Consolidated and annual report 1999 CENTROTEC HOCHLEISTUNGSKUNSTSTOFFE AG 1 1 History of the company 1973 Initial plastics processing activities 1981 Founded as producer of plastic semi-finished products and prefabricated parts 1985 Introduction of CNC technology for chip removal 1990 Acquisition of Centroplast Kunststofferzeugnisse GmbH & Co. by current owner 1991 Start of production of films and panels by means of calendering 1992 Initial successes with high-performance plastics (PVDF) Development of French, Swiss and Austrian markets 1993 Start of production of calibrated hollow rods 1994 Founding of Centrotherm GmbH (gas flue systems) Sales activities are launched in Great Britain, the Netherlands and Benelux 1995 Gas flue development project with the backing of technology development programmes Accreditation to DIN ISO 9002 Sales activities launched in Scandinavia 1996 Construction approval granted by Deutsches Institut für Bautechnik (IFBT) for rigid gas flue systems Development and marketing of Centropack transport systems 1997 New high-performance thermoplastics added to range Entire group of companies accredited to DIN ISO 9001 Construction approval granted by Deutsches Institut für Bautechnik (IFBT) for flexible gas flue systems 1998 Prefabricated parts production in Marsberg extended Conversion into a joint stock company Listed on the Neuer Markt segment of the Frankfurt Stock Exchange 1999 Market breakthrough for plastic gas flue systems Acquisition of Ubbink Systemtechnik Represented throughout Europe by own subsidiaries 2 Overview Consolidated in DM mn 1999 1998 change in % Sales total 34,3 26,5 29% Engineering plastics (Semi-finished and prefabricated plastic products*) 22,2 22,3 -1% Plastic Systems (gas flue systems) 13,5 4,9 174% Earnings EBIT 4,0 -0,2 Earnings before tax 3,9 -0,9 Net income 3,4 -1,1 Net income** 3,4 2,5 36% Earnings per share (3,6 Mill.shares; DM) 0,96 -0,32 Earnings per share (3,6 Mill.shares; DM)** 0,94 0,69 36% Employees Number (Average) 101 87 16% Personnel expenses 7,6 6,1 26% Sales per employee 0,34 0,31 10% Sales per industrial employee 0,40 0,37 8% Assets Fixed assets (excl. financial assets) 6,9 5,5 25% Current assets 16,6 20,0 -17% - therof liquid funds 1,3 10,7 -88% Total assets 39,8 25,7 55% Cash flow/Investments Cash flow I** 4,6 3,3 39% Depreciation 1,2 0,7 56% Investments (without aquisition) 2,6 2,2 17% * Internal sales with gas flue systems 1999 1,3 Mill. DM, 1998 0,7 Mill. DM. ** 1998 adjusted by one-off expenses incurred by the IPO. Courtesy Translation This report is a courtesy translation. Legally valid is only the original German text. CENTROTEC is not liable for mistakes due to the translation. (Figures are written in German manner; e.g. DM 1.000,000 = DM one thousand) 3 Report of the supervisory board for fiscal year 1999 The Supervisory Board is able to look back on a very their unqualified certification thereof.The auditors’ re- successful fiscal 1999.The group recorded its highest port, a copy of which was sent to each member of the sales and profits in its history.The potential for growth Supervisory Board, was discussed at length in the mee- that was anticipated above all for new types of plastic ting of the Supervisory Board which had the purpose gas flue systems has materialised. As a result of the ac- of approving it.The auditors attended this meeting and quisition of Ubbink Systemtechnik at the end of the fi- reported on the principal findings of their audit.The nancial year, the company has entered a new dimensi- Supervisory Board examined the annual financial state- on.We congratulate the Managing Board and the ma- ments, management report and consolidated financial nagement of the operative companies on this success, statements, including group management report, as and in particular all employees, who have once again drawn up by the Managing Board, as well as the de- shown exceptional commitment. pendence report.The examination by the Supervisory Board revealed no cause for objection.The annual fi- During the 1999 fiscal year, the Supervisory Board was nancial statements issued by the Managing Board were informed regularly and comprehensively of the com- granted the unqualified approval of the Supervisory pany’s business progress, and in particular of the deve- Board, and are thus established pursuant to § 172 Sen- lopment in its sales, orders, earnings, net worth and fi- tence 1 of AktG (German Stock Corporation Law). nancial situation and of the company’s discernible risks and opportunities, through both written and oral re- In accordance with the statutes of incorporation, the ports.The Supervisory Board has, in accordance with le- Managing Board and Supervisory Board have resolved gal requirements and the articles of incorporation, per- to allocate the amount of DM 1,015,251.27 to the reve- formed the tasks which fall due to it, and has in particu- nue reserves from the net income for the year of DM lar regularly monitored and advised the Managing Bo- 2,138,548.70 and the accumulated losses brought for- ard. On the basis of the Managing Board’s reports, the ward of DM 108,046.16, leaving a distributable profit commercial position and progress of the company, to- for the year of DM 1,015,251.27.The Supervisory Board gether with its risks, were regularly discussed with the endorses the proposal by the Managing Board to allo- Managing Board.Wherever ratification by the Supervi- cate the distributable profit to the revenue reserves.We sory Board was required, the proposals of the Mana- would like to thank all employees and the Board of Ma- ging Board were studied and approved by the mem- nagement for their deep commitment throughout in bers of the Supervisory Board.The topics discussed at fiscal 1999. the meetings of the Supervisory Board focused on the fundamental business policies of the parent company and its subsidiaries. Marsberg, March 2000 The accounts, annual financial statements, manage- ment report, consolidated financial statements and group management report for Centrotec Hochlei- The Supervisory Board stungskunststoffe AG as at December 31, 1999 have been examined by the auditors, Arthur Andersen Wirt- Guido A. Krass schaftsprüfungsgesellschaft, Hanover, who have given (Chairman) 5 Group management report for Centrotec Hochleistungskunststoffe AG, Marsberg for the 1999 fiscal year The Group headed by Centrotec Hochleistungskunst- sing boilers, whereas plastic systems are resistant to stoffe AG is able to look back on a highly successful such effects.This fuelled demand for plastic systems. 1999 fiscal year.We were able to achieve an extensive Following the changeover by innovative small and me- market breakthrough in Germany in our expanding bu- dium-sized boiler manufacturers to plastic in recent siness field of plastic gas flue systems, in particular years, the larger manufacturers are following suit in ad- thanks to securing exclusive supply agreements with opting plastic technology, now that it is fully mature. leading boiler manufacturers.We made considerable Plastic gas flue systems for condensing boilers are cur- progress in building up the structures and investments rently in widespread use only in Germany, Austria and that this enormous growth entails. Finally, we entered Switzerland. However, even in these countries, metal sy- an entirely new dimension towards the end of the year stems have only been supplanted to less than 50 %. with the takeover of Ubbink Systemtechnik, a move which represented a quantum leap in raising us to the The market for condensing boiler technology, on which status of Europe's leading supplier of gas flue systems. our gas flue systems are based, is likewise enjoying dy- The price of Centrotec Hochleistungskunststoffe AG's namic growth. Following the introduction of tougher shares mirrored these achievements, rising by 71.9 % pollution controls in Germany, this significantly more from EUR 57.00 on April 1, 1999 to EUR 98 on Decem- economical and pro-environmental heating technolo- ber 31, 1999 (prior to splitting at a ratio of 1:3). gy is being chosen in preference to traditional heating systems. As in recent years, this will once again produce The situation, risks and future expectations of our com- growth in the order of 30 % in Germany alone. As a re- pany are presented individually below. sult of the substitution effect within the field of con- densing boiler technology, signalling a shift from metal A. Business progress to plastic systems, we anticipate market growth for pla- stic systems in the order of 50 % to 100 % over the next 1. Development of the branch and the general two years in Germany.The emphasis of growth will economy – weak first half followed by dynamic then shift to other European markets, where the ener- second half gy-saving condensing boiler technology on which our The companies within the group headed by Centrotec systems are based is still in its infancy in view of lower Hochleistungskunststoffe AG are active in the markets environmental awareness. for plastic gas flue systems and engineering plastics. Temporary first-half slump in demand for investment Sharp rise in demand for plastic gas flue systems in goods now overcome Germany This new type of plastic gas flue system achieved a ge- Engineering plastics components are destined primari- neral market breakthrough in Germany last year. In ad- ly for the investment goods market.This sector was dition to product benefits such as ease of installation and environmental compatibility, it was undoubtedly to our advantage that it became increasingly clear to the market that traditional metal systems are suscep- tible to corrosion in conjunction with modern conden- 6 characterised by marked reticence in the first half of ment was clinched with the European market leader 1999, among other things as a result of the change of for boilers.We in addition attracted eight further large, government in Germany.This temporary slump had an medium and small new customers.