PWO continues growth in 2006 financial year

In line with its forecast, Progress-Werk Oberkirch AG yet again managed to boost its revenues and earnings in the financial year just ended. Based on preliminary figures for the Group as a whole, revenue climbed from EUR 219.7 million in 2005 to approx. EUR 225.3 million in the 2006 financial year, while total output (i.e. net sales plus inventory changes plus work performed by the enterprise and capitalised) rose from EUR 221.1 million to roughly EUR 227.0 million. Within this context, growth in volumes was more pronounced than that in revenue, as declining raw-material prices had to be passed on to customers. EBIT grew from EUR 15.5 million to approx. EUR 15.8 million; the EBIT margin calculated on the basis of total output thus remained stable year on year at 7.0 per cent. The EBT margin also remained unchanged, supported by a year-on-year increase in earnings before taxes from EUR 12.6 million to around EUR 12.7 million.

Earnings performance benefited from productivity gains; the latter helped to offset the annual de-cline in prices witnessed within the industry as well as the current charges attributable to the com-pany's international growth strategy for China and Mexico and the expansion of its operations in the Czech Republic. Net profit for the year grew significantly from EUR 7.9 million to approx. EUR 8.8 million, propelled upwards following the one-time capitalisation of corporation tax credits as a result of an amendment to Germany's tax legislation in 2006. As regards earnings per share, the new total number of shares following the capital increase in October 2005 was applied as a basis of calcula-tion for the first time in 2006, whereas the previous year's EPS calculation had been based on the average number of shares. As a result, earnings per share for FY 2006 contracted to approx. EUR 3.54, compared with EUR 3.80 a year ago.

All company sites contributed to the solid performance of the PWO Group. PWO is particularly en-couraged by the fact that its largest plant, located in Oberkirch, managed to stabilise its earnings margin despite high wages and that its operations in Canada and the Czech Republic further im-proved their profit margins in line with corporate targets. Canada had to contend with a consolida-tion in revenue following the production downsizing announced by North America's leading car ma-nufacturers. The company's expansion plans in Eastern Europe were implemented at pace, con-tributing to a sizeable increase in revenue from EUR 6.8 million a year ago to approx. EUR 10.3 million in FY 2006. As anticipated, the 50/50 joint venture in China has yet to generate revenues. However, start-up costs remained within the defined parameters.

Turning to the respective product categories, the Group achieved particularly strong growth within the area of safety components for airbags, seats and steering as well as structural components and subsystems for body and chassis, having received serial production orders for seats, steering col-umn adjusters and air suspension units. PWO has thus positioned itself in a number of lucrative product segments, allowing the company to build on its scope of expertise and unlock additional growth potential.

Confident of its performance in the current financial year, the Group is looking to generate a sub-stantial increase in revenue to around EUR 250 million. This is to be driven by organic growth as well as to a large extent by the inclusion in the consolidated group of PWO's new Mexican subsidi-ary Cartec S.A., effective from January 5, 2007. PWO currently holds an interest of 60 per cent in this entity.

Staff at the company's Oberkirch plant have been offered individual employment contracts as a means of safeguarding the future of the site. This decision was taken following the breakdown of negotiations with the IG Metall trade union. The aim had been to adopt a new and amended sup-plementary wage agreement. According to the individual employment contracts, standard working hours will rise from 37.5 per week in 2006 to 38.5 per week in 2007 and 40.0 per week from 2008 onwards. In return, employees will receive a job guarantee, higher performance-related remunera-tion and a number of other benefits not available under collective agreements. In addition, the Oberkirch location is to be further strengthened by targeted capital expenditure. To date, more than 92 per cent of staff have accepted the offer.

The trade union's collective wage agreement is likely to be significantly less competitive than in the previous year. Together with the company's structural expansion plans within the area of sales, development and controlling, this is expected to have an impact on PWO's cost base in the current financial year. Having said that, the investments in sales, development and controlling structures will support the Group's continued growth in the coming years, as well as benefiting the risk-adapted management of PWO's international sites. The target for 2007 is to achieve EBIT compa-rable to last year's figure despite the additional challenges faced by the Group.

Oberkirch, February 13, 2007

The Executive Board

Progress-Werk Oberkirch AG

Industriestraße 8

77697 Oberkirch

Germany

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