Financial overview

(in millions of EUR)	FY2007	FY2006	Rate of Change(%)	Factors
Net Sales	2,249	2,181	3.1	-After allowing for primary and secondary exchange rate factors that eroded sales, the organic growth amounted to a good 4 percent. -New orders booked by the Company rose 1.5 percent -Sales growth was reported by the divisions Pierburg, KS Pistons, KS Plain Bearings, and Motor Service. -Sales increases at Pierburg resulted from EGR valves, solenoid valves, and pumps. KS Pistons more than compensated for sales losses from the phaseout of a major piston program in the USA through higher shipments of large-bore and commercial vehicle pistons. -Other sources of sales momentum: car diesel engine pistons.
EBIT	120	113	6.2	-The Company upped its prior-year performance by 7 million EUR despite US burdens and ongoing high energy and commodity prices -The increase was chiefly due to Pierburg's input, a consequence of a strong sales surge, the implementation of the plan for the German locations, and operational improvements.

Joint-ventures
-In September 2007, the Company and Nippon Piston Ring Co., Ltd. has concluded an agreement to establish a business alliance. The two parties will cooperate in marketing and sales expansion of modulized parts to U.S. and European automakers in China and other markets and also in joint research on environmental technologies. They will pursue synergy effect on a global level by improving their capabilities to modulize piston and piston ring related parts and to supply related systems. (From an article in the Nikkan Jidosha Shimbun on Sep. 13)

Acquisition and Organizational Change
-Pierburg's (water, oil, and vacuum) pump business was spun off to form an independent Pierburg Pump Technology division. In acquiring from DANA Corporation/Tecnologia de Mocion controlada the Electrically-Driven Oil Pump unit and then contributing this to the newly established Pierburg Mexico Automotive, Pierburg Pump Technology made a strategically important addition to its product portfolio, one that allows access to new applications.

Outlook for FY2008
The Company expects FY2008 as follows;
-The current and future restrictive emission limits even more so, especially in European Union countries, are likely to assist the Company's organic growth in the coming years.
-The Company is anticipating for FY2008 moderate organic sales growth of 3 percent and a rise in EBIT above the expected sales increase.

R&D Expenditure

(in millions of EUR)	FY2007	FY2006	FY2005
Total	126	115	104
% of Sales	5.6	5.3	5.1

Product Development
Electric motor-driven EGR system:
-The Company developed a second-generation electric motor-driven EGR system due to come on stream in 2008. With a view to meeting Euro 5 and 6 emission levels, diesel engine EGR modules comprising cooler and cooler bypass units were developed for series production and shipments to the first customers in 2008.

New pump engineering
-Pierburg Pump Technology directed its attention at variable vane-type oil pumps which allow fuel savings of up to 4 percent. The available range was extended to embrace commercial vehicle applications. Besides recirculating water pumps for improved vehicle heating and cooling effect after engine switch-off, electric coolant pumps for the main cooling system were developed and manufactured in series. Existing drawbacks accompanying conventional coolant pumps in terms of footprint, weight, longevity and noise will be significantly reduced by further development work on an external bearing. In the case of vacuum pumps, R&D efforts focused on function and cost improvements in diesel engine applications as well as on the rising demands posed by gasoline applications increasingly using vacuum pumps.

Capital Investment

(in millions of EUR)	FY2007	FY2006	FY2005
Total	148	142	162

-The Company spent 148 million in 2007, up by a good 4 percent and equivalent to 6.6 percent of its sales.

-Numerous new contracts were booked and in order to cope with this those orders capacity expansion expenditures were incurred both in and outside Germany.


Domestic Investment by Division (In Germany)
Pierburg
-Expenditures by Pierburg centered on raising solenoid manufacturing capacities.

Pierburg Pump Technology
-Expenditures by Pierburg Pump Technology, on extending water pump production and on a new assembly line for coolant pumps.

KS Kolbenschmidt
-New steel-piston contracts booked by KS Kolbenschmidt required the installation of additional assembly lines.

KS Gleitlager
-Spending by KS Gleitlager focused on capacities for new zero-lead products.

KS Aluminum Technology
-At KS Aluminum Technology investments targeted the completion of buildings along with the necessary infrastructure for extending the net machining of engine blocks.


Overseas Investment by Division (non-German locations)
Pierburg and KS Kolbenschmidt (India)
-The Pierburg division incurred the first of its infrastructure expenditures as groundwork for the establishment of an industrial park at Pune, India. The production facilities planned will be shared jointly by the KS Kolbenschmidt divisions.

Pierburg (USA, Brazil and Czech Republic)
-Besides the expenditures in the USA and Brazil for setting up EGR system capacities, Pierburg built a second production shop at its Czech plant. This same division prepared production start-ups for coolers, a joint effort between the division's German and Spanish companies.

Pierburg Pump Technology (France)
-Pierburg Pump Technology started work on setting up a new line for future series-production water and vacuum pumps. Also on the expenditure bill: a vacuum pump line in Italy to cope with rising customer orders.