Ha lf-Yea r Repor t 2008
Double-digit earnings growth
Substantial improvement in margins
Sales affected by exchange rates

2
Forbo posts double-digit earnings increase
and strengthens profitability

Forbo – a leading manufacturer of flooring, adhesives as well as
power transmission and conveyor belt solutions – again reported
strong earnings growth following the record result of the previous
year. Operating profit ( EBIT ) increased by 10.4 % and Group profit
by 15.7 % compared with the prior-year period. Despite the strong
rise in raw material prices, the EBIT margin increased from 7.3 % in
the same period the previous year to 8.4 %. The unfavorable exchange rate trend and more difficult market conditions, especiallyin the USA, had an adverse impact on net sales, which at CHF 961.2
million were 4.2 % lower than in the first half of 2007. In local cur­rencies, organic sales growth came to 0.9 %.

Dear shareholders,
In the first half of 2008, the Forbo Group repeated the success of the previous year. Despite moredifficult market conditions, a weak dollar and strongly rising prices for raw materials and energy, theGroup succeeded in strengthening its profitability and again substantially increased earnings. This
success was driven by the long-term view we take in decision-making, the consistent implementationof strategies and our unceasing efforts to adapt to the changing market environments. Our
strategy of engaging only in those activities that are profitable long-term led to our relinquishing ofcertain customer segments and products in the wake of the strong increase in raw material prices.
Sales growth affected by exchange rates
In the first half of 2008, Forbo generated net sales of CHF 961.2 million, which was 4.2 % lower than in
the same period the previous year. In local currencies, organic sales growth came to 0.9 %. The
three divisions showed mixed trends. While Flooring Systems grew by 6.1 % and Movement Systems by
6.9 % in local currencies, Bonding Systems reported a decline of 7.6 %. The reason can be soughtin the difficult market conditions in the USA , where Bonding Systems generates 40 % of its sales, and in
the termination of the synthetic fuel business activities.
Substantial margin improvement and stronger profitability
Despite the strong rise in raw material and energy prices, the operating profit (EBIT ) margin increased
from 7.3 % in the prior-year period to 8.4 %. Forbo took measures early on to secure earnings, optimize
processes, cut costs, rationalize its range to focus on high-margin products and exit unprofitable
activities. All these steps together further strengthened profitability.
Double-digit earnings growth
Forbo increased operating profit (EBIT ) from CHF 73.1 million to CHF 80.7 million, equivalent to a growthof 10.4 %. Group profit improved by CHF 7.3 million compared with the same period the previous year
to CHF 53.9 million, corresponding to a rise in profits of 15.7 %.
Solid equity base and close to 10 % of treasury shares, with low net debt
At the end of June 2008, equity stood at CHF 691.3 million. This represents an equity ratio of 44.3 %.
Moreover, Forbo held close to 10 % of its treasury shares, which had a market value of CHF 122.2 million
on June 30, 2008. Net debt came to CHF 76.3 million.
Performance of the three divisions
Forbo Flooring Systems reported net sales of CHF 437.8 million in the first half of 2008, corresponding
to a growth of 1.8 % versus the same period in the previous year. The increase came to a pleasing
6.1 % in local currencies. Whereas business in the German-speaking markets fell short of expectations,performance in the Eastern and Southern Europe regions was very satisfactory. New vinyl collectionsin the commercial market gave sales a fresh boost. The strong rise in raw material prices was again
compensated by efficiency gains and selective price adjustments, with the result that operating profit(EBIT ), which came to CHF 54.2 million, was once more substantially higher (30.3 %) than in the prioryear period. This increase brought the EBIT margin to 12.4 %. Preparations for the launch of a new lino­leum collection in the spring of 2009 are the focal point of activities in the second half of the year.

3

Investment spending will concentrate on the modernization of production in France and the development of a new manufacturing facility in Russia for the commercial market.
Forbo Bonding Systems reported net sales of CHF 338.8 million in the first half of 2008. This represents a decrease of 13.1 % versus the prior-year period. The drop in revenues came to 7.6 % in local
currencies. The termination of the synthetic fuel business activities in the USA at the end of 2007 led, as
expected, to a substantial fall in sales of synthetic polymers. In addition, demand for industrial adhesives in North America for consumer durable goods, an important customer segment for this division,
dropped sharply. The decline in sales, coupled with a significant increase in raw material prices(only part of which could be passed on owing to the difficult business conditions), eroded profitability.
Successful sales of the division’s strong and well established building and construction ­a dhesives
products, especially in Western and Eastern Europe, only partially offset the negative impact of thetwo other business activities. The division posted operating profit (EBIT ) of CHF 22.6 million; a 23.1 %decrease compared with the prior-year period. The EBIT margin came to 6.7 %. In the second half, thedivision will focus on systematic margin management and measures to improve efficiency and cut
costs. Furthermore, new customer segments for synthetic polymers along with new formulations andproduct improvements in industrial adhesives are expected to safeguard margins.
Forbo Movement Systems reported net sales of CHF 184.6 million in the first half of 2008, corres­
ponding to a growth of 0.7 % versus the prior-year period. The increase came to a pleasing 6.9 % in
local currencies. Growth was driven by sales in all regions, with the fast-growing markets in China
and Eastern Europe being the strongest. Rising raw material prices and the more sluggish economy
were offset by continuous switchovers to different materials, efficiency gains in production and thelaunch of diverse product innovations, especially in the logistics and food market segments. Operating
profit (EBIT ) again increased by a strong 26.4 % to CHF 11.5 million versus the prior-year period. The
EBIT margin came to 6.2 %. The division is maintaining its strategy of focusing on growth markets andprofitable market segments. At the same time, the products and services are to be rounded off toensure optimum coverage for selected core segments.
Outlook for 2008
We expect market conditions to be more difficult in the second half of the year. It is possible that theeconomy will slow down further. The major imponderables are, on the one hand, the direction of
raw material and energy prices and, on the other, exchange rate movements. Forbo is well positioned
to meet these c­ hallenges. We are confident that we can increase earnings in the second half again
by a ­combination of innovative products, range rationalizations and efficiency improvements as well as
by proactively taking the necessary measures.

Dr. Albert Gnägi
Chairman of the Board of Directors
Forbo Holding Ltd
Baar, August 19, 2008

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

4Consolidated Income Statement andConsolidated Balance SheetFirst half
2008

First half
2007

Unaudited, CHF m
Net sales

961.2

1,003.5

Cost of goods sold 1)– 650.2– 677.1

Summary of consolidated Income Statement

Gross profit

311.0

326.4

Operating expenses1)– 230.3– 253.3

Operating profit

80.7

73.1

Financial expense, net

– 4.9

– 5.8

Group profit before tax

75.8

67.3

Income taxes– 21.9– 20.7

Group profit

53.9

46.6

Earnings per share in CHF (basic)

22.04

18.12

Earnings per share in CHF (diluted)

21.98

18.06

1) In the period under review, sales commissions and logistics costs are shown for the first time as part of cost of goods
sold (previous year: operating expenses) and sampling costs as operating expenses (previous year: cost of goods sold).
To ensure comparability, the previous year’s report has been restated accordingly (net effect CHF 15.2 million).

30.6.200831.12.2007

Unaudited, CHF m
Non-current assets

561.9

601.7

Tangible and intangible assets

536.1

575.6

Employee benefit assets, deferred taxes,
investments in associates and other non-current assets

25.8

26.1

Summary of consolidated Balance Sheet

Current assets

997.4

803.5

Inventories

325.9

286.3

Trade and other receivables, prepaid expenses and deferred charges

372.4

339.7

Marketable securities

148.5

-

150.6

177.5

1,559.3

1,405.2

Shareholders’ equity

691.3

713.1

Non-current liabilities

276.9

254.7

Non-current financial debt

205.5

194.9

Cash and cash equivalents
Total assets

71.4

59.8

Current liabilities

591.1

437.4

Trade payables

128.8

138.1

Current financial debt

169.9

24.2

Employee benefit obligations, non-current provisions and deferred taxes

Current provisions and accrued expenses, tax and other liabilities
Total shareholders’ equity and liabilities

292.4

275.1

1,559.3

1,405.2

5
Consolidated Cash Flow Statement andConsolidated Statement of Changes in Equity

First half
2008

First half
2007

Summary of consolidated Cash Flow Statement
Unaudited, CHF m
Cash flow from operating activities– 10.7

43.2

Cash flow from investing activities– 177.8– 36.5

Cash flow from financing activities

165.7– 18.6

Decrease in cash and cash equivalents– 22.8– 11.9Translation differences

– 4.1

5.9

Cash and cash equivalents at January 1

177.5

294.1

Cash and cash equivalents at June 30

150.6

288.1

First half
2008

First half
2007

Summary of consolidated Statement of recognizedIncome and Expenses
Unaudited, CHF m
Fair value adjustments of cash flow hedges

– 0.3

1.2

Fair value adjustments of net investment hedges

9.0

– 4.1

Fair value adjustments on available-for-sale financial assets– 13.1

0.0

Actuarial loss from defined benefit plans, net– 12.30.0

Translation differences– 52.321.5

Net income recognized directly in equity– 69.018.6

Group profit
Total recognized income and expenses

53.9

46.6

– 15.1

65.2

Summary of consolidated Statement of Changes in Equity

Unaudited, CHF m
At 1.1.2008

SharecapitalTreasurysharesReserves

AFS asset

38.0

– 4.0

821.3

0.0

Group profit– 12.3

Share-based compensation

0.1

– 7.7

– 128.6– 13.1– 0.3

9.0– 52.3

– 0.1

– 0.2

– 6.5
856.3

Share
capitalTreasurysharesReserves

AFS asset

54.3

– 3.5

735.4

0.0

46.6

Net income and expenses­recognized in equity

0.0– 69.00.0– 4.1

Group profit

Total

713.1
53.9

38.0

Treasury shares

Unaudited, CHF m
At 1.1.2007

– 5.9

53.9

Net income and expenses­recognized in equity

At 30.6.2008

Net
Cash flow investment
hedge
hedge Translation
reserve
reserve differences– 6.7– 13.1– 6.2

1.3– 180.9Net
Cash flow investment
hedge
hedge Translation
reserve
reserve differences

– 8.3

– 9.2

– 130.1

691.3

Total

638.6
46.6

0.0

1.2

– 4.1

21.5

18.6

Share-based compensation

0.1

1.2

1.3

Treasury shares– 0.4– 13.5– 13.9

– 3.8

769.7

At 30.6.2007

54.3

0.0

– 7.1

– 13.3– 108.6

691.2

6
Notes to the consolidated half-year Financial ­Statements(unaudited)
01

Group accounting principles
This summary of the consolidated interim financial statement covers the six-month period fromJanuary 1, 2008 to June 30, 2008 (hereinafter 'reporting period') and was drawn up in accordance with
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, 2007.
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 12, 2008.
The accounting policies applied in the consolidated half-year financial statements are in line with theaccounting policies set out in the Annual Report 2007 with the following exceptions: since January 1,
2008, the Forbo Group applies the new standards IFRIC 11 'Group and Treasury Share Transactions', IFRIC
12 'Service Concession Arrangements' and IFRIC 14 'The Limit on a Defined Benefit Asset, Minimum
Funding Requirements and their Interaction' as far as these interpretations are relevant to the Group’sbusiness activities. The application of these standards has no significant effect on the Group’s equity,
profits or cash flows.
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 thebest 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 thefacts 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, 2007. 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 actual
average tax rates during the current business year.

02

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

03

Segment information
Flooring Systems

Bonding Systems

Movement Systems

Group

CHF m

2008

2007

2008

2007

2008

2007

2008

2007

Net sales

437.8

430.2

338.8

390.0

184.6

183.3

961.2

1,003.5

Operating profit (EBIT)

54.2

41.6

22.6

29.4

11.5

9.1

80.7

73.1

EBIT margin in %

12.4

9.7

6.7

7.5

6.2

5.0

8.4

7.3

Group profit

53.9

46.6

Number of employees

6,059

5,839

Information on the segments can be found on pages 2 and 3 of this Report.

704

Balance sheet
The total assets grew by 11.0 % to CHF 1,559.3 million mainly because of the seasonal increase inoperating working capital and investments in securities. Plant, property and equipment and intangible
assets declined by CHF 39.5 million compared with December 31, 2007. While intangible assets werelargely unchanged, investments in plant, property and equipment came to CHF 18.1 million, which wassubstantially lower than the depreciation of CHF 26.8 million. Changes in exchange rates, furthermore,
resulted in plant, property and equipment declining by about CHF 31 million. The investments in plant,
property and equipment were used primarily to finance projects designed to expand production
capacity, improve efficiency, and develop new markets.
Equity decreased by CHF 21.8 million to CHF 691.3 million compared with December 31, 2007. The
Group profit of CHF 53.9 million for the first half of 2008 was set off against a number of factors: theactuarial losses recognized in equity in connection with defined benefit pension plans (CHF 12.3
million), the losses arising from the translation of subsidiaries’ half-year reports into the Group accounting currency (CHF 52.3 million), the costs incurred in connection with the purchase of treasury shares(CHF 6.7 million), the effects of hedging cash flows and net investments (CHF 8.7 million), and thenegative fair value changes, recognized directly in equity, of securities classified as 'available for sale'(CHF 13.1 million). As per June 30, 2008, the equity ratio stood at 44.3 %.
Net debt increased by CHF 34.7 million from CHF 41.6 million to CHF 76.3 million compared with Decem­
ber 31, 2007. The increase in interest-bearing debt compared with the end of the previous business year
corresponds roughly to investments in securities. Accordingly, the increase in net debt is due primarily
to the seasonal increase in net working capital. Gearing (net debt/equity) stood at 11.0 % as per end ofJune 2008.

05

Income statement
Financial expenses in the reporting period were CHF 4.9 million. Income tax came to CHF 21.9 million,
corresponding to a tax rate of 28.9 %. In the prior-year period, the tax rate had been 30.8 %. Structural
measures to optimize taxes are bringing about a steady decrease in the tax rate. Group profit rose by
15.7 % versus the prior-year period and stood at CHF 53.9 million. The undiluted profit per share cameto CHF 22.04.

06

Free cash f low
Free cash flow was negative at CHF – 188.5 million. The key factors leading to this result were investments in securities (CHF 164.9 million), investments in plant, property and equipment (CHF 18.1 million)
and the seasonal increase in working capital, which in the year under review was due mainly to thelaunch of new global collections for Flooring Systems.

07

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

CHF

2008

2007

Balance sheet
Rate on balance-sheet date

30.6.2008 30.6.2007

Euro countries

EUR 1

1.61

1.63

1.61

1.65

USA

USD 1

1.05

1.23

1.02

1.23

Japan

JPY 100

1.00

1.02

0.96

1.00

8

08

Events after the balance sheet date
On April 25, 2008, the Annual General Meeting of Forbo authorized the Board of Directors to buy backa maximum of 10 % of the share capital entered in the Commercial Register over a period of three years.
This corresponds to a maximum of 271,315 registered shares at CHF 14 each. The shares to be acquired
will be repurchased via a second trading line after deduction of withholding tax and are (without exception) to be extinguished by means of a reduction of capital. As at the balance sheet date, Forbo Holding
Ltd held 213,152 such treasury shares, directly and indirectly via its subsidiary Forbo International SA ,Baar; this was equivalent to 7.9 % of the share capital entered in the Commercial Register.
On July 9, 2008, Forbo Holding Ltd informed Rieter Holding AG , Winterthur, that it possessed 445,530
registered shares of Rieter directly and indirectly through its subsidiary Forbo International SA , Baar.
This corresponds to 10.01 % of the voting rights. It passed the threshold of 10 % of the voting rights on
July 3, 2008.
As per July 11, 2008, the Forbo Group acquired the lightweight PVC conveyor belting business ofFenner Dunlop (Charlotte) Inc. In connection with this acquisition, moreover, Forbo concluded anagreement for the distribution of lightweight rubber belting products that are manufactured by
Fenner Dunlop Americas, Inc. The sales volume of PVC and rubber belting products was about
USD 30 million in the 2007 business year. As part of the acquisition, Forbo Movement Systems will takeover about 40 employees.
For the 2007 business year, shareholders received a reduction in par value instead of a dividend
distribution. This was approved by the Annual General Meeting of Forbo Holding Ltd on April 25, 2008.
CHF 10 per registered share was paid out to shareholders. Unlike a dividend distribution, thispayout is not subject to withholding tax. The payout was made to shareholders in Switzerland on
July 21, 2008 (value date) free of charge.
The Forbo Group announced the acquisition of Bonar Floors on July 28, 2008. Bonar Floors is the
Flooring division of Low & Bonar PLC , a company listed on the London Stock Exchange. The acquisitionof Bonar Floors will enable Forbo Flooring Systems to complement and strengthen its product portfolio of high quality flooring solutions for the global commercial market. Bonar Floors maintains sevenmanufacturing sites in France, the Netherlands and the United Kingdom. The products are marketedin more than 40 countries. Bonar Floors generates annual net sales of about CHF 230 million and has
more than 800 employees. The transaction is subject to the satisfaction of prior conditions, including
the approval by the Low & Bonar PLC shareholders and certain antitrust authorities in Europe. The transaction is expected to close by the end of October 2008. The agreed purchasing price is £ 123 million.

Dates
Media and financial analysts’ conference: March 17, 2009
Annual General Meeting: April 24, 2009
Forbo Holding Ltd
Lindenstrasse 8
CH-6340 Baar
Phone +41 58 787 25 25
Fax +41 58 787 20 25
www.forbo.com

Forbo International SA
Lindenstrasse 8
CH-6340 Baar