Sto AG, Stühlingen Interim Report from Management pursuant to section 37x German Securities Trading Act At a glance: Sto consolidated sales slipped 3.4% in 9M 2009 to EUR 708.1 million Downturn in business outside Germany, while business inside picked up slightly Earnings down on the year but better than expected End of September: Sto payroll 4,236 as against 4,199 one year earlier Outlook for business 2009 unchanged: Lower consolidated sales and earnings expected Sector trends In 2009, the effects of the worldwide financial and economic crisis continued impacting the international construction sector through to the fall. Sharp drops in demand were experienced by countries that included the USA, where commercial construction was particularly hard hit, Great Britain, Spain, as well as North and Eastern Europe. Following a weak Q1 the rest of the year saw the building industry in China gain somewhat in momentum. As expected, the trend in sales in France, Austria, and Switzerland was stable to positive, shored up in particular by renovation business. Though the main construction industry in Germany posted a fall in overall cumulated sales of 7.3 % to EUR 49.4 billion, there has been a marked slowing down in the decline since 1
April. In Q1, for example, the shortfall in comparison with sales in the same period one year prior was still 12.9 %. There was a similar trend with regard to orders received: Following a sharp fall at the beginning of the year, as of Q2 the situation has gradually improved. August was the first month this year in which more orders were placed than in the corresponding month one year prior. The first eight months overall witnessed a fall of 9.6 % in orders received. The building construction segment was particularly hard hit by this trend, posting a cumulated drop in orders of 16.5 %. Sto performing well in a difficult environment Tough economic conditions also impacted on Sto AG s business: Consolidated sales slipped in 9M 2009 on the year by 3.4 % to EUR 708.1 million. Exchange-rate differences cut balance EUR 5.2 million off the books. In 9M 2009 exchange-rate related losses were recorded primarily as regards Polish zloty, Swedish krona and pound sterling, a trend only partly offset by the revaluation above all of the Swiss franc, the US dollar, and the Chinese Renminbi. The consolidated sales as at the end of September were still below the prior year, whereby the decrease on the previous year period has gradually eased in the course of 2009. This could indicate that demand for Sto products has at least bottomed out. The only modest decline in sales is the product mainly of the steady performance of our core German market, which based mainly on the ongoing strong business with our façade systems: In the first three quarters of 2009 we saw domestic sales rise 2.6 % to EUR 340.4 million. By contrast, sales outside Germany decreased during the same period by 8.3 % to EUR 367.7 million. Sto saw tangible losses above all in the United States, Great Britain, Spain and North/East Europe. These losses were in part offset by positive business in Switzerland, France, Italy, Austria and in our Asian markets. The share of sales outside Germany in total consolidated sales fell as at Sept. 30 from 54.7 % to 51.9 %. 2
Earnings down on the year, but better than expected Dwindling business outside Germany and ongoing pressure on prices strained earnings during the period under review. However, we limited the negative impact by swiftly introducing cost-cutting measures and process optimization plans. Moreover, all the staff demonstrated superb cost discipline. As a result, operating EBIT and net earnings as at Sept. 30, 2009 were down on the year, but both figures were nevertheless better than budgeted. This favorably influenced cash flow from operating activities, which was likewise better than we had scheduled. Investments throttled back From January through September 2009 Sto Group invested EUR 11.3 million (9M 2008 EUR 13.0 million) in tangible and intangible assets. Investments in financial assets were not undertaken in the current year, as against EUR 0.1 million in 2008. The lower investing activities are the product of the tough market conditions which have prompted us to concentrate on projects of a high strategic significance. In the current year, these primarily included building of the insulating materials plant in Lauingen and commissioning of our third production plant in China. These two projects were likewise the two main investment focuses in 9M 2009. Otherwise, we more or less only invested in the necessary purchases of replacements. Sound assets position The Sto Group s assets position remained strong as at the end of September 2009. The changes in individual balance-sheet items compared with year-end 2008 and/or June 30, 2009 were not out of the ordinary and mainly reflected the typical course of business in the third quarter. Payroll grows As at Sept. 30, 2009 the Sto Group payroll came to 4,236 staff members. Compared with one year earlier this amounted to a modest increase by 37 persons or 0.9 %. The payroll 3
inside Germany came to 2,364 employees, 28 persons or 1.2 % more than one year before. The hirings were selective and focused primarily on the new insulating materials plant in Lauingen. Outside Germany, we primarily adjusted staffing levels in America and North Europe to the very difficult conditions there. By contrast, in the other countries in which we are active we in part opted for new hirings. On balance, as at the end of September the payroll outside Germany ran at 1,872 staff, 9 persons or 0.5 % more than one year earlier. Outlook for business 2009 remains unchanged Despite the emerging stabilization in the economies in various countries, demand for construction services in Q4 will no doubt remain very difficult in key selling markets. They include above all the United States, Great Britain, Spain and North and East Europe. Moreover, there are risks in the coming months as regards exchange rates of currencies of importance to Sto, as the foreign exchange markets are currently very volatile. In addition, the course of business in the last quarter traditionally depends critically on the weather. All in all, we expect that business 2009 will see consolidated sales dwindle. As a result of the lower business volume, despite the counter-measures initiated earnings will also decline, and probably further than sales. Stühlingen, November 2009 The Management Board 4
Key Financials (in EUR million) Sto Group (IFRS) 9/08 9/09 Change Sales 732.7 708.1-3.4 % - of which inside Germany 331.8 340.4 2.6 % - of which outside Germany 400.9 367.7-8.3 % Investments (excl. financial investments) 13.0 11.3-13.1 % Payroll as at Sept. 30 4,199 4,236 0.9 % - of which inside Germany 2,336 2,364 1.2 % - of which outside Germany 1,863 1,872 0.5 % 5