Pfleiderer feels significant price improvement in first quarter of 2010 – capacity utilization good in all regions and very good in April

• First-quarter revenue of 355.6 million euros at prior-year level
• Raw-material prices impact EBITDA, which falls to 22.2 million euros; EBITDA margin of 6.3 percent
• Western Europe with rising unit sales, North America shows growth in panels but decreasing business with laminate; Eastern Europe benefits from currency effects

Neumarkt, May 7, 2010 – MDAX-listed Pfleiderer AG (ISIN DE0006764749) generated first-quarter revenue of 355.6 million euros, which is very close to the 358.0 million euros of the prior-year period. The proportion of revenue generated outside Germany was 70.9 percent, compared with 70.6 percent in the first quarter of last year. Compared with the previous quarter, revenue grew by just over 4 percent. Although the average level of prices for the products was still lower than in the first quarter of 2009, Pfleiderer compensated for this price effect with volume growth of nearly 2 percent and positive exchange-rate effects of 13.3 million euros, primarily from the zloty and the Canadian dollar. Increasing demand and better capacity utilization thanks to adjustments within the engineered-wood industry led to the price of one cubic meter of raw particleboard rising from its low of approximately 90 euros in summer 2009 to around 135 euros for new orders placed in April 2010.

Gross profit of 74.4 million euros (Q1 2009: 102.6 million euros) was affected above all by the distinct increase in raw-material prices compared to the prior-year period, especially for wood and chemicals (glue and input materials). For example, wood prices increased year-on-year by 10 to 30 percent, depending on location and type of wood, and prices of chemical products were about 10 percent higher than a year earlier. Increases in the prices of raw materials resulted in a total additional expense of 23 million euros. In combination with the lower sales prices for engineered-wood products, this led to a reduction in the gross margin from 28.7 percent in the first quarter of 2009 to 20.9 percent in the period under review.

Earnings before interest, taxes, depreciation and amortization (EBITDA) decreased from 52.7 million euros in the prior-year period to 22.2 million euros in the first quarter of 2010. Positive exchange-rate effects contributed 1.4 million euros towards earnings. Due to substantial cost savings, administrative expenses were reduced by a significant 11.1 percent year-on-year. The EBITDA margin for the first three months of this year amounted to 6.3 percent, compared with 14.7 percent for the prior-year quarter. EBIT fell to minus 6.1 million euros from plus 23.0 million euros in the prior-year period. Depreciation and amortization amounted to 28.4 million euros (Q1 2009: 29.7 million euros).

The net financial expense of 12.5 million euros includes an amount of 3 million euros of interest expense for the recognition of accrued transaction costs for the Group’s new refinancing. Other financial income of 6.8 million euros resulted almost entirely from the translation into euros on the balance sheet date of financial items denominated in foreign currencies. In the prior-year quarter, there was other financial expense of 5.0 million euros. Deferred tax income was recognized in the first quarter of this year, contributing to an overall tax benefit of 2.2 million euros.

The result of continuing operations after taxes amounted to a loss of 16.4 million euros, compared with a profit of 4.0 million euros in the prior-year quarter. Of that total, a loss of 1.1 million euros is attributable to minority interests. The statement of income also includes the claims of hybrid bondholders of 4.6 million euros; this amount was not paid out but was recognized as a liability in the balance sheet. A loss of 19.9 million euros is therefore attributable to the shareholders of Pfleiderer AG, compared with a profit of 0.1 million euros in the first quarter of last year. This results in a basic loss per share of 35 euro cents, compared with 0 euro cents profit/loss in the first quarter of 2009.

“Developments in the first three months of the year 2010 show that we are still some distance away from so-called normality. But meanwhile, they also give us good reason for cautious optimism. We are now in a situation of a significant revival of demand, leading to good or very good capacity utilization. This allows us to adjust our prices,” stated Hans H. Overdiek, Chairman of the Executive Board of Pfleiderer AG, with regard to earnings for the first quarter of 2010.

Positive surprise from development of demand in Western Europe

In the Western Europe region, the order situation continued its recovery in the first quarter of 2010, and revenue of 193.7 million euros was close to the prior-year level of 197.0 million euros. Due to good utilization of capacity, there were no further adjustments of capacity in the market. In this improved situation, it was possible to increase the prices of nearly all products in the course of the first quarter. Following an initial recovery, sentiment in the furniture industry has worsened again somewhat. The situation for exports was different, with significant growth, due also to more favorable exchange rates with the weaker euro. Business with home-improvement stores and wholesalers was positive with increased demand for renovation products. The project business also developed better than in recent months. The region’s EBIT fell to 5.7 million euros from 8.4 million euros in the first quarter of 2009, equivalent to an EBIT margin of 2.9 percent. This development reflects higher raw-material costs as well as lower sales prices than in the prior-year quarter, despite adjustments. The ongoing idling of the plant in Gschwend due to short-time work also impacted earnings.

Significant market revival in Russia

In Eastern Europe, Pfleiderer achieved revenue growth of 16.9 percent compared with the first quarter of last year to 76.6 million euros. Of that total, 7.6 million euros was the result of exchange-rate effects, so despite falling prices, we still achieved revenue growth of a good 5 percent after adjusting for those effects. Growth in Russia was particularly strong as demand in that market has revived again significantly. In Poland, we achieved higher unit sales, in particular of raw particleboard and raw MDF/HDF while there was hardly any growth for surface-finished board. As in Western Europe, it was possible to increase sales prices for most products during the reporting period, but they were still lower than a year earlier. Raw-material costs, especially for wood, represent an increasing problem in Poland because demand meanwhile exceeds local supply. Wood prices in this market increased by about 30 percent. In combination with a difficult environment for our sales prices, this led to a worsening of first-quarter EBIT from plus 4.4 million euros to minus 3.5 million euros. The region’s EBIT margin was minus 4.5 percent.

Pfleiderer better than its competitors in North America

In the North America region, revenue fell by 9.0 percent compared with the prior-year period to 95.1 million euros. Currency translation boosted revenue by 3.9 million euros. Demand for panels increased slightly with some supply shortages, especially for MDF, and rising prices. Despite this recent revival, prices of particleboard and MDF were approximately 7 percent lower than a year earlier. Due to continuous gains in market share in North America, Pfleiderer was able to better utilize its particleboard capacities and was 20 percentage points above the market level. In geographic terms, demand in Canada developed better than in the United States. With laminate flooring, the trend towards low price products increased while prices continued to fall across all market segments. The Pfleiderer Group was also affected by this development; the less favorable product mix and falling prices led to a significant decrease in revenue. Rising raw-material prices had a negative impact on earnings also in North America. Together with the less favorable product mix, this resulted in EBIT falling from plus 6.1 million euros to minus 4.2 million euros. An EBIT margin of minus 4.4 percent is therefore expected for North America.

Positive cash flow and improved gearing

In the first three months of 2010, the Pfleiderer Group had a cash inflow from operating activities of 21.2 million euros, compared with a cash outflow of 37.6 million euros in the first quarter of last year. This net cash inflow is due on the one hand to an increase in trade payables, and on the other hand to the level of depreciation and amortization. Capital expenditure including advance payments amounted to 24.6 million euros, compared with 29.4 million euros in the first quarter of last year. Equity increased by 62.2 million euros to 693.9 million euros. While the earnings development reduced equity by 19.9 million euros, the 10 percent capital increase and the sale of treasury shares raised equity by 52.5 million euros. Currency translation accounted for 29.5 million euros of the increase. The equity ratio thus improved from 32.0 percent to 32.9 percent. The Group’s net debt increased compared with the end of 2009 by 44.5 million euros to 898.7 million euros. This was the result of the loss for the period, the increase in receivables and other assets (28.3 million euros) and the increase in inventories due to higher prices and volumes (9.7 million euros, excluding currency effects), as well as exchange-rate effects from translating financial liabilities denominated in foreign currencies into euros (39.5 million euros). There were positive effects from the capital increase and the sale of treasury shares (52.5 million euros). The ratio of net debt to equity (gearing) fell from 135.2 percent to 129.5 percent.

Good growth position despite decreasing capital expenditure

In the current year, Pfleiderer has no plans for investment in capacity expansion, but only for the maintenance of existing plants. The Group will still have growth opportunities thanks to the capital expenditure of the past three years for additional and more efficient production sites. Compared with the particularly successful year 2007 for example, Pfleiderer now also has the capacities of the MDF plant in Grajewo, Poland, the particleboard plant and the MDF plant in Moncure, USA, and additional surface-finishing capacity in Novgorod, Russia and Val d’Or, Canada. The Pfleiderer Group will focus in the coming years on debt reduction, cash management and further strengthening its market position. Cost-reducing measures will be taken again this year. The main focus will be on fixed costs in the administrative area, where Pfleiderer aims to save another 30 million euros. Several projects have already been initiated to achieve that target. In addition to those cost reductions, price adjustments in combination with stable or growing unit sales should improve operating profitability once again. Although revenue is expected to grow, operating profitability is likely to remain unsatisfactory in 2010 and the Group will probably report a loss for the full year. As of 2011, the Group should return to positive earnings as a result of better prices, a revival of demand and lower interest expenses.

Pfleiderer Group: key figures as of March 31, 2010

(according to IFRS)

Contact persons:

PFLEIDERER AG, Neumarkt
Fabian Schiffer
Vice President Corporate Communciations
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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