First half year results for the 2000/01 business year

BERU posts double-digit growth in sales and adjusted profit after for the first half-year 2000/01

Ludwigsburg, November 23, 2000 ¬ó In the first half-year 2000/01 BERU increased Group sales by 16.2% from DM 210.1 mn to DM 244.2 mn. The manufacturer of diesel cold-start technology, ignition technology and sensor technology and electronics lifted adjusted profit after taxes by 23.8% to DM 25.0 (20.2) mn. Investing more than DM 65 mn during the current business year BERU expands its activities in automotive electronics and sensor technology. For the full business year management expects the positive trend to continue, as BERU is benefitting from high growth rates in the diesel cold-start technology and automotive electronics markets.

Consolidated sales increase by 16%

Consolidated sales in the first half-year of 2000/01 (April,1 to September, 30, 2000) have increased sharply. BERU raised sales despite a weak German market in which passenger car new registrations declined by 11%. The companyÕs acquisition policy has contributed towards this achievement. Revenues rose by 16.2% to DM 244.2 (210.1) mn. The acquisitions carried out in 1999 Mexico (ignition technology), Korea and Spain (hybrid electronics) exceeded expectations and made an overall contribution of DM 19.3 mn towards sales.

Rapid pace of growth continuing in diesel cold-start technology

In a market showing continuing rapid growth, the company increased its sales with diesel cold-start technology products by 12.5% from DM 110.0 mn to DM 123.8 mn. Whilst BERU was able to achieve an increase in the OEM business in line with the market, the after-market performed slightly below expectations. In the USA there was a sharp drop in the number of new commercial vehicle registrations. This prevented further growth in the sale of flame-start systems for large diesel engines. By contrast, BERU benefited in the USA to a considerable extent from the continually rising share of diesel-powered vehicles in the smaller commercial vehicle and pick-up range in the popular Light Truck Segment. With a 50.7% share of sales the world market leader in diesel cold-start technology once again generated more than one in every two DM in sales in this business area.

Ignition technology ahead of forecast

In the ignition technology for petrol engines business field BERU increased its sales by 21.4% more than in the previous year with a total of DM 90.1 (74.2) mn. Here again, the positive effects from the process of internationalisation were evident. The consolidation of the firm of BERU S.A. de C.V. in Mexico which primarily manufactures ignition components for GM, VW and Nissan, made an important contribution towards this result. Thanks to new product start-ups and an expansion of the sales with DaimlerChrysler and Porsche, the company was able to increase sales with ignition coils by 27%. Even without the contributions from acquisitions BERU achieved growth of more than 3% despite the weak German market.

Growth in sensor technology and electronics

In the sensor technology and electronics business field BERU increased sales by 16.8%. Revenues rose from DM 25.9 mn to DM 30.3 mn. This growth area of the future already accounts for 12.4% of consolidated sales. Electronic tire pressure monitoring systems contributed DM 5.3 mn towards sales. The medium term aim of the management is to extend the OEM business beyond the luxury class models to mid-range vehicles. In the US, the law initiative making the introduction of tire monitoring systems obligate for 2004 offers further growth potential.

High profitability

In conjunction with the high level of capacity utilisation the company and despite the massive expansion in electronic activities and personnel in the area of electronics development the company was able to maintain the operating margin (earnings before interest and taxes to sales) at approximately the same high level of the previous year at 16.8 (17.2)%. Increased output as well as the initial consolidation of the subsidiaries Korea, Spain and Mexico contributed towards the number of employees increasing by 18.3% to 1,991 world wide. As anticipated, personnel expenses to DM 75.6 (62.4) mn. The personnel expenses portion was 31.0% compared with 29.7% in the previous year. Material costs increased by 16.8% to DM 80.6 (69.0) mn. The share of material costs remained virtually unchanged at 33.0% (32.8%). The company was able to offset the higher costs for the purchase of components for electronics production by a reduction in the costs of materials in the other areas. Other operating expenses, which include the costs for marketing and distribution as well as operation and administration, rose at a disproportionately lower rate than the increase in sales by 12.8% from DM 36.7 mn to DM 41.4 mn.

High investment in »Formela BERU«

The high level of investment being made by BERU in the expansion of its future activities in the area of diesel cold-start technology and automotive electronics, is reflected in the depreciation on intangible assets and property, plant and equipment which rose from DM 16.0 mn to DM 19.4 mn. For the full year BERU expects to invest between DM 65-70 mn as part of the implementation of the corporate strategy »Formula BERU« = Diesel + Electronics, with these funds flowing into the extension of the production capacities for diesel cold-start technology and expansion of the electronics activities at the new Bretten site in Germany.

EBIT margin maintained at high level

The company was able to increase the operating result by 13.9% to DM 41.1 mn , adjusted for the one-off income of 9.7 million DM before taxes from the sale of the stake in the Texas-based sensor manufacturer Optek, Inc. in the previous year. The company managed to maintain the operating margin (EBIT margin) at almost the same high level as the previous year, 16.8%, compared with 17.2% in the previous year.

Adjusted pre-tax result increased by 19%

The financial result, at DM 4.4 mn, showed a significant improvement, more than doubling over the previous year´s figure of DM 2.0 mn. Consequently, pre-tax profit, adjusted for the Optek sale in the previous year, rose by 19.4% reaching DM 45.5 (38.1) mn. The consolidated tax portion was once again lower than in the previous year at 45.1 (47.3)%. In this context, the group benefited from its increasingly international structure. Adjusted by the income of DM 5.0 mn after tax as a result of the Optek sale, profit after taxes was 23.8% higher rising to DM 25.0 (20.2) mn.

Earnings per share up 19%

With adjustment for one-off and extraordinay costs and income, BERU reported a DVFA/SG result of DM 24.0 mn in the first half of 2000/01 compared with DM 20.2 mn in the previous year. The company therefore increased the earnings per share by 18.8% to DM 2.40 (2.02).

Diesel share in Europe will capture almost 50% in 2006

Ulrich Ruetz, chairman of the board of BERU Group, expects sales to increase by 6-7% through organic growth and income to grow in line with, measured against the DVFA-earnings. Additional sales is to be created through further planned acquisitions.The upward-revised forecasts for the number of diesel passenger car new registrations in Europe by the year 2006 also look promising. Previous market studies had assumed that diesel´s market share in Western Europe would rise to 33-34% by 2005. Automotive Industry Data, London now anticipates that the figure will increase to 47-48% by the year 2006. As the world market leader in diesel cold-start technology BERU will also continue to benefit from the anticipated market growth through the after-market business. The acceptance of the diesel-powered engine is receiving an additional boost from the fact that the technology is now also making inroads into the luxury car range.

BERU Aktiengesellschaft, Konzern Gewinn- u. Verlustrechnung
1. Halbjahr 2000/01 (1. April ¬ó 30. September 2000)

in DM mn	1st half 2000/2001	1st half 1999/2000	Change in %
Sales	244.2	210.1	16.2
Change in inventory of finished products and work-in-process	8.4	7.8	7.7
Other own work capitalised	0.6	0.3	100.0
Other operating income*	4.9	11.7	-58.1
Material costs	80.6	69.0	16.8
Personnel expenses	75.6	62.4	21.2
Depreciation	19.4	16.0	21.3
Other operating expenses	41.4	36.7	12.8
Operating profit (EBIT)	41.1	45.8	-10.3
Financial result	4.4	2.0	120.0
Income from ordinary activities	45.5	47.8	-4.8
Pre-tax profit	45.5	47.8	-4.8
Taxes on income**	20.5	22.6	-9.3
Profit after taxes (PAT)***	25.0	25.2	-0.8
DVFA/SG-earnings	24.0	20.2	18.8
Earnings per share (in DM)	2.40	2.02	18.8
* including sale of Optek		9.7
** taxes on Optek		4.7
*** PAT excluding sale of Optek		20.2

Cash Flow Statement of the Group

in DM mn	30/09/2000 2000/2001	30/09/1999 1999/2000
Net income	25.0	25.2
Depreciation on intangible fixed assets and tangible assets	19.4	16.0
Increase in special item for investment subsidies	0.2	0.3
Increase in inventories	-27.1	-23.7
Decrease in trade accounts receivable	1.7	2.0
Decrease of other assets and prepaid expenses	3.6	-0.3
Decrease in other accruals	-14.2	-15.9
Increase in trade accounts payable	9.8	0.1
Increase in other liabilities and accrued expenses	8.3	1.5
Change in receivables from and liabilities to affiliated companies	-2.4	1.1
Inflow of funds from operating activities	24.3	6.3
Payments for investments in fixed assets	-30.1	-32.9
Outflow of funds for investment activities	-30.1	-32.9
Changes in liabilities due to banks	20.0	14.1
Dividends paid out	-18.9	-10.0
Inflow of funds for financing activities	1.1	4.1
Effective changes in overall funds	-4.7	-22.5
Total funds at beginning of period	153.6	157.7
Total funds at end of period	148.9	135.2

Group Cash flow

in DM mn	30/09/2000 2000/2001	30/09/1999 1999/2000
Net income	25.0	25.2
Depreciation	19.4	16.0
	44.4	41.2

Corporate background: BERU group is a listed public company since October 1997. The company is the leading manufacturer of diesel cold start systems with an estimated worldwide market share of 40% for glow plugs. In the field of ignition technology for gasoline engines BERU is one of the four major manufacturers in Europe. The company also produces suppressor devices, sensors, ignition systems for the oil and gas burner industry as well as electronic controlling devices. Almost all OE-manufacturers of automobiles, commercial vehicles and engines are BERUÕs customers. The companyÕs headquarters are located in Ludwigsburg.