Kontron Declares Dividends of 10 Cents Per Share

3/23/2006 - Kontron AG, one of the worldwide leading companies in the embedded computer technologies sector, will be making its first dividend payment to shareholders since going public in the year 2000. As the Management Board of the TecDAX listed company announced at the balance sheet press conference in Munich, a proposal to disburse 10 cents per share will be submitted to the General Meeting of Shareholders. With this step, Kontron is continuing the shareholderoriented policies of the past year. In 2005, an extensive program was launched in the course of which around 1 million company shares were repurchased representing a volume of EUR 6.3 million. Based on the company s sound liquidity, the share buyback program will continue in 2006 at a volume of around EUR 3 million. We are making the transition from being a pioneer to a primarily technology oriented corporation with a strictly market and profitability oriented organization, explained Management Board chairman, Hannes Niederhauser.

Orders at hand and design wins standing at record level
Following a slightly low-key start, Kontron AG experienced a 2005 business year with consistently strong growth from quarter to quarter. While sales in the first quarter still came in at around EUR 62.3 million, the fourth quarter showed a leap to a renewed record value of EUR 93.4 million. With these figures, Kontron has boosted sales by 15 percent to 300.4 million over the previous year (EUR 262.1 million). With this performance, the company recorded the sixth consecutive year of continuous growth. Orders at hand showed an even more dynamic increase than sales, and leapt from EUR 100 million at the beginning of the year by more than 50 percent to EUR 151 million as per December 31, 2005. This figure marked the largest volume of orders at hand in the history of the corporation. In 2005, Kontron also recorded a strong increase in design wins. Here the volume rose to EUR 175 million, following the prior year figure of EUR 120 million. The strongest growth was achieved in the emerging markets of Russia and the Far East and China. Revenues in this region rose by almost 50 percent from US-$ 43 million to US-$ 69 million. In 2005 the traditional, home markets of Europe and Germany also showed strong growth by 27 percent; on these markets, a considerable share of // many investments were committed than had been postponed in previous years. The American market developed along relatively consistent lines for Kontron in 2005. Following the very high growth rates of the years 2003 and 2004, initially the organizational adjustments and the relocation of headquarters to Poway put a damper on growth. By the fourth quarter, however, the region once again showed a strong upward movement to over US-$ 39 million. In the vertical markets, the applications in telecommunications and automation made the largest contributions. The energy sector as well as security technologies also generated strong impulses.

Further improvements in earnings strength
In line with earnings, the operating results were also boosted in a sustained and continuous manner from quarter to quarter. All in all EBIT advanced to EUR 22.6 million following on EUR 19.3 million in the previous year. A better development in performance was prevented by the necessary restructuring measures following the acquisition of the US company Dolch, as well as by the costs for the extensive measures in connection with the merging of logistics and production locations in the United States and Germany. The higher research and development expenditures for the realization of design wins and the establishment of new, forward looking ATCA technologies on the telecommunications market also impacted results. In spite of these burdens, the annual surplus of EUR 16.5 million represents the best result in the history of the corporation (previous year: EUR 12.9 million). This translates as a diluted profit of 31 cents per share.

High liquidity reserves for future growth and share buybacks
The financial and liquidity situation of Kontron AG was also solid and stable in 2005. As per December 31, 2005, the assets of the Kontron Group stood at EUR 338 million by comparison with EUR 279 million at the end of 2004. The share of short-term current assets amounted to 57 percent of the balance sheet total. The cash and cash items position stood at EUR 53.3 million, while net cash amounted to EUR 14.1 million. In addition to liquid funds, Kontron also has available credit lines of EUR 17 million, and therefore a total liquidity in excess of around EUR 70 million. In 2005, equity capital increased by EUR 41.8 million to EUR 234.3 million. The share of equity capital represents 69.1 percent of the balance 4 sheet total. In connection with the acquisition of the Dolch Group in the first half of the year, goodwill declined from EUR 90 million in the third quarter to some EUR 86 million at year s end. All in all, Kontron has further bolstered the sound financial and assets position, and commands a comfortable volume of reserves to realize future growth opportunities and secure corporate aims and targets, as Hannes Niederhauser stated.

New, highly qualified personnel driving additional future growth
In the 2005 business year the workforce grew to just under 2,400 employees, over some 1,830 the year before. Especially the research and development area was bolstered. With the new professionals on board, Kontron holds the largest potential of highly qualified engineers in the industry.

Outlook: Strong growth in sales and performance expected for 2006
With a view to the 2006 business year, Kontron AG anticipates an increase in consolidated sales of around 10 percent, and disproportionately strong gains in earnings, forecasts Hannes Niederhauser. Our declared aim is to improve continuously the EBIT margin within the next five years, as the Chairman of the Executive Board continued. According to Kontron, all of the quantitative indicators are pointing in the direction of this sustained, profitable growth: at the end of 2005, for example, the short-term two-month order volume stood at EUR 52.8 million, by comparison with EUR 35.4 million in the previous year. The sales generating volume of orders at hand over the medium-term sixmonth horizon reached a record figure of EUR 151 million, marking the highest level in the history of the company. The total volume of design wins, which will translate over the long term as from one year s time in concrete sales of at least EUR 1 million per year stood at EUR 175 million by comparison with EUR 120 million in the previous year. According to Kontron, telecommunications equipment providers will be the main drivers of this growth. Over the next years, these manufacturers will be converting their entire telecom infrastructure with embedded computers based on a new Advanced Telecom Computing Architecture (ATCA). Experts estimate the total market volume for this technology that will be operational as of 2006, at around US-$ 15 billion. The area relevant for Kontron is already estimated to hold a volume in excess of US-$ 1 billion in the year 2007, whereby the Eching-headquartered company is targeting a market share of around 10 percent. Already in 2005, Kontron AG succeeded in garnering five new projects in the area of advanced, forward-looking ATCA technology with an anticipated annual sales volume of more than EUR 100 million. Moreover, new innovative application areas as well as the persisting outsourcing trend will also be driving growth in the next years according to Kontron.

Reducing costs by centralization
By merging various locations, integrating subsidiaries, but also thanks to the centralization of production and logistics centers in the United States, as well as in Asia, Germany and Russia, Kontron has further streamlined the organizational structures in the course of the 2005 business year. In addition, the corporation expects to benefit from additional cost savings potentials and efficiency gains especially driven by the new manufacturing facilities in Malaysia, which will be more than doubling the production capacities to date. By the year 2008, more than 50 of the entire basic production will be conducted here. Particularly in the case of orders entailing higher volumes we will be able to considerably reduce manufacturing costs. At the same time, the centralization of processes will translate as an additional, further enhancement of the entire quality level, as Hannes Niederhauser explained.

Kontron Embedded Modules GmbH
Brunnwiesenstr. 16
D-94469 Deggendorf, Germany
Phone: +49 (0) 991 / 37024-100
Fax:+49 (0) 991 / 37024-333

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