Leica Press Release

The Leica Camera Group, Solms, has closed the first half year of fiscal 2005/2006(FY end March 31) with sales growing by 6.7 % on the previous year period, to € 48.0 million.

The largest sales growth was recorded by the binoculars, scopes and rangefinders of the Leica sports optics division, which increased by 34.4 % to € 17.7 million. The main driving force behind this positive development were the LEICA GEOVID BRF high performance binoculars with their integrated laser rangefinder. The integration of digital technology into the existing product range was also decisive for the 30.5 % growth experienced in the Leica system cameras division, which posted sales of € 16.6 million. The delivery of the LEICA DIGITAL-MODUL-R had a favourable effect on the sales of this division. The module is a globally unique digital complement to existing 35mm SLR cameras, as well as an example of the combination of classic Leica values and useful system complements. The demand for LEICA DIGITAL-MODUL-R will continue to exceed the Company’s manufacturing capacities. In addition, the analogue reportage cameras and lenses of the Leica rangefinder system experienced a slightly positive development.

Sales of analogue and digital compact cameras temporarily fell by 55.6 % to € 4.2 million, mainly as a result of the fact that the existing digital compact cameras reached the end of their life cycle. Towards the end of the first half year, however, the Company presented the new and especially compact digital camera LEICA D-LUX 2, which is to stimulate compact camera sales beginning with the Christmas business.

The positive development of sales originates in all of the Company’s key sales regions – except Germany, where the Group sales are down by 7.6 % on prior year, to € 10.1 million. However, sales of products in the German market show a slightly positive development. The decrease results from the declining sales in technical after-sales service and other sales areas.

“In spite of the existential crisis Leica Camera Group went through in the months following the beginning of the fiscal year until the end of August, the Company’s sales have developed favourably. This shows that the attractivity of the products and the strength of the brand have not been impaired. However, the challenges the Company faces remain. The reorientation of the Company has been started by defining the product strategy, rebuilding the management structures and implementing short-term measures such as the reduction of inventories. Now that the Company’s financing has been stabilised, we are tackling medium and long-term improvements”, said the Chairman of Leica Camera AG’s Board of Management, Dr. Josef Spichtig.

At € –1.9 million the operating result continues to be unsatisfactory, although it has been reduced by € 2.2 million compared to the previous year period. The extraordinary result comes to € –1.4 million, up from prior year’s € –2.4 million. The net loss after tax was reduced by € 2.8 million and amounts to € –4.6 million. In parts of the Group, the implementation of the adjustment of corporate structures to the lower level of sales has already begun. At the Solms location such implementation will begin in the coming months. The preparatory talks with the works council are approaching conclusion.

Measures aimed at reducing material and overhead costs are already working successfully. Especially as concerns the lowering of inventory and capital commitment costs, a first success has been achieved by reducing inventory by 29.3 % to € 32.4 million. Further improvements are expected on the basis of organisational measures in production that aim at a reduction of workin-process, as well as on the basis of strict inventory management.

Research and development expenditure increased by 12.4 % to € 3.9 million. In this connection, the Company aims at strengthening Leica Camera by increasingly integrating digital technologies into the existing product ranges and systems. Leica Camera Group’s access to innovative technologies is secured by strategic partnerships. Participating in project initiatives such as the new photonics centre at Wetzlar is a way to open up additional potential.

After completion of the capital increase the interests of the two large shareholders in the Company have increased. Hermès International SCA, Paris, now holds 36.2 %, as compared to 31.5 % before the capital increase. ACM Projektentwicklung GmbH, Salzburg, now holds 35.8 %, after 27.2 %. Because of a notification of exemption on the part of the Federal Financial Supervisory Authority (BaFin) ACM Projektentwicklung GmbH is exempt from submitting a mandatory offer in terms of §§ 29, 35 German Securities Acquisition and Takeover Act (WpÜG).