SURTECO optimistic for 2006 after good results for 2005

SURTECO AG, leading manufacturer of surface materials based on raw technical papers and plastics for the international building and furnishing industry, succeeded in increasing sales and earnings in the face of tough economic framework conditions. As a result of acquisitions, sales revenues were up by 4 % on the equivalent year-earlier figure, at € 396.4 million. A slight decline of 0.5 % would have been reported after adjustment for acquisition. This reflects stagnation among most of the industries of the company’s customers, particularly the furniture industry in Germany. The four-percent sales drop in Germany was compensated by an improvement in foreign sales of 9 % to € 253.3 million. The proportion of foreign sales climbed from 61 % to 64 %. The plastics business unit of SURTECO AG continued to make headway in 2005. Segment sales improved by 12 % to € 223.9 million. By contrast, business in the SBU Paper was very restrained throughout 2005. Segment sales therefore amounted to € 172.5 million, 4 % below the level for the previous year.

Consolidated net income improves by 20 %

While the operating result (EBITDA) at € 69.1 million was 4 % below the result for the previous year due to the impact of high raw material costs, EBIT, i.e. earnings before interest and tax and before restructuring costs improved significantly from € 45.8 million to € 51.3 million. The ROS (EBIT/sales) rose from 12.0 % to 12.9 %. However, elimination of amortization of goodwill for the first time should be taken into account for 2005 (2004: € 8.8 million). Despite higher restructuring expenses (€ 3.9 million after € 1.3 million in 2004) the pre-tax profit was 8 % over the previous year, at € 37.6 million. Consolidated profit after tax increased by one fifth from € 18.2 million to € 21.8 million. Net income per share climbed from € 1.72 to € 1.97.

Friedhelm Päfgen, Chairman of the Board of Management of SURTECO AG, was satisfied with the fiscal year 2005: “SURTECO succeeded in bucking the trend of difficult framework conditions in most customer industries in 2005. Sales revenues and net income continued to improve, as did our balance-sheet structure. In view of a good start to the new fiscal year, we’re also confident for the whole of 2006.”

Balance-sheet structure further improved

SURTECO succeeded in continuing to further improve the most important balance-sheet indicators for 2005. Net financial liabilities fell back from € 162.7 million to € 134.6 million over one year. The gearing, or level of debt, fell accordingly from 140 % to 90 %. The equity ratio also improved significantly from 32.2 % to 40.2 %. Gratifying operating performance made a contribution, but the capital measure carried out to increase the free float in 2005 also played a role.

Stronger opening to the capital market

After the free float of the company had already been increased from 7.6 % to 14.5 %, the Board of Management is also directing its efforts towards opening the company up further to the capital market. This necessitates a more transparent communication policy as well an additional stage involving higher trading volumes for the share. The objective is to have the SURTECO share listed in the SDAX. In view of the current market capitalization of around € 360 million, an additional increase in free float is necessary. SURTECO is maintaining continuity as far as dividend policy is concerned. The Board of Management and Supervisory Board are proposing an unchanged dividend payment of € 0.80 per share to the Annual General Meeting.

Cautious confidence for 2006

The first three months of the fiscal year 2006 have been satisfactory. Apart from a slight increase in sales, earnings posted an above-average increase during the 1st quarter. Details of precise figures will be published on 31 May 2006. The Board of Management is moderately confident for the year 2006 as a whole. While the domestic market is unlikely to yield any significantly positive stimuli, export business should continue to be positive. A slight increase in sales revenues is anticipated for 2006. Despite further increases in the price of raw materials, earnings should increase disproportionately. The new company-based collective agreement that has been in force since January 2006 is a key factor here. This has extended the weekly working time without wage compensation and introduced more flexibility into the working week.