Bergheim, Salzburg, 25 February 2009

The PALFINGER Group is looking back on an ambivalent year. In the first half double-digit organic growth was still reported, whereas the effects of the adverse economic environment became clearly noticeable in the second half. The Group’s strong starting position and the acquisitions that it carried out still allowed revenues to go up by 14.3 percent to EUR 794.8 million for 2008.

The development of earnings is an even stronger reflection of the economic environment. While earnings were pleasing in the first half, they did not increase in the second, with EBIT falling from EUR 99.6 million to EUR 69.1 million in 2008. The accounting rules relating to acquisitions and the changed weighting of the products within the Group – the shift from cranes to hydraulic systems – as well as the decline in the European crane business in the second half contributed to this trend.

In the fourth quarter 2008 PALFINGER recorded negative quarterly results. Apart from business development, this result primarily reflects impairment losses of EUR 6.4 million and the costs for the Group’s redundancy compensation plan in the amount of EUR 3.1 million. Without these effects, PALFINGER would have reported a positive result in this quarter in spite of the measures taken to reduce capacities.

The EBIT margin, still pleasing at 8.7 percent as compared to 14.3 percent in the previous year, needs to be seen in the light of the measures taken in the fourth quarter and also acquisitions, which due to the purchase price allocation and integration costs had a negative impact on the Group’s earnings.


Significant changes
For PALFINGER 2008 was dominated by intense acquisition activities. The takeover of the German MBB Group at the end of 2007 made PALFINGER the global number two in tail lifts. In 2008 it contributed EUR 61.7 million to revenues. In August PALFINGER took over the ELEVANT access platform unit of the German WUMAG GmbH, and through the acquisition of Omaha Standard in October service bodies specific for the region were added to the product portfolio in North America. With a contribution of EUR 94.4 million to revenues, these acquisitions significantly added to growth and a further strengthening of the PALFINGER Group.

In 2008 PALFINGER completed its comprehensive three-year investment programme, which besides current replacement investments comprised expansion investments in the amount of EUR 80 million. While in 2007 the programme’s focus was on capacity expansion, the first priority in 2008 was to exploit rationalisation potentials by means of an improvement of processes and further quality enhancements.

In the first quarter 2008 PALFLINGER formed a new segment called VENTURES, which comprises all strategic initiatives of the Group. The objective is to guarantee a focus on the targeted exploitation of growth opportunities of the PALFINGER Group.

The current reduction of the order backlog and the noticeable decline in market demand in the course of 2008 were first absorbed thanks to the flexible structures in place at PALFINGER. After already having laid off temporary workers, the further deterioration of the economic climate prompted management to cut jobs in the fourth quarter in order to be prepared for the expected trough in 2009. A redundancy compensation scheme was implemented for the 96 employees of Austrian sites who were affected by these job cuts. Until further notice, short-time work was introduced for the majority of employees in Austria, taking effect from January 2009 onwards. These measures were taken on the assumption that a recovery would take place in the medium term in which case operational output may quickly be increased by around 20 percent.

Assets and finances
Equity increased by 5.0 percent as compared to the previous year, up to EUR 309.8 million; the equity ratio amounted to 48.5 percent. The gearing ratio went up against the background of the acquisitions made by the Company and the investment programme, but at 53.8 percent, up from 26.7 percent in the previous year, it is still at a very low level.

Cash flows from operating activities amounted to EUR 32.6 million, compared to EUR 53.0 million in 2007. The decline was mainly due to fewer investment activities as compared to 2008, the development of business throughout the year, as well as income tax payments. In 2008 the acquisitions that were carried out were to a lesser extent financed from operating cash flows, which resulted in cash inflows from financing activities. This was also reflected in a decline in free cash flow from EUR – 23.2 million to EUR – 39.5 million in the 2008 financial year.

In accordance with PALFINGER’s dividend policy the Management Board will propose to distribute a dividend of EUR 0.39 per share for 2008 (previous year: EUR 0.70). Relating to the average price of the PALFINGER share in 2008 this corresponds to a dividend yield of 2.1 percent.

The reduction in capacities in the second half of the year resulted in an increase in tied-up capital. In this connection the return on capital employed (ROCE) went down to 13.1 percent. Reducing inventories to adjust to the changed markets will form a material challenge for 2009.


Outlook
The expected business performance in 2009 has to be seen against the background of the further development of the overall economy. The well-established regional and product-oriented position as well as the sound financial basis of the PALFINGER Group will prove to be a substantial competitive advantage in this uncertain market environment.

Management proceeds on the assumption that a decline in revenues in the crane business will be compensated in part by the acquisitions carried out by the Group. As far as income goes, 2009 will clearly fall short of the 2008 period under review. This has to do with the fact that the newly acquired companies operate in product areas that are characterised by lower margins than the crane business. In addition, the demand for cranes will presumably continue to be weak, which will have a clear impact on results.

In the fourth quarter 2008 a project for sustainably strengthening the earnings and finance structure of the PALFINGER Group was initiated. Its fundamental pillars are savings in fixed costs, process improvements, revenue increases, and measures to reduce the capital employed. However, a potential backing of dealers and suppliers of strategic importance may very well increase the capital tie-up. Against this background as well as in light of acquisition opportunities that present themselves, plans are underway for putting the finance structure on a longer-term basis.

Management is in the process of preparing a bond emission. With a volume of EUR 50 million these bonds are to be used for a long-term refinancing of existing current liabilities and for using further growth opportunities. The interest shown by investors confirms the strength and potential of the PALFINGER Group. Furthermore, very recently the Company acquired a 40-percent share in the Romanian supplier Nimet Srl, a company that currently achieves approximately one fourth of its revenues with the production of chrome-plated components for PALFINGER.

Against this backdrop Herbert Ortner, CEO of PALFINGER AG, is still optimistic and remarks, “We cannot withdraw from our economic environment, but our strength is shown in the numerous opportunities that we see and are also able to make use of. Apart from adjusting structures and processes to future market trends, we are clearly committed to the objective of gaining further market shares and actively participating in the consolidation process of our industry.”

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About PALFINGER AG
For many years PALFINGER has been one of the world’s leading manufacturers of hydraulic lifting, loading, and handling systems. As a multinational group headquartered in Salzburg, the Company’s 4,600 staff generated total sales of EUR 794.8 million in 2008.

The Group has production and assembly facilities in Europe, in North and South America as well as in Asia. The pillars of corporate strategy comprise innovation, and the further internationalisation and diversification of products and services. PALFINGER is regarded not only as the market leader, but also the technology leader, in the global market for hydraulic knuckle boom cranes. PALFINGER is always in proximity to its customers due to its over 4,000 sales and service centres located in over 130 countries across five continents.