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Sales Stable, Dividend Unchanged

Eglisau, March 26, 2002

Concentration on the four core businesses concluded - Speedy expansion of the Adhesives Business through acquisitions - Take-over of Swift leads to top ten position in the global adhesives market - Sales stable, profit declining - Strong cash flow and solid balance sheet - Unchanged dividend of CHF 22 per share as in the previous year Under difficult trading conditions, the Forbo Group reached sales of CHF 1 354 million (minus 1 % compared with the previous year). Net profit decreased to CHF 52 million. The earnings per share decline is somewhat eased as a result of the share buy-back program. The concentration on the four core businesses was concluded with the sale of the Carpet Business. Like Linoleum and Belting, the Adhesives Business now also has a globally leading market position following the acquisition of the Swift activities. Thus, the Adhesives Business will play a predominant part in the Group. The contribution from activities in North America and Asia will continue to rise. A solid balance sheet and a favorable cash flow development allow the distribution of an unchanged dividend of CHF 22 per share, as in the previous year.

Sales maintained by narrow margin, profit decreased
In the financial year 2001, the continued activities of the Forbo Group reached sales of CHF 1 354 million. This corresponds with a 1% and 5% decrease in local currencies and Swiss Franc, respectively. Expressed in local currencies, Linoleum and Adhesives in particular recorded a sales plus. Sales of vinyl floor coverings and especially of synthetic belts showed a negative development, in the latter segment mainly a result of weak demand for capital goods. The operating profit dropped by 32% to CHF 89 million, of which more than 3 million are due to the exchange rate development alone. In addition to lower sales with high-margin products and the general price pressure in most markets, higher raw material prices as well as the general cost development had a negative impact. Higher financial expenses also had a negative influence on the Group profit. At CHF 52 million, Group profit was 43% below previous year. Related to the number of shares at year-end, the 2001 earnings per share is CHF 40 after CHF 62 in the previous year – a 35% decline. "We have taken numerous steps to achieve an even stronger market coverage and cost savings in response to the unparalleled accumulation of negative influences. These measures will become effective only with some time delay, however", said CEO Werner Kummer at the occasion of the media conference on March 26, 2002.

Strong balance sheet as before
Despite a 24% decline, the operating cash flow (EBITDA) is still at the attractive level of CHF 179 million or 12 % of sales. The free cash flow before dividends and without acquisitions and divestments reached CHF 74 million compared with CHF 89 million in the previous year. Compared with the operating profit, this relatively favorable development was the result of a cautious investment policy and excellent management of working capital. This means that the balance sheet is still solid with an equity ratio of 49 % (compared with 53 % in the previous year). This is in spite of the share buy-back worth CHF 147 million or 10.4 % of the share capital. Thanks to this high level of equity capital, the acquisition of the Swift adhesives activities can be financed with borrowed capital while still maintaining a strong balance sheet with an equity ratio of about 40 %. In view of the profitable business activity and especially the strong cash flow generation, the Board of Directors will propose the distribution of an unchanged dividend of CHF 22 per registered share at the Annual General Meeting of Shareholders on April 23, 2002.

Strategic renewal program making further progress
The strategic renewal program could be concluded successfully with the sale of the Carpet Business to its management. Now Forbo is focused on four businesses: Linoleum and Vinyl (Flooring), as well as Adhesives and Belting (Industry Specialties). Each business is profitable and cash-generative, and pursues a value-driven strategy. The intention to grow the core businesses also through acquisitions was realized with three take-overs in the Adhesives Business in 2001: The acquisition of the Spanish adhesives producer Carzuh, S. L. brought about a strategically important geographical expansion which will open up the markets of Spain and Portugal for Forbo. Spain represents some 10 % of the European adhesives market and has substantial growth potential. The take-over of the shoe adhesives business from Salamander Industrie-Produkte GmbH and Sika Tivoli GmbH in Germany ensured Forbo the market leadership in this segment. Another acquisition was made at the beginning of 2002 with the purchase of SABA Klebstoff- und Abdichtungssysteme GmbH (Germany), which maintains a leading position in the adhesives market for car interior trims.

Forbo becomes a global player in the adhesives market
The acquisition of the adhesives activities from the US-company Reichhold Inc., integrated under the name of Swift, will increase the significance of Forbo's Adhesives Business. The transaction planned to be concluded in April 2002 includes all the Swift adhesives activities in Europe, USA, Canada and Latin America. Swift has an annual sales volume of some CHF 400 million, CHF 240 million of which in the USA alone. The transaction will give Forbo access to the attractive US market, and the company expects numerous benefits for its European business thanks to complementary market positions and product technologies. Thus, Forbo will turn from a European producer into a global player in the Adhesives Business as well. At the same time, the focus in the Forbo portfolio will shift to Industry Specialties, and Adhesives will become the strategic core business with the highest sales.

Share buy-back program concluded, second trading line closed
Forbo repurchased 156 974 units or 10.4 % of its own shares in the context of the share buy-back program approved by the last Annual General Meeting. The shares will be eliminated. The transaction was carried out in two phases by the issue of tradable put-options and subsequently by a second trading line at the SWX Swiss Exchange Zurich, which was especially established for this purpose. Through the latter, a total of 53 600 Forbo shares were repurchased. The repurchase of additional shares was suspended when there were signs of a substantial acquisition in September 2001. The second trading line is being closed effective March 26, 2002.

Cautiously optimistic for 2002
Forbo is operating in a market with short lead times. As a result, Forbo would directly benefit from an economic upswing. "The cost-cutting measures taken will quickly lead to a more than proportional profit recovery", said CEO Werner Kummer. "Structurally speaking, the company is in a good position to reach its objectives as the world economy recovers. Business activities in the first two months of 2002 give no reason for euphoria yet, but we are determined to improve profits this year. Our hopes also rest on the Swift activities, which will make a positive profit contribution, in particular with their strong US business."

Forbo is a global producer of floor coverings and industry specialties. The Group employs some 5 200 people worldwide and has an international network of 22 production companies in 12 countries and 58 marketing organizations in 26 countries.

Contact:

Ursula Leonhard
Head of Corporate Communications
Tel: + 41 1 868 25 69
Fax: + 41 1 868 35 69

Gerold Zenger
Chief Financial Officer
Tel: + 41 1 868 25 25
Fax: + 41 1 868 25 26