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Sales growth at lower margins

Eglisau, July 25, 2003

In the first half-year sales of CHF 791.8 million were recorded, an increase by 9.7 % or 15.2 % in local currencies over previous year. The sales growth is especially the result of the Swift Adhesives business acquired in April 2002. In local currencies, also the Belting business increased sales, whereas the Flooring business recorded a slight decline. The operating result after depreciation and amortization (EBIT) of CHF 34.8 million is CHF 9.6 million below the previous year. This is due to depressed selling prices, higher material costs and mainly the currency situation.

Sales and profit development
Net sales were at CHF 791.8 million excluding the sales of the Repoxit AG (floor coverings for industrial applications) divested at the beginning of the year. The operating result before depreciation and amortization (EBITDA) was at CHF 81.4 million. This corresponds to 10.3 % of sales. The operating result after depreciation and amortization (EBIT) of CHF 34.8 million is CHF 9.6 million or 21.6 % below the previous year. CHF 2,1 Mio of the result decline are induced by currency translations.

All three businesses contributed to the deterioration of results which is mainly due to external factors. Due to the higher sales portion of Adhesives, but also due to depressed selling prices and higher material costs the gross profit margin declined from 34.3 % in the previous year to 32.4 %. Cost savings could only partly compensate for this negative development. Since the Forbo Group generates an essential sales portion in North America and Asia on the basis of exports from Euro countries, the development of the dollar also had a negative impact on the margin.

The lower operating result and acquisition-related higher financial expenses and a higher tax rate lead to a consolidated profit after tax of CHF 14.2 million (previous year: CHF 24.5 million).

The company's liquidity (cash and marketable securities) is unchanged strong with CHF 146.8 million, aligned with a solid shareholders' equity basis. The gearing (net debt/equity) at the end of
June 2003 is at 78.5 %, 3.7 percentage points better than at the end of the previous year.

Business development
Encouraging growth in the Flooring business was recorded in the sales regions of Asia, USA, Eastern and Southern Europe as well as France. As opposed, sales dropped in the traditional markets of Western Europe, especially in the Benelux countries and in Germany.

The Adhesives business recorded sales growth mainly as a result of acquisitions. The integration of the Swift adhesives business into the Forbo Group has been concluded successfully. Margin pressure was aggravated by price increases for key raw materials in the first quarter. Since May 2003, there have been signs of a slight improvement of the situation.

The global Belting business continues to suffer from a general reluctance in investments, specifically in investments in the logistics infrastructure. Market development was far better in Asia and America than in Western Europe, which led to an overall sales growth in local currencies.

Outlook
A rigorous cost management, the further improvement of internal structures and an efficient management of current assets will be continued in the second half-year. Thus, the group anticipates an amelioration of results.

Forbo is a global manufacturer of floor coverings, adhesives and conveyor and processing belts. The Group employs some 5700 people worldwide and has an international network of 32 production companies in 12 countries and 60 marketing organizations in 30 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