Strong sales growth in 2006

    Gränichen, Switzerland, January 26, 2007. – Zehnder Group, with international operations in the indoor climate sector (radiators and comfort ventilation systems), reported total sales of EUR 426 million(1) for fiscal 2006 (EUR 384 million in 2005), an increase of 11 percent.

    This sales growth was above expectations, and may well be partially attributable to the mild weather conditions prevailing up to the end of the year.  Sales growth in 2006 was broadly based and, with the exception of France, all countries and product groups contributed. Italy, the U.K., the United States, China and the Iberian Peninsula reported above-average growth rates as did several smaller markets such as Austria, Poland and Russia. For the first time in ten years sales revenues were up in Germany which, together with France and Italy, is one of the Group's three largest markets. Conversely, development of sales revenues in the Benelux countries was sluggish. In Switzerland as well as in Germany there was an above-average increase in sales of comfort ventilation systems.

    In terms of volume, sales growth was particularly strong for the aluminum radiator product group and for overhead heating and cooling systems.

    Of total growth, 9 percentage points are attributable to internal growth. The companies acquired in 2006 contributed a further 2 percentage points.

    In mid year management had assumed that the very good prior year's result (net profit in 2005: EUR 28.1 million(2)) would not be reached because of cost-related temporary pressure on margins for aluminum radiators. Fortunately the forecast decline in earnings for aluminum radiators was balanced out by higher earnings for other product groups. Thus management can revise its profit forecast for 2006 upwards, and is assuming that net profit will at least be at the same level as in 2005.

    Since January 2005 the company has on several occasions published information on the planned restructuring measures to be implemented at its French production plant in Vaux.

    After a long period of inadequate capacity utilization it was decided to adjust personnel numbers by a maximum of 20 percent, and to do this in line with social compatibility considerations. For political reasons, the unions and employee representatives unduly delayed the implementation of these measures. In December 2006, as a result of pressure brought to bear by the plant's workforce, the unions and employee representatives called off their 18-month-old policy of applying delaying tactics. Thus the reorganization measures can now be implemented.

    (1) provisional
    (2) incl. third-party interest

    René Grieder
    Moortalstrasse 1
    5722 Gränichen

    Chief Financial Officer

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