Sales up 31% in first six months to around #8364;4.6 billion

Operative results (EBIT) #8364;739 million in first six months, EBIT margin 16 %

Free cash flow improved in first six months to #8364;336 million

Net debt reduced to around #8364;5.9 billion

Crisis successfully mastered, on track for further growth

The Schaeffler Group, one of the world’s leading automotive and industrial suppliers, has successfully mastered the worst economic crisis in recent times and returned to its usual strength faster than expected.The company is availing from a fresh strengthening of demand in the automotive and industrial sectors. The Schaeffler Group is already working almost at full stretch and is close to capacity in all of its plants worldwide. Meanwhile, a cost-cutting and optimization program launched in 2009 is showing positive results. The Schaeffler Group is also making progress in reducing its debt and thus creating the flexibility for investment and further growth.

Sales rose 31% in the first half of 2010 to around #8364;4.6 billion (compared to around #8364;3.5 billion in the same period the previous year). The Schaeffler Group’s innovative strength and operative excellence are highlighted even more clearly by the development of results: From business operations over the first six months, Schaeffler generated earnings before interest and taxes (EBIT) of #8364;739 million (#8364;108 million). The EBIT margin went up to around 16 percent (3 percent) and is thus above the long-term average.

Both divisions – Automotive and Industrial – increased sales and significantly improved results: In the Automotive division EBIT rose to #8364;517 million (#8364; -1 million) in the first half, while EBIT in the Industrial division more than doubled to #8364;222 million (#8364;109 million).Experience shows that there usually is a lag of several months between the recovery in the automotive and industrial sector. This is illustrated by the difference in development of sales in both divisions during the first half-year: Automotive rose 45 percent to around #8364;3.1 billion, while Industrial increased by 5 percent to around #8364;1.4 billion.

For 2010 as a whole, the Schaeffler Group expects sales to exceed #8364;8 billion, with an EBIT margin of more than 10 percent. Schaeffler Group CEO Dr. Juergen M. Geissinger commented: “The Schaeffler Group has generated an excellent operative result for the first half-year. We have started well into the second half and are optimistic that we will be able to exceed the targets we set ourselves.”

Company results for the first six months were minus #8364;260 million. This includes a one-off dilution loss of #8364;396 million in connection with the rights issue at Continental AG in January, in which the Schaeffler Group did not participate. Without this one-off effect, group net profit for the first half-year is #8364;136 million (#8364; -625 million). The second quarter recorded a positive result of #8364;97 million.

Further evidence of operative strength and improved financial flexibility is the free cash flow of #8364;336 million in the first six months. This reflects the Schaeffler Group’s above average profitability and its ability to meet investment and interest payments entirely from current business. With this in mind, comprehensive investments in growth markets are being planned. Schaeffler will invest around #8364;300 million in the next few years in Asia alone.

The Schaeffler Group’s net financial debt was around #8364;5.9 billion at the end of June, representing a debt reduction of more than #8364;200 million compared to the end of the previous year. This positive development is also reflected in the leverage ratio, calculated as net financial debt in relation to EBITDA that was reduced to 3.5 at the end of the half-year from 5.6 at the end of 2009. The Schaeffler Group’s equity was around #8364;3 billion on June 30, 2010. With total assets of around #8364;13.3 billion, this resulted in an equity ratio of 23 percent. Schaeffler Group CFO Klaus Rosenfeld said: “Our financing situation has eased significantly in the first half-year. We will further reduce our net financial debt in the coming few years. De-leveraging is a key priority for us.”

The cooperation with Continental AG is a further component of the strategy of positioning the company as a global leading automotive and industrial supplier. The focus here is on the operative business and joint projects that have already been started up successfully. Besides cooperation in purchasing, the companies are, for instance, working together on the development of turbochargers, and many other projects have already been kicked off.

Overall, the Schaeffler Group is profiting from its leading market position and its product quality as well as its unabated innovative strength. Even if the global economic recovery is still plagued by uncertainties, Schaeffler is optimistic. “We are very well equipped, both operatively and strategically, to drive the big future trends in our sector – energy efficiency, mechatronics and electric mobility – and to expand the Schaeffler Group’s market position,” says Schaeffler Group CEO Dr. Juergen M. Geissinger.

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