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Röchling Reports Significantly Higher Results

Concentration on Plastics Bears DividendsHigh-performance plastics continue pleasing trendAutomotive plastics boost performanceExpansion of plastics activities continues

Mannheim (Germany), May 26, 2007 – The Röchling Group, based in Mannheim and with worldwide operations, can look back on a pleasing 2006 fiscal year. The processor of high-quality plastics for a wide range of industrial uses reports its best-ever result – EUR 44.4 million in earnings before taxes, an increase of 33.3 percent on the 2005 fiscal year. Earnings before interest and taxes (EBIT) rose by 41 percent to EUR 57.8 million.

“This earnings increase shows that our Proficiency in Plastics alignment is bearing dividends on a lasting basis,” said Röchling Group CEO Georg Duffner. “As a technology leader in plastics processing, we have aligned our portfolio to growth markets with a bright future and set our course for the future by means of both acquisitions and organic growth.”

In the 2006 fiscal year, the BEA Group, the last vestige of Röchling’s erstwhile electronic activities, was sold. The disposal of the Röchling Kaltwalzwerk mill marked the end of Röchling’s steel era.
Due to these disposals, sales were down by 8.8 percent to EUR 1,051 million. However, the remaining plastics business reported sales growth of 7 percent.

Acquisitions Strengthen Röchling Group

The Röchling Group strengthened itself, in contrast, by acquiring five companies that are an ideal match for the Group by virtue of their proficiency in plastics processing, their market positions and their sales channels:

Meta-Plast A/S of Denmark, with production facilities in Allingåbro, Denmark and Liepaja, Latvia, manufactures machined finished parts.
The General Engineering division of Canada’s GL&V, based in Bacup, England, makes extruded profiles and finished parts out of thermoplastic resins.
SGT Spritzgießtechnik GmbH, based in Weidenberg, Germany, improves our access to engineering plastics markets where Röchling has not previously been strongly represented.

The American-based Glastic Corporation in Cleveland, Ohio is a leading manufacturer of upmarket fiber-reinforced materials for electrical and industrial uses.

Symplastics Limited of Orangeville, Ontario, is a Canadian manufacturer of thermoplastic semi-finished goods and other special plastic products with specialized know-how in processing the extremely wear-resistant material PE-UHMW (ultra-high molecular polyethylene).
In total, companies with a sales volume of circa EUR 70 million and a payroll of 450 were acquired.

In addition, in the high-performance plastics division, the Haren and Lahnstein locations were further extended. In 2006, around EUR 32 million was invested and in 2007, a total of EUR 37 million is being invested in boosting production capacity.

In the Automotive Plastics division, the main focus of investment was on getting production up and running at the new manufacturing location in the Czech Republic as well as setting up two new factories in China. In addition, there were acquisitions of new injection molding machinery for production in the United States as well as machinery for new projects in China.

High-Performance Plastics: Sales Up 20.8 Percent

The High-Performance Plastics division benefited from brisk business activity and boosted sales by 20.8 percent to EUR 427.8 million. Incoming orders rose by 22.8 percent to EUR 445.4 million. This growth was reflected in employee numbers, which rose by 258, or 13.7 percent, to 2,070. The strong increase in demand also increased the pressure on employees, who handled the production expansion with a keen sense of commitment.

Growth in the division significantly exceeded average growth for the industry. According to the industry association Gesamtverband Kunststoffverarbeitende Industrie e.V. (GKV), average nominal sales growth was around 10 percent in 2006. Domestic production grew by 9 percent and production abroad by 12 percent. “In 2006, we again secured additional market shares,” Duffner said. “That makes our outstanding expertise and strength in the plastics business clear.”

Automotive Plastics: Cost Reduction Boosts Earning Power

Sales in the Automotive Plastics division totaled EUR 529.1 million compared with EUR 535.3 million in 2005. In spite of a marked rise in the cost of materials and substantial price reductions due to pressure from automobile manufacturers, the division was able to increase its earning power.
This was due in part to personnel cuts as well as a reduction in current assets and bought-in materials. Along with investments in the Czech Republic, the United States and China, the division invested in rationalization in Germany and Italy as well as in new production technology. The number of employees rose by 80 to 3,285. This was due largely to setting up a new production facility in the Czech Republic, personnel recruitment in China and new hires in the United States. In Germany and Italy, personnel numbers declined.

Outlook: Growth Course Set To Continue

The Röchling Group looks to the future with optimism. It sees the cyclical upswing as set to continue. In view of favorable overall framework conditions, business continued to develop well in the early months of 2007. It remains to be seen how the cyclical downturn in the United States will affect business in the 2007 fiscal year.

In the High-Performance Plastics division, the Röchling Group anticipates further organic growth by the end of the year. In the Automotive Plastics division, the company expects sales to be on a par with the previous year. The marked increase in energy costs poses a challenge for the Group and will lead to an additional cost burden during the year in progress. Moreover, raw material costs have also risen in some instances and it is not clear whether, as was the case in 2006, there will be a recovery.

Furthermore, structural change in the automobile industry with strongly growing markets in Asia and growing cost pressure all over the world imposes a burden on Röchling activities.

In spite of these challenges, Duffner sees opportunities for Röchling. “We will further strengthen our good position in Europe, continue our expansion in the United States and take our strong growth in Asia forward by means of heavy investment. Extension of production, our international presence and our product range will be both home-grown and a result of acquisitions should the opportunity arise.”

About Röchling: The Röchling Group, a worldwide operating plastics group with over 6,000 employees at 54 locations in 18 countries, stands for proficiency in plastics.

Its two divisions, High-Performance Plastics and Automotive Plastics, concentrate on processing quality plastics into semi-finished products, components and systems for a wide range of industrial uses.

Röchling stands for innovative products and state-of-the-art process technology in plastics processing.

The High-Performance Plastics division’s product range extends from semi-finished products such as sheets, rods, hollow and flat bars via sectional and cast parts to mechanically finished assembly units.

The Automotive Plastics division makes plastic parts for the automotive industry. They consist of technologically sophisticated products made of polymer materials and natural fiber plastic composites for the engine compartment, the underbody and the interior.