Beru AG Business Report FY2007

Business Highlights

Financial overview
-In the Company's strongest-growing division, Electronics and Sensors, the Company was able to increase the sales revenue generated by its tire-pressure monitoring system TSS (Tire Safety System) by more than 50 % compared with 2006. Ignition Technology also developed positively once again, with growth of 6.6 %. However, more than half of this combined effect was neutralized by the decline in sales revenue by the Diesel Cold Start Technology division, which was partially due to the weak aftermarket business in the first quarter of 2007.

Original Equipment business
-In the 2007 financial year, the Company succeeded in maintaining its share of supply in the original equipment business. In the direct business with automobile manufacturers, it supplies nearly all producers of cars and engines worldwide. The Original Equipment segment accounts for nearly 70% of the Group's total revenue. As in the prior year, the sources of growth were the Ignition Technology division and the Electronics and Sensors division.

-Premium manufacturer BMW uses the Company's tire-pressure monitoring system TSS (Tire Safety System) in all models exported to the United States. Numerous other manufacturers such as Audi, Bentley, Bugatti, Daimler, Ferrari, Maserati, SsangYong and VW offer TSS as optional equipment. In the United States, Ford and Hyundai are supplied with TSS in cooperation with the Company's joint-venture partner, Lear.
The Company's PTC auxiliary heating system is fitted as standard equipment by producers such as Audi, Ford, Hyundai, Kia, Mazda, Seat, Skoda, Volvo and VW.
In the field of ignition technology, the Company slightly expanded its share of supply with the French automaker, Renault, in 2007. Although it did not expand its market share in the field of diesel cold-start technology, it defended its position as one of the global market leaders.

-In the new Audi R8, a second-generation BERU Tire Safety System (TSS) pre-warns the driver of damages through tire pressure that has been set too low. (From a press release on June 26, 2007)

-The Tiguan from Volkswagen goes into series production in November 2007 featuring a BERU Instant Start System (ISS). (From a press release on Oct. 26, 2007)


R&D Expenditure

(in EUR thousand) Dec. 2007 Dec. 2006 Dec. 2005*
R&D Expenditure 34.3 33.5 24.8

R&D Structure

-More than 200 people work on future the Company's future innovations at its research and development facilities in Germany. In 2007, the Company invested 7.6% (7.6%) of its revenue in this area, which was once again above the average for the industry.

R&D center

-In the spring of 2007, the extension of the Company's research and development center (FEZ) was officially opened. The main element of this EUR 5 million extension is a new all-wheel dynamometer inside a cooling chamber, in which tests can be carried out at temperatures down to -40 ツーC.

Product Developments in 2007
Diesel Cold窶「Start Technology
-The Pressure Sensor Glow Plug (PSG) will be fitted as standard equipment by two automobile manufacturers starting in the middle of 2008. As of 2009, the Company will also supply the PSG with ceramic heating elements.

-It will also launch a ceramic glow plug in 2009. Ceramic glow plugs reach higher temperatures faster than steel glow plugs, so engines have better starting characteristics, supply heat for vehicle interiors more quickly, and generate lower emissions.

Electronics and Sensor Components
-The TSS monitors tire pressure, warns the driver of dangerous pressure loss in good time, and thus reduces the risk of accidents. In addition, optimal tire pressure helps to reduce fuel consumption and thus also emissions. BERU is currently developing a system that works without the need for batteries.

-The Company developed High Temperature Sensor (HTS). This closed temperature sensor, which is constructed similarly to a glow plug, is designed for use in the exhaust-gas after-treatment of gasoline and diesel engines. It is used to monitor exhaust-gas recirculation systems, oxidation catalysts, particulate filters and deNOx systems, and will go into series production in 2009.

Investment Activities

Investment Dec. 2007 Dec. 2006 Dec. 2005*
Investment in property, plant and equipment 24.7 24.1 24.8

Domestic Investment
-Investment continued in Ludwigsburg and Neuhaus in new equipment for the production of the Company's important products for the future: ceramic glow plugs and Pressure Sensor Glow plugs (PSG). In both Muggendorf and Ludwigsburg, substantial sums were invested in new facilities for the production of ignition coils and in the expansion of such facilities. At the Group's electronics plant in Bretten and at the plant in Muggendorf, investments were carried out for additional production lines for BERU's Tire Safety System (TSS).

Overseas Investment
-Substantial sums were also invested at the plant in Bretten for additional production lines for the diesel Instant Start System (ISS). Investment in modernized production facilities continued at the Company's plant in Chazelles sur Lyon, France, where its European production of spark plugs is concentrated; it amounted to EUR 2.7 million in 2007. Furthermore, BERU invested EUR 0.8 million in Tralee, Ireland, part of which was for the production lines for sensor production.

-In May 2007, the Company inaugurated the new plant of its 100% subsidiary, BERU Mexico S.A. de C.V. in Morelos, Mexico. The subsidiary produces spark plugs and sensors and is active in the distribution and sale of ignition technology products in the NAFTA region (From a press release on June 6, 2007)