2009 a year of challenges

Due to the effects of the financial crisis in the second half of the year, SURTECO SE – leading manufacturer of surface materials based on plastics and technical papers for the international building and furnishing industry – was unable to match the record figures for the previous year. Consolidated sales amounted to € 403.0 million. They fell short of the figure of € 414.5 million for 2007 by 3 % (adjusted for exchange rates 1.2 %). Sales revenues were at the level of the previous year by the close of the third quarter. The Board of Management of SURTECO SE responded immediately to the changed framework conditions and adopted a comprehensive restructuring programme. This action included a reduction in the workforce by around 15 % and a renewed drive toward cost efficiency in all areas of the company. These measures entailed restructuring expenses amounting to € 7.3 million, which impacted negatively on the operating result (EBITDA) in the amount of € 58.3 million (2007: € 74.4 million). An impairment amounting to € 11.5 million on a package of shares in Pfleiderer AG held by SURTECO also exerted a negative effect on earnings before income tax of € 15.8 million (2007: € 46.9 million). In view of these developments and against the background of the anticipated difficult environment in 2009, a dividend of € 0.35 per share (2007: € 1.10) is being recommended to the Annual General Meeting. There is unlikely to be an upswing in demand during the business year 2009.

Growth in the Strategic Business Unit Plastics fuelled by acquisition, paper division continues to be subject to pressure

Sales in the Strategic Business Unit Plastics increased by 3 % to € 254.7 million, driven by the first-time consolidation of Swedish foil manufacturer Gislaved for an entire year. However, following adjustment for this effect, a fall of 5 % would have been reported. The new product lines launched, such as cable-duct edgebandings, exerted a particularly positive effect in 2008. The strategic focus in the coming years will continue to be on making business even more international.

In the Strategic Business Unit Paper, the economic crisis exacerbated the structural problems that have been evident in the sector for some time. Accordingly, the sales of € 148.3 million in 2008 came out 11 % less than in the previous year. SURTECO is increasingly focused on innovative products in this segment as well. These are tailored even more intensively to customers’ requirements owing to their flexibility in terms of time and cost.

Very firm financial structure

Despite the decline in the operating result, SURTECO SE succeeded in keeping the free cash flow virtually stable at € 17.5 million during the year under review. The company also used the cash generated over the course of 2008 to improve its long-term financial structure. The virtually unchanged equity ratio of 36.8 % and a financial structure secured over the long term means that the SURTECO Group is based on very sound finances.

Comprehensive measures for efficiency introduced

SURTECO SE has launched a very comprehensive efficiency enhancement programme to meet the challenges of the difficult business year 2009. This encompasses a number of measures including the transfer of edgebanding production within Germany from Buttenwiesen to Sassenberg, and a further optimization of the production facilities in North America. These measures are unavoidable in an environment of weak demand across the world and will lead to a reduction of some 320 jobs. The anticipated expenses were reported in full in the annual financial statements for 2008.

Business year 2009 will be difficult, while also offering opportunities

A revival of demand is no longer anticipated for the business year 2009. It is likely that business activity will be subdued until well into the year 2010. However, the SURTECO Group also perceives opportunities in the current crisis. Plant shutdowns, site closures and insolvencies among competitors will bring about further consolidation in the surface manufacturers’ sector during the next few years. The Group continues to maintain a sound technological and commercial platform and is therefore in a position to adjust quickly and flexibly to new market conditions. Against this background, the objective is to continue to generate long-term profitable growth after the unprecedented economic environment has returned to “normal”. The aim is also to expand market and technology leadership.