Q2/ Sales almost +++ at last year s level Sales +++ on the up in China Wacker Construction Equipment AG Half-year report

Transcription

1 Q2/2007 Wacker Construction Equipment AG Half-year report Region Europa Region Amerika Region Europa Region Asien Sales almost +++ at last year s level Strong share +++ performance Sales +++ on the up in China

2 Key Figures 1 April 1 through June 30 and January 1 through June 30 Apr. 1- Jun. 30, Apr. 1- Jun. 30, Jan. 1- Jun. 30, Jan. 1- Jun. 30, 2007 in million 2006 in million Change in % 2007 in million 2006 in million Change in % Wacker Group Sales By region Europe Americas Asia By business segment 2 Light equipment Compact equipment Services Gross profit in % PP PP EBITDA Above margin in % PP PP Depreciation and amortization EBIT Above margin in % PP PP EBT Profit for the period Earnings per share in Cash flow (from operating activities) Purchase of property, plant and equipment Net borrowings Working capital Equity ratio in % PP PP Employees 2,932 2, ,932 2, Consolidated figures based on IFRS 2 Consolidated sales after discounts SaLES DISTRIBUTION by region by business segment in % (previous year) Asia 3.1 (3.5) Compact equipment 13.5 (14.4) Europe 65.3 (60.6) Light equipment 65.3 (66.4) Americas 31.6 (35.9) Services 21.2 (19.2)

3 01 Content Foreword by Executive Board 02 Interim Review 03 Responsibility Statement by the Management 19 Interim Financial Statement 20 Income Statement, Balance Sheet, Statement of Changes in Equity, Cash Flow Statement and Segmentation Notes to the Consolidated Interim Financial Statements 26 Financial Calendar 30 R / Press Contact H news +++ Content H1 highlights Americas: Second quarter sales in the region down 0.1 percent on the same quarter last year +++ Increased average euro / US dollar exchange rate effects growth Europe: 16.5 percent sales growth in the first half-year underlines the region s position as an economic driver +++ Successful IPO on the Prime Standard segment of the Frankfurt stock exchange +++ Stock exchange price 25.5 percent higher than the issue price at the end of the quarter +++ Positive customer feedback at the bauma construction trade fair Asia: Discounting major orders, intensified sales activities lead to a 65 percent sales increase in China compared with the previous year +++ Construction work on the production plant in Manila proceeding according to plan

4 0 During the first half of fiscal 2007, Wacker Construction Equipment AG developed in line with our predictions. High customer demand for our products and services helped us achieve our targeted sales growth of over eight percent. Despite the uncertainty surrounding the US property market, second-quarter sales in the Americas remained stable and were level with those reported in The European, and above all German, market continued to grow in the second quarter. Earnings have also met our expectations. Although growth during the first half-year was influenced by budgeted one-off expenses, we do not expect this to prevent us from achieving our annual targets. Our customers reacted positively to the new wheel loaders we launched at the start of bauma, the world s largest construction trade fair, in April of this year. Strong demand provides compelling proof that our strategy for expanding the compact equipment business segment is paying off. The keenly-awaited new manufacturing plant for wheel loaders from Wacker and our subsidiary Weidemann is scheduled to start operations in The planned merger with Neuson Kramer Baumaschinen AG represents another key milestone for the Company. Negotiations are proceeding according to plan and we aim to close the contract as scheduled this summer. Under the name of Wacker Neuson AG, we will then be focusing on tapping new market potential, above all in the compact equipment segment across Europe, the US and Asia. Foreword by Executive Board We have every reason to remain optimistic about the further course of this fiscal year and are confident that we will surpass the exceptional results achieved last year. Our first forecast in the wake of our IPO reflects this positive trend. Assuming Europe and the US continue to show stable growth, we expect sales figures for fiscal 2007 to total between EUR 655 and 670 million and profit before interest, tax, depreciation and amortization (EBITDA) to total between EUR 110 and 115 million. Yours sincerely, Dr.-Ing. Georg Sick, CEO and President

5 03 Interim Review Sales and earnings on target Strong growth in Europe, particularly in Germany Second quarter sales growth in the Americas matches last year s results Increased revenue from rental business in Central and Eastern Europe company aims for continued growth Overall economic trends Global economy remains at high level According to economic experts, the global economy continued to grow in the first half of 2007 and remained at a high and strong level. While a stable economic climate continued to prevail in Latin and Central America, the North American economy did not develop as positively during the second quarter. In contrast, individual national economies continued to grow in Asia. Interim Review The Ifo institute reported a particular improvement in economic development and business projections in Western and Eastern Europe during the first six months of Increased demand from abroad ensured that the German economy continued to grow. Experts assessed the situation during the first half-year as particularly favorable. Construction industry overview The construction industry as a key economic driver The construction industry remained a key economic driver in many countries during the first half of Funds for improving national infrastructures were approved in China, Russia and Eastern Europe. In contrast, economic development in the US continues to be marked by a drop in private residential construction as well as buyer uncertainty. In Europe, Euroconstruct lists a boom in the property market and commercial construction as one of the main driving forces fueling the European construction industry. The graphics and tables in the following are not part of the Group Management Report as reviewed by the auditors. They are provided by way of additional information only. The Federation of the German Construction Industry reports that the German construction industry is growing at a stable and sustainable rate. The Federation also states that this positive development in the construction industry is primarily due to commercial and public construction. The German Engineering Federation (VDMA) reported that orders received by the German machine and plant construction industry in June 2007 were 21 percent up in real terms on the previous year.

6 0 Group business development Business development proceeding according to plan Business trends in the Wacker Group developed according to plan in the second quarter of fiscal 2007 and have met budgetary targets. Demand for our products and services remained consistently high, resulting in an 8.1 percent increase in sales from EUR million to EUR million for the first six months of this year compared with last year. With an increase of 13.1 percent compared with the first quarter, sales rose more significantly in the second quarter of 2007 than in the previous year (11.5 percent) despite the mild winter. Sales Q2 / H and 2006 Q2/ ,601 Q2/ ,325 H1/ ,023 H1/ ,702 First half of 2007 compared with the previous year (discounting exchange rate fluctuations) Discounting figures from our subsidiaries Weidemann GmbH, Ground Heaters, Inc. and Drillfix AG, sales totaled EUR million (previous year: EUR million). This corresponds to organic growth of 7.4 percent. Adjusted to reflect exchange rate fluctuations, sales were up 11.5 percent. Exchange rate fluctuations had a much greater impact on business development this year than in the previous year. This is represented as follows: Change in % Sales 11.5 Gross profit margin 8.6 EBIT Interim Review In the first half-year, budgeted one-off expenses affected profit. Our main benchmark, profit before interest, tax, depreciation and amortization (EBITDA) increased by 0.8 percent to EUR 55.3 million (previous year: EUR 54.8 million) in the first half of 2007 due to high levels of investment. Without one-off expenses totaling EUR 7.9 million, EBITDA would have risen by 15.1 percent to EUR 63.1 million in the first half-year. EUR 6.2 million of these expenses were incurred in the second quarter. EBITDA Q2 / H and 2006 Q2/ ,337 Q2/ ,736 Q2/2007* 36,933 H1/ ,822 H1/ ,260 H1/2007* 63,122 * adjusted Profit before interest and tax (EBIT) reported for the first half-year was affected by budgeted one-off expenses totaling EUR 9.7 million. EUR 6.9 million of these were incurred in the second quarter. As a result, EBIT amounted to EUR 23.8 million in the second quarter (previous year: EUR 25.7 million). Without these one-off expenses, EBIT would have risen by 17.7 percent to EUR 51.6 million in the first half-year.

7 0 EBIT Q2 / H and 2006 Q2/ ,670 Q2/ ,827 Q2/2007* 30,686 H1/ ,838 H1/ ,898 H1/2007* 51,615 * adjusted According to the asset history sheet, investments for the first half of fiscal 2007 totaled EUR 37.9 million (previous year: EUR 25.0 million). The Wacker Construction Equipment AG IPO On May 15, 2007, trading in Wacker Construction Equipment AG shares commenced on the Prime Standard segment of the Frankfurt Stock Exchange. We intend to channel the IPO proceeds predominantly into expanding the Company s leading market position and pursuing its international growth strategy. A total of 18,398,985 shares were placed at EUR per share. 7,500,000 of these shares were from a capital increase, 8,499,117 were from the holdings of Wacker Beteiligungs GmbH & Co. KG and a family shareholder, and 2,399,868 shares were from a greenshoe option held by Wacker Beteiligungs GmbH & Co. KG. The increase in capital resulted in net proceeds of approximately EUR 153 million for the Company. Following the IPO, the Company s share capital amounts to EUR 51 million. The Company retains approximately 8.5 percent of treasury shares. Interim Review Following the IPO, the management has actively informed the capital market about current developments. The stock exchange price developed positively and was listed at EUR on June 30, 2007, 25.5 percent higher than the issue price of EUR Share price trends in % May 15, 2007 June 1, 2007 June 15, 2007 June 30, 200 WACKER SDAX DAX Dividend payment At the Wacker Construction Equipment AG AGM, held in Munich on April 13, 2007, shareholders approved the Executive and Supervisory Boards proposal to pay out a dividend in the amount of EUR 24,273,000. This corresponds to a dividend of EUR 0.62 per share.

8 06 The new Weidemann production plant will start operations this year. Planned merger with Neuson Kramer Baumaschinen AG Wacker Construction Equipment AG and Neuson Kramer Baumaschinen AG (Austria) are scheduled to merge during the course of summer The company will bear the name Wacker Neuson AG. The merger was approved by the German antitrust authorities (Bundeskartellamt) on May 4, 2007 and the Austrian antitrust authorities (österreichisches Kartellamt) on May 11, On June 28, 2007, Neuson Kramer Baumaschinen AG announced a significant increase in group-wide sales and earnings (Expenditure Format) during the first quarter of fiscal 2007/2008 (February 1 through July 31) compared with the same quarter last year. This was driven by increased demand for Neuson Kramer products. This resulted in a 40.1 percent rise in group-wide sales from EUR 67.6 million in the first three months of fiscal 2006 to EUR 94.7 million for the first quarter of Profit before interest, tax, depreciation and amortization (EBITDA) grew 60.7 percent to EUR 19.6 million (previous year: EUR 12.2 million). Profit before interest and tax (EBIT) was up 63.6 percent to EUR 18.7 million (previous year: EUR 11.4 million). Profit for the period amounted to EUR 13.3 million (previous year: EUR 7.9 million). Interim Review Construction work proceeding on schedule Construction work being carried out by the Wacker Group is proceeding according to plan. The new manufacturing plant for Weidemann GmbH in Korbach should be ready for operation as scheduled in the fourth quarter of 2007, enabling us to meet increased demand for wheel loaders for the construction and agricultural industries. Preparations for the move are currently underway. Since the new plant will significantly increase production efficiencies, some personnel reorganization measures will be necessary when the plant opens despite the increase in incoming orders. The new production plant in Manila is scheduled for completion in fall Delivery problems for sanitation facilities delayed construction work on the European training center at the production site in Reichertshofen. The center is now scheduled to be finished at the end of Good results from bauma trade fair The Company was able to report a high number of visitors and promising discussions with customers at the international construction trade fair bauma 2007 in Munich. Orders totaling EUR 7.5 million were placed during the fair. This represents a

9 07 46 percent increase compared with bauma 2004, underlining the strong demand for our products and services. The total costs for bauma that affected EBIT amounted to EUR 1.9 million. Profit, finances and assets Positive sales trends Profit In the second quarter, sales and profit results developed in line with company projections. Wacker Group sales were up 8.1 percent to EUR million in the first six months of 2007 (previous year: EUR million). Adjusted to reflect exchange rate fluctuations, sales were up 11.5 percent. Manufacturing costs rose to EUR million (previous year: EUR million). This is attributable to increased unit sales, additional expenditure on materials to meet increased production levels, higher production and freight costs and expansion of the rental pool. Gross profit reached EUR million (previous year: EUR million). The gross profit margin was at 41.2 percent (previous year: 41.9 percent). This figure was mainly influenced by an increase in inventory recorded as of June 30, 2007, fuelled by a disproportionately high level of stock on hand required to cater for major orders and the establishment of demo fleets. As a result, EUR 3.2 million had to be eliminated from the interim profit at the end of the quarter (previous year: EUR K 53). We expect this figure to fall in the second half of the year. Without this factor, the gross profit margin would have risen to 42.1 percent in the first half-year. Interim Review HR and property, plant and equipment costs below forecast range Selling expenses were up 12.9 percent to EUR 68.8 million. This is attributable to additional employees hired to expand sales activities as well as measures implemented in the run-up to bauma. Research and development costs rose 23.2 percent to EUR 9.7 million due to new hires as well as active development work for new products and work to enhance existing products. At EUR 21.7 million, however, general administrative costs were almost level with those of last year (previous year: EUR 21.6 million) despite the new hires. In total, HR and property, plant and equipment costs were below the forecast range. Profit affected by one-off expenses Profit before interest, tax, depreciation and amortization (EBITDA) grew 0.8 percent to EUR 55.3 million (previous year: EUR 54.8 million) in the first half-year. This corresponds to an EBITDA margin of 16.2 percent (previous year: 17.3 percent). In the first six months of 2007, this was affected by one-off expenses amounting to EUR 7.9 million. EUR 6.2 million of these were incurred in the second quarter. Without these one-off expenses, EBITDA would have risen 15.1 percent to EUR 63.1 million. The Company s high level of investment in the rental business was one of the factors that caused depreciation and amortization to increase 21.6 percent to EUR 13.4 million (previous year: 11.0 million) during the first half-year. Profit before interest and tax (EBIT) totaled EUR 41.9 million in the first half-year (previous year: EUR 43.8 million). This figure was affected by budgeted one-off expenses amounting to EUR 9.7 million. EUR 6.9 million of these were incurred in the second quarter. Without these one-off expenses, EBIT would have risen 17.7 percent to EUR 51.6 million.

10 0 The one-off expenses included the aforementioned costs for the construction trade fair bauma, which takes place every three years, as well as the effects of eliminating interim profit as a result of the inventory build-up recorded as of June 30, Other factors that affected one-off expenses included a shortage of industry materials at the Wacker subsidiary Weidemann prompted by increased production of wheel loaders, as well as costs for the preferential allocation of shares to employees as part of the IPO plus exchange rate fluctuations fuelled by a rise in the euro to US dollar exchange rate to EUR 1 = USD 1.33 (previous year: EUR 1 = USD 1.24) compared with the same quarter last year. Profit before tax (EBT) totaled EUR 40.8 million (previous year: EUR 43.3 million). The tax rate was 39.2 percent (previous year: 36.2 percent). Factors affecting this increase include the fiscal impact of the dividends of our American subsidiary Wacker Corporation. Profit for the period amounted to EUR 24.8 million (previous year: EUR 27.6 million) while earnings per share reached EUR 0.60 (previous year: EUR 0.67). Finances Free cash flow reconciliation Jan. 1- Jun. 30, 2007 Jan. 1- Jun. 30, 2006 Cash flow from operating activities 2,598 14,606 Purchase of property, plant and equipment - 41,252-24,581 Purchase of intangible assets Proceeds from sale of intangible asstes and property, plant and equipment Proceeds from sale/purchase of investments and marketable securities - 122,548 0 Interest received 1, Free cash flow - 159,870-9,078 Interim Review Investments considerably higher than in previous year Cash flow from operating activities amounted to EUR 2.6 million (previous year: EUR 14.6 million). This is attributable to the drop in profit as well as a change in inventories and trade payables. In the first half of fiscal 2007, Wacker invested a total of EUR 42.0 million (previous year: EUR 25.0 million). Here it should be noted that investments as reported per fixed asset schedule are adjusted to discount investments which will be settled at a later date and investments that were made last year yet paid in the first six months of Investments disclosed for the period thus include investments made to expand the rental business in Central and Eastern Europe and finance construction work to enhance capacity at our production plants in Manila and Korbach and the construction of a training center at the production site in Reichertshofen. Working capital was up 24.7 percent to EUR million (at December 31, 2006: EUR million). This is due to inventory build-up and increased trade receivables. The slight growth in trade payables is attributable to long payment periods for the expansion of the rental park.

11 09 IPO transforms net financial debt into cash surplus At the end of the first half-year, cash surplus totaled EUR 52.6 million (at December 31, 2006: EUR million). This was due to higher short-term loans for expanding the rental business as well as the effect of the IPO. Net financial debt Jun. 30, 2007 Dec. 31, 2006 Long-term borrowings 58,118 60,802 Short-term borrowings from banks 42,435 13,342 Current portion of long-term borrowings 12,438 7,566 Marketable securities 122, Cash and cash equivalents 42,913 36,441 Total 52,611-45,128 Cash flow from financing activities totaled EUR million (previous year: EUR million). This is mainly attributable to the EUR million of gross income generated by the IPO. Equity ratio remains high Assets The balance sheet total increased to EUR million (at December 31, 2006: EUR million) at the end of the first half-year as a result of income from the IPO. Non-current assets, including deferred tax, increased to EUR million. This is mainly attributable to increased rental equipment inventory required for expanding the rental business. Current assets rose to EUR million (at December 31, 2006: EUR million) due to inventory build-up, increased trade receivables and the effects of the IPO. Interim Review Equity capital rose to EUR million (at December 31, 2006: EUR million) as a result of income generated by the IPO. This resulted in an equity ratio of 65.5 percent (at December 31, 2006: 59.5 percent).

12 10 Segment reporting by area With its wide range of products and services, the Wacker Group caters both directly to end-customers and to dealers, rental companies and importers worldwide. Segment comparison Europe Q1/2007 vs. Q1/2006 Q2/2007 vs. Q2/2006 H1/2007 vs. H1/2006 Sales 103,763 (86,480) 119,450 (105,055) 223,213 (191,535) EBIT 11,482 (8,580) 15,940 (14,824) 27,422 (23,404) EBT 10,655 (8,205) 15,749 (14,441) 26,404 (22,646) Americas Sales 51,858 (57,389) 55,890 (55,969) 107,748 (113,358) EBIT 6,766 (9,287) 8,464 (8,860) 15,230 (18,147) EBT 6,913 (9,348) 8,252 (8,939) 15,165 (18,287) Asia Sales 4,756 (5,553) 5,985 (5,577) 10,741 (11,130) EBIT 530 (746) 588 (801) 1,118 (1,547) EBT 514 (774) 557 (827) 1,071 (1,601) Interim Review Strong sales growth in Europe Results for Europe, the Americas and Asia In Europe, Wacker Group sales totaled EUR million in the first half-year (previous year: EUR million). This represents an increase of 16.5 percent. Profit before interest and tax (EBIT) prior to consolidation rose from EUR 23.4 million to EUR 27.4 million (an increase of 17.2 percent). Without the aforementioned one-off expenses, the EBIT margin would have increased significantly in Europe. Europe Q2 / H and 2006 Sales Q2/2006 Q2/2007 H1/2006 H1/2007 EBIT Q2/2006 Q2/2007 H1/2006 H1/ , , , ,213 14,824 15,940 23,404 27,422 Strong demand for construction machinery and equipment fuelled growth throughout the entire region. Although infrastructure projects in Italy and Spain were delayed due to local elections, Eastern European countries are profiting from state subsidies. Our subsidiary in Russia experienced a sales increase of around 150 percent in the first six months of We therefore intend to open a service station in Jekaterinenburg (Russia) by the end of Plans for opening a new service station in Spring 2008 in Ostrau (Czech Republic) are also being underway.

13 11 American subsidiary Ground Heaters, Inc. was successfully integrated into the Company. High demand for products and services throughout the entire region drove sales in individual countries. Denmark and Italy were the only countries with figures slightly below the previous year s results. In Germany, consistently high levels of investment by German construction companies saw consolidated external sales for Wacker Construction Equipment AG rise 28.8 percent in the first half-year to EUR 69.9 million (previous year: EUR 54.3 million). Interim Review Sales generated by Weidemann GmbH rose 15.7 percent to EUR 43.5 million (previous year: EUR 37.5 million) in the first half of Discounting Group-internal sales, consolidated external sales were up 1.7 percent to EUR 34.6 million (previous year: EUR 34.0 million). A shortage of industry materials continues to affect growth at this subsidiary. Exchange rates impact growth in the Americas In the first half-year, sales in the Americas fell 4.9 percent compared with last year to EUR million (previous year: EUR million). Profit before interest and tax (EBIT) prior to consolidation was down from EUR 18.1 million to EUR 15.2 million, representing a fall of 16.1 percent. Overall, however, business developed in the second quarter more favorably than the first quarter of Second quarter sales were at almost the same level as last year. The EBIT margin also remained more or less unchanged. Americas Q2 / H and 2006 Sales Q2/2006 Q2/2007 H1/2006 H1/2007 EBIT Q2/2006 Q2/2007 H1/2006 H1/ ,969 55, , ,748 8,860 8,464 18,147 15,230

14 12 Growth in the Americas was again influenced by the increased euro / US dollar parity. On the whole, Wacker experienced a rise in sales in the individual business fields during the first half-year. While growth in Mexico was characterized by dependency on the US market, Wacker was able to generate further sales in Canada and South America. In Mexico, Chile and Brazil, sales in the utility business field rose significantly. In the first six months of 2007, Ground Heaters, Inc., which was initially consolidated on March 24, 2006, achieved sales of EUR 2.8 million (previous year: EUR 0.4 million) during the offpeak period for its products. Wacker s service-based franchise concept, EQUIPRO, Inc., is developing according to plan. Sales generated through this concept amounted to around EUR 0.5 million in the first half-year, representing a plus of 146 percent on the previous year. Expansion of sales activities in Asia In the first half of 2007, sales in the Asia region were down 3.5 percent on last year, dropping from EUR 11.1 million to EUR 10.7 million. Profit before interest and tax (EBIT) prior to consolidation amounted to EUR 1.1 million (previous year: EUR 1.5 million). We are pleased to report a positive sales trend in this region during the second quarter. Sales rose 7.3 percent to EUR 6.0 million, although exchange rate movements impacted sales. Growth was particularly strong in Australia and New Zealand. The expansion of sales activities in China has already started to show positive results. Discounting results from major orders placed in the first half of 2006, sales during the first two quarters of 2007 were up 65 percent on the previous year. If these major orders are taken into consideration, however, sales in China were down on last year. Due to stagnation in the construction industry, the results from our subsidiaries in Japan and Thailand fell below those reported last year. The Manila production plant saw a rise in demand for small vibratory plates for the Asian market. Interim Review Asia Q2 / H and 2006 Sales Q2/2006 Q2/2007 H1/2006 H1/2007 EBIT Q2/2006 Q2/2007 H1/2006 H1/2007 5,577 5,985 11,130 10, ,547 1,118

15 13 bauma 2007 saw lively public interest in the BH24 low-vibration gasoline vibrator. Segment reporting for business segments Jan. 1- Jun. 30, 2007 Jan. 1- Jun. 30, 2006 Light equipment sales 224, ,423 Compact equipment sales 46,669 45,836 Services sales 72,871 61,151 Interim Review Discounts 2,694 2,387 Total sales 341, ,023 Apr. 1- Jun. 30, 2007 Apr. 1- Jun. 30, 2006 Light equipment sales 118, ,072 Compact equipment sales 25,236 22,423 Services sales 39,111 34,307 Discounts 1,542 1,201 Total sales 181, ,601 Strong demand in the light equipment business segment The light equipment segment covers the Wacker Group s activities within the business fields of concrete technology, soil and asphalt compaction, demolition and utility. In the first half of fiscal 2007, sales before discounts rose from EUR million to EUR million (6.4 percent) in this business segment. This brought the segment s share of total sales (before discounts) to 65.3 percent. In the first half-year, all business fields made a positive contribution to growth. The new products presented at the construction trade fair bauma, in particular the BH 24 gasoline breaker, generated considerable interest among our customers. Preparations are also underway for launching heating equipment from Ground Heaters, Inc. in Scandinavia and Russia in the coming winter. Inventory stock was increased in the soil and asphalt compaction business field to offset delays in deliveries from suppliers.

16 14 Addition of wheel loaders to the compact equipment business segment The compact equipment business segment covers the manufacture and sale of compact equipment weighing up to approximately eight metric tons. In the first half-year, sales before discounts rose from EUR 45.8 million to EUR 46.7 million (1.8 percent). Increased internal sales resulting from the inclusion of wheel loaders in the Company s rental park plus the creation of a demo fleet for the market launch of wheel loaders in April and May reduced consolidated external sales generated by Weidemann GmbH. The segment s share of total sales (before discounts) was 13.5 percent. This business segment experienced significant growth in the second quarter, with sales before discounts rising 12.5 percent to EUR 25.2 million (previous year: EUR 22.4 million) in these three months. The launch of our construction industry wheel loaders at bauma in April 2007 was well received by our customers, with demand especially strong in the German and Austrian markets. In the US, preparations are underway for launching compact equipment in the first half of At the Wacker subsidiary Weidemann, a shortage of industry materials prevented suppliers from delivering goods on time. This then lead to an inventory build-up. Expansion of sales activities in the services business segment The services business segment comprises the rental and after-market (repair and maintenance) business fields. In the first half-year, sales before discounts rose significantly by 19.2 percent to EUR 72.9 million (previous year: EUR 61.2 million) in this segment. This brought the segment s share of total sales (before discounts) to 21.2 percent. Interim Review Demand for repair services and spare parts increased in the after-market (repair and maintenance) business field, driving sales up 11.9 percent to EUR 51.2 million (previous year: EUR 45.8 million). Wacker has also continued investing heavily in the rental business throughout the second quarter. In Central Europe, sales in the rental business increased sharply from EUR 15.4 million to EUR 21.6 million (40.7 percent) in the first half-year. Strategy for the rental business Wacker rents construction equipment in Germany, Austria, Switzerland and Holland. Our experience shows that construction companies in these countries regard equipment rental as a useful supplement to purchasing. Subsequently, Wacker has identified considerable growth potential for the rental business at locations in these countries. Our aim is to transfer this concept to a number of East European countries (including Poland and the Czech Republic) and harness the potential for growth here. We will not be launching our rental concept in countries where we already have good working relationships with existing rental companies. Wacker does not want and does not intend to compete with these companies. This applies in particular to the US, the UK, France, Spain and Scandinavia.

17 15 Other factors that impacted on results High factory output Consistently high demand for our products continues to ensure high capacity utilization at our three manufacturing plants in Reichertshofen, Milwaukee and Manila as well as at the Weidemann GmbH production facilities in Diemelsee-Flechtdorf and Gotha. While products from the light equipment segment can still be delivered immediately, customers currently have to wait four to six months for delivery of wheel loaders. Higher level of research and development Research and development costs in the period under review amounted to EUR 9.7 million (previous year: EUR 7.8 million). In relation to sales, the research and development ratio rose 2.8 percent in comparison with last year (2.5 percent). We continue to work intensively towards developing new products to be launched on the market in the coming years. Fast delivery as the key to success Creating new jobs The first half of 2007 has shown that customers continue to place great value on the availability of all products and spare parts as well as fast delivery times and rapid response to service requests. Wacker has improved delivery processes to Russia during the second quarter and is working intensively on further enhancing our logistics workflows. The Wacker Group HR situation also reflected the Company s growth during the second quarter of fiscal A total of 2,932 employees were employed at Wacker on June 30, 2007 (previous year: 2,775). This represents an increase of 5.6 percent. New hires were mainly concentrated in the sales and service areas as well as in R&D. Interim Review Opportunity and risk report In the first six months of fiscal 2007, the Wacker Group continued to implement its risk management system as a key factor in business decisions and processes. The system enables us to identify and assess risks promptly and take appropriate preventative and protective measures. The Company identifies the following changes to the general risk situation facing the Wacker Group as of June 30, 2007 compared with the situation reported in the 2006 annual financial statements and the quarterly report to March 31, 2007: Mergers among our customer base and growing market concentration are intensifying international competition. Take-overs by financial investors may also have an impact here. In the first half of 2007, for example, Hewden Tools Division was acquired by Speedy Hire PLC in Great Britain. In July 2007, United Rentals, Inc., a major customer of our US subsidiary, announced its agreement to be bought by financial investor Cerberus Capital Management, L.P. Although these developments may have a long-term impact on Wacker Group sales and revenue, we cannot provide an exact assessment at this time. The Wacker Group is countering this risk by actively maintaining close ties and open communication with its customers. We are not currently aware of any other significant new risks to the Wacker Group that have not already been mentioned in the Management Report for fiscal 2006.

18 16 We also have not identified any single or collective risks to our continued existence as a going concern that might negatively affect individual companies within the Group or the Group as whole in the foreseeable future. On the whole, Wacker sees its own business development and the planned merger with Neuson Kramer Baumaschinen AG as good opportunities to expand the Company s leading market position during fiscal The outlook for the economy as a whole and the construction industry in particular is promising. We will be working intensively to steadily implement our strategic goals and increase unit sales, revenue and profit. Supplementary report The following events since the reporting date may have an impact on future business development in the Wacker Group: On July 19, 2007, the Executive and Supervisory Boards approved the construction of a new production plant for Ground Heaters, Inc., the Wacker subsidiary acquired in The new plant, located in Norton Shores, Michigan (USA) will expand production capacity for portable heating equipment. The Company also plans to produce portable construction site lighting equipment for the utility business field at this location and implement more efficient production processes. The plant is due to be finished in the second half of The investment volume is USD 10 million. If necessary, the planned production facility can be progressively expanded to meet future increases in demand. Work on the facility began on August 3, Interim Review Neuson Kramer Baumaschinen AG, headquartered in Linz (Austria), has submitted a report on August 14, 2007 detailing the preliminary results for the first half of fiscal year 2007/2008 (February 1 - July 31) to Wacker Construction Equipment AG. The report reveals that the company has continued to build on the positive results from the first quarter and that group-wide sales and profit (Expenditure Format) are up on the same period last year. Strong demand for Neuson Kramer Baumaschinen AG products pushed preliminary group-wide sales up 30.3 percent from EUR million for the same period last year to EUR million. Preliminary figures for profit before interest and tax (EBIT) rose by 45.2 percent to EUR 36.0 million (previous year: EUR 24.8 million). As previously announced, Wacker Construction Equipment AG and Neuson Kramer Baumaschinen AG aim to conclude an agreement to merge in summer Both parties have reached an agreement regarding the main terms of the contract, which is scheduled to be signed within the coming weeks. The merger is aimed to be executed during October The merger will most likely take place through the transfer of shares in Neuson Kramer Baumaschinen AG by the shareholders of the same to Wacker Construction Equipment AG in exchange for anticipated 19,140,000 new shares (capital increase through contributions in kind).

19 17 Furthermore, the Neuson Kramer Baumaschinen AG majority shareholders will transfer part of their shares to Wacker Construction Equipment AG in exchange for 4,349,961 treasury shares in Wacker Construction Equipment AG and a cash payout. The new additional cash settlement will amount to EUR 6 million. The contribution ratio stated in the Memorandum of Understanding remains unchanged. Aside, the shareholders of Neuson Kramer Baumaschinen AG will be entitled to an extra dividend of up to EUR 12.1 million in total from Neuson Kramer Baumaschinen AG funds prior to the merger. This arrangement acknowledges the strong sales and profit growth prospects enjoyed by Neuson Kramer Baumaschinen AG, which could not be accurately predicted at the time the Memorandum of Understanding was signed (March 30 / April 11, 2007). Global economy remains strong in 2007 A resolution to change the legal form of Wacker Construction Equipment AG to a Societas Europaea ( SE ), and consequently the company name to Wacker Neuson SE, will be proposed at the next Annual General Meeting for Wacker Construction Equipment AG (currently scheduled for the start of June, 2008). The relocation of the company s seat to Austria is not intended for the time being. This move will be open to further discussion if the tax environment in Austria changes to the disadvantage of the majority Austrian shareholders. Outlook Experts predict that the global economy will remain stable and strong for the remainder of In particular, the above-average growth of Asian economies is forecast to continue. The Ifo institute has adjusted its economic predictions for the second half of 2007 downwards for the US. Interim Review According to various sources, Europe continues to enjoy economic growth. The German Federal Ministry of Economics and Technology (BMWi) and the German Institute for Economic Research (DIW) confirms that the economic upturn in Germany is set to continue. In contrast, the Centre for European Economic Research (ZEW) predicts a downturn in economic growth in Germany in the coming six months. Promising mid-term outlook for international construction Prospects for the international construction industry remain promising. Studies report that investment in infrastructure projects as well as in residential and commercial construction activities is set to grow particularly strongly in China, Russia, India, South Asia and Eastern Europe. Euroconstruct predicts a downturn in growth in the European property market, particularly in Spain, in the coming two years. Commercial construction in Europe, however, should continue to grow. The US property market remains uncertain and this situation is not set to change for the duration of Studies indicate that construction investment in Germany will rise by 1.7 percent in The Federation of the German Construction Industry expects sales for 2007 to be up five percent on last year and reports that construction activities should remain stable in the coming months. The Federation also anticipates that demand for machinery, equipment and supplies will remain strong. The German Engineering Federation (VDMA) expects a 15 percent rise in sales

20 18 compared with last year for the German construction and building materials industry in Nevertheless, experts predict that exchange rate fluctuations will lead to a slight downturn in the construction industry towards the end of the year. Company forecast Wacker Group aims for further sales and earnings growth The Company does not see any need to adjust its assessment of business trends for fiscal 2007 stated in the annual financial statements for The Wacker Group remains on a strong growth path and intends to expand its global market position. We currently anticipate business to develop in line with our predictions throughout the course of the year. This includes our assumption that the construction situation in the US will not deteriorate significantly and that weather conditions in Europe will not have a major impact on developments compared with last year. Based on the overall economic forecast, the positive outlook for the construction industry and growth realized during the first half of 2007, we expect to achieve sales totaling between EUR 655 million and EUR 670 million for fiscal 2007, and profit before interest, tax, depreciation and amortization (EBITDA) ranging from EUR 110 million to EUR 115 million. The Wacker Group intends to continue investing proceeds from the IPO to drive growth in the regions and business segments. The rental business will be expanded at existing locations in Central Europe and at new locations in Eastern Europe. We also aim to further expand our global sales and service network particularly in China, Russia and India. The Wacker Group intends to continue enhancing its product portfolio and service offering across all business segments. Interim Review

21 19 Responsibility Statement by the Management (statement in accordance with section 37y of the German Securities Trading Act (WpHG) in conjunction with section 37w, paragraph 2, number 3 of the WpHG; section 289, paragraph 1, clause 5 of the German Commercial Code (HGB)) To the best of our knowledge, and in accordance with the applicable reporting principles for interim financial reporting, the interim consolidated financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group, and the interim management review of the Group includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal opportunities and risks associated with the expected development of the Group for the remaining months of the financial year. Responsibility Statement by the Management

22 20 Income Statement April 1 through June 30 and January 1 through June 30 Apr. 1- Jun. 30, 2007 Apr. 1- Jun. 30, 2006 Jan. 1- Jun. 30, 2007 Jan. 1- Jun. 30, 2006 Revenue 181, , , ,023 Cost of sales - 106,258-95, , ,696 Gross profit 75,067 70, , ,327 Sales and service expenses - 35,841-30,827-68,780-60,925 Research and development expenses - 5,203-4,066-9,657-7,839 General administrative expenses - 11,054-11,156-21,746-21,617 Other income 1,475 2,095 2,582 4,004 Other expenses ,141-1,149-2,112 Profit before interest and tax 23,827 25,670 41,898 43,838 Financial result , Profit before tax 23,393 25,392 40,768 43,274 Taxes on income - 9,171-8,932-15,962-15,663 Profit for the quarter 14,222 16,460 24,806 27,611 Earnings per share (in euros) Consolidated Interim Financial Statements Income Statement

23 21 Balance Sheet As of June 30, 2007 Jun. 30, 2007 Dec. 31, 2006 ASSETS Property, plant and equipment 169, ,526 Investment property Goodwill 36,208 36,837 Other intangible assets 31,607 32,147 Investments 0 0 Deferred taxes 8,271 6,885 Other non-current assets 5,891 5,797 Total non-current assets 251, ,230 Inventories 105, ,168 Trade receivables 136,813 98,534 Marketable securities 122, Current tax receivables 3,613 2,977 Other current assets 10,992 7,522 Cash and cash equivalents 42,913 36,441 Total current assets 422, ,783 TOTAL ASSETS 674, ,013 EQUITY AND LIABILITIES Subscribed capital 51,000 43,500 Other reserves 202,319 51,305 Treasury shares - 36,691-36,691 Retained earnings 224, ,260 Total equity 441, ,374 Consolidated Interim Financial Statements Balance Sheet Long-term borrowings 58,118 60,802 Deferred taxes 16,025 16,482 Long-term provisions 13,327 12,821 Total non-current liabilities 87,470 90,105 Trade payables 44,649 40,073 Short-term borrowings from banks 42,435 13,342 Current portion of long-term borrowings 12,437 7,566 Short-term provisions 9,043 8,797 Current tax payable 1,490 1,207 Other liabilities 35,429 31,549 Total current liabilities 145, ,534 TOTAL LIABILITIES 674, ,013

24 22 Statement of Changes in Equity As of June 30 Share capital Capital reserves Exchange differences Other neutral changes Retained earnings Treasury shares Total Balance at December 31, ,500 72,319-8, ,924-11, ,861 Exchange differences , ,066 Other neutral changes Subtotal - 9,729 Profit for the quarter , ,611 Total profit for the period 17,882 Dividends , ,620 Cost of capital 0-1, ,666 Balance at June 30, ,500 70,653-18, ,915-11, ,457 Balance at December 31, ,500 72,330-21, ,260-36, ,374 Exchange differences 0 0-2, ,145 Other neutral changes Subtotal - 1,963 Profit for the quarter , ,806 Total profit for the period 22,843 Consolidated Interim Financial Statements Statement of Changes in Equity Dividends , ,273 New shares issued 7, , ,000 Cost of capital 0-4, ,523 Balance at June 30, , ,307-23, ,793-36, ,421

25 23 Cash Flow Statement January 1 through June 30 Jan. 1- Jun. 30, 2007 Jan. 1- Jun. 30, 2006 EBT 40,768 43,274 Depreciation and amortization 13,362 10,984 Foreign exchange result 510-5,811 Proceeds from sale of intangible assets and property, plant and equipment Book losses from the disposal of rental equipment 1, Proceeds from sale of investments and marketable securities Investment income - 1, Interest expense 2,747 1,530 Changes in inventories - 5,506 3,175 Changes in trade receivables and other assets - 41,849-42,088 Changes in provisions 752 3,251 Changes in trade payables and other liabilities 12,217 17,215 Interest paid - 2,427-1,304 Income tax paid - 18,158-15,468 Cash flow from operating activities 2,598 14,606 Purchase of property, plant and equipment - 41,252-24,581 Purchase of intangible assets Proceeds from the sale of intangible assets and property, plant and equipment Proceeds from sale/purchase of investments and marketable securities - 122,548 0 Change in consolidation structure ,474 Interest received 1, Cash flow from investing activities - 162,027-38,158 Consolidated Interim Financial Statements Cash Flow Statement New shares issued 165,000 0 Costs of increasing capital - 4,523-1,666 Dividends - 24,273-15,620 Proceeds from long-term borrowing 27,123 29,733 Repayment on long-term borrowings - 3,600-19,410 Cash flow from financing activities 159,727-6,963 Increase/decrease in cash and cash equivalents ,515 Effect of exchange rates on cash and cash equivalents - 1, Change in cash and cash equivalents - 1,285-31,468 Cash and cash equivalents at beginning of period 28,044 45,378 Cash and cash equivalents at end of period 26,759 13,910 1 Borrowings from banks in the Group s cash pool accounts were offset.

26 24 Segmentation January 1 through June 30 Primary segmentation (geographical segments) Europe Americas Asia Consolidation Group Q Segment revenue Total external sales 170,064 81,861 10,848 Less intrasegment sales - 41,478-11, ,586 70,141 10,384 Intersegment sales - 9,136-14,251-4,399 Total 119,450 55,890 5, ,325 Segment result (EBIT) From continuing business segments 15,940 8, From discontinued business segments Total 15,940 8, ,165 23,827 Q Segment revenue Total external sales 145,797 79,297 10,563 Less intrasegment sales - 32,736-8, ,061 70,706 9,867 Intersegment sales - 8,006-14,737-4,290 Total 105,055 55,969 5, ,601 Consolidated Interim Financial Statements Segmentation Segment result (EBIT) From continuing business segments 14,824 8, From discontinued business segments Total 14,824 8, ,185 25,670 The profit before interest and tax (EBIT) reported for Q1/2007 amounted to EUR K 11,482 in Europe, EUR K 6,766 in the Americas and EUR K 530 in Asia. The corresponding figures (EBIT) for the same period last year were EUR K 8,580 for Europe, EUR K 9,287 for the Americas and EUR K 746 for Asia. The effects of consolidation remained the same at EUR K for Q1/2007 and EUR K for Q1/2006.

27 25 Primary segmentation (geographical segments) H Europe Americas Asia Consolidation Group Segment revenue Total external sales 324, ,341 20,516 Less intrasegment sales - 83,653-19, , ,961 19,581 Intersegment sales - 17,654-32,213-8,840 Total 223, ,748 10, ,702 Segment result (EBIT) From continuing business segments 27,422 15,230 1,118 From discontinued business segments Total 27,422 15,230 1,118-1,872 41,898 H Segment revenue Total external sales 274, ,189 19,414 Less intrasegment sales - 64,732-17,108-1, , ,081 18,121 Intersegment sales - 18,241-27,723-6,991 Total 191, ,358 11, ,023 Consolidated Interim Financial Statements Segmentation Segment result (EBIT) From continuing business segments 23,404 18,147 1,547 From discontinued business segments Total 23,404 18,147 1, ,838 Secondary segmentation (business segments) Apr. 1- Jun. 30, Apr. 1- Jun. 30, Jan. 1- Jun. 30, Jan. 1- Jun. 30, Segment revenue from external customers Light equipment 118, , , ,423 Compact equipment 25,236 22,423 46,669 45,836 Services 39,111 34,307 72,871 61, , , , ,410 Less discounts - 1,542-1,201-2,694-2,387 Total 181, , , ,023