Starrag Group: Significant organic growth - Sustained profitability

Increase in order intake on a solid base The increase in order intake was primarily fuelled by the European market. Positive sentiment throughout the machine tool sector induced many companies to reactivate replacement and modernization plans that they had postponed during the recession. In the aerospace sector the improving economic outlook led to an increase in orders from the civil aircraft manufacturing industry. The increase in new orders from the energy sector was primarily driven by replacement and expansion expenditure on conventional energy assets in BRIC countries. Capital spending on wind power in Europe and Asia was very subdued but a good increase in spending on plant and equipment was observed in the industrial engineering and transport sectors in Europe and in China.

Solid earnings power
Operating profit EBIT increased from CHF 10.1 million in the previous year by 89 % to CHF 19.1 million in the year under review and the EBIT margin rose from 5.1 % to 5.4 %, which is well above the average sector margin. Net income reached CHF 10.9 million or CHF 3.52 per share (+34 %).

Balance sheet remains strong, sound capital structure
Starrag Group’s capital base remains strong and stable. Thanks to the rights issue conducted to refinance the acquisition of Dörries Scharmann, the equity ratio remained at a high level of 54.1 % (2010: 64.1 %). Cash holdings at 31 December 2011 were sharply higher at CHF 44 million (previous year CHF 32 million), buoyed by the high operating cash flow. The company’s net cash position (cash and cash equivalents minus debt) could be increased from CHF 31 million at the end of 2010 (including Dörries Scharmann) to CHF 37 million at the end of 2011.

Also in 2011, the Starrag Group invested a considerable amount in the future growth of the company: At the European factories CHF 6.8 million were invested in the optimization of the manufacturing infrastructure; CHF 3.4 million were invested in the start-up of our new manufacturing plant in Bangalore, India.

Expansion into Indian market on track
Starrag Group’s geographic focus during the year under review was on Asia. After the inauguration of a technology center in Bangalore, India, in 2010, we began to build a new plant in 2011 that will manufacture machining centers for the Indian market. This is the first manufacturing plant we will be operating outside Europe and it underscores the growing importance of Asia as a future source of sales and as a production base.



From StarragHeckert to Starrag Group
We revised our brand concept during the year under review in the context of the strategic acquisition of Dörries Scharmann and adjusted our branding to address the new circumstances. The company as a group now presents itself under the Starrag Group name while the products themselves are marketed under the same strong, established brands as before: Berthiez, Dörries, Droop+Rein, Heckert, Scharmann, SIP, Starrag, TTL, WMW. This will strengthen the innovative capabilities of each individual brand thanks to the common banner and enhances the overall potential of success.

Dividend proposal
In view of the positive Group results, the Board of Directors will propose a dividend of CHF 1.20 per share at the Annual General Meeting, to be paid from capital contribution reserves, which are not subject to Swiss withholding tax. The payout ratio of 37 % is at the upper end of the targeted 25 % to 33 % range. Based on the closing share price of CHF 49.55 on 31 December 2011, this corresponds to a dividend yield of 2.4 %.

Looking to the future with confidence
Our high order backlog of nearly CHF 240 million at the end of 2011, a full project pipeline and the strong course of business in civil aircraft manufacturing – an important market for Starrag Group – make us confident that we will be able to report higher sales, orders and earnings in 2012, assuming a stable economy.

The acquisition of Dörries Scharmann and the merger of the two companies’ sales organizations in the USA and Great Britain are expected to show substantial synergies, particularly with regard to lowering costs for material. We are establishing offices in Mexico and Brazil to address the growing importance of Latin American markets. On the product front, three new machine concepts will be introduced.

Contact
Starrag Group Seebleichestrasse 61 9404 Rorschacherberg Tel. 071 858 81 11 Fax 071 858 81 22 info@starragheckert.com

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