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INSIGHT Hamburg, Germany, August 2002 Interim Report June 30, 2002 The German economy has recovered from its low. The recession of early
2001 seems to have been overcome, and slight growth was recorded in
the past few months. However, the mood in the business sector has become
only slightly more optimistic although early indicators do show that
German industry is now on the road to moderate growth. However, it is
necessary to keep in mind that future economic development in Germany
will be dependent upon the situation of the U.S. economy, which is now
one of uncertainty. The German automobile industry is now exhibiting signs to the effect
that stability has set in. At the same time, however, there are no indications
to the effect that the overall market is reviving. In particular, domestic
demand continues to reflect uncertainty on the part of consumers. Due
to thriving export activity, automobile production for the month of
June 2002 was up 5% from the previous year. On the other hand, first-half
automobile production was down 8% from the comparable 2001 figure. First-half revenues of AG reached last year’s very good level and
were up 1.6%. At €17.8 million, operating EBIT for the first six months
of the year fell somewhat short of the comparable figure for the previous
year.
*Before income tax Revenues on target
Despite a difficult economic environment, Phoenix AG continued to
deliver good performance and posted revenues of €573.7 million for the
first half of the year 2002, up 1.6% from a year earlier. At €508.2
million, revenues generated by the company’s core activities were up
from first-half 2002, and revenues from other activities down at €65.5
million. Consolidated revenues showed an increase despite the sale of
the company’s Evergomma location and offset blanket business last years.
After restatement to eliminate the effect of these structural changes,
revenues were up round 5%. Earnings down from previous
year Operating EBIT came to €17.8 million for the first six months of
the year 2002, down €1.4 million from the year-ago figure. This decrease
resulted from higher development outlays in the area of CS Automotive
activities and an increase in the loss incurred by the company’s Other
Activities as compared with the previous year. Holding expenses, including
company-wide projects, amounted to €5.2 million. The EBIT return for
the first half came to 3.1%, down slightly from 3.4% a year ago. Net borrowings
of the Phoenix group decreased in plan by €17.3 million from €341.4
million in first-half 2002 to €324.1 million. This difference resulted
among other things from a decrease in working capital and capital expenditure. Capital expenditure
for the first six months of the year came to €31.8 million, down from
€35.9 million a year earlier. The
following projects represented the company’s investment priorities in
the course of the first six months of the year: ¨ Construction of a production
unit for the Polo in the engine and chassis bearings product area (Comfort
Systems Automotive), ¨ Restructuring of floormat production
in Hamburg (Comfort Systems Automotive) As of June 30,
the Phoenix workforce came to 9,818, which represented a decrease
of 4.4% or 447 positions from year-end 2001. This change was essentially
due to the sale of the Evergomma location. The above figure includes
half of the employees of the company’s Vibracoustic joint venture. Core Activities
Comfort Systems
Revenues generated
by the company’s Comfort Systems (CS) activities, which include
the company’s Automotive activities (Stankiewicz and Vibracoustic) and
Traffic Technology, were up 6.3% from the first half of the preceding
year. Despite a substantial drop in automobile production, Phoenix continued
to achieve a significant improvement in performance in the area of CS
Automotive activities. At €8.0
million, Comfort Systems operating EBIT for the first half of the year
2002 was down 12.1% from the comparable 2001 figure. This was due an
increase in development expense and overhead costs in the Vibracoustic
area as a result of the fact that demand for air springs for a high-volume
car model turned out to be much lower than originally planned. However,
the earnings performance of Stankiewicz showed substantial improvement
in the second quarter. Comfort Systems Automotive activities contributed revenues
in the amount of €230.6 million in first-half 2002, up 7.0% from the
previous year. The performance of acoustic insulation systems for the
underbody of BMW and VW vehicles was encouraging. In the area of Traffic Technology, Phoenix was able to repeat
last year’s excellent performance, with revenues of €40.5 million as
compared with €39.4 million for first-half 2001. However, cutbacks in
production for commercial vehicles and postponement of start-up of production
to fill new orders for rail vehicles had a dampening effect in this
area. Fluid Handling
First-half revenues generated in the area of Fluid Handling,
which includes both Automotive and Industrial activities, were down
from the comparable period last year, going from €173.2 million to €167.7.
This decrease resulted primarily from weakness in the sales to industry. Good first-quarter performance continued into the second three months
of the year, and operating EBIT for first-half 2002 came to €13.8 million,
up a substantial 21.1% from the comparable figure a year ago. The resulted
in an EBIT return of 8.2%, which reflected the excellent position held
by Phoenix in this market segment. With first-half revenues of €107.8 million, down a slight 1.7% from
the comparable figure of €109.7 million a year ago, Phoenix was able
to repeat last year’s encouraging performance in the area of Fluid
Handling Automotive. The slight decrease reflected the sale of the
company’s Evergomma location. Due to the continued popularity of diesel-powered
vehicles, sales performance of turbocharger hoses was especially encouraging. Revenues generated by activities
in the area of Fluid Handling Industry were down 5.7% to €59.9
million for the first half as compared with €63.5 million the previous
year. This resulted primarily from stagnating sales of hoses for oil
exploration, although this segment is showing initial signs of recovery. Conveyor Belt Systems
Conveyor Belt Systems continued to deliver very positive performance.
First-half revenues went from €66.3 million a year ago to €69.4 million,
which represents an increase of 4.7%. Although sales to the mining industry
remained positive, industrial sales were not completely satisfactory
although they were higher that the previous year’s figure. Operating EBIT kept pace with the improvement in revenues and was
up 5.0% from the preceding year to €4.2 million. Further cost-reduction
measures contributed to the increase in operating EBIT. Other Activities
First-half performance in the area of Other Activities fell
short of the previous year’s figure of €69.9 million. Revenues were
down 6.3% to €65.5 million, primarily due to last year’s disposal of
the company’s offset blanket business and persistent sluggishness in
building and construction. Operating EBIT
came to a negative €3.0 million as compared to a negative €0.8 million
for first-half 2001. This disappointing situation resulted from sluggish
activity in the area of building and construction mentioned above, a
less than satisfactory cost structure and an increase in IT expenses. The company’s
Special Products business unit markets profiles and frames, roofing
membrane and rubberized fabrics. Revenues in this area dropped 19.6%
to €36.4 million from €45.3 million a year earlier. However, the sale
of the company’s offset blanket business, which was mentioned above,
contributed substantially to this decrease. Earnings in this area continue
to be negatively impacted by persistent weakness in the building and
construction industry. First-half revenues
from the sale of Compounds were up 7.0% to €22.8 million from
the previous year. With revenues
from unaffiliated customers up to €6.3 million, the company’s Services
business unit achieved a 90.9% improvement in performance for the first
half of the year. Outlook for 2002
The Germany economy is still recovering haltingly, and the economic
situation remains fragile. In addition, substantial stock market losses
will noticeably inhibit private consumption, and the automobile industry
could suffer from a further reduction in demand. In the first half of
the current year, Phoenix AG demonstrated its ability to assert itself
in the marketplace even against the background of a difficult economic
environment. As a result, given the company’s strong position in its
core markets, Phoenix continues to expect revenues to reach last year’s
level and also anticipates an improvement in operating results. Hamburg,
August 2002 Phoenix
Aktiengesellschaft The Management
Board Konrad
Ellegast Phoenix Financial Calendar November
6, 2002: Q3 2002 Financial Results January
2003: Press
Conference Results for the Year 2002 For
further information, please contact: Phoenix
AG, Investor Relations Dept. Phone: +49 (0) 40/7667-1521 Fax: +49 (0) 40/7667-2577 http://www.phoenix-ag.com Information provided by: Mike
Rebbin Marketing
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