Ha lf-Yea r Repor t 2010
Group profit from operations doubled
Sales in local currencies up considerably by 6.2 %Big jump in profitability – earnings guidance increased
for 2010

flooring. bonding. movement.

2
Forbo doubled Group profit from operations

The Forbo Group – a leading manufacturer of flooring systems,
adhesives, as well as power transmission and conveyor belt­solutions – doubled its Group profit from operations in the firsthalf of 2010 to CHF 58.7 million (same period in 2009:
CHF 28.5 million). In addition, it generated an extraordinary
financial income of CHF 32.2 million after tax from the sale ofRieter shares. Net sales came to CHF 918.8 million, which isequi­valent to solid growth in local currencies of 6.2 % comparedwith the previous year period. Forbo lifted operating profit (EBIT)
to CHF 83.9 million, representing a significant increase of 79.7 %.
The EBIT margin improved substantially from 5.3 % in the previous
year period to 9.1 % in the reporting period.

Dear shareholders,
In the past two years, Forbo has delivered good results despite the economic crisis. We are therefore
all the more pleased to report that our performance improved substantially once again. The first half of2010 turned out to be better than expected on the whole. Demand stabilized in most regions. Distinct
growth trends were clearly visible in customer segments that are crucial for Forbo such as machine tools
and plant engineering as well as consumer durables such as cars, furniture, and textiles. In addition,
the go-ahead was given for orders from logistics projects that had been previously postponed. The
expansion of our sales and distribution organization, the structural adjustments made in the past
two years, new and innovative products, and a strong customer focus are now yielding results. Putting
decision-making on a long-term footing despite the economic crisis led to a further major improvement in profitability as well as a considerable increase in sales during the period under review.
Good sales growth affected by strong Swiss franc
In the first half of 2010, Forbo generated net sales of CHF 918.8 million, a significant increase of 6.2 % in
local currencies compared with the same period the previous year. The strong Swiss franc lopped 2.5 %off this figure so that sales growth in the Group presentation currency came to 3.7 %. Bonding Systems
and Movement Systems reported double-digit sales growth in local currencies of 11.8 % and 10.1 %respectively. Flooring Systems posted sales growth of 1.5 % in local currencies.
Strong increase in profitability
All three divisions reported a substantial improvement in operating profit before depreciations andamortizations (EBITDA), which rose 39.7 % to CHF 113.6 million. Operating profit (EBIT ) increased sharply
by 79.7 % to CHF 83.9 million. Profitability has been strengthened sustainably by a number of factors:
the structural adjustments carried out in 2008 and 2009 to counter the economic downturn, the successfully implemented measures to increase efficiency, and new products with greater added value.
Significantly higher margins
All three divisions reported significantly higher operating profit margins in the first half of 2010. The
EBITDA margin rose from 9.2 % in the previous year period to 12.4 %, while the EBIT margin increased
from 5.3 % to 9.1 %.
Group profit from operations doubled
Group profit from operations soared to CHF 58.7 million, which was more than double the previous
year's period result of CHF 28.5 million. In addition, Forbo generated an extraordinary financial incomeof CHF 43.0 million before tax (CHF 32.2 million after tax) from the sale of Rieter shares. Overall, Group
profit in the period under review amounted to CHF 90.9 million.

3

Performance of the three divisions
The Forbo Flooring Systems division reported net sales of CHF 449.1 million in the first half of 2010,equivalent to an increase in local currencies of 1.5 % versus the same period the previous year (– 0.6 %in Swiss francs). Sales growth of the fully integrated Flooring Systems activities in the first half does
not yet fully meet our expectations. A solid uptrend especially in markets such as Switzerland, America,
and Eastern Europe was offset by weaker demand in the Netherlands and in France. Measures havebeen taken to strengthen sales performance across the comprehensive product portfolio. Given that
integration and restructuring costs were no longer necessary, operating profit (EBIT ) increased significantly by 40.7 % versus the previous year period to CHF 61.2 million. The EBIT margin was a pleasant
13.6 % (previous year period: 9.6 %). Following the successful integration of Bonar Floors in the past year,
the division will focus in the coming months on making the marketing of its expanded productportfolio stronger and more effective.
The Forbo Bonding Systems division reported net sales of CHF 304.6 million in the first half of 2010,equivalent to an increase in local currencies of 11.8 % versus the same period the previous year (8.2 %in Swiss francs). This gratifying growth was driven primarily by the industrial adhesives business, where
our key customer segments such as automotive manufacturers, furniture producers and textiles­r ecovered in all regions. The building and construction adhesives business is being held back by theongoing weakness of the European construction industry. Operating profit (EBIT) for the entire divisionrose strongly by 39.9 % to CHF 20.0 million, partly owing to lower costs for raw materials and theincrease in sales. The EBIT margin improved from 5.1 % to 6.6 %. The decisive factors for the future
profitability of the Bonding Systems division are price developments and the availability of raw
materials. In the coming months, we expect a rise in raw material prices, only part of which can bepassed on to our customers. In the second half, the division will focus on continuously developing
sophisticated products with additional cus­tomer benefits.
The Forbo Movement Systems division reported net sales of CHF 165.1 million in the first half of 2010,equivalent to an increase in local currencies of 10.1 % versus the same period the previous year (8.1 %in Swiss francs). This sales growth was due to the upturn in the plant engineering and machine tools
customer segments in Japan, Germany, and Italy and to major logistics projects. The increase in
net sales, along with the adjusted structures, resulted in a sharp rise in operating profit (EBIT ) toCHF 10.5 million (previous year: CHF – 2.8 million). The successful restructuring last year to counter the
economic downturn stabilized and further improved profitability. The EBIT margin rose sharply from– 1.8 % to 6.4 %. In the second half, the division will have to react very flexibly to the ongoing volatile
market trends.
Outlook for 2010
The economic environment has had a positive impact on our business operations this year to date.
Nevertheless, we are guardedly optimistic since there is still no confidence in a sustainable recovery of
the global economy and future developments, especially as regards exchange rates, are difficult toassess. Barring any major changes in the business environment, we expect another good result in thesecond half. This means that the Group profit from operations for 2010 should beat the record resultof CHF 110.7 million in 2007.

Dr. Albert Gnägi
Chairman of the Board of Directors
Forbo Holding Ltd
Baar, August 17, 2010

This E. Schneider
Delegate of the Board of Directors and CEO

4Consolidated balance sheet and income statement

30.6.201031.12.2009

Non-current assets

836.9

885.7

Property, plant and equipment and intangible assets

805.3

859.0

Condensed consolidated balance sheet
Unaudited, in CHF m

AssetsDeferred income tax assets, investments in associates and other non-current assets
Current assets

31.6

26.7

820.0

859.7

Inventories

287.7

261.0

Trade and other receivables, prepaid expenses and deferred charges

343.6

300.3

Marketable securities

38.6

100.2

Cash and cash equivalents

150.1

198.2

1,656.9

1,745.4

Total assets

Shareholders’ equity and liabilities
Shareholders’ equity

685.6

679.6

Non-current liabilities

528.6

720.2

Non-current financial debt

335.5

550.1

Employee benefit obligations, provisions and deferred income tax liabilities

193.1

170.1

Current liabilities

442.7

345.6

Trade payables

123.7

123.3

Current financial debt

83.6

3.4

Provisions and accrued expenses,
tax and other liabilities

235.4

218.9

Total liabilities

971.3

1,065.8

1,656.9

1,745.4

First half
2010

First half
2009

Unaudited, in CHF m
Net sales

918.8

886.1

Cost of goods sold– 614.3– 598.3

Gross profit

304.5

287.8

Operating expenses– 220.6– 241.1

Operating profit

83.9

46.7

Total shareholders’ equity and liabilities

Condensed consolidated income statement

Financial result

37.3

– 8.7

Group profit before taxes

121.2

38.0

Income taxes– 30.3– 9.5

Group profit

90.9

28.5

Basic earnings per share in CHF

40.14

12.62

Diluted earnings per share in CHF

40.07

12.62

5
Comprehensive income statement andconsolidated shareholders’ equity

First half
2010

First half
2009

90.9

28.5

Comprehensive income statement
Unaudited, in CHF m
Group profit
Income and expenses directly recognized in shareholders' equity:
Translation differences– 34.5

40.5

Changes in fair value of financial instruments available-for-sale

4.6

4.9

Proceeds from the sale of financial instruments available-for-sale;transfer to income statement– 14.3

Actuarial loss on pension liabilities– 26.5– 12.1

Fair value adjustments of cash flow hedges

– 0.7

– 0.5

Fair value adjustments of net investment hedges

– 3.0

– 2.4

Other comprehensive income, net of tax– 74.430.4

Total comprehensive income

16.5

58.9

Consolidated statement of changes in equity

Unaudited, in CHF m
As at January 1, 2010

Share
capitalTreasurysharesReserves

Revalua­tion
reserve

0.3

– 0.1

778.4

136.5

Reservefor AFSfinancialassets21.2

Reserves
Reserves
fromfrom net
cash flow investment Translation
hedgeshedges differences

– 0.2

10.5

– 267.0

Total

679.6

Group profit

90.9

90.9

Other comprehensive
income, net of tax– 26.5

– 9.7

– 0.7

– 3.0

– 34.5– 74.4

Total comprehensive
income

64.4

– 9.7

– 0.7

– 3.0

– 34.5

16.5

Share-based payments

0.0

1.8

1.8

Treasury shares

0.0

1.2

1.2

– 0.1

832.3

136.5

11.5
Reservefor AFSfinancialassets0.0– 13.5

Dividend
As at June 30, 2010

Unaudited, in CHF m
As at January 1, 20090.3

– 13.5

SharecapitalTreasurysharesReserves

Revalua­tion
reserve

10.9

– 2.0

696.9

143.3

– 0.9

7.5

– 301.5

Reserves
Reserves
fromfrom net
cash flow investment Translation
hedgeshedges differences

– 7.0

0.4

– 258.1

685.6

Total

584.4

Group profit

28.5

Other comprehensive
income, net of tax– 12.1

4.9

– 0.5

– 2.4

40.5

30.4

16.4

4.9

– 0.5

– 2.4

40.5

58.9

Total comprehensive
incomeShare-based payments

0.0

Treasury shares
As at June 30, 2009

10.9

28.5

0.3

0.0

0.5

– 2.0

714.1

0.3
0.5
143.3

4.9

– 7.5

– 2.0

– 217.6644.1

6Consolidated cash flow statement

First half
2010

First half2009

Condensed consolidated cash flow statement
Unaudited, in CHF m
Cash flow from operating activities

18.3

59.9

Cash flow from investing activities

81.9

– 4.1

Cash flow from financing activities– 143.8– 41.7– 43.6

14.1

Decrease (–) / increase in cash and cash equivalents
Translation differences on cash and cash equivalents

– 4.5

6.2

Total cash and cash equivalents at beginning of year

198.2

215.6

Total cash and cash equivalents at June 30

150.1

235.9

7
Notes to the condensed consolidated
half-year financial statements (unaudited)

01

General information
This condensed consolidated interim report covers the six-month period from January 1, 2010 toJune 30, 2010 (hereinafter 'reporting period') and was drawn up in accordance with the International
Accounting Standard 34 (IAS 34) 'Interim Financial Reporting'. The consolidated half-year financial­s tatements do not include all information reported in the consolidated full-year financial statements
and should therefore be read in conjunction with the consolidated financial statements at December 31,
2009.
The consolidated half-year financial statements have not been audited by the auditors. They wereapproved for publication by the Board of Directors on August 16, 2010.

02

Group accounting policies
The accounting policies applied in the consolidated half-year report are in line with the accounting
policies set out in the 2009 Annual Report with the following exceptions.
The following new and revised standards and interpretations with a significant effect on the
Forbo Group were applied for the first time as of January 1, 2010:– IFRS 3 (revised), 'Business Combinations' and derived supplements to IAS 27 'Consolidated andSeparate Financial Statements', IAS 28 'Investments in Associates' and IAS 31 'Interests in Joint
Ventures'. The revised standard still stipulates that business combinations are to be accounted forby the purchase method, but with some significant changes. For example, all payments to purchasea business are recorded at fair value at the acquisition date, with contingent payments classified
as debt subsequently remeasured through the income statement. There is a choice on an acquisitionby-acquisition basis to measure the non-controlling interest in the acquiree either at fair value
or at the non-controlling interest's proportionate share of the acquiree's net assets. All transaction
costs are recognized as expense. The Forbo Group began applying IFRS 3 (revised) to all businesscombinations prospectively as of January 1, 2010.
The following new and revised standards and interpretations came into effect as of January 1, 2010.
For the time being, however, their application has no significant effect on the Forbo Group.
– IFRS 2 (revised), 'Share-Based Payment'– IFRIC 17 (new), 'Distributions of Non-Cash Assets to Owners'– IFRIC 18 (new), 'Transfers of Assets from Customers'– Improvements to IFRSs (published in May 2008): the IASB published 'Improvements to IFRSs', acollection of amendments to various IFRSs. All the amendments published were applied by the
Forbo Group as of December 31, 2009 with the following exception:
IFRS 5 'Non-Current Assets Held for Sales and Discontinued Operations'. The amendment clarifies
that all assets and liabilities of a subsidiary are to be classified as held for sale if the subsidiaryis classified as being held for sale. This is true even if the company retains part of the divested
subsi­d iary without a controlling interest in it. The amendment is applied prospectively andhad no impact on the financial position or performance of the Forbo Group.
– Improvements to IFRSs (published in April 2009): the IASB published its second collection ofamendments to various IFRSs, with the primary aim of eliminating inconsistencies and clarifying
formula­tions. The collection prescribes transitional provisions for each amended IFRS .

8The Forbo Group has not early applied further standards, interpretations or amendments that havebeen published but are not yet mandatory.
The preparation of the consolidated half-year financial statements requires management to makeestimates and assumptions that can affect reported revenues, expenses, assets, liabilities and contingent
liabilities at the date of the financial statements. If the estimates and assumptions made to the bestof their knowledge by management at the date of the financial statements differ from the actual facts,
the original estimates and assumptions will be adjusted in the reporting period in which the facts
have changed.
The consolidated half-year financial statements do not contain any new estimates and assumptions bymanagement compared with the consolidated financial statements at December 31, 2009. Earnings
and expenses which are not incurred on a straight-line basis during the business year are only deferred
if such deferral was justified at year-end. Income tax expenditure is estimated on the basis of average
actual tax rates during the current business year.
03

Changes in the scope of consolidation
There were no significant changes in the scope of consolidation in the reporting period.

04

Segment information
Forbo is a global producer of Flooring Systems, Bonding Systems and Movement Systems. The divisions
have their own management structure and are run separately because the products that they manu­
facture, distribute, and sell differ fundamentally in terms of production, distribution, and marketing.
Flooring Systems develops, produces, and sells linoleum, vinyl floorings, entrance matting systems,
carpet tiles, and needle felt as well as the various accessory products required for installing, processing,cleaning, and care of flooring. Bonding Systems develops, produces, and sells adhesives for industrial
applications and the construction industry as well as synthetic polymers. Movement Systems develops,
produces, and sells high-quality power transmission, conveyor and processing belts, as well as plastic
modular, timing and flat belts made of synthetic materials. Corporate includes the costs of the Group
headquarters and certain items of income and expenses which are not directly attributable to a specificdivision.
Flooring Systems, Movement Systems, Bonding Systems, and Corporate are reportable segments. The
identification of reportable segments is based on internal management reporting to the Chief Executive
Officer of the Forbo Group and hence on the financial information used to review the performanceof the operational units in order to reach a decision on the allocation of resources.

9

Segment information on the reportable segments for the reporting period:

Unaudited, in CHF m
Total net sales

Flooring
Systems
449.3

Bonding
Systems
316.1

Movement
Systems
165.1

Corporate-

Elimination– 11.7

Total
918.8

Inter-segment sales– 0.2– 11.5

– 0.0

-

11.7

-

Net sales to third parties

449.1

304.6

165.1

-

-

918.8

Operating profit (EBIT)

61.2

20.0

10.5

– 7.8

-

83.9

Operating assets

727.5

410.8

261.3

36.1

-

1,435.7

Number of employees(June 30)

2,803

1,382

1,769

41

-

5,995

Corporate-

Elimination– 10.1

Total
886.1

Segment information on the reportable segments for the previous year:

Unaudited, in CHF m
Total net sales

Flooring
Systems
452.1

Bonding
Systems
291.4

Movement
Systems
152.7

Inter-segment sales

– 0.2

– 9.9

– 0.0

-

10.1

-

Net sales to third parties

451.9

281.5

152.7

-

-

886.1

Operating profit (EBIT)

43.5

14.3

– 2.8

– 8.3

-

46.7

Operating assets

807.8

407.5

275.0

50.4

-

1,540.7

Number of employees(June 30)

2,828

1,327

1,891

41

-

6,087

Management reporting is based on the same accounting policies as external reporting.
The Chief Executive Officer assesses the performance of the reportable segments based on theiroperating result (EBIT ). The net financial result is not allocated to the divisions since it is Corporate
Treasury that in the main exercises central control over the financial result.
Sales between the divisions are effected at arm's length. The reportable segments apply the sameaccounting policies as the Group. Sales to third parties, as they are reported to the Chief Executive
Officer, are identical to the sales reported in the income statement.
Reconciliation of segment results to the income statement and balance sheet:

Unaudited, in CHF m
Total segment profit (EBIT)
Financial income / expenditure (–), net
Group profit before taxes

Unaudited, in CHF m
Total operating assets
Non-operating assets
Total assets

First half
2010
83.9

First half
2009
46.7

37.3

– 8.7

121.2

38.0

30.6.2010
1,435.7

31.12.2009
1,419.7

221.2

325.7

1,656.9

1,745.4

1005

Balance sheet
Total assets as at June 30, 2010 decreased by CHF 88.5 million to CHF 1,656.9 million versus the end of
the previous year. Of this amount, about CHF 60 million was due to exchange rates movements compared with the end of the previous year. The decrease in total assets, adjusted for currency fluctuations,came to about CHF 29 million. The decrease can be explained as follows: the decline in cash and cash
equivalents (CHF 44 million) and in marketable securities (CHF 62 million) was offset by a growth-driven
increase of CHF 95 million in inventories and accounts receivable. Since investments in fixed assets
amounting to about CHF 11 million were much lower than the depreciations of CHF 29 million, fixed assets
decreased by CHF 18 million. The investments were made mainly for replacements and projects toimprove efficiency. The balance sheet item 'Employee benefit obligations, provisions and deferredincome taxes' increased by CHF 23.0 million to CHF 193.1 million compared with the end of the previous
year. This rise was due mainly to the increase in employee benefit obligations. In the period underreview, restructuring provisions of CHF 4.2 million were used; no new ones were made.
Compared with December 31, 2009, shareholders' equity increased by CHF 6.0 million to CHF 685.6 million.
The negative effects mainly of the actuarial losses recognized in shareholders' equity in connection
with defined benefit pension plans and the losses arising from the translation of subsidiaries' half-year
reports into the Group presentation currency were more than offset by the profit of CHF 90.9 million
for the first half of 2010. As per June 30, 2010 the equity ratio stood at 41.4 %. Net debt as at June 30, 2010
was CHF 230.4 million. This is equivalent to a reduction in net debt of CHF 24.7 million versus year-end
2009. Gearing (ratio of net debt to shareholders' equity) stood at 33.6 % as per end of June 2010.

06

Income statement
Net financial result came to CHF 37.3 million in the reporting period. This sum consists mainly of
CHF 43.0 million from the sale of marketable securities to related parties and interest expense
in connection with the financing of the Group. On April 12, 2010, Forbo sold 288,691 Rieter shares
to Artemis Beteiligungen IV AG , controlled by Michael Pieper, at a price of CHF 320 per share. This
price is about CHF 12 higher than the average stock market price for the preceding 20 trading days.
The sale was structured as a forward transaction. The delivery of the shares and the payment of
the sales price took place on June 29, 2010. The proceeds for Forbo from the sale of the Rieter sharesamounted to CHF 92.4 million. Forbo realized a substantial financial income of CHF 43.0 million
before tax in the reporting period on the strength of this sales price. As a result of this transaction,
Forbo has reduced its stake in Rieter from over 9 % to below 3 %.
Income tax amounted to CHF 30.3 million, corresponding to a tax rate of 25 %.
Group profit came to CHF 90.9 million. The CHF 62.4 million jump in profit compared with the prior-year
period includes the non-recurring gain from the sale of marketable securities. Basic earnings per sharein the period under review amounted to CHF 40.14. Diluted earnings per share (adjusted for the dilution
effect of outstanding options) was CHF 40.07.

07

Free cash f low
The free cash flow generated in the period under review came to CHF 100.2 million.
Despite the substantial improvement in operating profit, operating cash flow declined by CHF 41.6 million
compared with the prior-year period and came to CHF 18.3 million. The reduction was due primarily
to the build-up in net working capital which resulted from the need to finance growth and from thetemporary increase in inventories owing to the shifting of production sites. The major improvementin cash flow from investing activities compared with the previous year period is due to the inflow of
CHF 92.4 million from the sale of Rieter shares. The free cash flow of CHF 100.2 million was usedcompletely in the period under review to reduce financial liabilities.

11

08

Main exchange rates applied
The following exchange rates have been applied for the most important currencies concerned:
Income statement
Average exchange rate,
6 months

Currency

2010

2009

30.6.201031.12.2009

EUR 1

1.44

1.51

1.35

1.49

CHF

Euro countries

09

Balance sheet
Exchange rateon balance-sheet date

United Kingdom

GBP 1

1.65

1.69

1.64

1.66

USA

USD 1

1.08

1.13

1.09

1.03

Japan

JPY 100

1.18

1.18

1.22

1.12

Events after the balance sheet date
There are no events after the balance sheet date to report.

Calendar
Media and financial analysts' conference: March 15, 2011
Ordinary General Meeting: April 29, 2011
Forbo Holding Ltd
Lindenstrasse 8
CH-6340 Baar

Forbo International SA
Lindenstrasse 8
CH-6340 Baar

Phone + 41 58 787 25 25
Fax + 41 58 787 20 25
www.forbo.com

flooring. bonding. movement.