Strategy of product and market diversification ensures high sales - profitability further consolidated

Roding, August 01, 2006 – The Mühlbauer technology company, quoted on the Prime Standard and worldwide active provider of system solutions for the TECURITY market, ends Q2 despite the expected weakness in Smart Label with another slight improvement in new orders over the same period of last year (49.3) and managed to raise its order backlog to the record level of EUR 90.2 million at the end of the reporting period.
Sales could – due to project business – not yet fully profit from the positive trend in demand and, with EUR 40.3 million, were slightly down on the comparable value of last year (41.7). As a consequence of the product mix and increased risk measures in inventories, gross profits on sales amounted to EUR 16.9 million over the same period of time – after EUR 18.3 million in the year before. Earnings before interest and taxes (EBIT) generated during the reporting period decreased 11.1% to EUR 8.4 million compared to last year’s EUR 9.5 million and equal an EBIT rate of a respectable 20.9% (22.7). Earnings before taxes (EBT) reached EUR 9.0 million (10.0) and pretax profit margin came in at 22.3% – after 24.0% in the year before. After taxes another EUR 6.1 million (6.4) can be transferred to retained earnings. This equals a ratio of earnings per share of EUR 0.42 (0.44). Over a period of 6 months, the Mühlbauer Group generated a EUR 77.7 million volume in sales, which is 16.2% more than last year (66.9), while the EBIT over the same period of time rose 37.4% to EUR 16.3 million (11.9) and earnings per share improved to EUR 0.81 (0.57).

In particular due to the business-related build-up in inventories, the successive consumption of payments received on orders as well as higher advance tax payments over the year, Q2 free cashflow fell to EUR +2.1 million and was clearly down on the comparable EUR +9.6 million of last year. Over a period of six months, free cashflow stood at EUR +3.6 million – compared to +14.9 in the year before. Accordingly net working capital consequently rose from last year’s EUR 18.6 million to EUR 32.2 million at the end of the reporting period. Over the first six months of the current financial year, the company’s net cash declined, as a result of a 50% increase in dividend payments to shareholders, by EUR 9.6 million to EUR 46.4 million. On June 30, 2006, the equity ratio of 74.0% was 2.2% points down on the previous year (76.2).

In the reporting period the global technology group’s order books posted another slight increase of 2.3% to EUR 50.4 million compared to the relatively high value of last year (49.3). While the SmartID core business worth EUR 26.4 million closed 9.7% down on the same level of last year (29.2) despite the positive trend in demand for TECURITY solutions but curbed by the expected weakness in Smart Label, all other business sectors showed a consistently positive performance: The demand for mature technology solutions in the semiconductor industry was rewarded with a 16.8% order increase to EUR 16.3 million (14.0). The Traceability market also improved significantly. New orders grew 29.2% year-on-year and contributed an order value of EUR 3.6 million (2.8). The business area Precision Parts and Systems posted EUR 4.1 million during the reporting period and climbed 23.8% (3.3) year-on-year. Considering the value of order income acquired during the reporting period, consolidated order books were filled with EUR 88.2 million (85.1) in the first half of the current financial year. For the technology group this means an 3.6% increase compared to the first half of the last financial year. The order backlog until June 30, 2006, amounted to EUR 90.2 million and was 9.7% up on last year’s EUR 82.2 million and has thus formed a solid basis for a positive trend in business.

The strategy of product and market diversification pursued by the company proved once again to be successful. The result is another slight increase in new orders to a total of more than EUR 50 million over last year’s comparable period of time, which was only topped once in the company’s 25 year old history. With a new record level in order backlog worth EUR 90.2 million, the technology company has created a sound base for its further business development. The growth market of ’Smart Label’ is undisputed. Nevertheless, the world market for the manufacture of RFID-Smart Label has been temporarily stagnating for one year because of existing overcapacities as well as delays arising from the implementation of new chip generations. Although there was an improvement in Q2 new orders compared to Q1, 2006, from today’s point of view it cannot be predicted if the desired upswing ot the market will take place in the second half of the year.

In the TECURITY market, Mühlbauer is the only company worldwide capable of developing and offering all required production systems for manufacturing ID cards and ePassports as a one-stop provider. The increasing number of reference projects qualify the company as a reliable partner for even more national governments and authorities. The solution provider considers itself extremely well positioned in order to generate above-average gains in this highly sensitive market for digital security.

Mühlbauer is a global and independent consultant and manufacturer of technologically innovative security solutions in a market segment the company refers to as the TECURITY® market. With approx. 1,500 employees at 26 locations on five continents, Mühlbauer is the leading provider of production systems for the Smart Card industry.
Mühlbauer system solutions are suitable for the manufacture of any card type. They are used in the production of ID cards, ePassports, eVisa, contact and contactless cards, dual interface cards and multimedia cards. The products are, above that, suitable for the manufacture of Smart Labels for the security, supply chain, textile and retail industries.
The complete quarterly report can be downloaded from our Internet site www.muehlbauer.de.

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Josef-Mühlbauer-Platz

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Mühlbauer Holding AG & Co. KGaA

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