PWO improves earnings and bolsters equity

Ad hoc announcement according to § 15 WpHG: Annual accounts

Oberkirch, February 13, 2006 – Despite increasingly challenging market conditions, Progress-Werk Oberkirch AG once again met its forecasts in the 2005 financial year. According to preliminary figures, Group sales rose by more than 9 per cent to approx. EUR 220 million (FY 2004: EUR 201.1m). Total output (i.e. net sales plus inventory changes plus work performed by the enterprise and capitalised) increased by 12 per cent to over EUR 221 million (FY 2004: EUR 197.5m). Sales attributable to the Oberkirch location rose by 3.3 per cent to EUR 183 million (FY 2004: EUR 177.1m). The Czech subsidiary UNITOOLS, acquired at the beginning of 2005 and included in the consolidated group as at April 1, 2005, generated sales of close to EUR 7 million over a period of 9 months.

PWO Canada Inc. continued to perform strongly, recording growth in excess of 24 per cent, taking sales to over EUR 31 million (FY 2004: EUR 24.9m). Owing to the encouraging performance of the foreign subsidiaries within the Group, consolidated earnings before interest and taxes (EBIT) increased to approx. EUR 15.8 million (FY 2004: EUR 14.4m). Due to a slight improvement in net finance costs, consolidated earnings before taxes (EBT) rose to approx. EUR 12.6 million (FY 2004: EUR 11.4m), while net profit for the period increased to EUR 7.9 million (FY 2004: EUR 7.1m). This performance was achieved only as a result of the considerable contributions made by all areas of the company, as well as PWO’s customer base. It was due to this support that expenses were counterbalanced over the course of the year, particularly those associated with spiralling raw material prices.

Supported by substantial improvements in productivity, the incisive move towards in-house tool manu- facturing at the company’s unit in the Czech Republic rather than external sourcing, as well as the responsible approach taken by the company’s employees, who agreed, effective from March 1, 2005, to an increase in weekly working time to 37.5 hours at the Oberkirch plant without extra pay, PWO was able to maintain its profitability levels and secure jobs within the Group.

The balance sheet was strengthened significantly as a result of income generated and the successful increase in share capital executed in October 2005. In total, equity rose by approximately EUR 21 million to over EUR 63 million. Of this, EUR 13.8 million was attributable to the increase in share capital. As at December 31, 2005, the equity ratio stood at 41 per cent (FY 2004: 33 per cent). The balance sheet total increased by 22 per cent to approx. EUR 156 million (FY 2004: EUR 128.5m). The acquisition of UNITOOLS is reflected in this figure. Within this context, the overall structure of assets did not change significantly.

The company is not anticipating any noticeable economic upturn in Europe or North America in the current financial year. In view of the more favourable situation within the steel market, PWO expects to see a considerable fall in prices, both in terms of purchasing and sales. As a result, revenue growth is likely to be moderate. The phase-in of series production in the Czech Republic, the start-up of business activities in China as well as market entry in Mexico represent major challenges for PWO in 2006. However, the Management Board is confident that profitability within the Group can be further enhanced over the course of the current financial year.

Contact Information

Bernd Bartmann

Progress-Werk Oberkirch AG

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