Tognum confirms forecasts for 2008 notwithstanding global financial and economic environment

• Strong and profitable growth in 2007
• Further reduction in net debt
• Ongoing high level of investment
• Strong workforce growth
• Positive outlook and forecast for 2008

Friedrichshafen, 3 April 2008. Tognum AG today presents its first annual financial statements since last year’s initial public offering and in the company’s history (http://investors.tognum.com -> Reports). Initial key figures for the 2007 financial year were already published on 28 February; the complete and detailed results are available as of today.

Order intake exceeds €3 billion for the first time

In 2007, the company recorded order intake of €3,107 million, which is 12% higher than in 2006 (pro forma 2006: €2,781 million). The high level of order intake led to a book-to-bill ratio (order intake to revenue) of 1.1, implying that a positive future revenue trend can be expected.

Further strong increase in revenue

During the year 2007, the production capacities of manufacturers of off-highway products were almost fully utilized. Tognum substantially increased its production capacities as a result of expansionary investment as well as by means of overtime and Sunday shifts, and was thus able to participate overproportionally in the market growth. While the market expanded by a high single-digit percentage, Tognum’s total revenue increased in line with order intake in 2007 by 11.8% to €2,835 million (pro forma 2006: €2,535 million).

Revenue generated in the domestic market accounted for 21% of the total. The export ratio was therefore 79%. Last year, Tognum increased its sales in particular in Europe, the Group’s biggest market. But sales achieved in North America also increased significantly. As planned, Tognum continued to strengthen its position as one of the world’s leading suppliers of diesel engines, complete propulsion systems for off-highway applications and onsite energy systems.

Substantial increase in earnings before interest and taxes (EBIT)

Tognum achieved an adjusted EBIT1 of €390 million in 2007 (pro forma 2006 adjusted: €309 million). This positive increase in adjusted EBIT resulted primarily from higher volumes and a high-margin revenue structure reflecting, among other things, the positive effects of high deliveries of large engines and an increased proportion of after-sales business. Continuing efforts to improve efficiency and reduce costs were also partially responsible for the current earnings trend. Together, these factors led to a corresponding improvement in the return on sales to 13.8%, which is 1.6 percentage points above the prior year.

Significant reduction in net debt

Compared with the end of 2006, net debt (interest-bearing debt less cash and cash equivalents) was reduced significantly by €334 million to €294 million. This was due in particular to cash inflows from the initial public offering of €264 million and the positive free cash flow of €52 million. As a result of the IPO, Tognum was able to redeem consortium financing of more than €1.2 billion and replace it ahead of time with new long-term credit facilities of €450 million and $260 million. The new facilities, which were granted without any collateral, have a term of at least five years.

Sharp increase in net profit

The Group’s profit for the year after taxes amounted to €212 million (pro forma 2006: €27 million). The application of an adjusted effective tax rate of 40% resulted in an adjusted net profit (profit after taxes) of €199 million, compared with an adjusted pro forma net profit for the year 2006 of €138 million. The adjusted earnings per share2 for the year 2007 thus amounted to €1.58 (pro forma 2006: €1.15).

Substantial increase in equity

Equity increased by €471 million compared with the end of 2006 to reach €535 million as of December 31, 2007. This increase reflects above all the cash inflow from the IPO and the good profit for the period. The equity ratio was 23% at the end of 2007 (2006: 3%).

Ongoing high investment

Investment in property, plant and equipment and intangible assets totaled €140 million and led, in relation to revenue, to a gross investment ratio of 5%. Property, plant and equipment were the main area of investment, accounting for €100 million of the total. The main focus was on the ongoing modernization and expansion of our production capacities, not least with the objective of further improving our competitiveness.

Expanded workforce

The workforce of the Tognum Group (consolidated companies) expanded to a total of 8,179 employees at the end of 2007. This represents an increase of 1,027 employees during the year under review. The main area of recruitment was engineers (plus 133), mainly in development and sales. Most of the workforce growth was in Germany (plus 594) and the United States (plus 413), the latter especially due to the acquisition of Katolight Corp., a manufacturer of power-generator sets in Minnesota.

At the end of the year 2007, Tognum employed 424 apprentices and trainees. MTU Friedrichshafen GmbH alone recruited 100 apprentices in the reporting period, the highest number in one year for two decades.

Segment reporting

mtu Engines

The mtu Engines segment recorded order intake of €2,684 million in 2007, representing an increase of 10% compared with 2006 (pro forma 2006: €2,440 million). The main drivers of the ongoing positive development of the segment’s order intake were the application areas of Marine and Defense, but growth was also achieved in the areas of Industrial and After Sales. Power Generation was the only application area to record a decrease compared with the prior year; however, order intake in 2006 was boosted by a very large one-off order.

The mtu Engines segment generated revenue of €2,416 million in 2007, thus surpassing the level of €2,195 million achieved in 2006 by approximately 10%. Tognum’s strategy of a broad-based business orientation once again proved to be effective. Lower sales in the area of Power Generation were more than offset by growth in other application areas.

The mtu Engines segment’s adjusted earnings before interest and taxes (EBIT) of €373 million for the year 2007 were 28% higher than in 2006 (pro forma 2006: €292 million). This positive earnings trend was partially due to the higher revenue volume, but above all also to the increase in the high-margin applications of Marine, Defense and After Sales. In addition, the efforts made to improve efficiency and reduce costs also had positive effects. The recent development of the US dollar exchange rate had an adverse impact.


Tognum Onsite Energy Systems & Components

The Tognum Onsite Energy Systems & Components (OES&C) segment increased its order intake by 29% to €539 million in 2007 (pro forma 2006: €418 million). The segment profited significantly from the acquisition of Katolight Corp. This company, whose power-generation systems based on diesel and gas engines are allocated to the Onsite Energy Systems application area, contributed €111 million to the segment’s total revenue.

The revenue of the OES&C segment amounted to €527 million in 2007. This represents an increase of 36% compared with the pro forma figure for 2006 of €388 million. The 2007 figure includes revenue of €88 million from the newly acquired Katolight Corp. Without Katolight, revenue growth would have been approximately 13%. The organic growth was primarily achieved through higher sales of injection systems by the subsidiary L’Orange and of power-generation systems based on gas engines by the subsidiary MDE.

The OES&C segment achieved earnings before interest and taxes (EBIT) of €31 million in 2007 (pro forma 2006: €21 million).

Outlook and forecast confirmed

The Tognum Group is confident that its above-average growth of recent years will continue in the medium and long term in most of its sectors and markets.

Current sector and market developments

In the off-highway markets for high-speed diesel engines that are relevant for Tognum and in its markets for energy systems, after the first two months of the year, the Group anticipates ongoing growth for almost all applications and sales regions in full-year 2008. On the assumption that today’s forecasts for economic and exchange-rate developments are accurate, Tognum expects annual growth (on a euro basis) of 6.5-7.0% for the relevant diesel-engine market and of 8.0-9.0% for the relevant market for energy systems. On the basis of banks’ projections, Tognum now anticipates an average exchange rate of $1.45 per Euro in 2008.

Tognum

As in the years 2006 and 2007, the Group aims to exceed the growth rates forecasted for its markets in 2008. Based on the general conditions described above and on the actual figures for 2007, Tognum continues to expect revenue growth of 12% in 2008 (+/-1%). Despite the substantial expenditure and efforts that the anticipated expansion will require in the medium term, provided that economic and financial conditions do not change significantly, the Group continues to forecast that it will achieve an adjusted return on sales of 14% in 2008 (+/-1%). For the year 2008, Tognum aims, as before, to achieve adjusted earnings per share of more than €2.00 and plans to make another dividend payout of at least 30% of net profit.


1) The adjustments are due in particular to the acquisition by Tognum of DaimlerChrysler’s off-highway activities in the first half of 2006 and the related purchase price allocation (in accordance with IFRS), and are also due to other acquisition-related expenses. There were also effects from currency translation, primarily from the translation on the balance sheet date of liabilities to banks denominated in US dollars, and gains on the sale of assets no longer required for operating activities. Profit in the year 2007 was also negatively affected by transaction costs that were not directly charged to equity and by one-time advisory services before the decision on the initial public offering. The unadjusted EBIT for the year 2007 also included an impairment loss of €10 million recognized on Tognum’s strategic minority shareholding in Fuel Cell Energy Inc., a listed company active in the field of fuel-cell technology.

2) Earnings per share are determined on the basis of the weighted average number of shares (120,025,000 in 2006 and 125,902,123 in 2007).

Key Figures
in € million	2006 (pro forma)	2007	change
Order intake	2,781	3,107	12%
Revenues	2,535	2,835	12%
Adjusted EBITDA	369	457	24%
EBITDA margin	14.6%	16.1%
Adjusted EBIT	309	390	26%
EBIT margin	12.2%	13.8%
Adjusted net profit	138	199	44%
Adjusted earnings per share (in €) (1)	1.15	1.58	37%
Dividend payout	-	79	-
Dividend (in €) (2)	-	0.60	-
Market capitalisation as of 31 December 2007	-	2,708	-
Total assets	2,098	2,361	12%
Equity ratio (3)	3.0%	22.7%	643%
Net debt	628	294	-53%
Investments in property, plant, and equipment and intangible assets	n.a.	140	n.a.
Free cashflow (4)	n.a.	52	n.a.
Number of employees (end of period)	7,152	8,179	14%

(1) Earnings per share based on weighted number of shares outstanding (120,025,000 in 2006 and 125,902,123 in 2007)
(2) Subject to the approval of the Annual Shareholder's Meeting on 10 June 2008
(3) Shareholders' Equity as % of Total Equity and Liabilities
(4) Free Cash flow based on Cash flow from operating activities and Cash flow from investing activities


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Tognum

Tognum is one of the world’s leading suppliers of high speed diesel engines and complete propulsion systems for ships, heavy land and rail vehicles and of industrial drive systems as well as decentralized power plants, set-up in the two divisions mtu Engines and Tognum Onsite Energy Systems and Components.

Its product portfolio includes diesel engines in the power range from 20 to 9,100 kW, gas engine systems, gas turbines and fuel cells and is one of the most modern and comprehensive in its sector. In addition, the Group develops and manufactures custom-made electronic control and monitoring systems for its engines and propulsion systems.

Revenue of the Tognum Group amounted to more than EUR 2.8 billion in 2007. By the end of 2007, the Group employed approximately 8,200 personnel worldwide. It maintains a global sales and distribution network including 22 subsidiaries, more than 130 distribution partners and 1,100 authorized dealers.

Disclaimer regarding forward-looking statements et al.:

This report also contains forward-looking statements based on assumptions and estimates of Tognum’s Executive Board of Management. Although we assume that our assumptions and estimates on which we have based these forward-looking statements are realistic, we cannot guarantee that they will in the future prove to be correct. The assumptions and estimates, by their nature, may harbour risks and uncertainties that may cause the actual figures to differ considerably from the forward-looking statements. Factors that may cause such discrepancies include, among other things, changes in the economic and business environment, variations in exchange and interest rates, the introduction of competing products, lack of acceptance for new products or services and changes in corporate strategy. Tognum does not undertake any obligation to update, to review or to confirm the forward-looking statements or to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date of this announcement.