Pfleiderer AG To Invest $41M in Its German Sites

Neumarkt, Germany, March 23, 2007--Pfleiderer AG said it intends to sustainably improve the competitiveness of its German production sites. To this effect, Pfleiderer AG's Executive Board has agreed on an investment package for the Business Center Western Europe (BC West).

The planned measures concentrate on the production sites at Arnsberg, Leutkirch, Nidda and Gschwend. Entitled 'Future BC West', the spending concept involves substantial unscheduled investments of around 31 million euros (US$ 41.2M) in the period 2007 through 2009.

This spending will go hand-in-hand with a marked improvement in structural and personnel costs. On condition that productivity increases, in future, employees at German production sites will be entitled to participate in the success of their plants. This will be achieved by introducing a bonus-based wage model, as well as through additional measures. Negotiations with employee representatives on this new model are due to start shortly.

The 'Future BC West' project stands under the leadership of Dr. Robert Hopperdietzel, who joined Pfleiderer AG's Executive Board on September 1, 2006, with responsibility for Technology and Operations / Plants. 'In turning these measures into reality, we are not only safeguarding the long-term profitability of our German sites and their continuation. This project is also in the interest of our employees, who want job security,' commented Hopperdietzel when describing the aims of the concept. Hopperdietzel expects the German production sites to achieve the Group EBITDA and ROCE targets on a sustained basis as a result of these measures. At the same time, employees will be motivated to rise to the challenges involved.

Plans for the Arnsberg site, where the Business Unit Duropal produces HPL/CPL laminates, worktops and HPL elements, are currently at an advanced stage. Talks between Management and the works council have already been held on the main aspects of the concept. Negotiations with employee representatives are due to start at Arnsberg at the beginning of April. Management wants to invest 10.5 million euros in a new continuous laminate press, as well as in additional measures which will improve and automate the workflow. These rationalization measures will involve the loss of around 130 jobs by the end of 2008.

As the planned investment package and improved personnel and structural costs will result in greater competitiveness, Management sees no need for substantial reductions in headcount at its other sites in Germany beyond those measures already discussed with the employee representatives.