SURTECO AG in difficult sector environment after record year for 2004

The Board of Management of SURTECO AG were able to report a “record year” for 2004 at this year’s Annual General Meeting. SURTECO AG underwent positive development during the year 2004, with EBIT rising by 19 percent to 44.4 million euros and EBT increasing by as much as 28 percent to 34.7 million euros. On this basis, the Board of Management proposed a 14 percent dividend increase to 0.80 euros per share, which was approved by the shareholders voting at the meeting. The total payout (8.9 million euros) amounted to half the consolidated net income.

Strengthening the SBUs Plastics and Paper

Acquisition of the Canplast Group in October 2004 enabled SURTECO AG and its Strategic Business Unit Plastics (sales 2004: 200.7 million euros) to expand significantly, primarily in the North American market. The company is now the leading provider of plastic edgings there with a market share of 58 percent. This is also a position it enjoys worldwide. After the extensive restructuring measures within the Strategic Business Unit Paper (sales 2004: 179.7 million euros) had been completed, SURTECO AG continued to enhance the design expertise of printing activities within this division by taking a 30-percent stake in Saueressig Design Studio GmbH. Saueressig is regarded as the specialist for design development and origination of reproductions for printing and stamping moulds.

Free-float increase completed by capital measures

In mid-March, SURTECO AG – listed in the prime standard – increased the free float from 7.6 percent to 14.5 percent with a capital increase for cash by nominally 500,000 euros and reallocation of shares from the portfolio of an existing shareholder with the aim of further strengthening the free float. The issue was several times oversubscribed and achieved gross proceeds of 15.5 million euros through the issue of new shares. The proceeds were primarily used to reduce acquisition-related liabilities. As a consequence, the equity ratio rose to a respectable 37.4 percent on 31 March 2005.

Difficult development in the year 2005

During the first quarter of 2005, sales of the world’s leading supplier of surface materials based on raw papers for technical applications and plastics rose by five percent to 101.7 million euros during the first quarter of 2005. However, after adjustment for first-time consolidation of the acquired Canplast Group, sales fell by two percent. Performance during the second quarter indicated that this trend will be symptomatic for the whole year. This reflects the sustained weak domestic economy and the tangible decline in demand in key foreign markets, where SURTECO AG generates 61 percent of its sales. In the light of the latest overall framework conditions and conditions currently prevailing in the foreign-exchange and raw-materials markets, SURTECO AG has forecast a slight increase in sales for 2005 following adjustment for consolidation but lagging behind sales for the previous year. In 2004, the Group increased sales by seven percent to 380.4 million euros.

Further job losses projected

SURTECO AG has been compelled to adapt the size of the workforce to meet demand, in order to be in a position to play a strong role in the tougher competitive environment. By mid-2006, job losses amounting to 150 are planned for the Group by mid-2006, of which around 100 jobs will be lost in Germany. At the close of the first quarter of 2005, the company employed 2,134 employees. The costs associated with the job losses will impact negatively on earnings for the second quarter with around 4.0 million euros.