21.08.2009

Clearly improved result with a 6% drop in sales in the first six months and slightly lower operating margins

Gränichen, Switzerland, 21 August 2009 (1) – For the first 6 months of 2009, Zehnder Group, with international operations in the indoor climate sector (radiators and comfort ventilation), reported consolidated net income of EUR 10.0 million (first half of 2008: net loss of EUR 9.2 million). Sales were 6% down on the prior year. The operating margin was maintained at a good level thanks to the implementation of various strategic and operational measures. The relatively moderate decline in sales so far will become more pronounced because Zehnder Group's operations are late-cyclical.

Differing sales development in Zehnder's various markets

Sales in the first half of the year totalled EUR 207 million, a decrease of 6% compared to the first half of 2008. The organic and currency-adjusted decrease was 5% and differed according to business segment. Sales were up by a very satisfactory 11% in the comfort ventilation segment. Conversely, sales in the radiator segment fell by 7% and in the AsiaAmerica segment by 22%. Thus the impact of the recession on sales development has been relatively moderate so far because Zehnder Group's business operations are late-cyclical. Sales in the first half of 2009 were largely generated through projects launched before the advent of the economic crisis. The comfort ventilation segment has grown further and now accounts for 27% of total Group sales (2008: 23%). The contribution from the AsiaAmerica region has dropped slightly to some 8%. The radiator segment is still the main sales contributor with just under two thirds of total sales. Sales were marginally below the prior year's level in the Group's two main markets, France and Germany, and also in the Netherlands and in the United States. Particularly in the UK, Spain and Italy there was a huge drop in sales. In other major markets such as Switzerland, Poland and Belgium sales increased noticeably. Business volume in China was clearly below the prior year's level, though this is largely attributable to early deliveries necessary because of government legislation with regard to building activities in Beijing during the Olympic Games. The change in the consolidation matrix had practically no impact on sales development in the first half of 2009. (2)

Operational margins relatively stable thanks to strategic and operational measures

Given Zehnder Group's strong competitive position in its markets, it was possible to increase product prices in some markets. The proportional share of the cost of materials has risen slightly because of changes in the product mix in favour of comfort ventilation. As communicated earlier this year, Zehnder Group implemented various measures to reduce costs. This led to substantial savings, particularly with regard to marketing and administrative costs. At 30 June 2009 the Group employed some 2,900 people, which is just under 6% fewer than in the first half of 2008 and roughly 4% lower than at 31 December 2008. Through the new measures implemented and despite declining sales volume for radiators, the operating EBIT margin remained relatively stable at 7.5% (first half 2008: 8.4%). Consolidated net income for the reporting period amounted to EUR 10 million. In the prior year the Group reported a net loss of some EUR 9 million, which arose as a result of Zehnder's withdrawal from the aluminium radiator business.

Prospects for the second half of the year

It is still extremely difficult to make a forecast for the entire year. Apart from the current uncertainties with respect to future economic developments, the short-term nature of Zehnder Group's operations makes a reliable estimate of its business development all the harder. In the past the Group's sales in the second half of the year tended to be higher than in the first half. Whether this pattern will be repeated in 2009 and how far this seasonal effect will balance out recession-related declining sales is impossible to predict at the present time. Management assumes that there will be a stronger drop in sales in the second half of the year. The various strategic and operational measures, some of which were already implemented in 2008, are already showing results, which is clearly reflected in the figures for the first half of the year. Given the late-cyclical nature of Zehnder Group's operations, 2010 will be a very challenging year. Management does not expect further growth before 2011 at the earliest. However, management is convinced that with Zehnder's leading market position and its recent organizational and operational improvements as well as continuing stringent cost and liquidity control, the Group will come out of the present crisis stronger than ever.

Changes in major balance sheet items

Consolidated equity including minority interests increased from 31 December 2008 to 30 June 2009 by EUR 6.6 million to EUR 159.2 million and thus the capital ratio rose to 46%. Investments of just under EUR 13 million primarily focused on the acquisition of a new sales and administration facility in Beijing and on the completion of new production and development centres at the Group's headquarters in Gränichen, Switzerland and in Reinsdorf, Germany. The net debt rose by EUR 5.0 million to EUR 10.8 million, mainly as a result of the investments made and of a more than proportional decrease of trade accounts payable.

(1) This notice meets the requirements of Swiss GAAP FER 12.

(2) First consolidation of Greenwood (UK) as of 1 Mach 2008; divestment of two companies in France as at 30 June 2008.

René Grieder
Moortalstrasse 1
5722 Gränichen
Switzerland

Chief Financial Officer

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