Buderus Announces Final 1999/2000 Full Year Results; Record High Sales and Pre-tax Profit.

Business Editors

WETZLAR, Germany--(BUSINESS WIRE)--Jan. 31, 2001

Hans-Ulrich Plaul, chief executive of Buderus Group AG, the Germany-based heating and specialty products group, today made the following remarks about Buderus Group's results at a press conference in Wetzlar, Germany:

On behalf of the Board of Management, I would like to welcome you to Buderus AG's annual Analyst Conference. We provided you with the preliminary figures for the financial year ended on Sept. 30, 2000 at our October press conference. We would now like to present you with an overview of the final financial statements for the 1999/2000 financial year, as well as a description of the business development in the shortened financial year, from Oct. 1, 2000 to Dec. 31, 2000.

Group Overview

Buderus Group recorded sales of Euro 1,817 million in the 1999/2000 financial year (1998/99: Euro 1,746 million). This represents an increase of Euro 71 million, or 4% from the previous year's level. Without taking into consideration the changes in the scope of consolidated companies -- Buderus Verwarming Chauffage N.V./S.A., Belgium has been consolidated for the first time -- sales would have been up by Euro 48 million, or 3%.

Following is a breakdown of Group sales by division, sales market and region.

Group Divisions
 as follows:
64%              (1998/99: 64%)             Heating Products;
18%              (1998/99: 19%)             Castings; and
18%              (1998/99: 17%)             Special Steel Products;

Sales markets
 as follows:
75%              (1998/99: 76%)             construction industry;
17%              (1998/99: 16%)             automotive industry;
 8%              (1998/99: 8%)              engineering industry;

Sales regions
 as follows:
64%              (1998/99: 67%)             Germany; and
36%              (1998/99: 33%)             other countries.

33 percent (1998/99: 30 percent) of foreign sales were generated in European countries. Global sales outside Europe account for 3 percent, as in the previous year.

Earnings before taxes (EBT) rose by Euro 24 million, or 15%, to Euro 182 million (1998/99: Euro 158 million). The result from ordinary operations thus reached a historical high for the eighth time in succession.

Consolidated profit for the year rose by Euro 25 million to Euro 102 million (1998/99:Euro 77 million).

At the Annual General Meeting on March 14, 2001, the Board of Management and the Supervisory Board will propose to apply unappropriated profits of Euro 33 million towards dividend payments of Euro 0.53 (1998/99: Euro 0.44) per share. This is a dividend increase of approximately 20% per share. Taking into account the corporation tax credit in Germany, the gross dividend amounts to Euro 0.76 (1998/1999: Euro 0.63) per share.

DVFA/SG Group earnings rose by Euro 8 million to Euro 84 million from the previous year, and DVFA/SG earnings per share increased from Euro 1.16 to Euro 1.34. Taking into account the reduced number of outstanding shares following the share buyback, the comparable previous year's result per share amounts to Euro 1.22.

DVFA/SG (net) Group cash flow increased by Euro 17 million to Euro 159 million. Cash flow per share was correspondingly higher at Euro 2.54 (1998/1999: Euro 2.15). Taking into consideration the share buyback, the previous year's cash flow per share amounts to Euro 2.27.

On Sept. 30, 2000, Buderus employed 9,608 people, 7,737 thereof in Germany and 1,871 abroad. 67 employees were added due to the initial consolidation of Buderus Verwarming-Chauffage N.V. / S.A., Belgium. The total number of employees in the Group increased by 31 people compared to Sept. 30, 1999.

Staff costs reported in the consolidated profit and loss account amounted to Euro 437 million -- down by Euro 4 million, or 1% from the previous year. Staff costs per employee -- whose numbers declined by 5 to 9,560 on the annual average -- amount to Euro 46,000, as in the previous year.

Pursuant to the output method, value added deduced from the profit and loss account reflects an increase of Euro 20 million, or 3%, to Euro 626 million in the 1999/2000 financial year. Value added per employee amounts to Euro 65,000, up by 3% from the comparable previous year.

Pursuant to the income received method, 70% of added value (1998/98: 73%) is attributable to employees. The share of taxes paid by the company amounted to 13% (1998/99: 13%). By way of dividend payments, shareholders again will receive a value added share of 5%, and 11% (1998/99: 8%) will go to the Group by means of changes in the reserves. As in the previous year, the remaining 1% is attributable to interest expense.

Consolidated earnings improved for the eighth time in succession

With Euro 120 million, the Heating Products Division once more reported the highest contribution to consolidated earnings before taxes (EBT) of Euro 182 million (previous year Euro 158 million) . The Castings and Special Steel Product Divisions added Euro 33 million (1998/99: Euro 35 million) and Euro 31 million (1998/99: Euro 20 million), respectively, to the Group result. The holding company records a loss of Euro 2 million (1998/99: minus Euro 10 million).

Pre-tax profit during the reporting period was primarily influenced by the following factors:

Positive influences included distinctly lower ongoing power supply prices and one-off credits for former years. Also, Buderus no longer had expenses for adjusting pension provisions to the 1998 actuarial tables. This was partially offset -- especially at the end of the reporting period -- by rising gas prices and increasing prices for other input materials.

Return on sales -- defined as the company profit before taxes on income in relation to external sales -- improved from 9% to 10%.

Operating profit also improved. EBITDA increased by Euro 27 million or 13% to Euro 239 million from the previous year. EBIT increased by Euro 23 million or 15% to Euro 173 million. Accordingly, return on sales in relation to EBITDA improved from 12% to 13%, and in relation to EBIT from 9% to 10%.

Return on equity before taxes increased from 39% to 43%, and the return on invested capital (ROI) before taxes increased from 14% to 15%. Taking into consideration the share of interest expense attributable to provisions for pensions when calculating the return on invested capital, this ratio also exceeds the Group target of 16% (1998/99: 15%) for the first time.

Buderus Group's economic value added (EVA) -- which is a ratio for measuring company success on the basis of reporting periods -- amounts to Euro 13 million in the period under review. The added value generated is composed of the company's profit (before financing costs and after taxes) of Euro 98 million less the cost of capital of the necessary business assets amounting to Euro 85 million. The company result has been derived from the profit for the year. Cost of capital is defined as the minimum yield investors would expect on necessary business assets, i.e. on equity and outside capital, which were determined on the basis of the internationally applied WACC method (weighted average cost of capital). For the 1999/2000 financial year, this resulted in a weighted average cost of capital ratio of 7.0% on the necessary business assets.

Total shareholder return (TSR), as a measure for the total return a shareholder receives over a certain period, amounted to approximately 20% in the reporting period. For the period from Sept. 30, 1996 to Sept. 30, 2000, total shareholder return on the Buderus share was approximately 56%. TSR is defined as the difference between the share price at the beginning and the end of a period plus all dividends paid during the period, in relation to the share price at the beginning of the period.

Consolidated profit and loss account

The consolidated result in the profit and loss account developed as follows:

The Group's total output -- i.e. total sales, changes in inventories and own work capitalized -- rose by Euro 71 million or 4% to Euro 1,824 million.

Other operating income was up by Euro 7 million to Euro 67 million. In this context, profits on disposals of fixed assets and write-ups, as well as income from the release of provisions, each decreased by Euro 5 million. Income from the release of special reserves increased by Euro 3 million; income from the release of general bad debt charges increased by Euro 2 million, and other operating income increased by Euro 12 million. The latter primarily include income from previous financial years, income from insured events, as well as currency and price gains.

Against the backdrop of an increase in total output by 4%, the Group's cost of materials rose by Euro 48 million, or 6%, to Euro 917 million. Lower energy costs (minus Euro 9 million) were offset by higher expenditure on raw materials, supplies and merchandise.

Staff costs within the Group of Euro 437 million decreased by Euro 4 million, or 1% from the previous year. This sum primarily consists of approximately Euro 12 million less pension costs (including transfers to pension provisions) and approximately Euro 8 million of higher wages and salaries, including social security, half of which is attributable to the first-time consolidation.

79% (1998/99: 77%) of staff costs are attributable to wages and salaries and 17% (1998/99: 16%) to social security. Pension costs and staff welfare costs account for 4% (1998/99: 7%).

Group depreciation and amortization amounted to Euro 66 million in the 1999/2000 financial year -- up by Euro 4 million from the previous year. Scheduled depreciation and amortization totalled Euro 53 million (1998/99: Euro 52 million). The remaining Euro 13 million (1998/99: Euro 10 million) constitute the special depreciation charge under article 6 b of the German Income Tax Act (EstG).

Broken down by Divisions, depreciation and amortisation within Heating Products (Euro 28 million) and Special Steel Products (Euro 9 million) remained on the previous year's level. In the Castings Division, depreciation and amortization rose by Euro 2 million to Euro 17 million. The volume in the holding company increased by Euro 2 million to Euro 12 million as a result of the above-mentioned special depreciation charge, which is exclusively attributable to Buderus AG's investments in the Heating Products Division's distribution organization.

Other operating expenses amounted to Euro 298 million, which is Euro 7 million below the previous year's level. Lower expenditure for marketing and sales promotion, repairs and maintenance, as well as transfers to untaxed special reserves, were offset by higher expenses for freight out, other external services, overhead costs and other operating expenses. The latter include all reportable operating, administrative and distribution costs.

The financial result, comprising the positive net interest which was down by approximately Euro 2 million, and the result from investments, which was approximately Euro 1 million higher, amounted to Euro 8 million in the reporting period. This was a decrease of Euro 1 million from the previous year. As in the previous year, net interest contains recoverable taxes on income reported as distributed amounts from the special fund of Euro 2 million.

The Group's taxes on income were down by Euro 1 million to Euro 80 million despite the increase in the result by Euro 24 million to Euro 182 million. The increased tax burden resulting from the higher profit for the year (Euro 13 million) and previous financial years (Euro 6 million) was more than compensated by refunds of trade tax allocations.

The income tax ratio deduced from the profit and loss account thus declined from 51.6% in the 1998/99 financial year to 44.0% in the reporting period. The taxable base for the income tax expense reported here in the profit and loss account is higher than the pre-tax result recorded in the profit and loss account.

From the consolidated profit for the year of Euro 102 million (plus Euro 25 million), Euro 10 million was transferred to Buderus AG's revenue reserves -- taking into consideration the profit brought forward of Euro 1 million. Another Euro 59 million was allocated to the Group's revenue reserves. This amount includes the German Group companies' reserves as well as the net profit of foreign Group companies.

Consolidated unappropriated profits -- which correspond to Buderus AG's unappropriated profits -- thus amount to Euro 33 million, which we will distribute to the shareholders.

Consolidated balance sheet remains sound

Buderus Group reported unchanged favorable asset and capital structure multiples at Sept. 30, 2000. The balance sheet total rose by Euro 57 million, or 5%, to Euro 1,217 million.

Assets

Fixed assets increased by Euro 3 million from the previous year and now amount to Euro 471 million. Fixed assets as a percentage of total assets declined from 40% in the previous year to 39%. Among total assets, fixed assets grew primarily due to the continued expansion of the distribution organization of the Heating Products Division in Germany. Due to the lower amount of loans to non-consolidated, affiliated companies recorded in the balance sheet, financial assets remained below the previous year's level. Securities classified as financial assets comprise shares in a special fund with a book value of Euro 141 million. Total assets are worth Euro 180 million at the balance sheet date. As in the previous year, attributable profits of these funds were carried forward. Creditable taxes (approx. Euro 2 million) were recorded.

Current assets (including prepaid expenses and deferred charges) were up Euro 54 million, amounting to Euro 746 million. Stocks rose by Euro 17 million and debtors (including deferred items) increased by Euro 37 million. Liquidity remained on the previous year's level of Euro 148 million.

Shareholders' equity and liabilities

Despite the capital reduction resulting from the share buyback (minus Euro 51 million), capital and reserves rose by Euro 19 million to Euro 426 million due to transfers to the reserves and the higher results of companies which are not controlled by Buderus (an aggregate of Euro 70 million). The equity ratio of 35% remained unchanged from the previous year. Thus 90% of Buderus Group's fixed assets are covered by capital and reserves (1998/99: 87%).

Provisions increased by Euro 56 million to Euro 603 million. The share of provisions in total capital currently amounts to 50%. The balance of provisions for pensions was up by Euro 1 million in this context. Tax provisions were Euro 45 million higher on account of timing differences. Other provisions, which again contain taxed provisions in accordance with 249 sect. 1 HGB (German Commercial Code), increased by Euro 10 million. Total liabilities declined by Euro 7 million to Euro 162 million.

Business development in the shortened financial year from Oct. 1, 2000 to Dec. 31, 2000

In accordance with the resolution of the extraordinary Annual General Meeting on Nov. 28, 2000, Buderus Group has decided to adjust the financial year to the calendar year. In order to successfully change over to the calendar year, Buderus inserted a shortened financial year from Oct. 1, 2000 to Dec. 31, 2000. I would now like to provide a preliminary business review on this period.

Group sales

In the shortened financial year, Buderus Group generated sales of Euro 482 million. Compared to sales recorded in the corresponding previous year's quarter, this represents an increase of Euro 3 million, or 1%.

Broken down by regions, foreign sales rose by Euro 22 million, or 13%, to Euro 190 million, while domestic sales recorded a decline by Euro 13 million, or 6%, to Euro 292 million. 39% (comparable previous year's period: 35%) of total sales are attributable to sales outside of Germany.

Results broken down by Division were as follows:

Against the backdrop of continuous declining market trends, the Heating Products Division generated sales of Euro 321 million, which is Euro 17 million or 5% below the corresponding previous year's period.

The Castings Division generated sales of Euro 78 million in the shortened financial year. Compared to the previous year, this reflects an increase of Euro 7 million, or 11%. Foreign sales rose distinctly due to the delivery of a large-scale order while domestic sales declined.

The Special Steel Products Division recorded sales growth of Euro 13 million or 19% to Euro 83 million in the period under review. We were able to significantly increase sales in Germany as well as abroad.

Group result

Earnings before taxes (EBT) are expected to amount to approximately Euro 49 million in the shortened financial year 2000. The pre-tax result thus slightly exceeds the result for the quarter ending on Dec. 31, 1999 by Euro 3 million, or 5%. A comparison is possible only to a limited extent as year-end postings were not generated in the corresponding previous year's period.

Outlook for 2001

Despite the risk potential inherent in exports, the general economic outlook for the year 2001 is expected to be favorable. We must, however, distinguish between the developments of the different sales markets relevant to our Divisions.

The domestic construction industry will remain on the decline in building construction and underground engineering. The construction-related segments of Buderus Guss GmbH therefore must continue to focus on generating sales abroad. The foundation for this development has already been laid.

The Heating Products Division has also suffered from weak domestic demand until now. Growth in Germany was achieved by gaining additional market share. Abroad, the favorable development was due to further expansionary measures. The great need for replacements in Germany has not induced higher demand levels. This may be due to the fact that pursuant to the Federal Emission Protection Order (BimSchV), transitional periods only expire in November 2001, November 2002 and November 2004, depending on the general condition of appliances.

Chimney sweeps estimate that approximately 1.5 to 1.8 million boilers will need to be exchanged. It is quite possible that this sales potential will be underpinned by the new Energy Conservation Order (EnEV) which may become effective this year.

Thanks to its product line, in particular in the areas of energy-efficient products such as condensing boilers and solar collectors, Buderus Heiztechnik is well equipped for a more animated market.

We expect further impetus from the International Sanitation, Heating and Climate fair (ISH) in March 2001. Buderus will present a new product at this fair: a gas heat pump which was awarded the "Special Award for Natural Gas and Renewable Energies" by the German gas industry in 2000. This product achieves substantial energy savings when compared to conventional boilers.

We assume that the Heating Products Division will be able continue its good sales and earnings performance in 2001.

Demand from the automotive industry and the engineering sector should remain on a very high level. The Special Steel Division, as well as those segments within the Castings Division which are oriented towards these markets, envisage further sales and earnings growth. These areas are running at full capacity and the order backlog is at a historical high.

In the current year, we plan to once more exceed the level of sales and earnings achieved in 2000.

Information on Buderus, a world leader in heating, specialty steel products and castings is available on Bloomberg under the symbol BUD GR and on Reuters under BUDG.O. Additional information is available on Buderus Group AG's home page: http://www.buderus.de.