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Annual Report
1999

Forbo Creates Value for Customers

Forbo Annual Report 1999

In the development and manufacture of its products Forbo
focuses on the needs and wishes of its customers and end-users.
The diversity of these needs is matched only by the uniquenessof the solutions Forbo provides – products that are designed
to meet a broad range of exacting requirements in a variety of
sectors around the world. The pictures in this Annual Reportshow just some of the ways in which Forbo products are used,giving the reader a brief but representative impression of thebroad spectrum of products the company offers.

Imprint
Concept/Editing: Rubeli Häusermann Public Relations, Zurich
Design: Gottschalk+Ash Int’l
Photography: Daniel Gerber, Zurich
Typesetting/Lithography/Printing: Neidhart + Schön AG, Zurich
March 2000

Page 8With the modern Novilon® floorcovering there are almost no
limits to individual choice. In the kitchen-cum-living areaof a new single-family home in Frankfurt am Main Novilux®
marquetry borders add a special note.

Page 14

Amsterdam’s former planetarium today serves as a conference
center and meeting place for architects. It was designed by thearchitects Van den Oever, Zaaijer, Roodbeen & Partners. P. Zeegers
was responsible for the original design of the Linoleum floorusing Artoleum® Scala.

Page 18

Siegling’s Transilon® conveyor belts transport the luggage atHong Kong’s new Chek Lap Kok airport where they demonstrate
the robustness and hardwearing qualities for which they are
renowned.

Page 22

Marmoleum® Real was used for the floor of the sports center
Pabellon Deportivo Colegio Manuel Peleteiro in Santiago deCompostela in Spain – an ideal and attractive choice.

Page 28

The wooden elements of the new bridge in the Sihltal valley
near Zurich, Switzerland, were glued together with Forbo
CTU’s weatherproof polyurethane wood adhesive Balcaton®.

Page 32

At the Lance factory in Charlotte (USA) Transilon® conveyor belts
by Siegling are used for the processing and packaging of cookies
and crackers.

The original language version of this Annual Report is German.

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Contents
2
3
4
6
10
16
20
24
26
30
34
35
36
EnclosureForbo
Key Figures
Report of the Chairman of the Board of Directors
Report of the Chief Executive Officer
Forbo Group: Promising Business Performance
Flooring: Market Position Strengthened
Industry Specialties: Products that Set Standards
Shaping the Future
Formula for Success: Highly Committed People
The Forbo Share
Corporate Bodies and Management Structure
Organizational Structure
Addresses
Forbo Financial Report23777_gb_Forbo_IN_E 21.3.2000 9:06 Uhr Seite 2

Forbo

Forbo is an internationally active industrial company which has grown steadily since it was established in 1928. The Group now operates 30 manufacturing
companies in 12 countries and 73 marketing organizations in 25 countries.
The Head Office is located in Eglisau/Zurich (Switzerland).
The Group develops, produces and markets products and systems in its two
Divisions, Flooring and Industry Specialties, each of which is made up of
several business units. These business units are focused on specific productgroups and carry responsibility for sales and income. The various business
units are linked by numerous synergies.
Forbo has an excellent store of product, manufacturing and market expertise
which it employs to the full in order to exploit existing synergy potential,
innovative thrust and to selectively expand its market activities.
Thanks to the Group’s attractive product portfolio and brand names that are
well-established worldwide, Forbo occupies leading positions in its chosenmarkets.
Forbo’s goal is to achieve a sustained increase in shareholder value by focusing
on profitable core products, through organic growth and acquisitions and bysystematically gearing its activities to market requirements.
The Forbo Group has approximately 7,000 employees worldwide.

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Key Figures

1)

1999

1998

1999

Forbo GroupGross sales
Change on previous year (%)
FlooringIndustry Specialties

m CHF

m CHF

m EUR2)

1,874.4

1,832.2

1,169.8

+2.3

–9.7

1,088.3

1,066.0

679.2

786.1

766.2

490.6

1,754.5

1,714.5

1,095.0

Operating profit before specific provisions

123.0

112.2

76.8

Change on previous year (%)

+9.6

+16.5

As % of net sales

7.0

6.5

Operating profit after specific provisions

53.0

112.2

33.1

Cash flow

191.6

178.0

119.6

Net sales

Change on previous year (%)

+7.6

+1.4

As % of net sales

10.9

10.4

Consolidated profit before specific provisions

86.1

76.7

Change on previous year (%)

+12.3

+23.5

As % of net sales

4.9

4.5

As % of average shareholders’ equity

10.8

9.8

Consolidated profit

16.1

76.7

10.0

Capital investment, net

119.4

148.4

74.5

As % of cash flow

53.7

62.3

83.4

1,727.4

1,580.3

1,078.1

Shareholders’ equity

794.8

798.3

496.0

Equity ratio (%)

46.0

50.5

NumberNumber

6,829

6,781

m CHF

m CHF

18.5

10.1

11.5

1,105.1

884.0

689.7

CHF

CHF

EUR2)

Total assets

Employees (at 31.12.)

Economic value added (EVA®) 3)
Stock market capitalization (at 31.12.)m EUR2)Per share data
Earnings per share4)

58.44

52.06

36.47

Shareholders’ equity per share

539.43541.80336.66

Dividend per share

22.005)

22.00

13.73

Payout ratio4) (%)

37.6

42.3

1)

For explanatory notes, see Financial Report
CHF values translated at year-average exchange rate of CHF 1.6023/1 EUR (Bloomberg)
Registered trademark of Stern, Stewart & Co.
4)
relating to consolidated profit before specific provisions
5)
Proposal of the Board of Directors
2)
3)

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Report of the Chairman of
the Board of Directors
Ladies and Gentlemen,following the 1999 General Meeting of Shareholders the Board of Directors
reconstituted itself, replacing the previous Board Committee with three newones: an Audit and Finance Committee, a Corporate Development Committee
and a Committee for Human Resources and Remuneration. This reorganization ensures that the work of the Board of Directors is dealt with efficiently.
As previously announced, we conducted a thorough review of our company’s
overall business strategy in the year under review. This process resulted in theformulation and adoption of a new strategy, whose overarching objective is tobring about a sustained enhancement of enterprise value. In the next few
pages Werner Kummer, CEO, gives an in-depth report on the Group’s strategic
renewal.
Well-Equipped for the Future
Impressive increasein earnings

The results for the 1999 business year tell a clear story: we are approaching thefuture with greater strength. On sales of CHF 1,874.4 million, 2.3% up on
the previous year, we achieved an impressive 12.3 % increase in consolidated
profit, taking it to a total of CHF 86.1 million (before specific provisions forthe strategic reorganization amounting to CHF 70 million after tax). The
restructuring measures introduced in previous years and the Group’s efforts
to keep costs under control made an important contribution towards thispositive result. In addition, we can safely say that our product portfolio is wellpositioned in our major markets, finding strong and widespread acceptancein the face of stiff competition. Forbo is well-equipped to vigorously pursue
new and ambitious objectives.

Unchanged
dividend

Net profit for 1999 reported by Forbo Holding SA totalled CHF 33.5 million(previous year: CHF 33.0 million). In the light of this result the Board of
Directors proposes that the General Meeting of Shareholders approve paymentof a dividend of CHF 22 per registered share, unchanged from the previous
year. The total dividend distribution thus amounts to CHF 32.4 million (previous year: CHF 32.4 million), with the number of shares in circulation remaining the same as in the previous year.
Personnel Changes

Board of Directors

The term of office of Dr. Ivo Gerster will expire with effect from the date of theforthcoming Annual General Meeting of Shareholders. Dr. Ivo Gerster is standing
for re-election for a one-year term of office, at the end of which he will havereached the age limit according to organizational regulations. The Annual General
Meeting will also be asked to elect Michael Pieper, Hergiswil, for a term of officeof four years.

Group Executive
Management

In parallel with the formulation of Forbo’s strategic renewal, the Group’s
management structure was reorganized with effect from January 1, 2000. The
company’s core business is now divided into four Strategic Business Units:
Linoleum, Cushion Vinyls, Belting and Adhesives. Each of these units is under
the responsibility of one of the members of the Group Executive Board.

4 Forbo Annual Report 1999

23777_gb_Forbo_IN_E 21.3.2000 9:06 Uhr Seite 5This made it necessary to expand the Group Executive Board from five toseven members with the appointment of Marien A. G. Weijenberg and Dr. Jan
Lipton. Marien A. G. Weijenberg has been with Forbo Krommenie B.V. in
Holland for the past four years, where he was in charge of production. He now
assumes responsibility for the Linoleum business unit with effect fromJanuary 1, 2000. Dr. Jan Lipton, formerly a Member of the Group Executive
Board of the Laufen Group, with responsibility for sanitary ware productsin Europe/Asia, ceramic tiles business in the USA and technology and innovation, will become head of the Belting business unit as of April 1, 2000.
Well Set to Tackle the Changes
Concentrating on
our strengths

All the prerequisites for the process of change initiated by the Group’s strategic
renewal are in place. We command outstanding product and market expertise. We can count on business units whose performance capabilities compare
favourably with our competitors. And we aim to build on these strengths.
Our focused approach will enable us to deploy our human and financial resources efficiently and effectively. The changes that lie ahead are a greatchallenge for all our managers and staff.
Profit-Driven Growth

Dynamic management of the productportfolio

Our aim is to consolidate and further reinforce our leading positions in themost attractive markets. We will be striving not just for strong profitability but
also for sales growth, since the two need to be successfully combined if enterprise value is to be enhanced. This will require dynamic, profit-driven management of the Group’s product portfolio, a process for which all the necessary
prerequisites have now been created.
Forbo on the Move

A word of thanks

We can look back on a good business year and I would like to express our
sincerest gratitude to everyone in the organization for their impressive commitment, for all the hard work they have put in and for the results they haveachieved. I would also like to thank our customers for choosing the products
and services we offer. And of course we also owe a debt of gratitude to ourshareholders for the confidence they have shown in us through their investment in the company. Our Group is now moving forward. With the strategic
review we have plotted a new course, to which all our activities will be harnessed. I am entirely confident that we will achieve the objectives we have set
ourselves.

Karl Janjöri
Chairman of theBoard of Directors

Karl Janjöri

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Report of the Chief Executive Officer
Building on our Strengths – Creating Shareholder ValueIn the year under review we succeeded in further improving our operational
profitability. In a world of rapid change we aim to build on this strength tocreate a corporate entity that is constantly evolving with dynamism and flexibility. Technological advances have generated scope for innovation. Globalization is providing access to new markets. Mounting competitive pressurescall for adaptability. Our task is to engage in an unrelenting and intensive
search for appropriate and effective responses to these challenges. In the year
under review we have conducted a thorough analysis of the Group and its
markets and, based on the results of this analysis, have plotted a course for the
future. The new approach is based on four principles.
The Four Cornerstones of Forbo’s Future Strategy
Our business

Forbo will focus more intensely than before on its core businesses which offer
strong and sustained potential for strong profitability, sales growth, market
leadership and synergies. The sectors that we have designated as Strategic Business Units are Linoleum and Cushion Vinyls in the Flooring Division, Belting(conveyor and drive belts made from synthetic materials) and Adhesives in the
Industry Specialties Division. The future role to be played by the other business units will depend on whether they strengthen our strategic core businessor show the necessary potential for development into autonomous Strategic
Business Units in their own right.

Our goals

All Strategic Business Units must secure leading positions either worldwide orin their most important markets. This can be achieved by organic growth andthrough well-targeted acquisitions. At the same time we will focus on achieving earnings-driven growth. Capital investments will be channelled into areas
with strong and clearly identifiable earnings potential. Accordingly, every
business unit must measure itself in terms of performance against its external
competitors in the marketplace as well as against the other units within theGroup.

Our assets

Our most important assets are satisfied customers and employees with strong
capabilities and motivation. To achieve the former we must systematically gear
our market performance to the needs of our customers, ensuring their complete satisfaction through the unrivalled quality of our products and of theassociated services. And, in this, the all-important factor will be our managers
and staff, whose dedication and commitment, sense of responsibility andability to act on their own initiative will play a key role in moulding the customer’s perception of the company. And, for our part, we aim to do everythingin our power to ensure that all our employees can work as successfully andeffectively as possible, by providing for a corporate culture, which is open,
straightforward and performance-oriented, and which recognizes the importance of training, career development and performance-driven remuneration
systems.

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Our mission

Our mission is to achieve a sustained increase in enterprise value, for which
the best guarantee is a combination of strong earnings power and growth. Our
business strategy is closely and consistently geared to the creation of value.
Each and every operational unit must satisfy this requirement. At the sametime, this strategy is the main criterion for the future allocation of human andfinancial resources. The objective of systematically enhancing the value of ourcompany is an important underlying factor in all our planning and decisionmaking processes, as well as providing the key parameters for performanceassessment. A vital task for Forbo is to ensure that employees at all levels display the necessary understanding of and commitment to the process of change
in which we find ourselves, so that they may play a part in actively shaping thisprocess.
TargetAmbitious yet
realistic

Our objective is to achieve a sustained increase in earnings and sales. The
Group’s mid-term target is to raise the return on sales before depreciation(EBDIT as percentage of net sales) from today’s level of 13% to 16% and toincrease the return on assets (EBIT as percentage of operating assets) fromtoday’s figure of 8% to 15%. Over the same period we will seek to achieve asignificant increase in sales by means of internal growth and carefully targeted acquisitions.
By drawing on the combined resources of all Forbo employees we believe we
can rise to the challenge of securing a successful future for the Group.

Werner Kummer
President and Chief
Executive Officer

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W e c r e a t e a t m o s p h e r e.

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Forbo Group:
Promising Business Performance
In the 1999 business year Forbo’s total sales rose by 2.3% to
CHF 1,874.4 million. This increase was attributable to both the
Flooring and Industry Specialties Divisions in equal measure.
Considerable growth was achieved in Asia, North and SouthAmerica, regions of increasing importance for the Group.
Promising sales growth was recorded in the core products
linoleum, belting and adhesives.
Successful Performances in our Core Businesses
Number one inlinoleum

In the flooring business, sales of the core product linoleum expanded to account for a 40.7% share of the total. Forbo is the world leader in this area,with a market share of around 60%. In 1999 the Group’s linoleum sales grewby 4.0% to CHF 443.1 million, helped by new collections, which were successfully introduced in a number of markets. The market for cushion vinyl floor
coverings is suffering from overcapacities and price erosion. Even so, thanks tohighly effective marketing aimed at selected customer segments the Group
posted sales of CHF 370.7 million, a mere 1.2% below the previous year’s figure.

Strengthening
market position

The two core products of the Industry Specialties Division, belting (conveyor
and drive belts) and adhesives, put in a positive performance. Sales of belting
products were up 8.0% to CHF 339.5 million. The introduction of new products
and the expansion into attractive new segments enabled us to further reinforce our leading market position. Our Adhesives Business benefited fromrising demand in its major markets, with the result that sales were up 6.9% to
CHF 223.7 million.
Sales by business
m CHF
1999

Change98/99 %%

1,088.3
Flooring
786.1
Industry Specialties

2.1
2.6

58.1
41.9

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Vigorous Growth in USA and Asia
Europe remains theprincipal market

The Group’s business in Asia recovered from last year’s downswing, enablingsales to soar by 23.5%. This was due in part to the new belting manufacturing
company in China. Sales in North and South America were boosted by 8.2%.
The healthy state of the US economy led to a marked increase in sales, especially in the belting area. Nevertheless, Europe continues to account for morethan 80% of group sales. In the important market regions of Benelux and
Scandinavia Forbo registered slightly above-average sales growth rates. In the
United Kingdom, France and Germany sales were slightly down on theprevious year, more heavily so in Eastern Europe.
Sales by geographic area
Benelux
Germany
AmericaScandinavia
FranceUnited Kingdom
Asia/Africa
Switzerland
Southern Europe
Eastern Europe%

Change98/99 %

m CHF
1999

19.9
19.1
10.6
9.9
9.3
9.1
7.1
6.6
6.0
2.4

3.6
–0.9
8.2
3.2
–1.0
–3.6
22.2
1.5
0.5
–12.9

372.8
358.2
198.6
184.8
175.0
170.1
133.0
124.6
112.8
44.5
0

50

100

150

200

250

300

350

400

Capital Investments
Consolidation

Following the heavy investments effected in the period 1997/98 in large-scale
production facilities in the Netherlands, Germany and the United Kingdom,
the Group’s capital spending was at a much lower level in the year underreview, all investment projects combined amounting to CHF 125 million. This
figure includes the sum of CHF 37 million relating to projects from previous
years, which affected liquidity in 1999.
Our budgeted investment spending for the current business year is approximately CHF 100 million and will be focused on the Strategic Business Units.

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Staff
Structuraladjustments

At the end of 1999, Forbo had 6,829 employees worldwide, representing an
increase of 0.7 % on the previous year (6,781). This rise is largely attributable
to the expansion of operations in China and the growth achieved in the USA.
The strategic renewal process may bring a reduction in the headcount by up
to 200 jobs in 2000, mainly in the Carpets and Belting Business Units where
structural adjustments are required. At the same time, however, the planned
expansions in other areas will create new jobs.
Earnings

Above-average
profit growth

Following a somewhat weak performance in the first half of 1999, businesspicked up in the latter half of the year under review and, in particular, in the
fourth quarter. Thanks to this upturn and consistent efforts to cut costs, together with a greater emphasis on our more profitable core products, theGroup’s operating profit grew at a faster rate than its sales. At CHF 5.6 million,(net) financial expenses were by CHF 2.2 million below the previous year’slevel, due to higher financial income and lower interest cost. Consolidated
profit rose by 12.3% to CHF 86.1 million on a comparable basis to the previous year. As part of the strategic renewal initiative, specific provisions for
restructuring and valuation adjustments were created, e.g. for the Carpets andBelting Business Units, where structural adjustments are being carried out.
To this end the sum of CHF 70 million after tax was charged to consolidated
profit for 1999. Details on how these funds are to be applied will be given
once they have been allocated and used. After deduction of these specific provisions consolidated profit amounted to CHF 16.1 million.
The improvement in group operating profitability in 1999 is also demonstrated by the increase in the return on assets (operating profit as a percentage
of operating assets) to 8.2% and in particular by the Group’s economic value
added. This is expressed on an EVA® basis as the excess over the weighted
average cost of capital. EVA® increased in 1999 by CHF 8.4 million (83.2%) toCHF 18.5 million.
Through the targeted deployment of funds we succeeded in increasing the free
cash flow from a negative amount of 20.0 million in 1998 to CHF 35.3 million.
This positive development is also visible in the balance sheet where net financial liabilities were down by CHF 39.6 million to 205.1 million.

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Outlook
On course

We expect to see a continuation of the revival in business activity in our mainmarkets that set in towards the end of 1999. This, together with the strategic
measures designed to focus our operations more sharply, to gear our activities
more closely to the market and to promote growth in our core businesses,
means that we should already move a step closer in the current year to achieving our mid-term objectives.
Free Cash Flow 1999
m CHF

Cash flow from operating activities
Cash flow from investing activities
Dividend paid
Free cash flow

187
–120
–32
35
–25

0

25

50

75

100

125

150

175

200

75

100

125

150

175

200

Free Cash Flow 1998
m CHF

Cash flow from operating activities
Cash flow from investing activities
Dividend paid
Free cash flow

155
–147
–28
–20
–25

0

25

50

See Consolidated Cash Flow Statement in the Financial Report, page 4

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We l e n d e l e g a n c e a n d h a r m o n y.

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Flooring: Market Position Strengthened
In 1999, Forbo strengthened its position in the flooring market.
Despite stagnating volumes and falling prices in important markets, the Group’s considerable marketing efforts enabled it toincrease sales by 2.1% to CHF 1,088.3 million and operating profit (EBIT) to CHF 103.5 million (previous year: CHF 97.1 million).
Linoleum
Successful
marketing driveWith a market share of more than 60%, Forbo is the world’s leading supplierof linoleum, one of the Group’s core products. Total sales in the year underreview amounted to CHF 443.1 million, 4.0% up on the previous year. Our
substantial marketing efforts were one major factor behind this encouraging
result. The new Artoleum® 2 design collection launched in 1999 met with avery positive response on the market. And the Forbo collections attracted great
attention at Europe’s leading trade fairs, Domotex in Hanover and Bâtimat in
Paris.
A very promising performance was recorded by our activities in North America,
where linoleum, still commanding a relatively small share of the market, is
now achieving greater acceptance. The Forbo range is excellently positioned
in this market: in early January it was ranked number one by the Design Journal, and Artoleum® received the highly prestigious 1999 Platinum Award
for Design Excellence in the flooring category. In the USA Forbo has a highly
effective sales and marketing team. The two existing training centres forflooring techniques will be supplemented by a third one to be opened this year.
To mark its 100th anniversary, the Dutch company Forbo Krommenie B. V.
organized an exhibition of linoleum art prints in the Cobra Museum in
Amstelveen, Netherlands. The exhibition, entitled ‘From Kandinsky to Corneille’,enjoyed public and critical acclaim.
Cushion Vinyls

Success in spiteof difficult market
conditions

Like the previous year, 1999 was characterized by difficult market conditions.
The problem of excess capacities was aggravated further. Despite these conditions Forbo succeeded in maintaining its positions in the major European
markets. Thanks to its extraordinary design and the excellent benefits it offers,
the inlay chips technology of Forbo Novilon® made further headway in termsof market popularity. Total sales of cushion vinyl floor coverings in 1999 stoodat CHF 370.7 million, 1.2% below the previous year, which is substantially lessthan the decrease of the total market.

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At Forbo Novilon produktiebedrijven bv in Coevorden (Netherlands) the firstphase of a new production line was brought on stream. In the current businessyear the second phase of the new plant will be completed. This will give Forbo
the necessary production technology to manufacture innovative cushion
vinyls, which will be ready for market launch in the next few months. Forbo
Sarlino SA in Reims (France) vigorously expanded its market position in vinyl
floor coverings that offer strong sound insulation characteristics. In Colorex®
Shape, Forbo Giubiasco SA (Switzerland) has developed a new generation of
halogen-free vinyl floor coverings for special applications.
Carpets
Forbo does well in
declining market

Although the market for textile flooring continued to contract, Forbo
achieved a slight growth in sales, raising it by 1.7% from the previous year to
CHF 237.2 million. The business performance in this segment was helped
by investments in new collections and rationalization measures.
According to plan, we completed the closure of the needlefelt production
facility in Lachen (Switzerland) and the transfer of production to Reims(France) and Wermelskirchen (Germany) together with the concentration of
all Swiss-based textile floorcovering operations in Ennenda (Switzerland).
In the current business year we plan to carry out a restructuring of our European carpet operations. To that end the Carpets Business Unit was reorganized.
Parquet Flooring

Gratifying risein salesThe Group’s sole remaining parquet flooring factory, located in Sweden,
successfully boosted its sales to CHF 37.3 million, due to the extraordinarily
high-quality design of the ready-to-lay parquet flooring produced there.
In the Group’s new management structure this local parquet business will beassigned to the Linoleum Strategic Business Unit. Its main function is tostrengthen the Group’s market position in Scandinavia.
Sales byproduct group
m CHF
1999

Change98/99 %%

443.1
Linoleum
370.7
Cushion Vinyls
237.2
Carpets
Parquet Flooring 37.3

4.0
–1.2
1.7
18.4

40.7
34.1
21.8
3.4

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We keep the world in motion.

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Industry Specialties:
Products that Set Standards
Forbo’s Industry Specialties division raised its sales by 2.6% toCHF 786.1 million. Above average growth in sales was achievedin both core products: belting and adhesives. Operating profit(EBIT) came to CHF 44.5 million and was higher than in the previous year (CHF 35.7 million) by 24.6%.
Belting
Largest order everBelting as a core product comprises conveyor and processing belts, drive andmachine belts and is produced by the Siegling group. In the year under review
sales generated by belting products increased – in spite of heavy pressure on
prices – by 8.0% to CHF 339.5 million. The recovery of Europe’s mechanicalengineering industry made it possible to expand business volume in thissegment. Siegling’s American operation took advantage of the buoyant state of
the US economy to strengthen its market presence. In the year under review
Siegling succeeded in winning the largest order in its history for conveyor belts
to equip a new package-handling center in the USA. The Siegling Group alsoachieved higher sales in the Far East, and especially in Japan where the economy saw a slight improvement. The Group’s Chinese business partner is set
to sell Forbo its 20% minority stake in Forbo Siegling (Shenyang), thereby
enabling the company to be converted into a wholly-owned Forbo subsidiaryin January 2000.
In the 1999 business year, Siegling as leader in industry developed new
products, which will allow the company to further expand sales in selectedmarket segments. These products include, amongst others, a new range ofdrive and machine belts for the textile and paper industries and new processing belts for the textile printing industry.
The large-scale investment in the new production plant in Hanover (Germany)was completed in the year under review. Further funds were invested inrenewing and extending the drive and machine belts production facilities at
Siegling (Schweiz) SA in Wallbach.
To counter falling prices in the belting markets, operations in the year 2000
will aim to reduce costs in targeted areas.
Adhesives

Flourishing growth

In the adhesives segment Forbo stayed on its positive course in the year underreview, achieving total sales of CHF 223.7 million and thereby outstripping
the previous year’s result by 6.9%. The increase in demand stems from the construction and industrial sectors. In the Far East sales were considerably higher,
whilst brisk sales growth was also registered in Germany, the Netherlands
and France. By contrast, in Eastern Europe sales were down, as a consequenceof the general state of the region’s economy. Sales of Forbo hot-melt adhesives
for industrial applications recorded above-average growth.

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Forbo managed to make very good progress in the flooring segment, mainly
thanks to its systematic customer training in floor laying techniques andits new, environmentally friendly product range. An innovative welding rod
range was launched for the Artoleum® product line. At Eurocol B.V. in
Wormerveer (Netherlands), the new development and training center cameon stream.
In 1999, Forbo set up a distribution company by way of expanding the Group’s
presence in Poland. The German distribution company Forbo Uli-ChemieGmbH was integrated into Forbo Erfurt GmbH at the end of 1999.
Coated Textiles
Downturn in sales

The internationally active group company Forbo Stamoid SA, based in
Eglisau/Zurich (Switzerland), was able to maintain its market position in its
most important customer segments and, in particular, made significant
progress with products for the construction industry and outdoor advertising.
Nevertheless, sales for the year were 7.1% down at CHF 43.1 million, primarily
owing to a sharp drop in orders in the military sector.
Extruded Profiles

Subdued demand

The market for window profiles, in which we attained total sales of CHF
32.8 million, continued to be characterized by subdued demand in Germany,
Europe’s largest market. The decrease in sales in Germany was made up by
successful sales in Eastern Europe. In 2000 we expect to see a slight recovery in
the German market and a further expansion of business in other countries.
Decorative Films and Wallcoverings

Strong industrial
demandBusiness in decorative films for industrial applications continued to expand in1999 as it has done in recent years, whereas the products in the consumer
goods sector, including wallcoverings, were impacted by difficult market conditions. The measures taken in 1998 to restructure the Group’s wallcoverings
operations and the ongoing drive to rationalize the product range helped
to improve profitability, although the progress was not as pronounced as expected. Not only because of these measures, total sales decreased by 10.1%
to CHF 147.0 million. The new production facilities came on stream at the endof 1999, thereby removing the capacity bottlenecks afflicting business withindustrial customers and paving the way for the development of new products.

Sales byproduct group
Belting
Adhesives
Coated Textiles
Extruded Profiles
Decorative Films/Wallcoverings

m CHF
1999

Change98/99 %

%

339.5
223.7
43.1
32.8
147.0

8.0
6.9
–7.1
0.6
–10.1

43.2
28.4
5.5
4.2
18.7

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22 Forbo Annual Report 1999

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We set the pace.

23 Forbo Annual Report 1999

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Shaping the Future
Forbo pursues a systematic and carefully targeted investment
strategy to expand and further develop its existing productrange. To provide further encouragement for innovation, a new
body is being set up at group level. The Forbo Group attaches
great importance to quality assurance, quality enhancement andenvironmental compatibility. Forbo’s belief in the importance oftreating natural resources in an ecologically responsible manneris reflected in its environmental management system.
Innovation and Product Development
Attractive
development
projects

In the 1999 business year, the Group continued to work intensively on thedevelopment projects currently in progress such as the manufacture of
the world’s first 4.5 meter-wide conveyor belts, further expansion of the highquality linoleum collection Artoleum® and the preparation of new collections
for its Carpets and Cushion Vinyls Business Units (Novilon®). At present the
top priority projects include a new kind of halogen-free vinyl floorcoveringand new adhesives for demanding applications such as wood composite constructions.
Our declared objective for the next few years is to devote greater time andenergy to devising and developing new products and market services and to
make the necessary funds available. We also intend to force the pace on new
e-commerce applications and more generally on state-of-the-art IT solutions
with which we can support our more traditional business processes. At grouplevel a newly constituted committee will devote itself to identifying scope for,initiating and controlling group-wide innovation projects. Forbo’s projectwork is to be carried out increasingly by cross-unit teams and through interdisciplinary networks of employees. The range of products offered in our corebusinesses is to be expanded at a faster innovative pace, with the objective ofsetting new market standards and consolidating our leading market positions.
This will also include the provision of customer-oriented services, such as
training programs, information documents and user instructions.

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Investments
Investing in new
product generations

In the year under review the large-scale investment projects initiated inprevious years were brought to completion. These include the new state-ofthe-art production plant at Forbo Novilon produktiebedrijven bv in Coevorden(Netherlands), the world’s first production unit for manufacturing belting products up to 4.5 meters wide, installed at Siegling GmbH, Hanover (Germany),
and the cast film line and gravure printer at Forbo CP Ltd. in Cramlington(United Kingdom), which will support the manufacture of a new generationof decorative film products. Thanks to these capital investments we now havethe necessary production technology in place to bring new product generations to the stage of market maturity. Total investment spending in the year
under review was down from the year-earlier level to total CHF 125 million.
Capital investments 1995 – 1999
Flooring
m CHF

1999

76

1998

78

1997

74

1996

83

1995

85

Industry
Specialties
m CHF

49
81
80
57
61
0

10

20

30

40

50

60

70

80

90

Quality, Environmental Protection and Safety
Certification

Nearly all Forbo Group companies now satisfy the ISO 9001 quality standard.
This reflects the great importance that the Group attaches to quality control
at every level of business conduct and performance. In the year under review
a number of Forbo companies were once again subjected to ISO 9001 reexamination.
It is likewise Forbo policy to ensure that all manufacturing companies in
the Group meet the criteria set out in the ISO standard 14001 on environmental protection. The Dutch adhesives manufacturer Eurocol B. V. in Wormerveer(Netherlands) and Forbo Werke GmbH in Paderborn (Germany) bothachieved ISO 14001 certification in the year under review, thereby taking thenumber of Forbo production facilities which have attained this objective to 12.
Environmentally Friendly Use of Resources

Responsibility
toward environment

As a matter of high priority, all Forbo business units take a careful and environmentally responsible approach to the use of natural resources. In doing so,
our aim is not merely to discharge our responsibilities toward the environment; we also gain valuable knowledge and experience of measures to cut
consumption of resources and hence lower production costs. Our ‘Resource
Management Reporting’ system is implemented throughout the Group.

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Formula for Success:Highly Committed People
The performance of the Forbo Group is largely shaped by the
7,000 people who work for us. Because of the need to achieve asustained increase in shareholder value, combined with stiff
global competition and the rapid spread of new technology, ouremployees face increasingly heavy demands in terms of theircommitment, ability to learn and openness to change. Forbo has
a variety of programs in place that form a basis for successful
performance and exceptional motivation on the part of all thecompany’s employees.
Change at Forbo

Forbo’s staff training program was continued and expanded throughout theGroup in 1999, offering a total of more than 1,900 hours of training to inhouse course participants – this in addition to the external training courses
which Forbo companies offer their employees.
The Group’s focus on its core business activities, its earnings-driven approach,the shift of emphasis away from production towards marketing, the extra
encouragement given to innovation and, last but not least, the clear commitment to enhancing enterprise value as the company’s overarching strategic
objective – all these factors call for fresh ways of thinking and imply a fundamental change in the way Forbo employees are expected to work. This transformation requires both an understanding of the need for change and an
openness to new ways of doing things.
Breakdown of
employees by division
FlooringIndustry Specialties
Group HQ

1999

Change98/99 %

%

3,334
3,462
33

–1.1

48.8
50.7
0.5

2.5
–2.9

Breakdown of employees by geographic area
Benelux
Germany
United Kingdom
Switzerland
Scandinavia
FranceRest of Europe
Rest of World%

Change98/99 %

1999

22.8
19.2
17.1
9.5
8.1
7.1
3.0
13.2

–0.3
–2.6
3.2
–4.3
–0.9
0.6
4.1
9.0

1,560
1,311
1,168
649
550
486
205
900
0

200

400

600

26 Forbo Annual Report 1999

800

1000

1200

1400

1600

23777_gb_Forbo_IN_E 21.3.2000 9:18 Uhr Seite 27

We intend to actively promote this process of change by means of a comprehensive communications policy, a corresponding training program and thecreation of performance-based remuneration systems. At the same time
we must systematically cultivate the next generation of managers and hence
put in place a suitable group-wide staff development policy. The functionof Corporate Human Resources was set up with the aim to implement these
initiatives.
In the year under review two conferences attended by managers from all thebusiness units were organized for the purpose of preparing and then presenting the Group’s strategic renewal program. In mid-June some 150 Forbo managers gathered for the Group’s traditional annual conference, where the topics
included value-based company management, corporate culture and corporatechange, and e-commerce. The speakers were leading international figures fromboth the theoretical and practical spheres. In December, an information event
was held in Zurich for senior management. At this gathering the company’s
strategic renewal initiative was presented and the plans to implement it wererounded out in the subsequent discussions. The main objective of both eventswas to get management actively involved in shaping the process of change andto ensure that the Group’s new strategy was communicated to the different
organizational levels in all group companies in the most effective and appropriate manner.
Forbo Trophy
Rewarding exceptional achievements

In future, the Forbo Trophy will be awarded to promote the pursuit of ourshared objectives. It will be presented every year – commencing this year – tothe group company which achieved the most exceptional performance in theprevious year. In addition, each year six employees or teams will be awarded
medals for their outstanding contributions to the Group.

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We c o m b i n e f u n c t i o n a l i t y w i t h s e c u r i t y.

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29 Forbo Annual Report 1999

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The Forbo ShareWith the adoption of its strategic renewal program, Forbo hasmade a clear undertaking to manage the Group in the interests of
its shareholders and thus to attach the highest priority in all its
activities to maintaining and enhancing shareholder value.
Investor Relations

Forbo pursues an open communications policy, which provides capital market
investors with regular, up-to-date information. In addition to the annual
and interim business reports issued to shareholders, financial analysts and thefinancial press, Forbo cultivates contacts with its investors through presentations and discussions.

Share priceperformance

The Forbo share price advanced in the year under review from CHF 600 to
CHF 750. This 25% rise means that the Forbo share clearly outperformed the
Swiss Performance Index (SPI), which gained 11.7% in the same period.
The trading volume continued to be on a high level, which reflects not only
the stock’s strong performance but also the increased level of investor interestin the Forbo share. The stock’s performance certainly also reflects the raised
expectations amongst investors following the announcement of the Group’s
new strategic thrust to the business world on December 7, 1999.
Forbo share price and SPI performance 1999
CHF

SPI

800

5,500

750

5,250

700

5,000

650

4,750

600

4,500

550

4,250
JAN

FEB

MAR

APR

MAY

JUN

JUL

AUG

SEP

OCT

NOV

DEC

SPI Swiss Performance Index

Profile ofshareholders

At the end of December 1999 2,563 shareholders were registered in the Forbo
Holding SA share register. To the company’s best knowledge, no shareholder
owns more than 5% of the voting rights. In accordance with the Articles
of Association of Forbo Holding SA, no single shareholder is allowed to votefor more than 8% of all voting rights.

Diary dates

General Meeting of Shareholders: May 3, 2000
Autumn press conference:
November 7, 2000
Financial analysts’ meeting:
November 7, 2000

30 Forbo Annual Report 1999

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1999

1998

1997

1996

1995

Share capital
Issued registered shares in circulation (of CHF 50)
of which held by Forbo

NumberNumberNumberNumberNumber

1,473,416

1,473,416

1,473,416

1,465,800

1,465,800

9,894

18,592

9,247

9,127

10,907

40,134

40,134

40,134

46,134

46,134

Reserve shares (without voting and dividend rights)
Registered shares (of CHF 50)

Nominal capital
CHF

CHF

CHF

CHF

CHF

Total

75,677,500

75,677,500

75,677,500

75,596,700

75,596,700

of which issued and outstanding shares1)

73,670,800

73,670,800

73,670,800

73,290,000

73,290,000

of which issued and non-outstanding shares

2,006,700

2,006,700

2,006,700

2,306,700

2,306,700

Data per share
CHF

CHF

CHF

CHF

CHF

Shareholders’ equity Group

539

542

517

522

467

Cash flow Group

130

121

119

116

109

Consolidated profit before specific provisions1)

58

52

42

42

38

Gross dividend

222)

22

19

19

19

High

3.9

5.1

3.7

4.1

4.3

Low

2.9

2.4

2.9

3.5

3.1

38

42

45

46

50

Gross dividend return (%)
Payout ratio3) (%)

Stock market statistics
Share prices
Stock market capitalization (m)

High

CHF

CHF

CHF

CHF

CHF

764

900

654

550

610

Low

569

435

514

462

443

High

1,126

1,326

959

806

894

Low

838

641

753

677

649

1,105

884

880

792

723

Year-end1)

See also Financial Report, ‘Notes to the Consolidated Financial Statements’, page 8, ‘Earnings per share’, page 9
Proposal of the Board of Directors to the General Meeting of Shareholders
3)
Gross dividend as % of consolidated profit before specific provisions
2)

31 Forbo Annual Report 1999

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32 Forbo Annual Report 1999

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We get things moving.

33 Forbo Annual Report 1999

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Corporate Bodies and Management StructureA

Committe
Term of office expires

Chairman
CH-Herrliberg

2002

CH-Hurden

2002

Dr. Anton H. Bucher

CH-Küsnacht

2002Peter van Duursen

NL-Driebergen-Rijsenburg

2002

Dr. Ivo Gerster

CH-Binningen

2000

Dr. Gerd Hofmeister

D-Hanover

2002

Dr. Paul Tanos

A-Wien2003

Prof. Dr. iur. Rolf Watter

CH-Zurich

2003

Vice-Chairman
Dr. Willy Kissling
Members

Secretary
Andreas P. Lerch

CH-Hüntwangen

A: Audit and Finance Committee
B: Corporate Development Committee
C: Committee for Human Resources and Remuneration

Group Executive Board
ChairmanWerner Kummer

Chief Executive Officer (CEO)Deputy Chairman
Werner von Kuensberg

Adhesives SBU

Members
Dr. Jan Lipton

Belting SBU (as of 1. 4. 2000)

Drs. Antonie J. Pluijmert

Cushion Vinyls SBU

Jan E. Sångberg

Corporate Business Development (CBD)Marien A. G. Weijenberg

Linoleum SBU (as of 1. 1.2000)

Gerold A. Zenger

Chief Financial Officer (CFO)Group and Statutory Auditors
PricewaterhouseCoopers Ltd.

C

Mitglied

Board of Directors Forbo Holding SA

Karl Janjöri

B

Zurich34 Forbo Annual Report 1999

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Organizational Structure (as per 1.1.2000)

Executive Board

Chief Executive Officer

Chief Financial Officer

Corporate Business
Development

SBU Linoleum

SBU Belting

SBU Cushion Vinyls

SBU Adhesives

BU Carpets

BU Coated Textiles

BU Extruded Profiles

BU Decorative Films

Flooring Division
Industry Specialties Division
SBU Strategic Business Unit
BU Business Unit

35 Forbo Annual Report 1999

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Addresses
Forbo Holding SA
CH-8193 Eglisau

Tel. +41 1 868 25 50
Fax +41 1 868 25 51
Forbo International SA
CH-8193 Eglisau

Tel. +41 1 868 25 25
Fax +41 1 868 25 26
www.forbo.com
Investor Relations

Gerold A. Zenger(E-Mail: gz@forbo.com)
Corporate Communications

Ursula Leonhard(E-Mail: ul@forbo.com)

36 Forbo Annual Report 1999

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Annual Report
1999

Forbo Creates Value for Customers

Forbo Annual Report 1999

In the development and manufacture of its products Forbo
focuses on the needs and wishes of its customers and end-users.
The diversity of these needs is matched only by the uniquenessof the solutions Forbo provides – products that are designed
to meet a broad range of exacting requirements in a variety of
sectors around the world. The pictures in this Annual Reportshow just some of the ways in which Forbo products are used,giving the reader a brief but representative impression of thebroad spectrum of products the company offers.

Imprint
Concept/Editing: Rubeli Häusermann Public Relations, Zurich
Design: Gottschalk+Ash Int’l
Photography: Daniel Gerber, Zurich
Typesetting/Lithography/Printing: Neidhart + Schön AG, Zurich
March 2000

Page 8With the modern Novilon® floorcovering there are almost no
limits to individual choice. In the kitchen-cum-living areaof a new single-family home in Frankfurt am Main Novilux®
marquetry borders add a special note.

Page 14

Amsterdam’s former planetarium today serves as a conference
center and meeting place for architects. It was designed by thearchitects Van den Oever, Zaaijer, Roodbeen & Partners. P. Zeegers
was responsible for the original design of the Linoleum floorusing Artoleum® Scala.

Page 18

Siegling’s Transilon® conveyor belts transport the luggage atHong Kong’s new Chek Lap Kok airport where they demonstrate
the robustness and hardwearing qualities for which they are
renowned.

Page 22

Marmoleum® Real was used for the floor of the sports center
Pabellon Deportivo Colegio Manuel Peleteiro in Santiago deCompostela in Spain – an ideal and attractive choice.

Page 28

The wooden elements of the new bridge in the Sihltal valley
near Zurich, Switzerland, were glued together with Forbo
CTU’s weatherproof polyurethane wood adhesive Balcaton®.

Page 32

At the Lance factory in Charlotte (USA) Transilon® conveyor belts
by Siegling are used for the processing and packaging of cookies
and crackers.

The original language version of this Annual Report is German.