Dear Shareholders,
In this half-yearly report, we are providing you with information on the course of business and results for the first six months of fiscal year 2005/2006 (from October 2005 to March 2006). This interim report has been prepared in accordance with the German Commercial Code (HGB). Kässbohrer Geländefahrzeug AG will report on full-year fiscal year 2005/2006 for the first time in accordance with International Financial Reporting Standards.

THE MARKET AND SALES SITUATION

Winter tourism developed extremely positively in the 2005/2006 season. Early snowfalls and cold weather, which enabled mechanical snowmaking, provided a good start to the winter season. Small and medium-sized ski resorts in Germany and Austria were able to start operating in some areas as early as the end of November. Good to very good ski conditions continued even in lower-lying areas until the middle/end of April. Consequently, ski resort companies generated above-average results. The long ski winter and good snowfall increased the operating times of slope maintenance vehicles. As a result, the market situation was very positive, in particular for the spare parts and service business.

According to our market research, the global market volume for slope maintenance vehicles for winter 2005/2006 is on a par with the very high level of the previous year, which was well above the long-term average. While fewer slope maintenance vehicles were sold in certain markets in Central Europe (e.g. an investment grant program expired in Austria last year), the volume in Eastern Europe, Scandinavia and Asia was higher than in 2004/2005.

Kässbohrer Geländefahrzeug AG further extended its global leadership in this excellent market environment with a market share of clearly more than 50%.

The Company acquired a North American manufacturer's product rights for a tracked vehicle. The goal initially is to obtain access to energy and telecommunications companies, transportation and environmental protection organizations and civil defense and disaster control organizations in North America, who use these light and cost-efficient vehicles for service functions. The Company’s subsidiary Kässbohrer All Terrain Vehicle Inc. Reno/Nevada, USA is responsible for production and sales.

Kässbohrer Geländefahrzeug AG has once more demonstrated its technology and innovation lead. In February and March, a new generation of vehicles was launched on the European market under the motto "Fire-in-Red". The 400 hp PistenBully 600 is the new generation of the most popular slope maintenance vehicle on the market – the PistenBully 300. The PistenBully 600 convinced customers, drivers and technicians from the start. The vehicle received outstanding reviews for its innovative technology for our customers' benefit and the new design. The PistenBully 600 will be on sale for the first time for the coming 2006/2007 winter season.

In the upbeat winter tourism market environment, unit sales of the new PistenBully increased by a further 10% on the already excellent first half of fiscal year 2004/2005. Consolidated sales for the first half of fiscal year 2005/2006, rose faster than unit sales to €156.1 million (previous year: €138.2 million). This represents an increase of 13%. The Company's projections were significantly exceeded. The sales boost was mainly due to the increased sale of new vehicles at PistenBully, a favorable product mix and a positive exchange rate effect in relation to the US dollar.

The past winter season also resulted in good sales in the service and spare parts business due to the ongoing good snow conditions. Compared with the prior-year period, this figure increased by 16% to €28 million.

The used vehicle business declined slightly after the previous year's record sales. Sales amounted to €11.6 million as of March 31 (previous year: €12.7 million). However, the current level of unit sales and total sales remains satisfactory. The persistent high demand for used vehicles is being fuelled by the good snow conditions even in lower-lying areas.

Sales of beach cleaning vehicles rose to €0.9 million as of the end of March (previous year: €0.6 million). The key sales driver proved to be the BeachTech 2800, which was first launched on the market in summer 2005. However, the BeachTech business unit's actual sales season only begins in spring, usually after the Easter holidays. The market is recovering slightly overall after the disappointing last BeachTech season.

EARNINGS

The year-on-year sales increase of 13% in the first half of 2005/2006 led to a rise in grossprofit, from €56.5 million to €62.7 million. This represents a slower rate of increase comparedwith sales. As a result, the gross profit margin (expressed as a percentage of consolidatedsales) of 40.2% was below the previous year's figure of 40.9%. Vehicle equipment upgradesand price increases on the supplier side could not be fully passed on to customers.Personnel expenses rose by 8% to EUR 15.5 million. The increase was the result of a payrise under a collective wage agreement, the larger workforce and higher capacityrequirements. Thus overtime in production up to the end of March was reduced by a smalleramount than in previous years. The headcount in sales and services increased on the backof the steady rise in PistenBully unit sales in past years. This ensures that the high servicelevel on which the Company's market success is based is safeguarded and further improved.Other operating expenses, at €11.1 million, exceeded the previous year's €10.3 million by7%. Freight, commission and selling expenses increased on the back of sales. Additionalmarketing expenses for the PistenBully 600 product launch led to an increase as against theprevious year. Despite additional increases in energy prices, expenses rose less rapidly thansales.Although gross profit declined, earnings before taxes increased in proportion to sales. Thiswas due to the limited rise in operating costs. The result from ordinary activities for the firsthalf of 2005/2006 amounted to €34.7 million after €30.3 million the previous year.Income taxes, at €12.5 million, were €1.8 million up on the previous year. The increase isattributable to the higher pre-tax profit.The rise in consolidated sales led to an increase in consolidated net income in the first half offiscal year 2005/2006 from €19.6 million to €22.2 million.

OTHER MATTERS

Mr. Gebhard Schwarz, Chairman of the Company's Managing Board, resigned from Kässbohrer Geländefahrzeug AG by mutual agreement with effect from April 11, 2006. As of May 1, 2006, Mr. Jens Rottmair was appointed to the Managing Board. As the Managing Board spokesman, Mr. Rottmair is responsible for product development, production, sales and service.

OUTLOOK

The ski resort companies generated good results again in winter 2005/2006. Even resorts in lower-lying areas can look back on a satisfactory season. Kässbohrer Geländefahrzeug AG is largely dependent on the performance of cable car operators and the overall conditions in this environment. In the ski resorts, last summer and the beginning of winter 2005/2006 already saw a positive investment climate following the strong previous winter. Purchasing decisions were therefore made early on. Kässbohrer Geländefahrzeug AG was able to increase its market share and profited from a year-on-year increase in incoming orders for new vehicles. Sales in the spare parts and service business also rose.

It should be pointed out that due to the excellent winter and outstanding ski conditions last year, investment by the ski resort companies was at a very high level. To this extent, the result for fiscal year 2005/2006 must be seen as extraordinarily good. If climate conditions are unfavorable in future, this will become directly apparent in lower incoming orders for Kässbohrer Geländefahrzeug AG.

Due to the strongly seasonal nature of the business, Kässbohrer Geländefahrzeug AG usually realizes more than 75% of total annual sales in the first six months of the fiscal year (October to March). At €156.1 million, sales for the current fiscal year almost matched total annual sales for fiscal year 2004/2005 (€164.6 million), as a result of the long winter and the extremely positive business development. Usually, only low levels of sales activity can be expected in the second fiscal half-year. This explains why this period always generates a loss.

Based on the good performance of the previous winter, Kässbohrer Geländefahrzeug AG is increasing its forecast for fiscal year 2005/2006. Consolidated sales are expected to exceed €180 million. This represents an increase in sales of around 10%. Consolidated net income will rise at a distinctly faster rate than sales (previous year: €10.6 million). Consolidated net income may still be materially influenced by developments in the US dollar and Swiss franc exchange rates, as well as by the spare parts sales that can be generated in the summer. Equally, the timing of sales activities in Asian countries, in particular Japan and South Korea, cannot be predicted with sufficient certainty (from September or from October).

CORPORATE CALENDAR

September 30, 2006
End of fiscal year 2005/2006
Consolidated financial statements prepared for the first time in accordance with IFRSs

December 2006
Annual earnings press conference for fiscal year 2005/2006

February 2007
Ordinary General Meeting for fiscal year 2005/2006

KÄSSBOHRER GELÄNDEFAHRZEUG AG

The Managing Board

 

 

(€ thousand)	Oktober 1, 2004 to March 31, 2005	October 1, 2005 to March 31, 2006
Sales	138,157	156,096
Changes in inventory	-20,419	-22,262
Gross revenue	117,738	133,834
Cost of materials	-61,208	-71,119
Gross profit	56,530	62,715
Other operating income	526	723
Personnel expenses	-14,350	-15,473
Amortization and depreciation	-1,406	-1,538
Other operating expenses 1)	-10,341	-11,112
Financial result	-683	-663
Result from ordinary activities	30,276	34,652
Taxes on income	-10,645	-12,439
Consolidated net income	19,631	22,213
Consolidated earnings per share in € thou.	3.92	4.43
Employees as of March 31	432	448

 

1) The financial result includes the interest portion of the leasing payments for the Laupheim facility of €0.4 million for the first time (previous year: €0.4 million). The previous year's figures were adjusted accordingly.