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Quarterly Report - Zumtobel Group sustains Pace of Growth in first Quarter

• Sales revenues up 6.5% in first quarter
• Further marked improvement in EBIT margin
• Net profits for Q1 more than doubled
• Additional investments in future growth
• Further growth in revenues and earnings anticipated for full 2006/07 financial year

Dornbirn, Austria – During the first quarter (May to July) of the current financial year the Zumtobel Group posted a 6.5% increase in revenues, thereby sustaining the pace of growth registered in the previous year when the Austrian lighting group reported revenue growth of 6%. First quarter revenues showed a marked rise from EUR 290.4 million in the prior-year period to EUR 309.3 million. The Zumtobel Group also recorded further substantial growth in first quarter earnings, as Group EBIT moved ahead to EUR 31.1 million, compared to EUR 21.4 million in the first quarter of 2005/06, an increase of 44.9%. Net profit for the current reporting period more than doubled to EUR 27.6 million.

Dr. Andreas J. Ludwig, Chief Executive Officer of the Zumtobel Group, was delighted at the continued growth: “The increase in revenues over the first three months clearly shows that the growth pattern established in the previous year has now stabilised. While this development was supported by a favourable market environment, our own strategic growth initiatives in new markets, our innovative technologies and our new product applications also made a substantial contribution to growth. One particularly rewarding aspect is that we have also been able to post a further improvement in earnings, which surged ahead in the first quarter.”

Growth markets show dynamic development
Broken down by region, it was above all the defined growth markets that showed dynamic development: in comparison to the first three months of the 2005/06 financial year, the Zumtobel Group registered revenue growth of 22.5% in Eastern Europe and 32.8% in Asia during the first quarter of 2006/07. In its core high-revenue German-speaking markets too, the Zumtobel Group posted sustained growth, as revenues for the DACH region (Germany, Austria, Switzerland) reached EUR 74.3 million in the first quarter, which equates to an increase of 5.9%.

A breakdown of revenues by division reveals that both divisions of the Zumtobel Group once again contributed to growth: the lighting segment with the Zumtobel and Thorn brands posted revenues of EUR 231.5 million for the first quarter, an increase of 3.3%, while the TridonicAtco Division reported a pronounced 14.8% rise in revenues, which totalled EUR 95.4 million. This was due not least to the ongoing replacement of magnetic ballasts by innovative electronic ballasts and higher market prices in the magnetic sector. In the LED sector too – a key technology of the future for the lighting industry – the Zumtobel Group was able to enhance its position as LED revenues increased by approximately 30% in the reporting period to reach EUR 4.7 million.

Seasonal trends favour improved earnings
The marked 44.9% increase in EBIT is based on a steady improvement in operating profit and the scheduled termination of non-recurring expenses, as no restructuring expenses are planned for the current financial year. EBIT for the current reporting period shows an improvement of roughly 12% over the comparable prior-year period after adjusting the latter for non-recurring effects in the amount of approximately EUR 6 million.

As CEO Andreas Ludwig confirmed, with this level of earnings growth the Zumtobel Group is right on target:  “We are very pleased to have achieved a further significant improvement in results with an EBIT margin of 10.1% for the reporting quarter. That brings the Group substantially closer to its mid-term goal of recording a two-digit EBIT margin for the full financial year. That said, the seasonal nature of business in the lighting industry must also be taken into account. We generally have two quarters with strong sales at the start of the financial year, followed by a significantly weaker third quarter (November to January) and a recovery during the last three months of the year. On this basis, and assuming the economic environment remains favourable, we expect to reach our goal of realising a full-year two-digit EBIT margin on schedule in 2007/08.”

Improved financing structure
The balance sheet for the first quarter also reveals substantial improvements in the financing structure of the Zumtobel Group. Thanks to the increase in capital in the context of the initial public offering on May 12, 2006 and the positive development of earnings, the Group’s equity ratio has risen from 18.2% on July 31, 2005 to a current level of 38%.

Chief Financial Officer Thomas Spitzenpfeil welcomed the Group’s enhanced financing structure: “Along with the capital increase, the improvement in operating profit as a result of increasing revenues and cost-cutting restructuring measures has led to a significant improvement in the Group’s financing structure. In terms of balance-sheets ratios we are now very well placed to further enhance our position as a global player in the lighting industry through targeted investments in organic and external growth.”

Employee numbers also reflect the positive development of the Austrian lighting group: on July 31, 2006, the Zumtobel Group employed 7,246 staff (FTE = full-time equivalent) compared with 7,130 FTE one year earlier. This 1.6% increase in the payroll is largely due to the expansion of production capacities in low-wage locations, although employee numbers in Austria and Germany have also remained very stable.

Investments in the future
In order to stabilise growth throughout the financial year, the Zumtobel Group is continuing to invest in its long-term growth strategy. The development of new products across both divisions as well as in the LED segment is particularly important in this respect. This accelerated development activity is also reflected in research and development costs for the reporting period, which – including capitalised development expenses – increased from 2.7% of revenues in the comparable prior-year period to 3.1% for the first three months of 2006/07. The costs associated with efforts to access new growth markets in Eastern Europe and China and improve the qualifications of the Group’s sales force are reflected in the increase in sales-related costs. One example of these efforts is the “Thorn Academy of Light“, which was initiated during the first quarter of 2006/07 to strengthen training programmes for Thorn sales staff. The expansion of production capacities at low-wage locations is also proceeding on schedule. The Group’s new luminaire plant in Romania will commence production operations in October at the same time as production is discontinued at the Tettnang plant in Germany.

Outlook for the 2006/2007 financial year
The Executive Board of the Zumtobel Group expects to be able to sustain revenue growth over the full 2006/07 financial year. However, the growth rates for the remaining three quarters are expected to fade slightly on account of the surge in growth rates in the second half of the previous year. In terms of operating profit, the Board expects to see substantial further progress towards the corporate goal of realising a two-digit EBIT margin over the full financial year, which is due to be met in the 2007/08 financial year.

The Zumtobel Group at a glance:

 Period Q1*_July_06   Q1_July_05  FY**_2005/06
 Revenues (in EUR millions)  309.3  290.4  1,184.2
 EBIT (PY** adjusted)  31.1  21.4 (adj. 27.6)  86.1
 as a % of revenues  10.1%  7.4% (adj. 9.5%)  7.3%
 Net income  27.6  13.0  43.6
 Net debt  234.0  432.9  356.1
Equity 410.3 187.8 223.7
as a % of assets 38.0% 18.2% 20.7%
Employees (FTE***) at end of reporting period 7,246 7,130 7,212

*Q1: first quarter (May to July)
**FY: financial year (May to April); PY: previous year
***FTE: full-time equivalent

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Investor Relations
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The Zumtobel Group – global market leader in the lighting industry

The Zumtobel Group, based in Dornbirn in the Vorarlberg region of Austria, is one of the few global players in the lighting industry. The Group, which started life as Elektrogeräte und Kunstharzpresswerk W. Zumtobel KG in 1950, today employs a workforce of over 7,200 and in the 2005/06 financial year posted revenues of EUR 1,184.2 million. Under the leadership of its Executive Board of Dr. Andreas J. Ludwig (CEO) and Thomas Spitzenpfeil (CFO), the Group today comprises two subgroups. Zumtobel Lighting Division, the luminaire business, includes the Thorn and Zumtobel brands along with their shared production network, International Lighting Technologies. The TridonicAtco Division handles the lighting components side of the business. The financial year of the Zumtobel Group commences on May 1 and ends on April 30.

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