– Clear increase in sales and profit in all sales regions
– Very strong growth of 55.6 percent in Asia
– Consolidated net income at record high
– Healthy balance sheet and stable net debt

Only twelve months ago we were confronted with an unprecedented drop in demand in excess of 30 percent. The worldwide economic crisis had fully impacted on Bossard Group. In the second half of 2009 there were indications of a slight recovery and this trend was confirmed in the first six months of 2010. In all three of the Group's geographic regions demand grew more strongly than anticipated.


Record profit thanks to higher sales and stringent cost management

In the first six months of 2010, Bossard Group's sales amounted to CHF 244 million, an increase of CHF 38.1 million or 18.5 percent. Percentage growth expressed in local currencies was even higher reaching 21.5 percent. Through this clear sales increase and continuing consistent cost management the Group achieved a veritable profit leap. Compared to the first six months of 2009, consolidated net income quadruplet, reaching a total of CHF 22.4 million. Thus the CHF 15.3 million result for the entire prior year was already clearly surpassed in the first six months of 2010.


Upswing clearly noticeable in all markets

Bossard Group achieved strong growth in all three geographic regions.

Europe

In Europe sales in the first six months of 2010 rose to CHF 133.9 million, an increase of 16.1 percent. Expressed in local currencies they were up 18.6 percent. There was double digit sales growth in almost all the countries in this region.


America

After sales stabilized at a low level in the fourth quarter of 2009, the market environment continued to improve in the first six months of 2010. Compared to the first six months of 2009, sales rose by CHF 4.6 million to CHF 68.4 million, an increase of 7.3 percent. Expressed in local currency the increase was as much as 12 percent.


Asia

Demand in Asia had already begun to improve steadily during the course of 2009. In the first six months of 2010 the upswing gained momentum. Sales rose by CHF 14.9 million to CHF 41.7 million, an increase of 55.6 percent. Expressed in local currencies growth in sales revenues was only marginally lower. In all the countries in this region demand grew by more than 40 percent.

The main reason for the striking sales increase was the noticeably more rapid recovery of the markets and the related demand for fastening elements. However, this strong rise in sales and profit also reflects Bossard's entrepreneurial strength. The company demonstrated that even in economically difficult periods it can act flexibly and judiciously.

In the past two years the Group managed to cut costs, to utilize internal synergies and, at the same time, to remain close to customers and ready for the upswing. Thanks to the tremendous commitment of Bossard employees around the globe, Bossard not only grew but also acquired further market shares in all its major markets – and this despite the fact that conditions in many markets were still difficult.


Gross profit increased noticeably

Given the higher demand, gross profit was up from CHF 74.2 million to CHF 95 million compared to the prior year. The gross profit margin rose from 36.1 percent to 38.9 percent. Various and timely measures – such as cutting procurement costs and optimizing logistics – impacted positively on the margin. Additionally, stronger focus on special parts and on customer segments which generate higher value added contributed to margin improvement.


Cost increases lower than sales growth

Operating expenses before depreciation and amortization rose yearon-year by 5.5 percent to CHF 63.9 million. Personnel expenses showed the highest increase. They mainly rose because short-time work was lifted, and also because of pay increases and higher variable performance-related compensation. Overall, compared to sales growth, costs rose less strongly. This is attributable to the effect of the savings measures implemented in 2009, but also to productivity improvements, especially in America and Asia.


Consolidated net income at record high

The consolidated operating profit (EBIT) rose year-on-year from CHF 7.7 million to CHF 25.6 million and has thus more then tripled. The operating margin also rose markedly compared to 2009: from 3.9 percent to 10.9 percent. Compared to the prior year, all the regions improved their operating profit strongly. The America and Asia regions reached their best ever six-month result. The decisive factors in all the regions were higher volume and continuing cost discipline.

The result was burdened by a non-operating amount of CHF 0.8 million. On the one hand, this sum includes those payments, which can not be capitalized, for the name and marketing rights acquired in connection with the new ice hockey stadium in Zug, the BOSSARD Arena and, on the other, the profit from the sale of a minority interest. In the first six months Bossard Group's consolidated net income amounted to CHF 22.4 million, the best six-month result in the company's history. Compared to the prior year this is CHF 16.8 million higher or a fourfold increase of the profit. Year-on-year the return on sales rose from 2.8 percent to a record 9.5 percent.


Healthy balance sheet and high equity ratio

Total assets rose in the reporting period by CHF 30.3 million to CHF 314.8 million. This is an increase of 10.7 percent compared to end 2009. Total assets rose primarily because of the Group's positive business development. On the assets side the increase was due to higher cash and cash equivalents and a greater volume of accounts receivable. Inventories rose less than proportionally. Taking the dividend payout in April into consideration, the equity ratio fell by 1.2 percentage points to 55.7 percent compared to end 2009. At end June the gearing (net debt/equity) was at a very low 0.2. Year-on-year the return on equity (ROE) rose from 10.3 percent to 19.2 percent. The return on capital employed (ROCE) was up from 9.4 percent to a very satisfactory 15.2 percent.


Net debt still low despite growth

The good result also impacted positively on the net debt. Compared to end 2009 it was again reduced from CHF 38.6 million to CHF 36.5 million. In the past, strong growth invariably led to an increase in net working capital which, in turn, made it necessary to borrow funds. In the reporting period, however, the Group managed to finance the exceptionally strong growth through its cash flow from operating activities. Before changes in working capital, this was up from CHF 9.9 million to CHF 26.6 million year-on-year.


Prospects

Although the most recently published Purchasing Managers Indices (PMI) and other economic data suggest a slight slowdown in worldwide growth, the order intake our customers report has allowed us to move into the second half of the year with confidence. Our target for the entire year is sales in the range of CHF 465 to 475 million. We believe that we can surpass the record net income result of CHF 32.4 million dating back to 2008.