Demag Cranes Shows Significant Increase in Earnings after Three Quarters

Düsseldorf,   09. August 2007

  • Cumulative Group EBIT increases by 18.9 percent
  • Cumulative Group order intake up 13.5 percent
  • Cumulative Group sales grows by 8.4 percent
  • Uneven development in third quarter due to negative impact in Port Technology segment
  • Port Technology segment: intensive review of manufacturing costs initiated
  • Port Technology segment: unexpectedly high order intake at the beginning of the fourth quarter
  • Outlook: adjusted forecast announced on 13 July 2007 confirmed

In the first nine months of financial year 2006/2007, the results of Demag Cranes Group were significantly higher over those in the prior-year period. Adjusted Group EBIT was up by 18.9 percent. The order situation continues to be strong. At the end of the third quarter, Group order intake was up 13.5 percent over the prior-year figure. Group sales went up by 8.4 percent in the first nine months thanks to the continuing good development of business in the Industrial Cranes and Services segments.

The business of the Demag Cranes Group saw uneven development in the third quarter of financial year 2006/2007. On the one hand, the Industrial Cranes and Services segments produced sound results; the reported key figures showed a substantial improvement over the prior-year figures. On the other hand, the Port Technology segment with its high manufacturing costs and transport hold-ups had a negative impact on the adjusted Group EBIT.

Q3: Group Order Intake Up by 19.4 Percent thanks to High Demand in All Segments
The order intake in the Group saw a very positive development in the third quarter. Compared to the third quarter of the prior-year, the order intake increased solely thanks to organic growth by 19.4 percent to EUR 295.3 million. All three segments contributed to this positive development. The order intake in the Industrial Cranes segment grew in the third quarter in a year-on-year comparison by 31.5 percent to EUR 148.2 million due to strong demand for the standard and process crane product lines. At EUR 72.0 million, order intake in the Port Technology segment was up by 11.5 percent over the previous year. This growth is attributable, in particular to the core product, mobile harbour cranes and to high customer acceptance of the new Generation 5 cranes. The Services segment continued to see a positive trend with order intake growing by 7.3 percent to EUR 75.0 million. In particular, the demand for spare parts and refurbishments remained at a high level.

Q3: Sales Up by 11 Percent thanks to Strong Growth in Industrial Cranes and Services Segments
Group sales in the third quarter climbed 11.0 percent to EUR 276.2 million in a year-on-year comparison. In the first nine months, sales went up by 8.4 percent to EUR 773.8 million. In the third quarter, the Industrial Cranes segment contributed considerably to this positive development showing a sales increase of 12.6 percent to EUR 119.8 million. Essentially, all product lines saw significant growth. Sales in the Port Technology segment only grew slightly in a quarterly year-on-year comparison by 2.1 percent to EUR 79.0 million. This slower-than-expected development is mainly attributable to transport bottlenecks on the global market, causing delays of sales bookings due to hold-ups in deliveries. Sales in the Services segment were up by 19.2 percent to EUR 77.5 million at the end of the period under review. Spare parts and especially refurbishments are still the main business drivers.

Q3: Adjusted EBIT Affected by Higher Manufacturing Costs in Port Technology Segment
At Group level, adjusted EBIT dropped by 11.4 percent to EUR 21.2 million in the third quarter, largely due to the negative impact in the Port Technology segment. In the first nine months, the cumulative figure went up by 18.9 percent to EUR 65.2 million. At segment level, adjusted EBIT in the Industrial Cranes segment went up 42.5 percent to EUR 5.5 million in a quarterly year-on-year comparison. This was mainly attributable to the positive development in the standard cranes product line. In the Port Technology segment, adjusted EBIT plunged, amounting to minus 2.7 million euros. This is caused by higher manufacturing costs for our Generation 5 mobile harbour cranes and delays in sales bookings in connection with transport bottlenecks. In the Services segment, the EBIT in a quarterly year-on-year comparison soared by 50.0 percent to EUR 18.4 million.

Port Technology Segment: Intensive Review of Manufacturing Costs Initiated
Each of the Generation 5 performance classes is being thoroughly reviewed in terms of their design and equipment in order to achieve further optimisation with regard to the related manufacturing costs. In particular, the degree of standardisation and the procurement costs are being examined to improve flexibility with respect to the sales mix and to achieve lasting cuts in manufacturing costs without prolonging delivery lead-times. The continuing high demand for Generation 5 mobile harbour cranes indicates that this product line has been very well received by the market. As at 30 June 2007, Generation 5 units already accounted for more than 70 percent of mobile harbour crane sales. As at 31 December 2006, this figure was approximately 30 percent. The CEO of Demag Cranes AG, Harald J. Joos, stresses, “We are working hard on a set of action plans to achieve lasting cuts in manufacturing costs in the Port Technology segment. I am confident that we will resolve the current issues and that we will then return to significantly higher profitability in this segment.”

Port Technology Segment: Unexpectedly High Order Intake at the Beginning of the Fourth Quarter
The Port Technology segment has extraordinarily generated an unexpectedly high monthly order intake of some EUR 50 million at the beginning of the fourth quarter. Orders have been received for mobile harbour cranes of all generations and models. The average order intake in the Port Technology segment is usually some EUR 25 million per month. CEO Joos emphasises, “The excellent order situation in the Port Technology segment underscores, in particular, that the market for mobile harbour cranes is continuing to grow and that our products are very well received."

Outlook: Adjusted Goals for Financial Year 2006/2007 Confirmed
The Management Board of Demag Cranes AG adjusted the annual forecast for financial year 2006/2007 on 13 July 2007. Based on this forecast, we expect Group sales of EUR 1,040 million to EUR 1,070 million, an adjusted EBIT of some EUR 93 million and an adjusted Group EBITDA of some EUR 113 million to be achieved. We will publish the financial statements for financial year 2006/2007 on 12 December 2007. The Annual Press Conference and the Analysts’ Conference will be held in Dusseldorf.

About Demag Cranes:
Demag Cranes AG is one of the world’s leading providers of industrial cranes, crane components, harbour cranes and port automation technology. Services, in particular maintenance and refurbishment services, are another key element of the Group’s business activities. The Group is divided up into the three segments Industrial Cranes, Port Technology and Services and has the strong and established “Demag” and “Gottwald” brands. Demag Cranes sees its core expertise in the development and design of technologically advanced cranes and hoists, as well as automated transport and logistics systems in ports, the provision of services for these products and the manufacture of high-quality components.

As a global supplier, Demag Cranes manufactures in 16 countries on five continents and operates a worldwide sales and service network that is present in over 60 countries through its subsidiaries, representative offices and joint ventures. In financial year 2005/2006, 5,680 employees generated sales of some EUR 987 million. Since the end of June 2006, the Demag Cranes share (WKN: DCAG01) has been listed in the Prime Standard of the German Stock Exchange and is included in the SDAX share index.

Demag Cranes. We Can Handle It.


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