Half-Year Report 2007

Firm sales growth
Significant improvement in margins
Strong increase in net profit

flooring.bonding.movement.

Forbo remains on track for success andis growing in all three divisions
Forbo Group – a leading manufacturer of flooring systems, chemical bonds
and adhesives, as well as power transmission and conveyor belt solutions –reported a strong 73.9% increase in net profit in the first half of 2007. Net sales
came to CHF 1,003.5 million, 7.5% more than in the prior-year period. Operating profit (EBIT) also increased significantly by 32.7% compared with theprior-year period. All three divisions reported further progress and contributed to this encouraging result.

Dear shareholders,

Forbo Group can look back on a successful first half of 2007. Forbo again significantly increased its
profits in the first six months of 2007 on the strength of the excellent economic situation, the successful
implementation of its change in strategy and the effectiveness of the measures taken to increase
earnings.

Firm sales growth in all three divisions
In the first half of 2007, Forbo increased net sales by 7.5% (5.5% in local currencies) compared with theprior-year period to CHF 1,003.5 million. Growth in our key markets Central, South and Eastern Europe
was particularly pleasing, while demand in America leveled off to some extent. All three divisions wereinstrumental in the Group’s robust growth.
Substantial increase in profitability
Operating profit before depreciation and amortization (EBITDA) improved substantially in all threedivisions, rising to CHF 103.6 million, representing an increase of 19.5% compared with the prior-yearperiod. Operating profit (EBIT) rose by 32.7% to CHF 73.1 million.
Significant improvement in margins
All three divisions increased their operating profit margins significantly. The EBITDA margin
as a percentage of sales improved from 9.3% in the prior-year period to 10.3%. The EBIT margin
as a percentage of sales rose from 5.9% to 7.3%.
Strong increase in net profit
Group profit increased by CHF 19.8 million compared with the prior-year period to CHF 46.6 million,
corresponding to a rise in net profit of 73.9%. As a result of higher investments, free cash flow wasvirtually unchanged in relation to the prior-year period at CHF 6.7 million.
Sound equity base
Equity as per end of June 2007 stood at CHF 691.2 million, corresponding to an equity ratio of 43.4%.

2

Positive development in all divisions
Forbo Flooring Systems reported sales of CHF 430.2 million in the first half of 2007, corresponding
to a growth of 9.2% versus the prior-year period. The growth rate in local currencies was 5.7%.
The strong development in net sales in all core markets was supported by positive economic conditions. The main drivers were new product launches for the commercial segment and the expansion in
new markets in Eastern Europe. Against a background of an increasing demand for ecological products,
the most important flooring segment linoleum – environmentally friendly and manufactured fromrenewable resources – was expanded further. Operating profit (EBIT) also rose by 35.1% toCHF 41.6 million compared with the prior-year period. This corresponds to an EBIT margin of 9.7%.
Forbo Flooring Systems remains focused on the commercial segment and is planning to expand its
presence in growth markets.
Forbo Bonding Systems reported sales of CHF 390.0 million in the first half of 2007, corresponding
to a growth of 6.1% versus the prior-year period. The increase came to 4.9% in local currencies.
The somewhat muted sales trend in North America was offset by a pleasing upswing in Europe andAsia. The construction, transportation, paper and packaging market segments in particular contributed
to this positive trend. In the period under review, a third reactor for synthetic polymers in North America
and a new plant for leveling compounds in Russia were brought on stream. Operating profit (EBIT)
also increased by 14.0% to CHF 29.4 million compared with the prior-year period. Compared to the firsthalf of 2006, the EBIT margin improved by 0.5 percentage points to 7.5%. The impact of higher prices
for raw materials was offset by measures to enhance productivity.
Forbo Movement Systems reported sales of CHF 183.3 million in the first half of 2007, corresponding
to a growth of 6.7% versus the prior-year period. The increase came to 6.1% in local currencies. This
sales growth was driven by specific expansion of marketing and sales activities, intensified focus onservices and additional product innovations for the food-processing and printing industries. Thisdivision expanded its presence in Eastern Europe and Asia-Pacific, leading to better-than-average
growth in these regions. Operating profit (EBIT) almost doubled compared with the the prior-year
period, increasing by 97.8% to CHF 9.1 million. The EBIT margin of 5.0% was substantially higher thanthe prior-year period figure of 2.7%. Another important step towards improving the profitability ofthis division was thus taken. Forbo Movement Systems will continue to pursue the strategy it has
adopted and focus on highly profitable market segments.

Outlook for 2007
The economic environment has had a favorable impact on our business activities this year to date.
If the economy continues to develop positively, we expect the result in the second half of 2007 to be
similarly gratifying.

Dr. Albert Gnägi
Chairman of the Board

This E. Schneider
President and CEO

Forbo Holding Ltd
Baar, August 21, 20073

Summary of consolidated Income Statement
Unaudited, CHF mFirst half
2007

First half
2006

Net sales

1,003.5

933.1

Cost of goods sold–661.9–624.6Gross profit

341.6

308.5

Operating expenses–268.5–253.4

Operating profit

73.1

55.1

Financial expense, net

–5.8

–13.4

Group profit before tax

67.3

41.7

Income taxes

–20.7

–14.9

Group profit

46.6

26.8

Operating profit before depreciation and amortization (EBITDA)

103.6

86.7

Earnings per share in CHF (basic)

18.12

10.36

Earnings per share in CHF (diluted)

18.06

10.31

30.6.2007

31.12.2006

Non-current assets

604.5

593.4

Tangible and intangible assets

577.7

570.7

Deferred taxes, investments in associates and other non-current assets26.8

22.7

Current assets

987.4

905.2

Inventories

304.1

266.7

Trade and other receivables, prepaid expenses and deferred charges

395.2

344.4

Cash and cash equivalents

288.1

294.1

1,591.9

1,498.6

Shareholders’ equity

691.2

638.6

Non-current liabilities

310.0

304.4

Non-current financial debt

210.9

209.1

Employee benefit obligations, provisions and deferred taxes

99.1

95.3

Current liabilities

590.7

555.6

Trade payables

140.9

131.5

Current financial debt

128.5

128.3

Provisions and accrued expenses,
tax and other liabilities

321.3

295.8

1,591.9

1,498.6

Summary of consolidated Balance Sheet
Unaudited, CHF m

Total assets

Total shareholders’ equity and liabilities

4Summary of consolidated Cash Flow Statement
Unaudited, CHF m

First half
2007

First half
2006

Cash flow from operating activities

43.2

25.3

Cash flow from investing activities

–36.5

–18.8

Cash flow from financing activities–18.6–194.9

Increase (+)/decrease (-) in cash and cash equivalents–11.9–188.4

Translation differences

5.9

–0.5

Cash and cash equivalents at January 1294.1404.6

Cash and cash equivalents at June 30

288.1

215.7

First half
2007

First half
2006

Summary of consolidated Statementof recognized Income and Expenses in Shareholders’ Equity
Unaudited, CHF m
Group profit

46.6

26.8

Fair value adjustments of financial instruments

1.2

–0.1

Translation differences

17.4

–10.8

Total income and expenses recognized in shareholders’ equity

65.2

15.9

Summary of consolidated Statement of Changes in Shareholders’ Equity
Unaudited, CHF m

SharecapitalTreasurysharesReserves

Translationdifferences

Total

At January 1, 2007

54.3

–3.5727.1–139.3638.6

Group profit

46.6

Total income/expenses recognized in shareholders’ equity

1.2

Treasury shares

–0.3

–12.3

46.6
17.4

18.6
–12.6

At June 30, 2007

54.3

–3.8

762.6

–121.9691.2

At January 1, 2006

54.3

–1.6

647.8

–142.4

558.1

–10.8

–10.9

–153.2546.7

Group profit

26.8

Total income/expenses recognized in shareholders’ equity–0.1

Treasury shares
At June 30, 2006

54.3

–1.6

–25.7

–3.2

648.8

26.8
–27.3

5

Notes to the consolidated half-year Financial Statements(unaudited)
1. Accounting principles
This summary of the consolidated interim financial statement covers the six-month period fromJanuary 1, 2007 to June 30, 2007 (hereinafter ‘reporting period’) and was drawn up in accordancewith the International Accounting Standard 34 (IAS 34) ‘Interim Financial Reporting’. The consolidated half-year financial statements 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, 2006.
The consolidated half-year financial statements have not been audited by the Group auditors.
They were approved for publication by the Board of Directors on August 16, 2007.
The preparation of the consolidated half-year financial statements requires management to makeestimates and assumptions that can affect reported revenues, expenses, assets, liabilities andcontingent liabilities at the date of the consolidated interim financial statements. If the estimatesand assumptions made to the best of 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, 2006. 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.
The actuarial calculation of pension liabilities and assets is made at the end of the year. The impact ofthis calculation on equity is not stated in the consolidated half-year financial statements. For this reason,no actuarial profit or loss is reported in the reporting period.

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

3. Segment information
CHF m

Flooring
Systems

Bonding
Systems

Movement
Systems

2007

2006

2007

2006

2007

2006

2007

2006

Net sales

430.2

393.8

390.0

367.5

183.3

171.8

1,003.5

933.1

EBITDA

55.5

47.0

37.3

32.9

16.111.7

103.6

86.7

EBIT

41.6

30.8

29.4

25.8

9.1

4.6

73.1

55.1

EBIT margin in %

9.7

7.8

7.5

7.0

5.0

2.7

7.3

5.9

Group profit

46.6

26.8

Number of employees

5,839

5,874

Information on the segments can be found on page 3 of this Report.

6Group

4. Balance sheet
Total assets grew by around 6% to CHF 1,591.9 million mainly because of the seasonal increase inoperating working capital and owing to translation effects. Investments in tangible assets amount toCHF 27.6 million and are slightly lower than depreciations of CHF 29.9 million. The funds were usedprimarily to finance projects designed to expand production capacity, to improve efficiency and todevelop new markets.
Shareholders’ equity increased by CHF 52.6 million from CHF 638.6 million to CHF 691.2 million
compared with December 31, 2006. The increase mainly reflects the Group profit for the first half of2007, amounting to CHF 46.6 million. The positive impact of CHF 17.4 million from the translation of thehalf-year financial statements of subsidiaries into the Group currency was partially offset by costs ofCHF 12.6 million connected with the acquisition of the company‘s treasury shares. As per June 30, 2007,
the equity ratio stood at 43.4%.
Net debt increased slightly by CHF 8.0 million from CHF 43.3 million to CHF 51.3 million compared withDecember 31, 2006. Compared to the end of the previous business year, the amount and structure ofinterest-bearing debt remained unchanged. Accordingly, the increase in net debt is due mainly to thedecrease of CHF 6.0 million in cash and cash equivalents. Gearing (net debt/shareholders’ equity) stoodat 7.4% as per end of June (compared with 6.8% as per year-end 2006).

5. Income statement
Compared with the prior-year period, net financial expense declined appreciably by CHF 7.6 million
mainly due to the repayment of a bond on June 8, 2006 in the amount of CHF 150 million. In thereporting period, it came to CHF 5.8 million. Income tax amounted to CHF 20.7 million, equating toa tax rate of 30.8%. The tax rate in the prior-year period was 35.7%. Group profit improved to CHF 46.6million, corresponding to an increase of 73.9% compared with the prior-year period. The basic earnings
per share were CHF 18.12.

6. Free cash flow
Free cash flow was virtually unchanged compared with the prior-year period at CHF 6.7 million.
Cash flow from operating activities of CHF 43.2 million, which was substantially higher than in theprior-year period, was offset by higher investments of CHF 36.5 million. Cash flow from investing
activities contains primarily investments in fixed assets (CHF 27.6 million) and acquisitions(CHF 9.9 million). This mainly involves an earn-out payment.

7. Main exchange rates applied
The following exchange rates have been applied for the most important currencies concerned:

CHF

Income statement(average rate, 6 months)

Balance sheet(rate on balance-sheet date)

2007

2006

30.6.2007

Euro countries

EUR 1

1.63

1.56

1.65

31.12.2006
1.61

USAUSD 1

1.23

1.27

1.23

1.22

Japan

JPY 100

1.02

1.10

1.00

1.03

Dates:Media and financial analysts’ conference: March 18, 2008
Annual General Meeting: April 25, 20087flooring. bonding. movement.

Forbo Holding Ltd
Lindenstrasse 8CH-6340 Baar
Phone +41 58 787 25 25
Fax +41 58 787 20 25
www. forbo. com