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annual report excellence in connectivity solutions

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huber suhner group huber suhner group the huber+suhner group is a leading global manufacturer of components and systems for electrical and optical connectivity to the communication transportation and industrial markets we provide technical expertise in our three core competences of radio frequency fiber optics and low frequency from a single source we focus on the needs of customers throughout the world and distinguish ourselves with continual innovation at the heart of our offering is a broad range of products and consistent high quality backed up by fast flexible and reliable worldwide services we concentrate on complex applications that allow us to differentiate ourselves representing usable added value such as expanded product functionalities customer-specific innovations engineering and other services our product range includes coaxial and fiber optic cables and connectors copper cables and cable systems as well as antennas and lightning protection components huber+suhner has three divisions in the reporting year radio frequency fiber optics and low frequency eighteen subsidiaries and agencies cover more than 60 countries around the world communication mobility and safety three needs that characterise our society today we communicate at any time any place by many means and overcome vast distances in little time we do so reliably with uninterrupted access and no breakdowns this is taken for granted our solutions help shape the future as they meet the need for communication mobility and safety front page the huber+suhner showrooms in pfäffikon and herisau were put into operation in the beginning of 2008 the permanent exhibition explains our company our technologies and our markets in a modern and clear way to customers visitors and other interested people huber suhner annual report 2008

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contents annual report 2008 key figures the 2008 business year 2008 market highlights radio frequency division fiber optics division low frequency division our workforce environment and sustainability corporate governance 1 group structure and shareholders 2 capital structure 3 board of directors 4 executive group management 5 compensation shareholdings loans 6 shareholders participation rights 7 change of control and defence measures 8 auditors 9 information policy 2 4 9 22 25 27 30 33 36 36 38 40 46 48 49 50 50 51 financial report 2008 group financial statements financial statements huber+suhner ag share data financial calendar addresses 52 106 118 119 120 contents huber suhner annual report 2008

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key figures huber+suhner group in chf million 2008 2007 change in order intake order backlog net sales gross margin ebit as a percentage of sales net income as a percentage of sales ebitda as a percentage of sales purchases of pp&e and software free cash flow shareholders equity as a percentage of total balance sheet employees as of 31.12 market capitalisation as of 31.12 data per share chf 755.2 133.7 760.2 36.1 85.3 11.2 60.2 7.9 114.5 15.1 43.4 16.3 460.9 76.6 3 614 717 783.7 157.6 731.9 36.0 83.9 11.5 78.8 10.8 107.9 14.7 33.9 3.1 442.81 74.3 1 3.6 15.6 3.9 1.6 23.6 6.1 28.0 4.1 3.3 51.5 3 497 1 477 2008 2007 change in stock market price as of 31.12 net income shareholders equity dividends repayment of par value 1 2 37.00 3.09 23.80 1.002 ­ 75.85 4.05 22.74 1 51.2 23.7 4.7 20.0 1.25 3.00 adjusted ifric 14 see financial report notes to group financial statements note 1 proposed dividends net sales chf million 800 ebit chf million 80 net income chf million 80 600 60 60 400 40 40 200 20 20 0 04 05 06 07 08 0 04 05 06 07 08 0 04 05 06 07 08 2 key figures huber suhner annual report 2008

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business segment results in chf million 2008 2007 change in order intake radio frequency fiber optics low frequency net sales radio frequency fiber optics low frequency ebit radio frequency fiber optics low frequency corporate employees as of 31.12 radio frequency fiber optics low frequency geographical segment results in chf million 755.2 339.8 130.7 284.7 760.2 349.2 125.3 285.7 85.3 43.5 21.7 26.4 6.3 3 614 2 015 650 949 783.7 368.6 116.2 298.9 731.9 355.5 117.6 258.8 83.9 48.3 21.6 19.7 5.7 3 497 2 185 512 800 3.6 7.8 12.5 4.7 3.9 1.8 6.5 10.4 1.7 9.9 0.5 34.0 10.5 3.4 7.8 27.0 18.6 net sales by business segment 45.9 radio frequency 16.5 fiber optics 37.6 low frequency 2008 2007 change in net sales switzerland emea europe middle east and africa [excl ch apac asia-pacific americas north and south america employees as of 31.12 switzerland emea europe middle east and africa [excl ch apac asia-pacific americas north and south america 760.2 75.2 423.2 173.5 88.3 3 614 1 579 801 1 009 225 731.9 75.6 410.7 169.1 76.5 3 497 1 527 881 853 236 3.9 0.5 3.0 2.6 15.4 3.3 3.4 9.1 18.3 4.7 net sales by geographical segment 9.9 switzerland 55.7 emea 22.8 apac 11.6 north and south america key figures huber suhner annual report 2008 3

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2008 business year huber+suhner increases sales and operating profit slight downturn in order intake profitability hindered by currency effects the year 2008 followed on seamlessly from several previous years of positive business development within the huber+suhner group the company succeeded in increasing its previous year s sales from continuing operations in local currency by 11 negative currency effects and a divestment in the non-core business reduced the growth rate to 3.9 net sales rose from chf 732 million to chf 760 million the ebit was up 1.6 from chf 83.9 million to chf 85.3 million representing a new historical high this figure includes one-time gains of chf 8 million chf 5.5 million in the previous year resulting predominantly from the sale of the berkol business unit but even discounting these one-time gains huber+suhner achieved a double-digit ebit margin for the third time in succession order intake was however down in the fourth quarter and for this reason the overall value for the full year could not be achieved it fell by 3.6 to chf 755 million chf 784 million in the previous year during the reporting year consolidated profits amounted to chf 60.2 million previous year chf 78.8 million whereas currency gains of chf 5.3 million were recorded in the previous year the reporting year 2008 saw a high net currency loss of chf 17 million the equity ratio of 76.6 a balance sheet total of chf 601 million and net liquidity of chf 139 million are proof that huber+suhner s financial situation is extremely solid allowing the group to pursue its strategy on the basis of its own momentum 4 2008 business year huber suhner annual report 2008

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on the left dr david w syz chairman of the board since 2004 the fiber optics and low frequency divisions once again recorded significant growth during 2008 whereas the radio frequency division saw a slight downturn our strategy of balanced diversification kept the company on a steady course despite the increasingly difficult business environment on the right urs kaufmann chief executive officer since 2002 successful in markets with future potential despite a considerable slowdown towards the end of the year huber+suhner succeeded in achieving major successes with innovative products in interesting niche markets during 2008 over the past few years the renewable energies segment solar wind has turned out to be an important market for huber+suhner in the future after the successful expansion of the installation business huber+suhner succeeded in moving up the value chain into the solar panel manufacturers business with the solar box this is a connectivity system for photovoltaic solar panels in the middle of the year huber+suhner were awarded a large contract worth approximately chf 75 million from the suntech group first deliveries already took place in 2008 and larger-scale deliveries are expected for 2009 during the reporting year we also recorded significant growth with our patented odc® fiber optic connector range for antenna feeder lines with this range huber+suhner has set a global standard on the ftta fiber-tothe-antenna market licensing both the american company tyco electronics and the french company radiall at the end of 2007 with a view to improving market penetration huber+suhner are also successful on the ftth fiber-to-the-home market with a fiber optic system solution developed especially for this application after receiving large contract awards from companies in denmark and slovenia where the connecting of households with broadband technology is making considerable headway the swiss telecom company swisscom for instance awarded huber+suhner a large-scale contract during the reporting year over the next few years the fiber optics division will supply the swiss market leader with entire fiber management systems for connection hubs the railway market which we served mainly with low frequency technology products until recently continues to expand rapidly this market is now becoming a growth area for radio frequency and fiber optics division as well the equipment of railways with sophisticated antenna solutions for mobile communication and internet as well as reliable communication between control centre and moving trains opens up business opportunities for radio frequency products fiber optic products are used for passenger information and monitoring systems special cables and cable systems produced by the low frequency division are used for example for jumper cables train bogies and drivers cabs our strategy of forward integration with increased added value i e as well as supplying components we also provide complete solutions for our customers problems has been implemented so successfully during the reporting year that we may well speak of a real breakthrough balance of market segments in the core business continued to improve the rapidly growing transportation market 16.3 in 2008 increased its share of sales in the core business of the group from 25 to 27 during the reporting year this was due to the strong development in the railway market compensating for the already noticeable sales downturn in the automotive sector 2008 business year huber suhner annual report 2008 5

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the industrial market 9 in 2008 has a share in total sales now of 29 previous year 28 renewable energies including solar and wind power as well as initial successes in industrial applications of fiber optics are the key growth drivers the share of the largest market communication dropped from 47 to 44 sales in this market remained on previous years level during the reporting year 0.1 the downward trend in terms of radio frequency products was compensated by successes in fiber optics further expansion of global presence over all the geographical growth at huber+suhner is broadly based each of the world s regions saw growth during the reporting year emea 3.1 americas 15.4 and apac 2.5 we managed to virtually double the volume of business in countries such as brazil india and russia in north america sales calculated in local currency increased also by 5 after the weak results of 2007 margins were however put under pressure due to the weak dollar huber+suhner adhered to its market-oriented growth initiatives during the reporting year among other measures these initiatives also include the setting up of a new subsidiary in dubai in july 2008 with a view to serving the still up-and-coming markets in the near and middle east we have also strengthened our geographical presence in sales and production and are well established in the so-called bric states of brazil russia india and china even in more difficult times these states are certainly expected to demonstrate growth downturn in order intake during the fourth quarter although the group s order intake increased until the third quarter compared with the previous year a noticeable downturn was recorded in the fourth quarter especially in europe and north america newly booked orders for the automobile market collapsed and a significant slow-down was also recognisable in industrial applications furthermore the substantially lower price of copper contributed in part to the lower order intake although some areas such as the railway market fiber optic applications and countries such as china brazil and india developed positively even during the fourth quarter initial measures were introduced to reduce the cost base due to the overall downward trend solid balance sheet and high liquidity the 2008 balance sheet total increased by 0.9 to chf 601 million total liquid assets such as cash and securities rose by chf 5 million to chf 142 million cash flow of operative activities rose from chf 60 million to chf 75 million due to reduced amounts of accounts receivables inventories and the higher depreciation sum despite higher expenditures for investments for the dividend and the purchase of own shares a significant positive free cash flow of chf 16 million has been reached previous year chf ­3 million net liquidity i e liquid assets after deduction of financial liabilities rose to chf 139 million compared with chf 132 million in the previous year the proportion of shareholders equity increased slightly amounting to a high 76.6 of the balance sheet total 74.3 in the previous year 2008 dividend the board of directors proposes to the shareholders at the general assembly distribution of a gross dividend of chf 1.00 per share for the financial year 2008 previous year chf 1.25 this corresponds to a dividend payment of chf 19.3 million or 32 of consolidated profits chf 60.2 million the proposal therefore represents slightly more than the long-term target payment ratio of 30 6 2008 business year huber suhner annual report 2008

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retirement of mrs sylvia hoffmann-suhner member of the board of directors in compliance with the articles of association mrs sylvia hoffmann-suhner will retire from our board of directors at the general assembly as she will reach her 70th birthday in december 2009 mrs sylvia hoffmann-suhner is a descendant of one of the company s founding families and an important shareholder in huber+suhner ag she presided for many years over the berthold-suhner-fonds which was integrated in the huber+suhner trust where mrs hoffmann-suhner will continue to act as a trustee we would like to thank sylvia hoffmann-suhner for her 20 years exactly of continuous valuable service to the huber+suhner board of directors and wish her good health and great satisfaction in her future commitments mr dr beat kälin is proposed to the general assembly as her successor on the board of directors beat kälin born in 1957 swiss citizen dr sc techn dipl ing eth is the ceo of the komax group dierikon he has held various management positions in the past from 1999 to 2004 he was a member of group management at sig schweizerische industrie-gesellschaft holding ag from 2004 to 2006 he was a member of group executive management of robert bosch gmbh germany employees successful initiatives and a high degree of satisfaction huber+suhner launched major initiatives for its employees during the reporting year the 2008 annual theme of in balance was aimed at making employees aware of the importance of taking care of their health and well-being a wide range of initiatives and seminars focusing on the themes of move reload and relax ensured that there was something for everyone both the global response to and implementation of the annual theme on the part of employees was extremely enthusiastic on 21 january 2009 huber+suhner was awarded the first prize of chf 15 000 by the international health organisation a.e.p.s association européenne pour la promotion de la santé during a ceremony in interlaken ch a large-scale employee survey was also conducted in 2008 initially covering more than 1500 employees in switzerland before being carried out globally the results were very positive for the company in switzerland the benchmark for industrial companies was beaten in all categories for the second year in succession huber+suhner received the award of top employer from its 800-employee-strong shanghai plant thanks to the workforce customers and suppliers we would like to sincerely thank our workforce who has made a significant contribution to the fact that 2008 was recorded as one of the three most successful years in our company s history our thanks also go out to our numerous customers who appreciate our products and services and whose confidence we always strive to justify and to our suppliers and business partners who make major contributions to our high quality standards outlook like many other companies huber+suhner anticipates a challenging economic environment for 2009 due to the downturn in order intake in the fourth quarter of the reporting year and the general bleak economic outlook although the consistent push of diversification into the markets of transportation and industrial over the past few years was designed to support our company s development in a global economic slowdown we still anticipate a decline in business volume for the current year in addition the pressure on prices in some segments is likely to increase further 2008 business year huber suhner annual report 2008 7

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however the prospects for the future appears quite varied we continue to expect above-average investment in infrastructure areas such as railway as well as in connecting private households to the broadband network fiber-to-the-home in the alternative energies market various investment projects are the subject of delays due to financing difficulties however for huber+suhner expansion in this future market is still in its early stages and there are opportunities to grow also through the increase of market shares the price of copper will also have a substantial impact on sales trends in 2009 having halved over the past few months if the average price of this important raw material remains at the low level recorded at the beginning of 2009 throughout the current year huber+suhner will have to anticipate a negative impact on sales revenue compared with 2008 of over chf 40 million we will keep a close eye on further developments in the various markets and adapt the cost base to the new market conditions where necessary first steps have already been taken in the area of radio frequency technology however we will adhere to our strategic growth initiatives and corresponding research and development projects even in an increasingly difficult business environment our sound financial situation enables us to invest consistently into the future of our company dr david w syz urs kaufmann chairman of the board chief executive officer 8 2008 business year huber suhner annual report 2008

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2008 market highlights solar power outlook in photovoltaic market still sunny wind power tailwind for system providers railways three technologies represented on the railway market fiber-to-the-home leading position in the expanding broadband market high-tech applications strict requirements in niche markets india strong in transportation and communication in india 10 12 14 16 18 20 market highlights huber suhner annual report 2008 9

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outlook in photovoltaic market still sunny solar power also has big potential worldwide with its products for the photovoltaic market the huber+suhner group will continue to benefit from this potential the high-quality radox® cables connectors and customised system solutions are fully established in the market particularly due to their reliability and life expectancy of more than 30 years in 2008 the company increased its sales in the solar sector by more than fifty percent compared with 2007 further growth is expected thanks especially to a large-scale order from the chinese company suntech for over chf 75 million which will run for a good two years europe has potential as well however swiss companies and many more customers use huber+suhner cables connectors and junction boxes.

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huber+suhner solar box these junction boxes are designed and produced in accordance with our customers requirements they are fixed at the backside of the modules and connect these to each other entire solar power plants can be cabled using huber+suhner systems.

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tailwind for system providers alternative energies are gaining ground wind turbines are no longer the preserve of the north sea and california more and more wind farms of all sizes are being installed in new locations ­ both offshore and onshore huber+suhner products are utilised here ever more frequently fiber optic cable assemblies resistant to corrosion oils salt water and mechanical stresses such as torsion and traction forces are installed in the rotating gondola the masterline® and smartline® fiber optic cable systems then serve as cabling between gondola and control unit pre-assembly makes simple and time-saving installation possible as ecological awareness is becoming more and more widespread around the world the potential for wind turbines remains huge the prognosis is promising annual growth of twenty percent is anticipated numerous wind turbine manufacturers are investing in china india and the usa in particular thanks to its global network huber+suhner is in a position to offer its services in each location.

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masterline® cable system this fiber optic cable system serves as cabling between gondola and control unit in wind turbines pre-assembly makes simple and time-saving installation possible.

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