Interim Report to mid-year 2010

• orders received climb 17.3 percent in H1/10 to EUR 547.7 million
• sales turnaround: +9.7 percent in H1/10 and +28.6% in Q2/10
• EBIT positive again:  EUR 5.0 million in H1/10 and EUR 6.7 million in Q2/10
• capital increase successfully executed
• positive outlook: guidance for 2010 raised

KUKA Group first half year business performance

KUKA Group's orders received were again significantly higher than last year. In total, orders received rose from EUR 466.9 million in the first half of 2009 to EUR 547.7 million in the first half of 2010, thereby increasing 17.3 percent year-over-year. The Systems division's orders received of EUR 329.0 million were 2.0 percent higher than the EUR 322.5 million posted in the first half of 2009, whereby the prior year's result included three major automotive industry orders worth about EUR 50 million. The Robotics division's growth accelerated considerably: the division was able to win orders worth EUR 246.4 million in the H1/2010, which is 57.3 percent more than the EUR 156.6 million recorded in H1/2009.

Overall, KUKA Group's consolidated orders received in the second quarter of 2010 came in at EUR 283.9 million, 12.1 percent higher than the EUR 253.2 million reported as in Q2/2009. The Robotics division's orders received for the quarter just ended came in at a record EUR 131.7 million, compared to EUR 66.5 million the year prior. This delightful development is primarily due to the significantly higher demand from the automotive industry. European carmakers placed several frame contracts. But the general industry business also picked up considerably. The Systems division's orders received in the second quarter of 2010 came in at EUR 167.4 million, slightly more than the EUR 161.6 million posted in the first quarter 2010. The division's orders were 13.2 percent lower than the high result of EUR 192.9 million posted in the second quarter of 2009, which was driven by three major orders.

KUKA Group's consolidated sales revenues in H1/2010 were also very satisfactory and were higher than the prior year's number. In total, sales revenues rose 9.7 percent from EUR 437.7 million in H1/2009 to EUR 480.1 million in H1/2010. Both business divisions contributed to this turnaround. Sales revenues generated by Robotics climbed 17.8 percent to EUR 199.0 million in H1 2010, versus EUR 169.0 million for H1/2009. In the first quarter of 2010, the division's result was still 10.8 percent below the prior year's number. The Systems division's sales revenues were also higher than the year prior, up 7.5 percent from EUR 282.8 million at the close of H1/2009 to EUR 303.9 million at H1/2010, while comparing the first quarter, the division's result was still slightly negative at -1.9 percent.

KUKA Group's book to bill ratio was clearly positive in the first half of 2010 and came in at 1.14.

Both the Robotics and Systems division reported very robust sales in the second quarter of 2010. The Robotics division generated sales revenues of EUR 112.8 million, 55.8 percent higher than the low EUR 72.4 million of the prior year's comparable quarter, which was also the lowest point on the business performance chart during the economic crisis. The Systems division had sales revenues of EUR 167.9 million in the second quarter of 2010, which is 16.5 percent higher than the EUR 144.1 million generated in the second quarter of 2009. Overall, KUKA Group's consolidated sales revenues in the second quarter of the current financial year came in at EUR 271.0 million, 28.6 percent higher than the EUR 210.7 million reported as of the end of the second quarter of 2009.

Because orders received continued to be higher than sales revenues in the second quarter of 2010, KUKA Group's order backlog continued to climb. As of June 30, 2010, order backlog was EUR 630.9 million, 4.0 percent more than at the end of last quarter and 9.1 percent higher than at the same time one year earlier. KUKA has thus largely returned to the levels prior to the crisis. The Robotics division's order backlog was especially noteworthy. At the end of the first half of 2010, it had reached EUR 146.6 million, 15.7 percent higher than at the end of the previous quarter and 67.0 percent above that of the prior year's record date. The division's order backlog is currently at its highest level ever. The Systems division's order backlog remained stable at a high level of just under EUR 500 million. As of June 30, 2010, it stood at EUR 499.1 million, only 2.0 percent less than at the end of last quarter and 0.5 percent below the Q2 2009 number.

Thanks to the expanding sales volume and the successful steps taken to optimize the cost structure, KUKA Group's earnings before interest and taxes (EBIT) improved and was positive overall. Consolidated EBIT at the Group level was EUR 5.0 million. This compares to a loss of EUR 22.9 million reported at the end of the prior year's first half, which was driven by extraordinary restructuring costs of about EUR 13 million and the difficult business situation. The Robotics division's EBIT was EUR 6.2 million in the first half of 2010 compared to EUR
-2.0 million in H1/09. The Systems division's EBIT reached EUR 7.6 million in H1/10 versus EUR -15.4 million in H1/09.

The Robotics division generated an EBIT of EUR 5.7 million in Q2 2010, corresponding to an EBIT margin of 5.5 percent. During the prior year's quarter, EBIT was still driven by significant underutilization, which led to an EBIT of EUR -6.2 million and a corresponding negative EBIT margin. The Systems division generated an EBIT of EUR 5.6 million in Q2 2010, corresponding to an EBIT margin of 3.3 percent. Here too, the operating result of EUR -14.3 million reported at the same time last year was driven by the business situation, above all special accruals for the closure of two locations in France. KUKA was also able to achieve a turnaround in the second quarter of 2010 at the Group level. The Group's consolidated EBIT was positive for the first time in a year, coming in at EUR 6.7 million versus EUR -1.9 million in the first quarter of 2010.

The Group's earnings from operating activities are no longer the same as EBIT as a result of changes to the accounting rules: financing costs for long-term contracts must now be reported under manufacturing costs. These costs of EUR 1.6 million are contained in the earnings from operating activities for the first half of 2010 as opposed to EBIT. Earnings from operating activities for the first half of the financial year was thus EUR 3.4 million, which compares to EUR -23.0 million at the end of the first half of 2009.

Cost-cutting program

The ongoing cost reduction program aims to generate EUR 65 to 70 million in recurring savings. Of the permanent savings target, a cumulative total of EUR 41 million affecting net income were already achieved in 2009 and of the first half of 2010. The program is thus at about two-thirds of plan.

The savings at the divisions and at KUKA AG were primarily achieved in the areas of personnel costs, processes and organizational structures, design to cost and in the area of indirect costs such as third-party services, travel costs, etc. In addition, the Systems division generated noteworthy savings in the area of supplier management.

Outlook

The 2010 financial year is one of transformation for KUKA. Continued cost structure optimization and further development of the corporate strategy will be the basis for generating sustainable profitable growth.

Based on the business growth in the first half of 2010, the Group is expecting to surpass the threshold of EUR 1 billion in sales in 2010 overall, provided general conditions remain stable. As a result, EBIT is expected to come in at between EUR 20 and 30 million, although currently it is estimated that restructuring expenses of about EUR 10 million will have to be deducted from this result.

“The stabilization of the company, cost structure improvement and strong growth in orders received have positioned us to raise our guidance for the current year,” emphasizes Dr. Till Reuter, CEO of KUKA. “After all, future prospects for robot-based automation continue to be outstanding.”

KUKA Group, Key figures