further improvement in the earnings situation for the full year.

One-time costs impact net financial expenses

As a result of higher depreciation, amortization, and impairment losses on investments in Eastern Europe, consolidated earnings before interest and taxes (EBIT) fell slightly in Q1 2008 to €32.2 million (€34.1 million). Pfleiderer generated profit before taxes from continuing operations (EBT) of €14.4 million (€24.9 million) in the period under review. Net financial expenses were impacted by the measurement as of the reporting date of interest rate hedges (€-4.5 million) and by currency forwards (€-1.2 million). By contrast, the same items made a positive contribution of €1.6 million in the prior-year period. Overall, this resulted in a year-on-year difference of €7.3 million in net financial expenses due to these one-time factors.

At €14.4 million, profit from continuing operations before income taxes remained below the figure for the previous year (€24.8 million) due to the one-time factors mentioned above. Profit for the period amounted to €10.9 million (€17.5 million), while consolidated profit was €5.3 million (€12.4 million). This corresponds to basic earnings per share of €0.10, compared with €0.24 in the previous year.

Solid net assets and financial position

Due to higher receivables and current assets, total assets increased slightly by 1.5% to €1,949.8 million as against the end of 2007. Noncurrent liabilities and equity remained virtually unchanged. The equity ratio was 41.1% (41.7%). In line with expectations, the Group’s net debt rose slightly as against the end of 2007 to €652.4 million (€618.2 million). Gearing, the ratio of net debt to equity, was 0.81.

Pfleiderer AG’s Executive Board confirms targets for 2008

Despite the unsatisfactory earnings trend record in Q1 2008, Pfleiderer AG’s Executive Board believes there is a realistic opportunity to meet the targets for the year that were previously announced, provided the market situation does not deteriorate further. The Company is aiming to achieve consolidated revenues in the order of €2 billion and to improve the Group-wide EBITDA margin to 15% in fiscal year 2008. This view is based on the measures that have been initiated, the Company’s strong performance in the Western Europe region, as well as business in North America, which is currently progressing better than planned. Over the rest of the year, these factors will offset the drop in earnings recorded in Eastern Europe in Q1.

Key figures for the Pfleiderer Group as of March 31, 2008

€m Jan.1 – Mar.31, 2008 Jan.1 – Mar.31, 2007 Delta (%)
Revenues 467.7 427.6 9.4
* International share (in percent) 72.2 68.1 6.0
EBITDA 60.4 56.4 7.1
* EBITDA margin (in percent) 12.9 13.2 -2.3
EBIT 32.2 34.1 -5.5
EBT from coming operations 14.4 24.9 -42.1
Profit for the period 10.9 17.5 -37.8
Consolidated profit 5.3 12.4 -57.8
Earnings per share (basic)(€) 0.10 0.24 -58.3
Earnings per share (diluted)(€) 0.10 0.23 -56.5
Employees (excl. vocational trainees) 5,866 5,810 1.0
* Germany 2,581 2,572 0.3
* Outside Germany 3,285 3,238 1.5
Average numbers of shares outstanding 50,938,862 52,752,806 -3.4

For further information:

PFLEIDERER AG, Neumarkt
Gala Conrad
Vice President Corporate Communciations/Investor Relations
Tel.: + 49 (0)9181 / 28 - 8491
Fax: + 49 (0)9181 / 28 - 606
E-Mail: gala.conrad@pfleiderer.com

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