Behr Business Report FY2007

Business Highlights

Financial overview
in million Euros FY2007 FY2006 Change of ratio
Sales 3,383 3,188 +6.1% (1)
Earning before taxes 40 95 (57.9%) (2)
Sales by Divisions
Automotive air-conditioning 1,271 1,304 (2.5%) (3)
Engine cooling systems 1,652 1,463 +12.9% (4)

-In Germany, the Company increased sales to 1,007 million euros – an increase of 10.1% compared to 2006. It realized growth of 4.6% to 1,194 million euros in the rest of Europe. Eastern Europe exhibited the most positive development. Sales in North America fell to 733 million euros due to the weak dollar and are thus 5.3% below the previous year. Asia, in contrast, continued its stable upward trend with growth of 37.9% to 222 million euros. Sales also improved in the so called
“other regions”, i.e. Brazil and South Africa, increasing by 15.8% to 227 million euros.
-In 2007, the Company was able to increase sales by 15% to 594 million
euros in the growth markets Brazil, Mexico, Eastern Europe, India, and China. The new plants in India, China, Mexico, and the Czech Republic got off to a good start and form a solid basis for future projects. Together, these six plants have a production area of over 100,000 sqm and represent a total
investment of 94 million euros.
For details, see "Investment."

(2)Earnings before taxes fell from 95 million euros in 2006 to 40 million euros, which mainly resulted from problems in North America and in the industrial sector. Additional strain resulted from rises in raw materials prices, mostly for stainless steel.

(3)The Air Conditioning Product Division posted sales of 1,271 million euros, which is slightly less than the previous year. In the meantime, the market has become saturated due to a peak
in the number of vehicles equipped with A/C systems, resulting in lower volume growth. The price pressure was also noticeable in this division.

(4)The Engine Cooling Product Division developed extremely well. Sales were up 12.9% to 1,652 million euros. This growth is chiefly attributable to the flourishing truck business, the new Behr EGR coolers, and front-end modules from the Company's joint venture HBPO.

-The Company is supplying modular air conditioning system and engine cooling package for the Audi A5. In future, it will be possible to use this modular A/C system in other Audi models, in addition to the A5. The Company has developed a modular design concept for the fully automatic climate control system, which can be expanded from one climate zone to up to four. The three-zone A/C system replaces the separate rear HVAC module and provides air conditioning to the rear of the vehicle, independent of the settings for driver and front seat passenger. Behr produces the climate control unit in its plant in Neustadt. In the diesel variant, Behr has integrated a new generation PTC auxiliary heater. For the engine cooling system in the new A5, Behr is supplying both the 80 and the 64mm deep charge air coolers, as well as a variant of the main radiator. (From a press release on August 7, 2007)

-The production of the front-end module for the new BMW Mini is launched at HBPO. For the first time, HBPO assumes overall responsibility for development, logistics and just-in-sequence delivery. The employees at the plant in Banbury, UK, assemble up to 170 individual parts from 31 suppliers into complete front-ends.

New company
With the founding of Behr Korea Behr continues its expansion in Asia


R&D Expenditure
(in million euros) 2007 2006 2005 2004 2003

R&D expenditure

241 229 215 195 184

% of sales

7.1% 7.2% 7.0% 6.4% 6.1%

R&D Structure
-The Company has 17 development locations. The Company has two fully equipped Technical Centers in Stuttgart (Germany) and Troy (Michigan).

Product Developments
(1) Automotive air-conditioning
No-idle air conditioning system
Behr America is working with a major U.S. truck manufacturer to launch its No-Idle Air-Conditioning (NIA/C) System in North America in 2007. Behr's NIA/C System provides air conditioning to heavy-duty truck cabins while the engine is turned off. This system has become desirable in the U.S. as stringent emissions regulations and soaring prices of diesel fuel discourage leaving truck engines running. The U.S. system is integrated into the vehicle's architecture to deliver high performance and exceptional comfort (From a press release on Apr. 17)

(2) Engine cooling systems
Improved exhaust gas recirculation
In May 2007, Behr America has developed an improved exhaust gas recirculation (EGR) cooler that adheres to the latest United States emissions standards for heavy trucks. An EGR cooler is a device used on diesel engines that works in conjunction with the EGR system.

Chrome-free process for coating
In 2005 the Company developed a new, completely chrome-free process for coating the evaporators of HVAC modules. This coating process has now been in series production for the past year. Not only does this eco-friendly BehrOxal(R) process satisfy the EU End-of-life Vehicle Directive that came into force on July 1, 2007, but it also improves the corrosion protection of the evaporator, inhibits the buildup of odors, simplifies process management, and contributes to industrial safety. Studies show that the BehrOxal(R) process sustainably protects the environment in all its process steps – a major improvement over yellow chromate coating. (From a press release on August 7)

New R744 Refrigerant
In the year under review, the Company made strides in the industrialization of the R744 refrigerant cycle. The new R744 refrigerant (carbon dioxide) will be implemented in Europe from 2011. By switching to R744, the CO2 emissions caused by vehicle air conditioning can be reduced by a total of 30%. Additionally, the new system provides for more rapid cooling and thus greater passenger comfort. As a potential alternative to R744, the automotive industry has discussed numerous synthetic refrigerants over the last two years.
Following intensive testing, this number has been reduced to one possible alternative, which, however, exhibits drawbacks in terms of performance and safety.

Investment Activities