With Pergo, Pfleiderer Sees More Growth

Munich, Germany, March 29, 2007-Following the best results in its history in fiscal 2006, Pfleiderer AG said it continues to pursue its strategy of earnings-led growth. After the successful integration of the former Kunz Group, the acquisition of the Swedish Pergo AB is the next step for Pfleiderer as the engineered wood manufacturer expands its market presence worldwide, especially its high-margin laminate flooring business in North America and Western Europe. Pfleiderer's executive board, at the presentation of the consolidated financial statements for 2006 in Munich on Thursday, discussed the extended acceptance period for the takeover ended on March 9, 2007. As of that date, Pfleiderer AG's wholly-owned subsidiary Pfleiderer Sweden AB held just under 99 percent of the share capital and voting rights of Pergo AB. According to its CFO, Derrick Noe, Pfleiderer AG intends to completely take over the Swedish company. Pergo AB will be de-listed from the Swedish stock exchange on March 30, 2007. The squeeze-out of the remaining shareholders, in line with legal requirements, is expected to be completed by the beginning of 2008. Noe also announced the issue of a hybrid bond in May this year, with which the Company will largely refinance its Pergo acquisition. As the CFO explained, 'The hybrid capital instrument gives us greater financial flexibility and opens up new growth possibilities for us.' In 2006, Pfleiderer AG carried out a successful capital increase of 25 percent of its capital stock, boosting it to 136.5 million euros. Receipts from the issuance of 10.6 million new shares in the spring of 2006, together with proceeds from the disposal of Pfleiderer track systems - no longer part of the Group's core business - enabled Pfleiderer AG to reduce its corporate net debt from 627.5 million euros at the end of 2005 to 414.6 million euros as of December 31, 2006. Its equity ratio improved from 19.1 percent to 39.5 by the end of the reporting period. “Today, the Pfleiderer Group is strongly positioned, not just in terms of its strategy and operations, but also through its strong balance sheet and financial opportunities, we are well prepared for further earnings-led expansion,” said Noe. In fiscal 2006, the Pfleiderer Group concentrated on integrating the engineered wood activities of the former Kunz Group in Western Europe and North America, which were acquired in December 2005. As a result of this acquisition, the start-up of a new particleboard plant in Russia and organic growth within the Group, total revenues rose in fiscal 2006 by 71 percent to around 1.415 billion euros (prior year: 829.3 million euros). EBITDA increased disproportionately, doubling to 208.1 million euros (prior year: 104.1 million euros). Including book gains from the disposal of Pfleiderer track systems, the Pfleiderer Group posted net profit of 83.9 million euros for 2006 (prior year: 28.8 million euros). This corresponds to earnings per share of 1.67 euros (prior year: 0.68 euro). Earnings per share for continuing operations, after minority interests, improved to 1.00 euro (prior year: 0.56 euro). The executive board and the supervisory board will propose to the 2007 annual shareholders' meeting that the company increase its dividend from the prior year's level of 0.15 euro to 0.25 euro per share. Michael Ernst, Executive Board member and temporarily coordinating the executive board in the absence of its speaker, Hans H. Overdiek, said, “Our aim is to enable the shareholders to participate adequately in the company's success, at the same time ensuring sufficient scope for further corporate growth. But our long-term dividend policy remains unchanged - which is to give precedence to the company's potential to increase its value. We can achieve this for our shareholders by further expanding the business.” With the integration of the former Kunz Group and the acquisition of the Pergo AB, the Pfleiderer Group will operate a total of 23 production plants in Western Europe, Eastern Europe and North America. 'Thanks to Kunz, we have closed the strategic MDF/HDF gap in our product portfolio,' said Dr Robert Hopperdietzel, member of the executive board responsible for Technology / Operations, describing Pfleiderer's operative growth targets. 'And we have entered the laminate flooring market as an integrated supplier for the first time. Now we intend to expand both positions in a targeted manner.' Looking at the Company's future development, this means focusing on: extending its international market position, in particular exploiting opportunities for further growth in Eastern Europe and North America, and expanding its product portfolio and integrated production. The planned introduction of a standardized global production system for all of Pfleiderer's plants worldwide will consistently reduce costs in production processes throughout and utilize economies of scale. Dr. Hopperdietzel gave more details at the Financial Statements Press Conference, 'We started to introduce our global production system in early March 2007 and intend to increase plant volumes by 10 percent within one year.' Further investments totaling around 31 million euros in the period 2007 through 2009 will make a sustained improvement in the competitiveness of the eight German production sites. The aim is to improve the profitability of all eight German sites to an EBITDA-margin of at least 16 percent and a ROCE of 20 percent in the medium-term. The announced takeover of the Pergo Group makes Pfleiderer the leading integrated manufacturer of laminate flooring in North America, with a market share of around 15 percent. The two brands Uniboard and Pergo will be managed in the market. Pergo operates two production plants in North Carolina, USA. Pfleiderer's nine future production plants in Canada and the USA will be networked to maximize economies of scale and synergies in procurement and logistics. The North American laminate flooring business will be combined and managed in future by the Business Center Floooring North America to generate economies of scale and synergies in procurement, logistics, production and with respect to overhead costs. Through its two Pergo plants in Sweden, Pfleiderer is entering the Western European market as a manufacturer and supplier of premium laminate flooring for the first time. At the same time, integrating Pergo provides a good starting point for the planned expansion of this high-margin business into Eastern Europe. In the first two months of the current fiscal year, strong demand and price increases have taken the Group off to a good start. Raw particleboard business has developed particularly well. In 2007, Pfleiderer's Executive Board expects the group in its new constellation - i.e., Pfleiderer and Pergo (consolidated as of March 2007) - to achieve revenues of 1.9 billion euros and an EBITDA of 270 million euros. That corresponds to an EBITDA margin of 14.2 percent after the Pergo takeover. In 2008, consolidated revenues are expected to well exceed the 2 billion euros mark, with a Group-wide EBITDA margin of over 15 percent. Key figures for the Pfleiderer Group