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Accelerated expansion in Romania, investments in Hungary

SW Umwelttechnik turned the good weather to its advantage to put in a bright start to the year, recording first quarter revenue growth of over €6 million and a €2 million improvement in EBIT. Meanwhile the group forged ahead with investment projects in Romania and Hungary.

SW Umwelttechnik grew revenue by 72% to €16.0 million (Q1 2006: €9.3 million) in the Q1 of 2007. Favorable weather conditions contributed to rapid revenue growth across all the group's business sectors, while revenue in its new Romanian market almost trebled. Revenue rose by 79% in Hungary, by 178% in Romania and by 26% in Austria, year on year.

In terms of geographical markets, 71% of total revenue was earned in Hungary (Q1 2006: 69%), 9% in Romania (Q1 2006: 6%), and 15% in Austria (Q1 2006: 21%). The fall in the proportion of revenue originated in Austria reflected last year's factory closures. There were only minor shifts in the segmental revenue breakdown. Water Conservation accounted for 31% (Q1 2006: 26%) of total revenue, Infrastructure continued to dominate at 56% (Q1 2006: 64%) and Engineering contributed 13% (Q1 2006: 10%).

Increased revenue boosted EBIT- historically weak in the Q1 due to seasonal factors - and it was negative by only €1.3 million, compared to €3.3 million in the like period of 2006. With finance cost almost down to zero due to the rising Hungarian forint and Romanian lei exchange rates, the loss on ordinary activities narrowed by €3.6 million to €1.4 million (Q1 2006: €5.0 million). Employees The average number of employees edged down by 3%, from 786 to 760, despite the growth in the group's sales. The fall is chiefly explained by the 20% drop in the Austrian head count. Meanwhile the workforce in Romania expanded from 46 to 80. Capital expenditure In the first quarter of 2007 capital expenditure was €5.6 million (Q1 2006: €2.1 million).

Investment programs in Hungary directed towards expanding capacity in the Infrastructure and Water Conservation sectors were completed during the quarter. The spun concrete plant in Alsószolca and the new facility for manufacturing prestressed bridge members at the South Budapest site entered service on schedule. In Romania the Temesvár (Timisoara) plant was finished, and production ramped up to full capacity. Construction of the new factory in Bucharest is going to plan, despite delivery delays due to the building boom. Preparations for the application for planning permission in Marosvásárhely (Targu Mures) are under way.

At the same a search has been launched for a fourth site in eastern Romania, and is due to be concluded by the end of the year. In Austria the machinery relocations and resultant capacity expansions were completed on schedule in May. Order backlog Exceptionally high output due to favorable weather conditions meant that order backlog was worked off unusually quickly, and it was slimmed to €26.1 million from €51.6 million a year earlier. The Infrastructure sector's order books were also affected by changes in the product mix. Nevertheless, management currently expects the sector's revenue target for 2007 to be exceeded.

However revenue in the Engineering sector is seen declining as the large contracts under the Hungarian Environment and Energy Operational Programme (KEOP) are not anticipated until the second half of the year. Overall, SW Umwelttechnik's total output should certainly be on target. Balance sheet The heavy investment program swelled non-current assets from €46.7 million to €62.1 million, while revenue growth buoyed current assets to €44.9 million (Q1 2006: €33.1 million).Total assets rose by 34% to €107.0 million (Q1 2006: €79.8 million).

Financial liabilities climbed from €42.7 million to €58.6 million due to borrowing to finance expansion. The marked improvement in retained earnings was reflected in a 39% increase in equity from €18.5 million to €25.7 million. Share price performance SW Umwelttechnik's return to the prime market segment of the Vienna Stock Exchange on 21 May 2007 reflected the market confidence that has brought a share price run-up of almost 200% since the start of the year. Capital Bank will act as the specialist for SW Umwelttechnik's stock.

The price reached an all time high of €125 in May, driven by investors' faith in SW Umwelttechnik's strategy of accelerated expansion in Southeastern Europe. Outlook On the light of the promising outlook on all the markets served by SW Umwelttechnik, the large-scale investment program and the successful completion of the restructuring exercises, management anticipates 75% year-on-year growth in EBIT, EBITDA and POA on roughly stable revenue for 2007 as a whole. In Austria restructuring programs have already brought a significant improvement in earnings in the first quarter.

In Hungary capacity utilisation was particularly good in the first quarter thanks to the mild weather. SW Umwelttechnik will use its high installed capacity and the cost leadership afforded by its modern equipment to continue to extend its market leadership. In Romania the Temesvár site is fully operational, while the first phase of the Bucharest project is scheduled for completion in September, when the production equipment for infrastructure products is due to be commissioned. A second development phase involving manufacturing equipment for water conservation products is scheduled for completion by the end of the year.

Building work at the Marosvásárhely site in central Transylvania is scheduled to begin near the end of 2007, and a suitable fourth location in eastern Romania is expected to have been identified by then. A start is being made with market development in neighboring Moldavia, Serbia and Ukraine, using exports from Hungary and Romania. Preparations are also being made to purchase land to build production facilities in these countries. If market entry is successful, the aim is to build one to two plants there each year.

The disposal of property surplus to operational requirements, often acquired in connection with investments, will make an additional ongoing contribution to earnings and financing. The group's recent strong performance and the positive outlook for the next few years give SW Umwelttechnik an excellent springboard for its drive to expand in Romania and its new focus markets. (