Grammer AG Increases Revenues in 1st Quarter 2008

Restructuring program making solid progress

Amberg, May 8, 2008 - Thanks to a solid order backlog, Grammer AG recorded an increase in revenues in both of its divisions during the first quarter of financial year 2008. The company simultaneously pressed ahead with its restructuring measures as planned, generating an operating result according to expectations despite restructuring expenses.

Grammer increased its Group revenues by 12.5 percent to 267.4 million euros during the first three months of the financial year (previous year: 237.7). The Seating Systems and Automotive divisions benefited from a favourable development of incoming orders, especially in Europe as well as in North and South America. As expected, earnings before interest and taxes (EBIT) amounted to 8.2 million euros, compared with 10.1 million euros for the same period of the previous year. Adjusted for restructuring expenses totalling 1.5 million euros, EBIT was nearly unchanged from the same quarter of the previous year. The profitability of the divisions developed differently: Whereas Seating Systems considerably boosted its EBIT over the same period of the previous year, the EBIT of the Automotive division was impacted by foreign currency developments as well as labour and cost increases, especially at the Eastern European locations.

Dr. Rolf-Dieter Kempis, CEO of Grammer AG, stated: “Both divisions benefited from a high level of demand for Grammer products. The Seating Systems business is highly profitable, whereas in the Automotive division we are in the process of implementing our restructuring program. Although we’re making good progress, as we indicated, the full impact will be noticeable not until 2009. Overall, we are moving in the right direction, and we continue to expect to slightly surpass the previous year’s profit for the year as a whole.”
Earnings before income taxes amounted to 4.2 million euros, compared with 7.6 million euros for the first quarter of the previous year. Net income for the period amounted to 2.3 million euros (previous year: 3.6).

Revenues increase in Europe and America

The Europe as well as the North and South America regions were the main contributors to the revenues growth. Revenues in Europe increased by 7.9 percent to 199.1 million euros (previous year: 184.5). Following the start-up of production, the North and South America region attained its full capacity, boosting its revenues by 56.5 percent to 40.6 million euros (previous year: 25.9) despite the weak dollar exchange rate. In Asia, revenues remained stable compared to the same period of the previous year.

Profitable growth in the Seating Systems division

The Seating Systems division remained a significant force for growth and profitability during the first three months of the financial year. Grammer benefited from its focus on high-margin niche products, with divisional revenues increasing by 15.4 percent to 102.0 million euros (previous year: 88.4). This was primarily a result of a solid order backlog in the offroad segment as well as in the truck market. Developments remained stable in the rail and bus segment. Through additional improvements in productivity and a high level of capacity utilisation, this division realized an EBIT of 10.5 million euros and thereby an EBIT margin of 10.3 percent.

Automotive division affected by ongoing restructuring measures

The Automotive division also recorded an increase in revenues during the first quarter, which were up by 15.4 percent to 174.0 million euros (previous year: 150.8). Nevertheless, earnings were burdened by the ongoing restructuring measures, wage increases due to labour agreements and the latest exchange rate effects. The operating EBIT of the division amounted to 0.2 million euros, compared with 3.2 million euros during the same period of the previous year.

Restructuring measures on schedule

Grammer AG continued to further advance the optimisation program for processes and costs during the reporting period. Productivity-boosting measures as well as organisational streamlining measures have been launched in the Eastern European and Mexican plants. Through a reduction in personnel expenses, measures to boost efficiency, the optimisation of processes in production, and a reduction in material costs, Grammer is striving to generate savings of at least 40 million euros over the next two years.

Sufficient financial scope to finance growth

With total assets of 515.1 million euros (31 Dec. 2007: 497.5), the equity of Grammer AG totalled 184.1 million euros at the end of the first quarter (31 December 2007: 184.7). The equity ratio of 36 percent remained high (31 December 2007: 37). The Group thereby continues to have sufficient scope for financing internal and external growth options.

Outlook

Based on business developments in the first quarter, the current market environment, and the scheduled progress of the restructuring measures, the Executive Board reaffirms the forecast for the year as a whole. Compared with the previous year, the Grammer Group continues to expect a moderate increase in revenues and a slight growth in EBIT despite non-recurring expenditures for restructuring.

About Grammer AG

Grammer AG, based in Amberg, specializes in the development and production of components and systems for automotive interiors and of driver and passenger seats for offroad vehicles, trucks, buses, coaches and trains. “Automotive”, Grammer’s strongest division in terms of turnover, supplies head rests, armrests and centre consoles as well as integrated child’s safety seats to major car manufacturers and system suppliers to the automotive industry. The second division, „Seating Systems“, comprises the segments driver and passenger seats. In the area of driver seats, Grammer is active both as an original equipment manufacturer and in the aftermarket business, supplying prestigious manufacturers of trucks and offroad vehicles. In the passenger seat segment, Grammer offers its products to original equipment manufacturers and railway operators. With more than 9,500 employees in 21 fully consolidated companies, Grammer is operating in 16 countries worldwide. Grammer shares are listed in the SDAX and traded on the Munich and Frankfurt Stock Exchanges, via the electronic platform Xetra as well as in OTC trading on the Stuttgart, Berlin and Hamburg Stock Exchanges.

Source: Grammer AG

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