Pfleiderer posts lower revenue and earnings in first quarter of 2009 – Increase in demand since revenue low point in December 2008

• First-quarter revenue down by 23 percent to 358.0 million euros
• EBITDA 13 percent lower than in first quarter of 2008, EBITDA margin of 14.7 percent due to lower raw-material costs and one-time effects above last year’s quarter
• Reduced levels of business in Western Europe and Eastern Europe, revenue close to stable in North America
• Continued focus on management of cash flows and costs in 2009

Neumarkt, May 20, 2009 – MDAX-listed Pfleiderer AG (ISIN DE0006764749) was unable to escape the general market situation in the first quarter of 2009: Group revenue of 358.0 million euros was 23.5 percent below the level posted in the first quarter of last year. Customers’ inventory adjustments continued at the beginning of this year, so the period was affected by very weak demand, especially in the first six weeks. Revenue was also reduced by exchange-rate effects totaling 14.1 million euros. The low capacity utilization in the markets put pressure on prices in nearly all product groups. 70.6 percent of revenue was generated abroad, compared with 72.2 percent in the prior-year quarter.

Thanks to lower raw-material prices and consistent efficiency-improving actions, Pfleiderer’s gross margin increased to 28.7 percent. Glue prices, which are influenced by decreasing oil prices after a six-month delay, have more than halved compared with their peak levels last year. Due in part to this reduction, the ratio of material expenses to revenue decreased compared with the previous quarter by 4.4 percentage points.

Earnings before interest, taxes, depreciation and amortization (EBITDA) decreased in the first three months of 2009 by 12.7 percent to 52.7 million euros (Q1 2008: 60.4 million euros). The fact that earnings decreased at a lower rate than revenue was the result not only of the lower cost of raw materials, but also of the release of provisions no longer required. The EBITDA margin for the first quarter was 14.7 percent. Earnings before interest and taxes (EBIT) decreased compared with the prior-year quarter by 28.5 percent to 23.0 million euros (Q1 2008: 32.2 million euros). This was partially due to higher depreciation and amortization caused by an impairment of 4.0 million euros. Depreciation and amortization increased from 28.2 million euros to 29.7 million euros in the first quarter of 2009.

The net financial expense of 16.4 million euros includes non-operating charges of 2.4 million euros from the mark-to-market valuation on the balance sheet date of financial positions denominated in foreign currencies as well as charges of 2.5 million euros for forward-exchange transactions and interest-rate hedges. In the prior-year quarter, the miscellaneous items under net financial result amounted to an expense of 5.7 million euros.

For the aforementioned reasons, earnings from continuing operations were 63.7 percent below the prior-year figure at 4.0 million euros. Including the deduction of minority interests of -1.2 million euros and the claims of hybrid-bonds holders of 4.6 million euros, net profit attributable to the shareholders of Pfleiderer AG amount to 0.1 million euros, compared with 5.3 million euros in the first quarter of 2008. This results in basic earnings per share of 0.00 euros, compared with 0.10 euros for the first quarter of last year.

“In view of the market situation, we can be just about satisfied with our first-quarter earnings. Without the measures we took in time to improve efficiency and reduce costs, we would be in a significantly worse position today. We are confident that we can cope with the crisis and emerge as one of the winners. Our confidence is boosted by the fact that customer demand increased in the first quarter following the low point in December last year,” stated Hans H. Overdiek, Chairman of the Executive Board (CEO) of Pfleiderer AG upon the presentation of the quarterly results.

Western Europe affected by sharp decrease in exports

In the first quarter of 2009, the Western Europe region reported a 24.3 percent drop in revenue to 197.0 million euros. The prior-year quarter was characterized by unusually high revenues. Furthermore, there were significant regional divergences in the development of revenue within Western Europe in the reporting period. Exports out of Germany fell sharply compared with the first quarter of last year, whereas domestic demand remained fairly stable. The project business is still fairly healthy whereas the office and shop business shows weakening signs. Demand for surfaced board was more stable than demand for raw particle- and fiberboard. The flooring market is and will remain difficult in Western Europe. For all segments it holds true that the low capacity utilization is exerting pressure on sale prices in all product groups. First-quarter EBIT in Western Europe fell from 32.0 million euros to 8.4 million euros. Earnings were reduced by 4.0 million euros, the EBIT margin therefore decreased to 4.2 percent.

Eastern Europe impacted by exchange-rate effects

In Eastern Europe, the financial crisis affected both exchange rates and domestic demand. According to the IMF, the sharp fall in raw-material prices led to a deep recession in Russia, while moderate economic contraction of 0.7 percent is to be anticipated in Poland. Demand for engineered wood in Russia was approximately 25 percent below the high level of the prior-year period and was about 10 percent down in Poland. In addition to these lower volumes, price falls in local currencies and the depreciation of currencies in Eastern Europe led to a fall in revenue of 37.7 percent compared with the first quarter of 2008 to 65.5 million euros. 15 percentage points are accounted for by currency effects. While demand for raw particleboard declined sharply, demand for raw MDF remained nearly stable and demand for surface-finished MDF actually increased. Due to the weakness of the zloty, Pfleiderer’s customers in Poland, which mainly produce furniture for export, were able to improve their competitiveness and now look forward to increased demand from their customers abroad. EBIT of 4.4 million euros in Eastern Europe was close to the prior-year level. The EBIT margin increased from 5.0 percent to 6.8 percent in the reporting period.

Revenue in North America close to prior-year level

The recession in North America is entering its third year, but is beginning to show signs of slowing down. In this still-difficult environment, Pfleiderer performed better than the market with revenue falling by only 5.7 percent to 104.5 million euros. Surface-finished products sold better than raw particleboard and raw MDF. Pfleiderer succeeded in increasing its share of the flooring market. Demand from manufacturers of office and kitchen furniture remained lower than expected, however. Due to the not fully utilized capacities still existing in the market, prices continued to fall in the first quarter. Lower raw-material prices and rigid cost management reduced the pressure on profitability. As a result, EBIT increased from 1.1 million euros in the prior-year period to 6.1 million euros in the first quarter of 2009. The reconstruction of the MDF plant transferred to Moncure, USA, is making good progress; the startup of production is still planned for the fourth quarter of 2009, depending on the market situation.

Investment in the USA to strengthen competitive position

Operating activities resulted in a net cash outflow of 37.6 million euros in the first quarter of this year. This is related on the one hand to the lower contribution to earnings and the decrease in provisions of 21.3 million euros compared with the end of 2008. Another factor is the increase in receivables caused by the significantly higher volume of business in March 2009 than in December 2008. Capital expenditure including advance payments made totaled 29.4 million euros, compared with 20.6 million euros in the first quarter of last year. Most of this amount (18.3 million euros) was expended in the North America region, primarily for the development of the new MDF plant in Moncure, USA. Primarily due to exchange-rate effects, the equity ratio decreased slightly to 36.3 percent in the first quarter. The Group’s net debt increased from 635.5 million euros at the end of 2008 to 715.8 million euros at March 31, 2009, whereby the ratio of net debt to equity (gearing) rose to 103.3 percent.

Planned additional savings of 80 million euros

Against the backdrop of the continuing financial-market crisis, Pfleiderer continues to anticipate a difficult development of the overall market in 2009. Prices and volumes are expected to fall in all segments, which should be partially compensated for by gains in market share due to the Group’s good relative cost position. The focus is on strict cash-flow management and the cost-cutting measures that were initiated in 2008; they are being continued and will lead to further savings of 80 million euros this year. Margins in Western Europe will be lower than in 2008 due to a further decrease in demand. Pfleiderer will react with continuous improvements in productivity and by expanding its export activities. In Eastern Europe, there will be a positive effect from the ongoing ramp-up of the new MDF plant in Grajewo, Poland. The same applies to the additional capacities that were created in Novgorod, Russia, in the second half of 2008. The new construction of an MDF plant at this site is being continued more slowly than originally planned. In North America, a moderate recovery of business volumes is expected due to increases in market share and the new particleboard plant in Moncure, USA. The MDF plant transferred from La Baie in Canada is to go into operation in Moncure in the fourth quarter of 2009, depending on the market situation.

Pfleiderer Group: key figures for the first quarter of 2009

(according to IFRS)

Contact persons:

PFLEIDERER AG, Neumarkt
Fabian Schiffer
Vice President Corporate Communciation
Tel.: + 49 (0)9181 / 28 - 8491
Fax: + 49 (0)9181 / 28 - 606
E-Mail: fabian.schiffer@pfleiderer.com

Lothar Sindel
Vice President Investor Relations
Tel.: + 49 (0)9181 - 28-8491
Fax: + 49 (0)9181 - 28-606
E-Mail: lothar.sindel@pfleiderer.com

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