Annual Report 2002

Pfister Group Pfister Holding GmbH exists of Pfister GmbH (dosing- and weighing-equipment) and Pfister Service GmbH (professional services). Pfister Holding GmbH is a 100%-subsidiary of the Danish F.L.Smidth Group and is amongst the leading suppliers of dosing technology for the cement industry. From their headquarters in Augsburg (Southern Germany), the company is acting worldwide. Branch offices and joint ventures in France, the U.S., Brazil, Malaysia, China and India as well as agency-agreements in several countries are supporting Pfisters international engagement. Pfisters technologies are being implemented during all steps of the cement manufacturing process: preparation of raw material, the burning process, grinding and mixing or for example preloading. Pfisters product portfolio consists of linear dosing systems as rotor weighfeeders and gravimetric belt feeders as well as a series of rotor weighfeeders for dosing pulverized fuels, raw meal, fly ashes and other additives. The operative business of another Pfister subsidiary, Pfister Waagen GmbH (industrial weighing systems), was sold to the italian specialist for weighing systems as of May 31st, 2002. Pfister Group thus successfully realized its strategy to concentrate all efforts on its original core business. Weighing systems are not part of this core business of Pfister Holding or its mother company, F.L.Smidth Group. With the Italian Bilanciai Group an ideal was met who will carry on and further develop the business of the wellknown german weighing specialist. Headquarters of the new company (Pfister Waagen Bilanciai GmbH) remains in Augsburg. All employees were also taken on. Development of Financial Results After an outstanding preceeding year, which was due to the outperforming development of Pfister GmbH, in 2002 Pfister Group is presenting a result as expected. With a turnover of 31 mill. a return (EBT) of 8.4% was reached. This equivals an increase in revenue of 3% as compared to 2001 (in it included below-the-line revenue from selling Pfister Waagen GmbH). Slow went the business during the first five month for Pfister Waagen GmbH. Hopeful therefore the positive agreement in the cooperation- and overtaking negotiations with the Italian weighing specialist Bilanciai Group. As one of the five leading companies in Europe, Bilanciai can guarantee Pfister Waagen outstanding chances for further development. Turnover and Profit of Pfister Group in 2002 2002 2001 Pfister Group Pfister Holding GmbH (incl. Pfister Waagen GmbH until (incl. Pfister Waagen GmbH) 05/2002) Turnover (in mill. ) 31 45,7 EBT in % 5,4 8,4* * here included below-the-line revenue due to the sellout of Pfister Waagen GmbH

Development of Business in certain Countries and Departments Due to the slow domestic economic situation, only a small percentage (appr. 10%) was generated within Germany. Domestic cement turnover has been falling for the past five years (turnover in 1998: 40 mill. t, in 2002 only 30 mill. t). The reason lies to a large extend in the construction business. The business there has been poor for quite a while; no signs of upturn can be seen. The same is true for other countries in Western Europe. Due to this development, cement manufacturers avoid investment in new facilities at the moment. The largest cement manufacturers worldwide tend to optimize their facilities in these times of tight economy. Thus, the tendency towards buying up old facilities (rather than construction of new sites) can be explained. On the other hand, this comes in positive for Pfisters replacement-business. Thanks to many years of experience as a processoptimizer Pfister is able to generate business in this field. Business also went slow in North- and South-America als well as Africa. Positiv was the receipt of orders from Eastern Europe, Turkey and the Near East. A booming region now as in the past is Asia with China in the first place. Pfisters strategy to put its feelers out in time, is paying back in the meantime. Pfister has been active in China since 1993. The activities there are taken care of by the Pfister branch office in Malaysia as well as service employees in the peoples republic. With a cement turnover of appr. 550 mill. t., China is by far the worlds largest cement consumer and also producer. Still, Pfister is generating the larger part of its turnover with cement factories which use traditional primary fuels (coal) in the burning process. Up and coming is the market for secondary fuels and it now comes in positive that Pfister has engaged itself in this market for a while. Secondary materials that are fired in the process are e.g. animal meal, rubber chips or industrial waste. The advantage for cement manufacturers is the price of this material (lower, as compared to primary fuels) as well as the fact that with burning this waste, money can even be made since waste-producers pay for this disposal. In the meantime some cement manufacturers even reach negative energy records. Besides this also an ecological aspect comes in play: Through the use of secondary fuels limited recources of primary fuels are being preserved. Product Development 2002 In 2002 Pfister was also able to introduce a number of new products to the market: The biggest and most development intensive product was the Integrated Feeder Controller iFC, an electronic control unit for all of Pfisters dosing equipment. Due to the special construction of this unit a competitive advantage could be gained in terms of costs and handling of the dosing electronics. Also developed and introduced to the market was a mill controller. This integrated dosing system for mill feeding is rounding up Pfisters product portfolio concerning linear conveyor systems. Further development could be accomplished in the field of secondary fuels. Successful testing was realized with the use of tyre chips in the cement manufacturing process, which means a substantial enlargement of the application field of this dosing electronics. Successful inhouse testing was also realized with a new dosing system for raw coal, which is supposed to gain importance for and at Pfister in the near future.

Other news in 2002 Internally implemented was a new software (Enterprise Ressource Planning ERP), which is Planning, organizing, coordinating and evaluating entrepreneurial proceedings from entering a bid to putting systems in operation and delivery of replacement parts. Also implemented was the so called Balance Score Card BSC. This electronic control of corporate numbers functions as a monitoring-system for all employees and departments. Work-, project- and company-goals can be formulated, visualized and controlled with this device. Internal proceedings, goals and the status quo are becoming more transparent and more clear for everyone involved. Employees and Training 2002 Pfister Group counted 152 employees in Germany and other countries. Newly contracted were 5 employees. Also in 2002, 5 trainees began their training as industrial- or office-trainees. Negotiations are still going on to install a new field of education for so called mechatronics. Pfister is also putting respectable emphasis on further education of all of its employees. Since a number of years language classes in English, Italian and Spanish have been offered on a regular basis. In addition in 2002, extensive software training (MS office) has been carried out. Upper management furthermore had the opportunity to take part in a management-training by a wellknown training college.

Prospects for 2003 With a very satisfying order book for the first six month (especially with orders from foreign countries) Pfister started the new business year. Management expects further development of the business to be closely related to this years further international political situation. Momentary a moderate increase of turnover of 3 4 % is being expected. The EBT will show a downward tendency as compared to 2002, since Pfister had realized below-the-linerevenue in the past year due to the sellout of Pfister Waagen GmbH. High hopes are being put on the Chinese market. With appr. 550 mill. t./yr China is by far the biggest cement consumer and producer (in comparison Western Europe: 197 mill.t./yr and the U.S.: 121 mill.t./yr). At the same time many of Chinas cement factories are technically not up to date. Thus, there is potential for development and investment. Furthermore in China there are momentary a number of mega-projects in the planning or building process (e.g. Tibet-Railway, highways, pipelines, canals or buildings in connection with the Olympic Games 2008) which ensure a continuing high consummation of cement. An own service office in China can be helpful for further and more intensive engagement in this region. Opportunities for that are momentarily considered. High expectations are also put in the field of secondary fuels. Since energy cost is a considerable factor during cement manufacturing, measures which help to decrease these costs are gaining importance. No cost energy is the subject. The more interesting are technologies which support the usage of secondary fuels instead of primary fuels in the cement manufacturing process. In the field of factories that are fired with secondary fuels, also a certain demand for turnkey operations is showing. For entrepreneurs this brings the asset to get an entire solution and everything from one hand. Pfister has recognized this trend and is already in negotiations with partners from within (and also outside) F.L.Smidth Group, with whom such projects can be realized.

In the sense of securing the business Pfister is making a constant effort to also test other branches than the cement branch for usage of its high-end-dosing-systems. Intensive development- and testing-efforts, which again will be realized in 2003, guarantee that Pfister Group remains a top international provider for dosing systems.