Projected increase for sales and earnings for fifth year in succession in 2008

SURTECO SE, leading manufacturer of surface materials based on plastics and technical papers for the international construction and furnishing industry, continued the trajectory of profitable growth sustained over the past 15 years during the course of 2007. Sales have increased on average by 17.3 % since 1993. EBIT (Earnings Before Taxes and Interest) improved on average by 23.5 % per year.

During the business year 2007, revenues went up 3 % to € 414.5 million. Apart from a lower level of organic growth, the main driver was the Swedish plastic foil manufacturer Gislaved Folie AB acquired in September 2007. EBIT also increased by 3 % to € 55.5 million. An improved tax rate enabled earnings per share to jump by 10 % to € 2.85. Despite a difficult environment, mainly in North America, SURTECO anticipates consolidated growth in sales and earnings to continue during 2008.

The aim is for shareholders of SURTECO SE to participate in the success of the company. The Board of Management and Supervisory Board therefore proposed to the Annual General Meeting held on 24 June 2008 that the dividend be increased by 10 % and that a dividend of € 1.10 per share be paid out in 2007 (2007: € 1.00).

North American business puts brake on consolidated growth

The difficult market conditions in North America also impacted on SURTECO in 2007. The decline in new-build activity exerted a direct effect on North American business. Falls in sales due to the weak US dollar and amounting to € 5.3 million also exerted a negative effect. Nevertheless, the export business generated by the Group increased by 5% to € 269.6 million. Export sales as a proportion of total sales of the Group rose slightly to 65 %. The key factor here was sales amounting to € 9.2 million contributed by Gislaved for the last four months of the year. Domestic sales at SURTECO SE amounted to € 144.9 million and stagnated compared to the level for the previous year.

Business Unit Plastics with higher demand

The Business Unit Plastics is responsible for manufacture and sales of plastic edging tapes and a large number of other high-quality plastic products generated growth of 7 % to € 248.3 million. This was achieved despite the impact of streamlining the product portfolio in the area of weak-margin goods held for resale in the do-it-yourself sector resulting in a reduction in revenues of € 4.5 million and a reduction in sales of € 6.3 million on account of the weak North American business (€ 4.1 million of which were due to currency effects). The Business Unit Paper also suffered from the subprime crisis, reflected in a reduction in sales of € 2.9 million in North America (of which € 1.2 million were due to currency effects). Another effect was that this segment was subjected to more intensive competition due to the entry of new, local producers into the marketplace. Sales of the paper business line therefore fell short of the value for the previous year by 3 % at € 166.2 million.

Earnings per share climb by 10 % to € 2.85

Despite the negative impacts, SURTECO achieved another record result in 2007. Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) increased by 4 % to € 74.4 million. The corporate tax reform brought about a significant decline in the tax rate from 37 to 32 %, so that profit after taxes could be improved by 10 % to € 31.6 million. Earnings per share improved accordingly from € 2.60 to € 2.85.

US private placement exerts significant effect on consolidated balance sheet

The US private placement involving a long-term loan amounting to € 150 million carried out in the summer of 2007 exerted a significant effect on the consolidated balance sheet in 2007. This loan was floated at very favourable conditions for the company before the start of the US credit crisis and is intended to strengthen the projected strong growth of the Group for the coming years. As a result, the equity capital ratio came down temporarily from 44.4 % to 36.1 %.

Sustained confidence for 2008

SURTECO expects moderate organic growth for the current business year 2008, if any growth occurs. However, first-time full consolidation of Gislaved will generate an increase in growth. Depending on the burdens exerted by the continuing weakness in the US dollar, a further improvement should be possible compared with 2007.

Sales should double over the medium term to € 800 million

Over the medium term, SURTECO is planning to continue profitable growth. An increase in the region of € 800 million is projected for consolidated growth by 2011. The EBITDA margin is forecast to increase from nearly 18 % in 2007 to more than 20 %. Consolidated planning envisages a large number of additional expansion stages for the coming years. These include expansion of the existing production facilities, as well as driving growth forward consistently. The main focus of regional expansion and supplementing the product portfolio was in the segment decorative plastic foils.