Pfleiderer Misses Interest Payment; NA Sales Up

Neumarkt, Germany, Aug. 24, 2009 – Pfleiderer AG said that it was unable to fulfill the financial covenants agreed upon with its creditor banks.

The company, which warned of this possibility in June, said the first half of 2009 was significantly affected by the recession.

Unit sales and product prices were both lower than in the first half of last year. Revenue fell by 24.5 percent compared with the prior-year period to 692.4 million euros.

The effects of currency translation reduced revenue by 4 percent.

In regional terms, the strongest drop in revenue was 39.4 percent in Eastern Europe, while the Pfleiderer Group posted revenue growth of 0.5 percent in North America.

The share of revenue generated outside Germany was 71.5 percent, compared with 71.9 percent in the first half of 2008.

Despite the sharp drop in revenue, the Pfleiderer Group said it was able to increase its gross margin compared with the prior-year period from 25.7 percent to 26.2 percent, thanks to lower raw-material prices, efficiency
improvements and consistent cost reductions.

Lower business volumes led to significant under-utilization of the plants’ capacities, resulting in cost cutting.

EBIT fell to 22.6 million euros, from 54.8 million euros in the first half of last year.

The result of continuing operations before taxes thus amounted to a loss of 3.7 million euros, compared with a profit of 22.9 million euros for the first half of 2008.

The profit for the period amounted to 3.7 million euros, compared with 16.3 million euros in the prior-year period.

After deducting profit attributable to minority interest and the hybrid bondholders, a loss of 2.8 million euros is attributable to the shareholders of Pfleiderer AG, compared with a profit of 5.3 million euros in the first
half of last year.

A liability will be formed for the suspended interest payment to hybrid bondholders because they are entitled to the subsequent payment of that interest.

The diluted and basic loss per share for the first half of this year amounts to 6 euro cents, compared with earnings per share of 10 euro cents for the first half of last year.

“Our half-year results are a reflection of the global financial and economic crisis," said CEO Hans H. Overdiek.

"With regard to the talks we are holding with our banks, we are confident that we will bring them to a successful conclusion in the coming months and will thus secure the Group’s long-term financing."

In the Western Europe region, the Pfleiderer Group posted a revenue decline of 28.4 percent to 369.3 million euros. Unit sales of laminate flooring continued to fall in Western Europe. In order to boost sales in the respective
markets, Pergo set up flooring competence centers in Berlin, Paris, Zürich and Barcelona in the second quarter.

In Eastern Europe, the Pfleiderer Group’s revenue declined by 39.4 percent to 124.9 million euros.

In its North American sales markets, the Pfleiderer Group increased its revenue in the first half of the year by 0.5 percent compared with the prior year period to 211.5 million euros. Pfleiderer said the growth came mostly in the flooring segment, in which Pergo further increased its share of a shrinking market.

Pfleiderer said its new MDF plant in Moncure, N.C. will go into operation on schedule, and will further improve the cost position in North America.