Clearly improved result – sales up 5 % in the first six months and slightly higher operating margins

    Gränichen, Switzerland, 20 August 2010 (1) – For the first 6 months of 2010, Zehnder Group, with international operations in the indoor climate sector (radiators and ventilation), reported consolidated net income of EUR 16.4 million (first half of 2009: EUR 10.0 million). Sales were up 5 % on the prior year. Various strategic and operational measures led to an improved operating margin. Currency adjusted sales were up 4 %. Management now anticipates slightly higher sales in the second half of the year. However, sustainable recovery of the construction sector is not expected before 2011 at the earliest.

    Sales up in most of the Group's markets

    Sales in the first half of the year totalled EUR 217.5 million, an increase of 5 % compared to the first half of 2009 (EUR 207.0 million). Currency-adjusted this increase amounted to 4 %. Sales remained stable in the radiators Europe segment (up 1 %, currency adjusted 0 %). Sales in the ventilation Europe segment were up by a very satisfactory 11 % (currency adjusted 10 %). Sales in North America rose by 7 % (currency adjusted 3 %) and in China by 26 % (currency adjusted 20 %). Sales were up on the prior year's level in the Group's main markets – France, Germany, and Switzerland, whereas especially in the UK, Spain and the Netherlands sales decreased further. As announced in May 2010, the Group's sales structure in China was enhanced through the acquisition of a holding in a Chinese company, Shanghai Nather Air Tech Co. Ltd, which has a leading market position in the rapidly growing market for energy-efficient solutions for a healthy indoor climate. The share of ventilation activities in the Group's business operations increased and now accounts for 31 % of total sales (first half of 2009: 28 %). Changes in the consolidation matrix in the first six months of 2010 had practically no impact on sales development. (2)

    Operating margins improved further

    The operating result (EBIT) rose by 23 % to EUR 19.1 million (first six months of 2009: EUR 15.5 million). The EBIT margin of 8.8 % was better than for the first six months of 2009 (7.5 %). The various measures designed to cut costs and to optimize processes and the organizational structure have taken hold.

    The radiator and ventilation segments are being brought more closely together in order that the Group will increasingly be perceived as a systems provider. The resulting joint marketing activities led to a temporary rise in marketing and distribution expense. The measures necessary to reach this strategic target have not yet been fully implemented. Thanks to the Group's strong market position it was possible to increase sales prices in various markets. However, the positive effect of such measures was partially neutralized through the higher cost of raw materials. Within the scope of the Group's "new ERP" project, its business model and processes will be harmonized in Europe and a SAP solution will be launched. First rollouts are scheduled for mid 2011. Foreign exchange gains added EUR 1.6 million to the consolidated financial result (first half of 2009: EUR – 1.9 million). Net income for the reporting period amounted to EUR 16.4 million, rising by 64 % year on year (first half of 2009: EUR 10.0 million).

    Financial situation and investments

    In the first six months of 2010 investments in fixed assets totalled approximately EUR 10 million (first half of 2009: EUR 13 million). The main investment focus was on continually optimizing the Group's production facilities. At 30 June 2010 shareholders' equity including minority interest amounted to EUR 190.6 million (at 31 December 2009: EUR 182.0 million). Net liquidity decreased from EUR 20.2 million to EUR 16.6 million. The capital ratio fell marginally to 51 % (at 31 Dec. 2009: 52 %).

    Number of employees

    On 30 June 2010 the Group employed 3,073 people, which is 7 % more than in the prior year and at 31 December 2009. The focus here was on temporary staff to absorb the higher production capacity. Additionally, sales capacities in the ventilation segment were enhanced.

    Prospects for the second half of the year

    In the past the Group's sales in the second half of the year tended to be higher than in the first half. The slight improvement in the world economy is a positive signal that this pattern will be repeated in 2010. However, the global economic situation is still uncertain. Among other things, it is difficult to estimate the effects of the high national debts incurred and the cuts in national programmes to stimulate the economy. Moreover, the short-term nature of Zehnder Group's operations makes it all the harder to provide a reliable estimate of future business development. The various strategic and operational measures implemented in the past two years have had a positive impact, as the figures for the first half of 2010 show clearly. However, the market environment is still very demanding, so that the Group's stringent cost and liquidity controls will remain in place. Additionally, prices for raw materials are climbing steadily, which will continue to impact on the cost of materials. For the entire year management anticipates sales in the region of EUR 450 million and an EBIT margin at the prior year's level (10 %).

    (1) This announcement is in line with the requirements of Swiss GAAP FER 12.

    (2) Shanghai Nather Air Tech Co. Ltd first consolidated as of 1 June 2010

    René Grieder
    Moortalstrasse 1
    5722 Gränichen

    Chief Financial Officer

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