KRONES AG — Interim / Quarterly Report 2007

Apr 26, 2007

q¹.2007

Dear shareholders and friends of krones,

krones has got 2007 off to a good start. A strong economic cycle and internal improvements we introduced last year have helped us do well in the first quarter. We have streamlined our production processes and increased productivity. In addition, price pressures have subsided. We will continue to steadily improve our internal processes so that we can continue to achieve strong results like those of the first three months of 2007.

At €505m, sales are up a solid 11.8% year-on-year. Earnings before taxes increased 18.4% to €36.1m. Thus, our pre-tax return on sales was 7.1%, slightly above our margin target of 7%.

A strong inflow of orders, which was up 14% year-on-year in the first quarter to €557.1m, and a comfortable orders backlog give us confidence that we will achieve new sales and earnings records for the eighth year in succession.

Volker Kronseder Hans-Jürgen Thaus

Chairman of the Executive Board Deputy Chairman of the Executive Board

		Q1 2 007	Q1 2 006	Chan ge
Sale s	in € m	505 .0	451 .6	11.8 %
ord ulat New ive ers, cum
inclu ding life cycl rvice e se	in € m	557 .1	488 .5	14.0 %
Ord n ha nd a ch t 31 Mar ers o
inclu ding life cycl rvice e se	in € m	798 .8	727 .5	9.8%
ital ndit Cap expe ures	in € m	17.6	17.2	2.3%
loye ch Emp t 31 Mar es a
ldw ide Wor		9,24 1	9,01 2	2.5%
Ger man y		7,59 0	7,37 9	2.9%
sha re * Earn ings per	€	2.17	1.79	21.2 %
ebit da	in € m	46.9	41.5	13.0 %
ebit	in € m	35.9	29.1	% 23.4
ebt	in € m	36.1	30.5	18.4 %
afte Earn ings r tax es	in € m	22.9	19.1	19.9 %
Cash flow	in € m	33.9	31.5	7.6%

* Diluted and basic

Sales up 11.8%

After krones generated a double-digit increase in revenues in 2006, strong demand for our machines and lines continued unabated in the first quarter of 2007. Sales were up 11.8% on the previous year, to €505.0m.

There are several reasons for our strong sales figures. On the one hand, krones is benefiting from the continuing trend toward bottling beverages in plastic (pet). We are one of the world's leading suppliers in this area. On the other hand, beverage producers in emerging markets like Russia and China have been investing heavily in expanding their capacities for some time now. But in Germany too, demand remained strong in the first quarter.

Sales by segment

»Machines and lines for product filling and decoration,« our largest and most profitable segment, increased sales 9.1% to €430.8m in the first quarter of 2007. A major portion of these revenues came from pet bottling lines. The segment's ebit was up sharply (see p. 20 for details).

Revenues in our »machines and lines for beverage production/process technology« segment were up 57.6% to €55.8m, but because a large portion of these sales were goods purchased for resale, earnings were negative. We expect a better segment ebit for 2007 as a whole.

Strong demand for krones machines and lines continued unabated in the first quarter.

Strong global economy

Although the global economy is likely to lose some momentum in 2007, it will likely continue to grow at a high rate. Optimistic forecasts like that of the International Monetary Fund (imf) are predicting 4.9% growth, while more cautious economic analysts are anticipating growth rates of just over 4%.

The us, the world's leading economy, is expected to grow by around 2.5% in 2007. Japan's economy is expected to grow at a similar rate. Countries like China, India, and Russia continue to experience rapid growth. For China, economists are predicting growth of at least 10%. The euro area is expected to continue its upswing, with growth rates of more than 2%.

Germany's economy is now experiencing very robust growth. The increase in the value-added tax slowed the economy only temporarily. The prevailing mood of economic optimism remained undiminished. The ifo business confidence index climbed to 107.7 in March, after having declined slightly in the first two months of 2007.

The five leading German economic research institutes are anticipating that gdp will grow 2.4% in 2007. The federal government is also optimistic and intends to revise its growth forecast for 2007 upward from 1.7% to more than 2%.

Germany's machinery sector will enter its fourth consecutive year of growth in 2007. The last time the sector underwent such a long growth period was between 1976 and 1980. The German Engineering Federation (vdma) has already indicated that its 4% growth forecast for output is not »set in stone« and could be adjusted upward over the course of the year.

»The business climate index has improved, particularly in manufacturing. The companies surveyed rate their current situation and their outlook for the next six months very positively. This improvement is all the more remarkable as expectations for export business have remained virtually unchanged.«

Business conditions and expectations for manufacturing in Germany

krones group sales at 31 March, in € m

hgb through 2003, ifrs from 2004 onward

krones group sales, by segment

Machines and lines for the low output range (kosme) 3.6% (€18.4m)

Machines and lines for beverage production/ process technology 11.1% (€55.8m)

Machines and lines for product filling and decoration 85.3% (€430.8m)

Sales at 31 March 2007: €505.0^m Sales at 31 March 2006: €451.6^m

Machines and lines for the low output range (kosme) 4.7% (€21.2m)

Machines and lines for beverage production/ process technology 7.8% (€35.4m)

Machines and lines for product filling and decoration 87.5% (€395.0m)

Our largest segment, »machines and lines for product filling and decoration,« increased sales and earnings considerably.

Profits up sharply

The positive earnings trend at krones continued in the first quarter of 2007. At €36.1m, earnings before taxes were 18.4% higher year-on-year. The return on sales before taxes was 7.1% (Q1 2006: 6.8%), slightly above our margin target of 7%. Internal measures aimed at increasing productivity and improved price quality in our new orders contributed to this gain.

After-tax earnings rose 19.9% to €22.9m (Q1 2006: €19.1m), slightly better than ebt because of a slight decrease in the tax rate.

First quarter earnings per share improved from €1.79 to €2.17 year-on-year.

A number of large-scale orders from Germany and abroad contributed to a sharp rise in new orders.

In our smallest segment, »machines and lines for the low output range« (kosme), sales declined 13.2% to €18.4m because finished machines had not yet been delivered by the end of the quarter. kosme is increasing its sales outside its traditional markets of Italy, Spain, and France. Although segment ebit was down in the first quarter, we expect it to be higher than 2006 for the year as a whole.

Strong orders inflow is a good basis for continued growth

In the months of January through March 2007, new orders increased 14.0% over the year-earlier period to €557.1m. A number of large-scale orders from Germany and abroad contributed to this sharp rise. Altmühltaler Mineralbrunnen AG, one of Germany's biggest mineral water bottlers, commissioned us to build a complete bottling plant. The order has a total volume of more than €80m.

Major orders also came in from Brazil and other countries in South America during the reporting period, confirming a trend that began in 2006 toward a revival of business with customers in this region following a long lean period.

In China, we received an order to build a complete brewery, including the bottling plant, for a major Chinese brewing group.

Orders backlog increases to nearly €800m

At the end of March 2007, orders on hand at krones amounted to €798.8m, which is 9.8% higher than in the year-earlier period. The large backlog gives us added planning security for the months ahead.

krones group new orders at 31 March, in € m

krones group orders on hand at 31 March, in € m

2003			622. 9
2004			637. 2
2005			686.	0
2006				727. 5
2007					798. 8

hgb through 2003, ifrs from 2004 onward

hgb through 2003, ifrs from 2004 onward

company situation and business development krones in figures

krones group earnings before taxes (ebt) at 31 March, in € m

2003		28.5
2004		27.5
2005		29.1
2006		30.5
2007			36.1

hgb through 2003, ifrs from 2004 onward

krones group earnings after taxes at 31 March, in € m

2003	15.9
2004	16.5
2005	17.4
2006	19.1
2007		22.9

hgb through 2003, ifrs from 2004 onward

2003	1.51
2004	1.57
2005	1.64
2006	1.79
2007		2.17

krones group earnings per share at 31 March, in € m

hgb through 2003, ifrs from 2004 onward

Capital expenditures remain high

In the first three months of 2007, we invested €17.6m in capital projects (Q1 2006: €17.2m). The largest portion, around €13.6m, went to property, plant and equipment, including the construction of the technology centre in Neutraubling and the expansion of our spare parts manufacturing.

Growing workforce

At 31 March 2007, krones employed 9,241 people worldwide (31 March 2006: 9,012), of which 7,590 were in Germany. In the first three months of 2007, krones hired 76

Balance sheet structure new employees.

The krones group's total assets increased 3.9% over the 31 December 2006 total to €1,529.6m at the end of March thanks to the continued expansion of our sales.

Due to an increase in inventories and trade receivables, current assets were up 4.9% to €1,094.2m (31 December 2006: €1,042.6m).

While non-current liabilities remained nearly unchanged at around €150m at the end of March 2007 compared to the end of the year 2006, current liabilities increased by around 5% to €730m.

With an equity ratio of 42.5%, krones has a sound capital structure and sufficient financial leeway.

2003					8,70 1
2004					8,65 5
2005					8,92 9
2006					9,01 2
2007					9,24 1

krones employees worldwide at 31 March

2003	12.6
2004	10.5
2005	14.0
2006	17.2
2007	17.6

krones group capital expenditures at 31 March, in € m

hgb through 2003, ifrs from 2004 onward

ifrs	31 M ar 20 07	31 M ar 20 06	31 M ar 20 05	31 M ar 20 04
Non rent ts -cur asse	436	430	403	382
of w hich pert y, pl ant and ipm ent, pro equ
inta ngib le as , and fina ncia l ass sets ets	381	374	357	335
Curr ent ts asse	1,09 4	1,04 2	880	828
of w hich h an d eq lent uiva cas s	44	58	57	75
Equ ity	650	629	572	526
l deb Tota t	880	843	711	684
liab ilitie Non rent -cur s	150	147	155	151
liabi litie Curr ent s	730	696	556	533
l Tota	1,53 0	1,47 2	1,28 3	1,21 0

nd c apit al s re, i et a tru ctu n € kro nes gr oup ass	m
----------------------------------------------------------------------------------------------	---

ifrs	200 7	200 6	Cha nge
	nths 3 mo	nths 3 mo
Sale s rev enu es	505 .0	451 .6	% 11.8
Cha f fin ishe d go ods s in inve ntor ies o nge
and rk in wo pro gres s	33.4	7.1
Goo ds a nd s ervi hase d ces purc	-288 .1	-22 1.3	30.2 %
el ex Pers onn pen ses	-14 9.0	-13 9.5	6.8%
Oth and itali sed ting inco me/ er o pera expe nses cap
deve lopm ent cost s	-54 .4	-56 .4	-3.5 %
ebit da	46.9	41.5	13.0 %
recia tion ortis atio d w rite- dow Dep , am n, an ns
nt a sset urre on n on-c s	-11 .0	-12 .4	-11 .3%
ebit	35.9	29.1	23.4 %
l inc Fina ncia /exp ome ense	0.2	1.4
ebt	36.1	30.5	18.4 %
inco Taxe s on me	-13 .2	-11 .4	% 15.8
Net inco me	22.9	19.1	19.9 %

krones group earnings structure, in € m

krones share at record high

The krones share continued to soar in the first quarter of 2007, closing at €146.71 on the Frankfurt Stock Exchange on 30 March. That means the share price climbed nearly 27% on the closing price for 2006 in the first three months of 2007. The mdax rose by around 8.5% in the same period.

Besides the share price, trading volumes also increased considerably over the past months.

In the first quarter, krones presented itself to investors through several international road shows and krones management held some 30 individual meetings with fund managers and analysts.

In order to promote trading of our share and to make the share more attractive to a broader range of investors, the Executive Board and Supervisory Board of krones ag are proposing to the annual shareholders' meeting on 20 June 2007 a 1:3 share split, under which shareholders would receive two additional shares for each krones share currently held. The increase in share capital to €40.0m that is needed for the split would entail a capital increase from the company's own financial resources.

Outlook

The strong first quarter has laid the groundwork for another successful year. Because the economic outlook remains positive and our customers are once again investing heavily, we are looking to achieve new records in sales and earnings in 2007.

We expect to pass the €2bn mark in sales for the first time in 2007, with sales growth between 7% and 12%. But our focus will not be on growth so much as profitability. We have already increased our company's efficiency and will continue to steadily improve our processes. The decrease in price pressures will also have a lasting positive effect on our earnings margins.

In the current fiscal year, krones intends to considerably increase earnings before taxes. Our target return on sales before taxes is 7%. Our target return on capital employed (roce) is 20%.

We expect to pass the €2bn mark in sales for the first time in 2007, with revenue growth between 7% and 12%.

company situation and business development krones in figures

management report

krones group consolidated interim financial statements

Consolidated balance sheet

ity a nd l iabi litie Equ s	31 M ar 20	07	31 M ar 20	06
	in € m	in € m	in € m	in € m
Equ ity		650 .2		628 .7
Prov ision s for sion pen s	72.4		70.8
Defe rred liab ilitie tax s	9.8		8.7
Oth rovi sion er p s	45.8		45.2
Liab ilitie ban ks s to	0.8		0.8
Trad yab les e pa	0.3		0.4
er fi Oth cial liab ilitie nan s	11.0		12.7
Oth er li abil ities	9.3		9.0
liab ilitie Non rent -cur s		149 .4		147 .6
Oth rovi sion er p s	90.7		92.3
ision s for Prov tax es	39.0		30.7
Liab ilitie ban ks s to	25.8		0.1
Adv ed ts re ceiv ance pay men Trad les	224 .6		190 .2
yab e pa Curr ent tax liab ilitie	139 .9 1.1		154 .2 2.7
s Oth er fi cial liab ilitie nan s	14.0		25.9
Oth er li abil and rual ities acc s	194 .9		199 .9
liab ilitie Curr ent s		730 .0		696 .0
l Tota		1,52 9.6		1,47 2.3

Asse ts	31 M	ar 20 07	31 M	ar 20 06
	in € m	in € m	in € m	in € m
ngib le as Inta sets	53.9		53.6
, pla nd e Prop erty nt a quip t men	311 .6		305 .5
l ass Fina ncia ets	15.0		15.0
, pla nd e ible nd f cial Prop erty nt a quip t, in tang ts, a inan ts men asse asse	380 .5		374 .1
Defe rred tax ets ass Trad able ceiv	6.2 33.0		5.8 34.0
e re s ivab les Curr ent tax rece	14.9		14.9
Oth sset er a s	0.8		0.9
Non rent ts -cur asse		435 .4		429 .7
Inve ntor ies	411 .3		387 .1
Trad able ceiv e re s	579 .4		540 .9
ivab les Curr ent tax rece	2.1		2.0
Oth sset er a s	57.1		54.9
Cash and h eq uiva lent cas s	44.3		57.7
Curr ent ts asse		1,09 4.2		1,04 2.6
Tota l		1,52 9.6		2.3 1,47

	200 7	200 6
	onth 3 m s	onth 3 m s
	in € m	in € m
ings bef taxe Earn ore s	36.1	30.5
n (re als) recia tion and ortis atio Dep am vers	11.0	12.4
Incr in p rovi sion ease s	8.9	19.4
Defe rred cha ised tax item in i nge s rec ogn ncom e	-0.7	-0.9
d int Inte rest t inc exp ense s an eres ome	0.2	-1.4
Proc eed d lo from the disp osal of n nt a sset s an sses on-c urre s	0.1	0.1
Oth ash inco nd e er n on-c me a xpe nses	-1.0	0.1
rade ivab les a nd o ther Incr in i tori es, t ets rece ease nven ass
ibut able or f not attr to i ting inan cing act iviti nves es	-72 .2	-80 .8
trad yab les a nd o ther liab ilitie Dec e/in se in reas crea e pa s
not attr ibut able to i ting or f inan cing act iviti nves es	-1.1	17.8
Cash ed f ratin tivit ies erat gen rom ope g ac	-18 .7	-2.8
paid Inte rest	-0.6	-0.2
d an d re fund d Inco me t pai eive axes s rec	-2.9	-5.3
Cash flow from ratin tivit ies ope g ac	-22 .2	-8.3
Cash ts to uire inta ngib le as sets pay men acq	-4.0	-5.8
eed s fro m th e dis l of i gibl Proc ntan sets posa e as	0.1	0.2
Cash y, pl and ts to uire pert ant ipm ent pro pay men acq equ	-13 .6	-11 .4
eed s fro m th e dis l of , pla nd e Proc erty nt a quip t posa prop men	0.3	0.8
Cash sha ated ts to uire res i soci ent ises pay men acq n as erpr	0.0	-1.8
Inte rest ived rece	0.2	0.7
Cash flow from inve stin tivit ies g ac	-17 .0	-17 .3
eed s fro ew b Proc win m n orro g	25.7	1.6
Cash leas e lia bilit ts to ies pay men pay	-0.1	-0.1
flow from fina Cash ncin tivit ies g ac	25.6	1.5
cha in ca sh a nd c ash ivale Net nts nge equ	-13 .6	-24 .1
Cha sh a nd c ash ivale g fro cha in ca nts a risin rate nge equ m ex nge s	0.2	1.1
Cash and h eq lent the beg f the iod uiva s at inni cas ng o per	57.7	56.5
Cash and h eq uiva lent the end of t he p erio d s at cas	44.3	33.5

	2007	2006	Cha nge
	1 Jan - 31 Mar	1 Jan - 31 Mar
	in € m	in € m	%
Sale s rev enu es	505 .0	451 .6	% 11.8
Cha f fin ishe d go ods and s in inve ntor ies o nge
k in wor prog ress	33.4	7.1
Tota l ope ratin g re ven ue	538 .4	458 .7	% 17.4
ds a nd s hase d Goo ervi ces purc	-28 8.1	-22 1.3	30.2 %
el ex Pers onn pen ses	-14 9.0	-13 9.5	6.8%
Oth ting inco d ca pita lised me/ er o pera exp ense s an
deve lopm ent cost s	-54 .4	-56 .4	-3.5 %
Dep recia tion ortis atio , am n,
and wri te-d rent ts own s on non -cur asse	-11 .0	-12 .4	-11 .3%
ebit	35.9	29.1	% 23.4
fina l inc Net ncia /exp ome ense	0,2	1,4
bef Earn ings taxe ore s	36.1	30.5	18.4 %
inco Taxe s on me	-13 .2	-11 .4	15.8 %
inco Net me	22.9	19.1	19.9 %
Prof it sh of m inor ity i nter ests are	0.1	0.3
Prof it sh of s hare hold f kr are ers o one s gr oup	22.8	18.8
re (d sic) sha ilute d/ba Earn ings in € per	2.17	1.79

Consolidated income statement Consolidated cash flow statement

Consolidated statement of changes in equity

			Pare nt co mpa ny		Min ority		Grou p
	Capi tal	ital Cap	ined Reta	Cur renc y	Oth er	Gro up	ity Equ		inte rests	equi ty
	k stoc	rese rves	ings earn	diffe renc es	rese rves	prof it			Equ ity
				in eq uity
	in € m	in € m	in € m	in € m	in € m	in € m	in € m		in € m	in € m
ber At 3 1 De 200 cem 5	26.9	103 .7	330 .1	4.2	-1.3	105 .0	568 .6		3.3	571 .9
solid ated Con net inco me Q 06 1 20						18.8	18.8		0.3	19.1
diff Curr ency eren ces				0.7			0.7			0.7
Cha the olid ated s in nge cons gro up			0.3				0.3		-2.1	-1.8
Hed ntin ge a ccou g					1.7		1.7			1.7
rch 2 006 At 3 1 Ma	26.9	103 .7	330 .4	4.9	0.4	123 .8	590 .1		1.5	591 .6
den d pa nt (€ shar e) Divi 1.40 yme per						-14 ,.7	-14 .7			-14 .7
Con solid ated net inco nths 6 me 9 mo 200						58.5	58.5		-0.1	58.4
Allo ed e cati on t tain arni o re ngs			34.9			-34 .9	0.0			0.0
diff Curr ency eren ces				-5.5			-5.5			-5.5
Cha s in the olid ated nge cons gro up			-2.7				-2.7		1.2	-1.5
Hed ntin ge a ccou g					0.4		0.4			0.4
At 3 1 De ber 6 cem 200	26.9	103 .7	362 .6	-0.6	0.8	132 .7	626 .1		2.6	628 .7
solid ated inco Con net me Q 1 20 07						22.8	22.8		0.1	22.9
diff Curr ency eren ces				-1.5			-1.5			-1.5
Hed ntin ge a ccou g					0.1		0.1			0.1
rch 2 At 3 1 Ma 007	26.9	103 .7	362 .6	-2.1	0.9	155 .5	647 .5		2.7	650 .2

	hine s and line Mac s		hine s and line Mac s		hine s and Mac	line s	kron es gr oup
	for p rodu ct fil ling and		for b prod uctio n/ ever age		for t he lo tput w ou
	deco ratio n		echn olog ess t proc y		e (ko sme) rang
	200 7	200 6	200 7	200 6	200 7	200 6	200 7	200 6
	nths 3 mo	nths 3 mo	nths 3 mo	nths 3 mo	nths 3 mo	nths 3 mo	nths 3 mo	nths 3 mo
	in € m	in € m	in € m	in € m	in € m	in € m	in € m	in € m
Sale s rev enu es	430 .8	395 .0	55.8	35.4	18.4	21.2	505 .0	451 .6
ebit	36.3	27.6	-1.5	-0.5	1.1	2.0	35.9	29.1
Emp loye t 31 Mar ch* es a	8,04 0	7,77 8	531	597	462	423	9,03 3	8,79 8
les ( ros) ** Retu rn o n sa	8.5%	7.5%	% -2.7	% -1.4	4.3%	6.6%	7.1%	6.8%

* Consolidated group ** Basis: ebt

krones group segment reporting

Consolidated group

Besides krones ag, the consolidated financial statements for the period ended 31 March 2007 include all material domestic and foreign subsidiaries in which krones ag holds more than 50% of the voting rights.

Consolidation principles

The separate financial statements of the companies included in the consolidated financial statements are prepared in accordance with uniform accounting policies and were all prepared as of the reporting date of the consolidated financial statements.

For companies that were acquired after 1 January 2004, acquisition accounting is performed in accordance with ifrs 3 (»Business combinations«), under which all business combinations must be accounted for using the »purchase method« of accounting, whereby the acquired assets and liabilities are to be recognised at fair value.

Any amount by which the cost of acquisition exceeds the interest in the fair values of assets, liabilities, and contingent liabilities is recognised as goodwill and subjected to regular impairment tests. Negative goodwill is immediately recognised in profit and loss. Goodwill arising before 1 January 2004 is still recognised in reserves.

Shares in the equity of subsidiaries that are not held by the parent company are reported as »minority interests«.

Inter-company receivables, liabilities, provisions, revenues, and expenses between consolidated companies are eliminated in the consolidation process.

Inter-company profits from deliveries effected or services rendered between Group companies are not eliminated because the amounts arising from these transactions are not material for the presentation of the group's assets, financial position, and results of operations.

Notes to the consolidated financial statements of krones group

General disclosures

Legal basis

The consolidated financial statements of krones ag (»krones group«) for the period ended 31 March 2007 have been prepared in accordance with the International Financial Reporting Standards (ifrs) of the International Accounting Standards Board (iasb), London, applicable on the reporting date, including the interpretations issued by the International Financial Reporting Interpretation Committee (ifric) as adopted by the European Union. No early application was made of ifrs^s that had not yet entered into force or their interpretations. A list of these standards and interpretations can be found on p. 29.

Minority interests in group equity are stated on the balance sheet as a special item within equity. Profit or loss shares attributable to minority interests are recognised on the income statement as part of consolidated earnings. The shares of consolidated earnings allocated to equity holders of the parent company and to minority interests are presented separately.

Minority interests have been added to the statement of changes in equity.

The following explanatory notes comprise disclosures and remarks that, under ifrs, must be included as notes to the consolidated financial statements in addition to the balance sheet, income statement, statement of changes in equity, and cash flow statement.

The »nature of expense« method has been used for the income statement. The group's reporting currency is the euro.

Currency translation

The functional currency for krones ag is the euro.

The financial statements of the consolidated companies that are denominated in a foreign currency are translated on the basis of the functional currency concept [ias ²¹] using a modified closing rate method. Because the subsidiaries operate primarily independently in the economic environment of their respective countries, the functional currency is always the relevant local currency for each subsidiary. Thus, in the consolidated financial statements, assets and liabilities are translated at the closing rate as on the reporting date, while income and expenses from the financial statements of subsidiaries are translated at average annual rates.

Any exchange differences resulting from these different rates in the balance sheet and income statement are recognised directly in equity. Exchange differences resulting from the translation of equity using historical exchange rates are also recognised directly in equity.

In the separate financial statements of krones ag and its subsidiaries, receivables and liabilities in foreign currencies are translated using the exchange rate at the time of the transaction and exchange differences are recognised as income or expense at the closing rate. Non-monetary items in foreign currencies are stated at historical cost.

Exchange rate differences compared with the previous year arising from acquisition accounting are recognised directly in equity in other retained earnings.

The exchange rates of those currencies that have a material impact on the group's financial statements have moved against the euro as follows:

Accounting policies

The separate financial statements of krones ag and its domestic and foreign subsidiaries have been prepared using uniform accounting policies, in accordance with ias 27.

Some discretion has been used in preparing the consolidated financial statements, particularly in terms of measurement of inventories and provisions, because their preparation requires some critical estimates and forecasts.

Intangible assets

Purchased and internally generated intangible assets, excluding goodwill, are recognised pursuant to ias 38 if it is sufficiently probable that the use of the asset will result in a future economic benefit and the cost of the asset can be reliably determined. They are stated at cost and amortised systematically on a straight-line basis over their estimated useful lives. The amortisation of intangible assets is carried out over a useful life of between three and five years and recognised under »Depreciation and amortisation of intangible assets and property, plant and equipment.«

Research and development costs

Development costs of the krones group are capitalised at cost to the extent that costs can be allocated reliably and the technical feasibility and a future economic benefit as a result of their use are probable. According to ias 38, research costs cannot be recognised as intangible assets and are, therefore, recognised as an expense in the income statement when they are incurred.

Goodwill

Goodwill resulting from acquisition accounting is capitalised and an impairment loss recognised in accordance with ias 36 if impairment is found to exist.

Sachanlagen

Property, plant and equipment are accounted for at cost less scheduled depreciation on a straight-line basis over their estimated useful lives. The cost of internally generated plant and equipment comprises all costs that are directly attributable to the production process and an appropriate portion of overheads. Borrowing costs are not recognised as acquisition or production costs (»cost«).

A revaluation of property, plant and equipment pursuant to ias 16 was not carried out.

		Clos ing r ate		Aver rate age
		31 M ar 20 07	31 De c 200 6	2007	2006
us d olla r	usd	1.33 0	1.31 8	1.31 0	1.20 2
sh p d Briti oun	gbp	0.67 9	0.67 2	0.67 0	0.68 6
Swis s fra nc	chf	1.62 5	1.60 8	1.61 6	9 1.55
ish k Dan rone	dkk	7.45 1	7.45 6	7.45 2	7.46 2
adia n do llar Can	cad	1.53 3	1.52 9	1.53 5	1.38 8
Japa nese yen	jpy	157 .150	156 .700	156 .495	140 .449
Braz ilian l rea	brl	2.71 7	2.81 4	2.75 9	2.63 6
(yu an) Chin inbi ese renm	cny	81 10.2	10.2 92	10.1 53	9.67 3
Mex ican pes o	mxn	14.6 56	14.3 04	14.4 20	12.7 16

Scheduled depreciation is based on the following useful lives, which are applied uniformly throughout the group:

In figuring the useful lives, the different components of an asset with significantly different costs were taken into account.

Government grants are only recognised if there is reasonable assurance that the conditions attaching to them will be complied with and the grants will be received.

Apart from grants related to income, which are recognized in their full amount as income, grants related to assets are deducted in arriving at the carrying amount of the asset on the balance sheet and recognised in profit and loss by way of a reduced depreciation charge in the subsequent periods.

Leases

Leases in which the krones group, as the lessee, bears substantially all the risks and rewards incident to ownership of the leased asset are treated as finance leases pursuant to ias 17 upon inception of the lease. The leased asset is recognised as a non-current asset at fair value or, if lower, at the present value of the minimum lease payments. The leased asset is depreciated systematically using the straight-line method over the shorter of its »estimated useful life« or the »lease term«. Obligations for future lease instalments are recognised as »other liabilities«.

In the case of operating leases, the leased assets are treated as assets belonging to the lessor since the lessor bears the risks and rewards.

Financial assets Financial assets are recognised at cost, less impairment losses.

Derivative financial instruments

The derivative financial instruments used within the krones group are used to hedge against currency risks from operating activities.

The primary category of currency risk at krones is transaction risks arising from exchange rates and cash flows in foreign currencies. These currencies are, primarily, the us dollar, Canadian dollar, British pound, and Swiss franc.

Within the hedging strategy, 100% of items denominated in foreign currencies are generally hedged. The primary hedging instruments used for this are forward exchange contracts and, occasionally, currency swaps.

The strategy objective is to minimise currency risk by using hedging instruments that are viewed as highly effective and thus both hedging the exchange rate and achieving planning security.

The derivative financial instruments are measured at fair value at the balance sheet date. Gains and losses from the measurement are recognised as income or expense in the income statement unless the conditions for hedge accounting are met.

The derivative financial instruments for which hedge accounting is applied comprise forward currency contracts and currency swaps whose changes in fair value are recognised either in income (»fair value hedge«) or in equity (»cash flow hedge«). In the case of cash flow hedges, to mitigate currency risks from existing underlying transactions, changes in fair value are initially recognised directly in equity and subsequently recognised in the income statement when the hedged item is recognised in the income statement. The derivative financial instruments are measured on the basis of the relevant commercial bank's forward rates.

They are derecognised only when substantially all risks and rewards of ownership are transferred.

Inventories

Inventories are stated at the lower of cost or net realisable value. Cost of production includes costs directly related to the units of production and an appropriate portion of fixed and variable production overheads. The portion of overheads is determined on the basis of normal operating capacity. Selling costs, general administrative costs, and borrowing costs are not included in the costs of inventories. For inventory risks arising from increased storage periods or reduced usability, write-downs are made on the inventories.

For the sake of convenience in measuring materials and supplies, the FiFo and weighted average cost formulas are applied.

Receivables and other assets

Receivables and other assets, with the exception of derivative financial instruments, are assets that are not held for trading. They are reported at amortised cost. Receivables with maturities of over one year that bear no or lower-than-market interest are discounted. Impairments are recognised to take account for all identifiable risks.

Construction contracts for specific customers

Construction contracts for specific customers that are in progress are recognised according to the degree of completion pursuant to ias 11 (»percentage-of-completion method«). Under this method, contract revenue is recognised in accordance with the percentage of physical completion of the lines and machines at the balance sheet date. The percentage of completion corresponds to the ratio of contract costs incurred up to the balance sheet date to the total costs calculated for the contract. The construction contracts are recognised under trade receivables.

	In ye ars
Buil ding s	14 — 50
Tech l equ and chin nica ipm ent ma es	5 — 16
iture and fixt and offi quip t Furn ures ce e men	3 — 15

Deferred tax items

Deferred tax assets and liabilities are recognised using the balance-sheet oriented »liability method«. This involves creating deferred tax items for all temporary differences between the tax and ifrs balance sheet carrying amounts and for consolidation procedures affecting income.

The deferred tax items are computed on the basis of the national income tax rates that apply in the individual countries at the time of realisation. Changes in the tax rates are taken into account if there is sufficient certainty that they will occur. Where permissible under law, deferred tax assets and liabilities have been offset.

Provisions for pensions

Provisions for pensions are calculated using the »projected unit credit method« pursuant to ias 19. Under this method, known vested benefits at the reporting date as well as expected future increases in pensions and salaries are taken into account with due consideration to relevant factors that will affect the benefit amount, which are estimated on a prudent basis. The provision is calculated on the basis of actuarial valuations that take into account biometric factors.

Actuarial gains and losses are only recognised as income or expenses if they exceed 10% of the obligations. These are recognised over the expected average remaining working lives of the employees.

Other provisions

Other provisions are recognised when the group has an obligation to a third party as a result of a past event, an outflow is probable, and a reliable estimate of the amount of the obligation can be made. Measurement of these provisions is computed at fully attributable costs or on the basis of the most probable expenditures needed to settle the obligation.

Provisions with a residual term of more than one year are recognised at the present value of the probable expenditures needed to settle the obligation at the reporting date.

Financial liabilities

Pursuant to ias 39, financial liabilities are measured at cost on first-time recognition. Cost is equivalent to the fair value of the consideration given. Transaction costs are included in this initial measurement of financial liabilities. After the initial recognition, all financial liabilities and derivative financial instruments that represent liabilities are measured at amortised cost.

Sales revenues

With the exception of those contracts that are measured according to ias ¹¹, sales revenues are recognised, in accordance with the criteria laid out under ias ¹⁸, when the significant risks and rewards of ownership are transferred, when a price is agreed or can be determined, and economic benefit from the sale of goods is sufficiently probable.

Sales revenues are reported less reductions.

Segment reporting

Intersegment transfers are conducted under the same conditions as transfers among third parties.

• Standards and interpretations not applied early The iasb has issued the following standards, interpretations, and amendments to existing standards, the application of which is not yet mandatory and which krones ag did not apply early:
• ifrs 23 »Borrowing costs«

These new standards and interpretations are not expected to result in material changes for the consolidated financial statements of krones ag in the period in which they are first applied.

f the Nam d lo cati e an on o com pan y
	Sha re in ital cap
	in %
sped blin Sped bH, blin Neu trau ition s-Gm Neu trau g, G neu ger erm any	100 .00
chaf es In tern atio nale Coo tion s-Ge sells t mb H, N eutr aub ling , Ge kic k ron pera rma ny	100 .00
ac G ebra ucht chin en G mbH utra ubli ng, G , Ne ecom mas erm any	100 .00
ice G mbH , Col lenb Mai Serv erg/ n , G mai ntec erm any	51.0 0
-la-N , Bel Lou vain gium s.a. kro nes n.v., euve	100 .00
Nord lte, D ark ic Ap S, Ho kro nes enm	100 .00
Hol ark a/s, te, D san der han sen enm	100 .00
.l., Ly on, F kro nes s.a.r ranc e	100 .00
Bolt kro nes uk l td., on, u k	100 .00
Staf ford shir , Bu rton on T rent kosm e uk ltd. e, u k	100 .00
rda (vr) ly ., Ga , Ita kro nes s.r.l	100 .00
Ned erla nd b osko herl and .v., B Net kro nes op, s	100 .00
Mas chin enfa brik .h., V ienn a, Au stria kro nes ges .m.b	100 .00
sells chaf llen ia e Ge t mb h, So au, A ustr kosm	100 .00
Spó lka z , Pol and , Wa kro nes rsaw .o.o.	100 .00
l Equ s Ind Lda. gal Port ipam ento ustr iais , Bar na, P ortu kro nes uga care	100 .00
Fed ., Mo , Rus sian erat ion kro nes o.o.o scow	100 .00
Rom ania Pro d. s. Buc hare st, R nia kro nes r.l., oma	100 .00
Butt wil, Swi tzer land kro nes ag,	100 .00
Iber ica, celo pain , Bar na, S kro nes s. a.	100 00
ch R blic ., Pra , Cze kro nes s.r.o gue epu	100 .00
bella ly .l., R , Ita kosm e s.r over	70.0 0
Surl atin ., Bu s Air es, A tina kro nes a s. a eno rgen	100 .00
a., S ão P aulo , Bra zil kro nes do b razi l ltd	100 .00
, São lo, B razil Pau kro nes s. a.	100 .00
ry (T ng) hine td., T hina Mac aica Co. L aica ng, C kro nes	100 .00
Trad (Taic ) Co . Ltd , Ch ing ., Tai ina kro nes ang cang	100 .00
(Beij ing) chin d., B hina Ma ery C o. Lt eijin g, C kro nes	100 .00
Asia Ltd ., Ho ng K , Ch ina kro nes ong	100 .00
Indi d., B alor dia a Pv t. Lt e, In kro nes ang	100 .00
. Ltd kyo, Japa n Co ., To Japa kro nes n	100 .00
hine . Ltd da Mac ry Co ., Bra mpt on, O ntar io, C kro nes ana	100 .00
And Ltda gotá , Col omb ina ., Bo ia kro nes	100 .00
Kore a Ltd ., Se oul, Kor kro nes ea	100 .00
. de ico C ity, M exic Mex Mex kro nes s. a c. v., o	100 .00
(Pro p.) L ther n Af rica td., J oha sbu outh Afr ica Sou rg, S kro nes nne	100 .00
nkli Inc. , Fra n, W isco nsin kro nes, , usa	100 .00
de V zuel ela Maq uina rias ., Ca s, Ve kro nes a s. a ene raca nezu	100 .00
(Tha ilan d) C d., B kok, Tha ilan d o. Lt kro nes ang	51.0 0
Beve Con sult ing and inee ring . Co. Ltd. , Ban gko k, Th aila nd Eng rage	49.0 0

Shareholdings

krones ag

Investor Relations Fax + 49 94 01 70 37 86 Internet www.krones.com Böhmerwaldstrasse 5 93073 Neutraubling Germany

Hermann Graf Castell Phone +49 94 01 70 32 58

Olaf Scholz Phone +49 94 01 70 11 69