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Zumtobel Group reports profitable growth in third quarter

· Revenues up by more than 6% in third quarter
· Profitability further enhanced
· Earnings per share surge from EUR 0.08 to EUR 0.36
· Forecasts for full-year and medium-term planning confirmed

Dornbirn, Austria – In the third quarter of the 2006/07 financial year (1 November – 31 January), the Zumtobel Group was able to maintain the positive trends of the first half-year. All key financial indicators improved. Revenues in the reporting period moved ahead 6% to EUR 296 million, while after adjustment for special results EBIT was approximately 20% up at EUR 20.4 million. On account of extraordinary profit items, net profit showed a disproportionate increase, rising to EUR 16 million. The Zumtobel Group also remains confident about the final quarter and accordingly the Executive Board reaffirmed its forecast for the year as a whole.

Zumtobel Group CEO Dr. Andreas J. Ludwig was very pleased with developments in the third quarter: “In the third quarter the Zumtobel Group was able to pick up exactly where the highly successful first-half of 2006/07 left off. For instance, we succeeded in improving our return on sales by a further 80 basis points. So we are well on the way to attaining our budgeted target of a return on sales of at least 9% and move into double-digit percentages in 2007/08.”

Improvements in both divisions
For seasonal reasons the third quarter is traditionally the weakest quarter of the financial year for the Zumtobel Group. Nevertheless, Group revenues in Q3 rose more than 6% to EUR 296 million, with both divisions making equal contributions to this positive development. The lighting division with the Zumtobel and Thorn brands reported sales revenues up approximately 6% to EUR 223 million, while in line with expectations the TridonicAtco division posted slightly stronger growth as revenues moved ahead 7% to EUR 89 million. Owing to postponements in individual projects and production start-ups in the reporting period, the new LED technologies were not quite able to attain the anticipated medium-term average growth of over 30%, and reported a 20% increase in third-quarter revenues. As forecast at the end of the first half-year, the key DACH region (Germany, Austria and Switzerland) showed a gratifying recovery, reporting 4% growth. Eastern Europe and Asia continued their dynamic progress, each posting revenue growth of over 20%. The only negative aspect was the continuing downturn in revenues in Norway. In cumulative terms, over the first three quarters of financial year 2006/07, the Zumtobel Group reported a rise in revenues of approximately 7% to a total of EUR 921 million.

Further improvement in profitability
As a result of increased revenues on the one hand and the ongoing efficiency initiatives launched by the Zumtobel Group in recent years on the other, the third quarter brought a further improvement in profitability. Return on sales stood at 6.9% in Q3, which is 80 basis points higher than the comparable prior-year figure of 6.1%. The first quarter had brought an improvement of 50 basis points, the second quarter 30 basis points. In the reporting period as a whole, after adjustments for exceptional results, the Group attained an operating profit (EBIT) of EUR 20.4 million. This compares with EUR 17.1 million in the prior-year period. Including exceptional results, which in 2006/07 derived primarily from the optimisation of the Group’s real estate portfolio within the scope of the LITE project, EBIT stood at EUR 21.8 million, compared to EUR 9.2 million in the prior-year period. As in the previous quarters, the financial result continued to improve as a result of the substantial reduction in Group debt. This led to a surge in third-quarter profit before tax from EUR -0.5 million to EUR 16.9 million. After tax, profit stood at EUR 16 million (against EUR 2.8 million in the prior-year period), which equates to third-quarter earnings per share of EUR 0.36 (prior-year period: EUR 0.08). In cumulative terms, the first three quarters generated an operating profit of EUR 87 million, an increase of 40%. Net profit for the first three quarters more than doubled, rising from EUR 33.2 million to EUR 79.3 million. This includes exceptional income of EUR 8.7 million from the sale of the non-core airfield lighting business. In terms of earnings per share, this equated to a rise of 90 euro cents to EUR 1.80.

Balance sheet structure further improved
In the third quarter, the Zumtobel Group continued to improve its key financial indicators, in some cases substantially. A strong operating performance and the capital increase realised in the course of the IPO ensured that, since the end of the last financial year (30 April 2006), the Group’s equity ratio has risen from 20.7% to 40.4% (31 January 2007). Over the past nine months, net liabilities have been reduced from EUR 357.4 million to EUR 213.2 million. Owing to the positive development of business, since 30 April 2006 the size of the workforce has increased from 7,182 to 7,447 full-time employees (per 31 January 2007).

Key strategic steps taken
In the third quarter the decision was taken to build a new luminaire production plant in Spennymoor, England. The aim here is to maintain a presence in the Zumtobel Group’s largest single market by setting up modern, efficient and flexible local production operations. The move also involves the sale of the site of the existing factory in Spennymoor, which has been redesignated as residential real estate. This will enable the Group to realise a large part of the planned positive impact on earnings in the context of its LITE real-estate portfolio optimisation project. The transfer of production to the new plant represents the biggest challenge of the coming financial year and is scheduled for completion by the end of 2007/08. With the acquisition of the German company my-tronic GmbH in January 2007, the Zumtobel Group further expanded its expertise in the high-growth LED sector. In the LED field, Q3 also brought the largest single order to date – for the Stadion Center shopping mall in Vienna – worth over EUR 1 million. By financial year 2010/11, the Group’s  LED business is expected to generate revenues of around EUR 100 million.

In March 2007, the TridonicAtco Division won two DALI Awards, confirming its innovation leadership in the components sector. DALI stands for Digital Addressable Lighting Interface, and every year awards are presented for the most innovative products based on DALI. TridonicAtco is the European market leader in lighting control systems and since 1999 has made decisive contributions to the development of this international interface standard. In view of the current debate over enhanced energy efficiency, the use of lighting control systems is becoming more widespread across the globe. 

Looking to the coming years with confidence
Given the continuing positive development of its activities in the third quarter, the Zumtobel Group is able to reaffirm its earnings targets for 2006/07. These envisage a return on sales of over 9% for the year as a whole, which compares with approximately 8% in the previous year. In the final quarter, the relative level of dynamic growth reported in previous quarters will fade as a result of the exceptionally strong fourth quarter in the previous year. The Executive Board expects to see fourth-quarter revenues at around the average of the first three quarters. For the coming financial year 2007/08, the Group’s medium-term planning envisages a return on sales of over 10% and, given the continuing robust economic climate and the positive development of business in the current financial year, this target remains unchanged.

Key indicators, Zumtobel AG
(in EUR million)
(3rd quarter figures: 1 November 2006 – 31 January 2007)

3rd Quarter  2005/06   3rd Quarter 2006/07 Change
Revenues 278.0 295.6 +6.3% 
Adjusted EBIT (1) 17.1 20.4 +19.3% 
EBIT (reported) 9.2 21.8 +137.0% 
Profit before tax (0.5) 16.9 n.a. 
Net profit (2) 2.8 16.1 +475.0% 
Earnings per share (EUR) (3) 0.08 0.36 +305.0%
Return on sales (4) 6.1% 6.9% +80bp (5)

  1st-3rd Quarter  2005/06 1st-rd Quarter   2006/07 Change
Revenues 864.3 921.2 +6.6% 
Adjusted EBIT (1) 77.0 86.9 +12.9% 
EBIT (reported) 62.5 87.2 +39.5% 
Profit before tax 33.6 68,1 +102.7% 
Net profit (2) 33.2 79.3 +138.9% 
Earnings per share (EUR) (3) 0.90 1.80 +100.0%
Return on sales (4) 8.9% 9.4% +50bp (5)

   31.01.2006  30.04.2006


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(1) Profit before financial results and income tax
(2) After minority interests
(3) Non-diluted, related to 36.8 million shares in circulation on 31 January 2006 and 44.0 million / shares on 31 January 2007
(4) Adjusted EBIT divided by revenues
(5) Basis points
(6) Financial liabilities less liquid funds

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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 almost 7,500 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, while the two start-up companies, LEDON and LEXEDIS, look after LED operations. The financial year of the Zumtobel Group commences on 1 May and ends on 30 April.

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