In the first half of 2011, Bucher Industries returned to growth, underpinned by a broad-based, generally positive market trend. Despite the strength of the Swiss franc, the Group was able to demonstrate its competitiveness and further increase profitability.

Powerful economic momentum
The first half of 2011 was marked by a strong busi-ness dynamic across the regions and in most of the principal markets in which Bucher Industries operates. This positive trend was overshadowed by geopolitical events in the Arab world, the high levels of national debt faced by European countries and the USA, and massive exchange-rate fluctuations affecting the Group's operating currencies. Compared with the same period of 2010, the Swiss franc strengthened against the euro by 12% and also rose strongly against the US dollar, sterling and other key currencies. The Swedish crown also strengthened. This trend put pressure on margins at our production plants in Switzerland and Sweden and the currency translation effects had a strong negative impact on the sales and results of foreign subsidiaries.

Strong business performance
Bucher Industries was able to maintain its strong market positions in the first half of 2011. All the divisions contributed to a significant increase in the order intake. In addition to the upsurge in the markets of Western and Eastern Europe as well as North America, there was also welcome growth in demand for specialised agricultural machinery, hydraulic components, and machinery for the glass container industry. Demand for sweeper vehicles was subdued owing to the high level of indebtedness in the public sector. The acquisition of Unipektin Engineering AG in August 2010 and the US-based Krause Corporation by Kuhn Group boosted sales by CHF 24.9 million, or 2.4%. The Sanjin joint venture in China was consolidated as of 27 July 2011, so its effects were limited to the balance sheet. Strong growth in the order book led to full capacity utilisation at production plants, in some cases operating at the limits of their capacity. The vigorous upswing was clearly reflected in pressure on the entire supply chain. Supply bottlenecks were overcome for the most part by means of forward-looking production management, but in some cases longer delivery deadlines were unavoidable. Broad international diversification of purchasing as well as currency hedges instigated at the start of the year helped to mitigate the huge impact of currency translation. In this challenging and complex environment, the Group achieved a marked improvement in the operating margin and profit for the period. The number of employees increased by 2 346 to 10 033 full-time equivalents, of whom 1 168 were accounted for by the Sanjin joint venture and 259 by the acquisition of Krause Corporation. The remaining growth in the number of employees was due largely to employees on temporary contracts.

Balance sheet
Owing to seasonal factors as well as payments relating to the acquisi-tion of Krause Corporation and Sanjin, cash and cash equivalents declined and net debt increased in the first half of 2011. Inventories rose strongly in response to the marked recovery in business activity. Equity and the equity ratio decreased, despite the positive half-year result, because of the effects of translating the equity of foreign subsidiaries into Swiss francs. The first-time consolidation of Kuhn Krause and the joint venture with Sanjin, the leading Chinese manufacturer of glass container forming machines, is provisional in view of the very short time scale.

Share buy-back
In the reporting period, the board of directors of Bucher Industries AG decided to launch a share buy-back programme covering up to 3% of the company's share capital, with subsequent cancellation of the shares through a reduction in the share capital. The buy-back programme will be handled by a second trading line at the SIX Swiss Exchange. Up to the end of June, the volume of buy-back was 49 600 shares, or 0.5% of the share capital, with a total value of CHF 9.5 million, equivalent to an average price per share of CHF 191.23.



Kuhn Group

Rising demand worldwide and higher prices for agricultural produce ensured a mood of confidence among farmers, stimulating investment. The key markets of Western Europe and the USA grew strongly and demand improved significantly in Eastern Europe. Growth was less pronounced in Brazil owing to the strength of the real. Kuhn Group was able to take full advantage of this market trend thanks to its strong market presence as well as a broad and innovative product range. Order intake increased in local currencies by more than a third and the sales trend indicated a return to healthy growth. However, the widespread drought in the first half gave cause for concern. Despite the negative currency effects owing to the strength of the Swiss franc, sales and operating profit showed a marked improvement and the operating margin was again in double figures. In the first half of 2011, the division expanded its market presence by means of an acquisition and two partnerships. Through the purchase of Krause Corporate in Kansas, USA, Kuhn Group gained a foothold in arable farming in North America and rounded out its product range with tillage and seed-drilling machinery designed for high-performance tractors. The division also took a minority holding in agricultural machinery manufacturer Rauch Landmaschinenfabrik GmbH in Germany, strengthening its long-term partnership in the areas of sowing and fertiliser technology. The strategic alliance between Kuhn Group and John Deere includes a manufacturing and licensing agreement in the area of large square balers. The Kuhn Geldrop plant in the Netherlands is expecting the first orders from John Deere in autumn 2011, with delivery scheduled for 2012. Kuhn Group continued the rapid integration of business segments acquired in previous years.


Bucher Municipal

As expected, the market for municipal vehicles failed to recover in the reporting period owing to high public-sector indebtedness. There was strong competition for projects coming up for tender and increasingly competitive pricing. Bucher Municipal, with a major plant in Niederweningen, was also particularly hard hit by the strength of the Swiss franc. In Latvia, whose currency is pegged to the euro, the development and expansion of production capacity, initiated in 2004, was commissioned on schedule in May of the reporting period. This enabled the division to transfer further production activities to Latvia. The market launch of new sweepers and a marketing drive in new business, as well as service and spare parts, helped counteract the downward trend. Despite rapid implementation of these measures, it proved impossible to offset the currency effects. Sales remained slightly below the same period of last year and both operating profit and operating profit mar-gin declined. In order to ensure distribution of Johnston truck-mounted sweepers in North America, following the bankruptcy of the previous importer, the division established its own distribution and assembly plant in Mooresville, North Carolina, USA. The existing local dealer network was taken over almost in its entirety. Apart from the start-up costs for the new company, the bankruptcy of the previous importer had no financial repercussions, thanks to far-sighted and prudent business practice.


Bucher Hydraulics

The strong upswing in the key markets served by Bucher Hydraulics, beginning in 2010, continued in the first half of 2011. Demand for hydraulic system solutions in Western Europe, North America, China and India continued to recover, particularly in the construction equipment and agricultural machinery segments, as well as in industrial hydraulics. This highly dynamic development is not reflected in the results because of the strong negative impact of currency translation. Despite this influence, order intake and sales showed a further significant year-on-year rise. The marked recovery was partly attributable to a certain rebound effect in the aftermath of the crisis. However, market proximity, a high degree of flexibility and long-term projects at key customers also contributed significantly to the success. Investments of EUR 9.5 million in capacity expansion at the major pro-duction plant in Klettgau, Germany, are planned for 2011 and 2012. The division has two important production sites in Switzerland which export about 90% of their production volume, so it was particularly hard hit by the strength of the Swiss franc. This effect could only partly be offset by the pronounced international orientation of the business activities and a purchasing volume of well above 50% from the euro zone. As a result, the operating profit margin in the first half of 2011 was below the high level of the previous period. The operating profit margin improved compared with the second half of 2010 thanks to an all-round effort.


Emhart Glass

The capital-intensive, late-cycle glass container industry overcame a ten-year low at the end of 2010. The sharp upturn in the reporting period was underpinned by high demand in Europe, Asia, the Middle East and South America. Emhart Glass experienced a steep rise in order intake, mainly for new machinery used in glass container manufacture, and sales began to grow strongly in the second quarter. The spare parts and service business benefitted in turn from this dynamic development. With the order book also growing strongly, production plants were operating at the limits of their capacity. Following the closure of the plant in Italy in 2010, components manufacture was increasingly relocated to Sweden and Malaysia, leading to a significant extension of production capacity in Malaysia. Purchasing in Asian markets was intensified. The production plant for new machinery and spare parts in Sweden, which exports its entire output and sources most of its purchasing in Sweden, was particularly affected by the strength of the Swedish crown. In spite of this, the division returned to profit. In the reporting period, Emhart Glass took an important strategic step, purchasing a 63% stake in Shandong Sanjin Glass Machinery Co. Ltd, Zibo, China, to establish a foothold in the Chinese market. The company generated sales of CNY 371 million in 2010, achieving an EBITDA margin of around 12%. Sanjin is the market leader in China, manufacturing low-cost glass-forming machinery and annealing lehrs geared to the Chinese market. The transaction was completed on 27 June 2011.


Bucher Specials

The performance of the independent businesses consolidated under Bucher Specials presented a varied picture. Winemaking systems experienced a decline, while fruit juice processing equipment largely recovered from the cyclical low of the previous year. The Swiss distributorship for tractors and agricultural machinery held its position well during the reporting period. Overall, Bucher Specials was able to increase both order intake and sales. Operating profit was negative due to seasonal effects. The fall in order intake for winemaking equipment compared with the same period last year can be attributed to two factors: France interrupted its subsidies to winegrowers for four to five months for financial and administrative reasons. In addition, unusual climatic conditions in the first half of the year meant that grape ripening was expected three to four weeks early, with a corresponding narrowing of the window for capital spending. The combination of these two factors led to a marked decline in investment in France, while in Italy, particularly, competitors adopted a very aggressive approach, exerting enormous pressure on margins. Bucher Vaslin participated only to a limited degree in the ruinous price war, forgoing a small number of unprofitable orders. At the end of January 2011, Bucher Vaslin purchased the wine presses of the Sutter brand and took over the corresponding spare parts and service business. Towards the end of July 2011, Bucher Unipektin succeeded in establishing an international distribution partnership to market municipal sludge dewatering systems with the French company Degrémont SA, a subsidiary of Suez Environnement. Degrémont is one of the world's leading suppliers and operators of municipal drinking water and wastewater treatment plants.

Outlook for 2011
The favourable business climate is expected to continue in most
markets during the second half. This positive trend will be overshadowed by uncertainties surrounding the unforeseeable consequences of the huge debt burden facing the economies of Europe and the USA. The impact of the accompanying turmoil in the currency markets is being felt above all by the production sites in Switzerland and Sweden, which are having to contend with a surge in the value of their currencies. The consolidated financial statements are likewise heavily affected by currency translation. Accordingly, the outlook is clouded by considerable uncertainty. Kuhn Group anticipates good basic conditions for the agricultural business during the second half of the year, with sales and operating profit expected to rise for the year as a whole. The sole cause for concern is the widespread drought prevailing in the first half and its likely impact on harvests in the following periods. Bucher Hydraulics and Emhart Glass are also expecting the positive market trend to be sustained, though at a lower level, and an increase in sales and operating profit. Bucher Municipal on the other hand is expecting business to remain subdued, with a decline in sales and operating profit, owing to the uncertain financial situation affecting public-sector budgets. Bucher Specials is anticipating a rise in sales and operating profit thanks to the pick-up in the fruit juice processing segment, despite persistent weakness in capital spending for winemaking equipment. The Group expects a continuation of overall sales and profit growth for 2011.



Niederweningen, August 2011

Rolf Broglie
Chairman of the Board

Philip Mosimann
Chief Executive Officer