Softing AG — Interim / Quarterly Report 2008

Nov 12, 2008

Quarterly Financial Report 3/2008

Softing shows strong performance: sales up 19 %, earnings up more than 35 %

Softing shows strong performance: sales up 19 %, earnings up more than 35 %

Dear shareholders, employees, friends and partners of Softing AG,

Lately, whenever you read the newspaper or talk with colleagues, friends or neighbors, the topic is the same: the crisis in the financial markets, which has been the cause of spectacular headlines and record plummets on the stock markets. In many cases, a company's valuation on the stock market no longer bears any relation to its actual economic performance. Meanwhile, fears of

recession seem to have been confirmed, as much of the real economy already finds itself in the middle of a sharp downturn. So much for the golden days of autumn.

There is nothing we can do about the overall economic situation. However, the figures in this quarterly report should go a long way towards raising the spirits of Softing's shareholders.

I am proud to say that our figures for the first nine months of 2008 are the best ever in the history of Softing. The third quarter continues the positive development of the past months.

The table below shows the most important key figures at a glance.

Sales

Net income

In our traditionally strong Industrial Automation division, we recorded sales growth of more than 27% and a remarkable increase in earnings of 77% in the first nine months. This corresponds to an EBIT margin of 14%.

Dr. Wolfgang Trier 9-month report 2007 9-month report 2008 All figures in EUR million Quarterly reportIII/ 2007 Quarterly reportIII/ 2008 Increase Jan. - Sept. in %

1.7

0.8

21.3 20.8 1.8 25.5 24.7 2.4 Incoming orders Earnings (EBIT) 7.0 7.2 0.6 8.6 8.7 1.0 19.7 18.7 35.7

0.1

0.7

The Automotive Electronics division increased sales by almost 10% and contributed EUR 0.5 million to Softing's net income. We expect returns to improve further in terms of the full financial year.

The continuous upward trend in Softing's figures speaks for itself: the company is clearly on a course of growth. Based on the positive development of business so far, we believe that we have the potential to surpass the EBIT of EUR 2.5 million forecast at the start of the year.

Our company has a strong focus and is well prepared for the harsh economic climate that is apparently ahead of us. But in spite of this confidence in our strength and solid position, let me make one thing clear: it would be illusory to believe that we could entirely avoid the effects of a sharp global recession. Softing is in the service industry; we provide our customers with the products and services they need to perform their own tasks. If there really is a widespread collapse in demand, it will affect Softing's growth and its margins.

But we are unfazed by this situation and will continue to focus on generating enthusiasm for our products amongst our customers. Among other things, Softing will attend SPS/IPC/DRIVES in Nuremberg from November 25-27 with our subsidiary INAT GmbH, in which we acquired a majority stake at the start of the year. This is the most important automation conference for the Industrial Automation division, and we intend to strengthen our existing customer relations there as well as tap new opportunities for future growth.

With warm regards,

121.1

Stock Price – Directors' Holdings Financial Calendar

Directors' Holdings as of 09/30/2008

Boards		Number of shares	Number of options
	As of	As of	As of	As of
	09/30/2008	06/30/2008	09/30/2008	06/30/2008
Executive Board
Dr. Trier	481,205	452,753	–	–
Dr. Siedentop	–	–	–	–
Supervisory Board
Dr. Schiessl	–	–	–	–
Mr. Butscher	–	–	–	–
Mr. Kratzer	8,000	8,000	–	–

Financial Calender

Quarterly Report 3/2008	11/12/2008
German Equity Forum, Frankfurt am Main	11/12/2008
Annual Report 2008	03/31/2009
Quarterly Report 1/2009	05/14/2009
Annual General Meeting in Munich	05/22/2009
Quarterly Report 2/2009	08/14/2009
Quarterly Report 3/2009	11/13/2009

Contact: Softing AG

Investor Relations Phone: +49 (89) 4 56 56-0 Fax: +49 (89) 4 56 56-492 InvestorRelations@softing.com www.softing.com

Group Management Report for the 3/2008 Quarterly Financial Report

Economic Environment

The continued and worsening financial crisis in the USA and the euro zone are putting pressure on the previously robust German economy. The German Federal Ministry of Finance and the Bundesbank forecast a significant economic slowdown. The forecasts for 2009 anticipate only slight growth of 0.2%. Nonetheless, based on its strong order book, Softing is expecting stable to increased sales and earnings in both Automotive Electronics and Industrial Automation for the remainder of the year and 2009.

Earnings

Sales in the Automotive Electronics division in the first nine month of 2008 rose by almost 10% to EUR 11.3 million (previous year: EUR 10.3 million), Industrial Automation even recorded sales of EUR 13.4 million (previous year: EUR 10.5 million). The sales of the Softing Group thus rose by 19% to EUR 24.7 million (previous year: EUR 20.8 million). EBIT in the reporting period came in at EUR 2.4 million (previous year: EUR 1.8 million). As of September 30, 2008, orders on hand in the Group totaled EUR 5.4 million (June 30, 2008: EUR 5.8 million).

Assets and Financial Position

The Softing Group lifted its equity in the first nine months of 2008 to EUR 15.3 million (December 31, 2007: EUR 13.9 million). Cash and cash equivalents as of September 30, 2008, totaled EUR 4.2 million.

Research and Product Development

In the first nine months of 2008, Softing capitalized a total of EUR 1.9 million (previous year: EUR 1.7 million) for the development of new products and the enhancement of existing ones. Other significant amounts were expensed.

Employees

As of September 30, 2008, the Group had 247 employees (previous year: 210). During the reporting period, no stock options were issued to employees.

Opportunities for the Future Development of the Company

As of the reporting date of September 30, 2008, the Company's risk structure had not deviated significantly from the description in the consolidated financial statements for the year ended December 31, 2007. Material changes are also not expected for the remaining three months of 2008. For more information, please refer to our Group Management Report in the 2007 Annual Report, page 15 et seq.

Outlook

Given the positive performance of our business, we expect earnings before interest and taxes for 2008 to total significantly more than EUR 2.6 million with sales clearly in excess of EUR 30 million.

Events after the Balance Sheet Date

There were no events of special importance after the balance sheet date of September 30, 2008.

Consolidated Balance Sheet

According to IFRS as of September 30, 2008, unaudited

	Quarterly	Financial
	report	statements
	09/30/2008	12/31/2007
Assets	EUR	EUR
Cash and cash equivalents	3,598,042	4,295,291
Marketable securities	574,713	631,625
Trade accounts receivable	6,293,286	5,546,907
Inventories	3,212,240	1,889,424
Prepaid expenses and other current assets	1,237,834	1,202,759
Total current assets	14,916,115	13,566,006
Property, plant and equipment	765,161	583,050
Intangible assets	4,022,761	3,356,186
Goodwill	2,875,138	2,351,125
Deferred taxes	1,545,977	1,811,276
Total non-current assets	9,209,037	8,101,637
Total assets	24,125,152	21,667,643

Total liabilities and shareholders' equity	24,125,152	21,667,643
Total shareholders' equity	15,322,694	13,857,524
Accumulated profits (incl. retained earnings)	8,530,293	6,850,876
Minority interest	237,044	0
Treasury shares	– 724,650	– 314,370
Capital reserves	1,642,809	1,683,820
Share capital	5,637,198	5,637,198
Total non-current liabilities	2,370,343	2,186,681
Pension provisions	892,890	813,835
Deferred taxes	1,351,641	1,097,884
Liabilities under long-term construction contracts	125,812	274,962
Total current liabilities	6,432,115	5,623,438
Deferred income and other current liabilities	4,165,405	4,434,574
Income tax liabilities	250,083	99,822
Provisions	149,159	115,043
Trade accounts payable	1,810,062	973,999
Liabilities to banks	57,406	0
Liabilities and shareholders' equity

Consolidated Income Statement

According to IFRS as of September 30, 2008, unaudited

	Quarterly report	Quarterly report	9-month report	9-month report
	III/ 2008	III/2007	2008	2007
	07/01/2008	07/01/2007	01/01/2008	01/01/2007
	– 09/30/2008	– 09/30/2007	– 09/30/2008	– 09/30/2007
	EUR	EUR	EUR	EUR
Revenue	8,685,985	7,230,519	24,686,448	20,800,352
Other operating income	164,553	52,297	366,250	189,041
Other own work capitalized	563,049	415,624	1,493,196	1,546,438
Cost of purchased materials and services	– 2,077,174	– 1,719,237	– 6,574,533	– 5,073,678
Staff costs	– 4,550,510	– 3,759,603	– 12,245,794	– 10,782,195
Depreciation and amortization	– 650,562	– 641,658	– 1,812,930	– 2,137,080
Other operating expenses	– 1,157,731	– 1,008,570	– 3,498,368	– 2,763,903
Operating income/loss	977,610	569,372	2,414,269	1,778,975
Interest income and expenses	– 2,399	– 11,298	– 3,462	– 45,545
Result before income taxes	975,211	558,074	2,410,807	1,733,430
Income taxes	– 222,536	– 496,299	– 646,816	– 952,534
Other taxes	– 6,316	–	– 6,316	–
Profit before minority interest	746,359	61,775	1,757,675	780,896
Minority interest	– 12,180		– 31,491
Net income	734,179	61,775	1,726,184	780,896
Earnings per share (basic)	0.14	0.01	0.32	0.14
Earnings per share (diluted)	0.14	0.01	0.32	0.14
Average number of shares
outstanding (basic)	5,382,476	5,637,198	5,438,064	5,616,531
Average number of shares
outstanding (diluted)	5,382,476	5,637,198	5,438,064	5,616,531

Consolidated Cash Flow Statement

According to IFRS as of September 30, 2008, unaudited

		9-month report	9-month report
		2008	2007
		01/01/2008	01/01/2007
		– 09/30/2008	– 09/30/2007
		EUR thsd.	EUR thsd.
	Cash flow from operating activities
	Net income	1,758	781
	Exchange differences recognized in equity	12	19
+	Depreciation/amortization	1,813	2,137
	+/– Increase/decrease in provisions	318	– 14
	+/– Change in net working capital	– 1,142	487
–	Payment of purchase price for H&S	0	– 375
=	Net cash provided by operating activities	2,759	3,035
	Cash flow from investing activities
–	Acquisition of subsidiaries, less acquired cash and cash equivalents	– 585	0
–	Payments made for investments in self-produced intangible assets	– 1,928	– 1,731
–	Payments made for investments in other intangible assets and
	in property, plant and equipment	– 498	– 325
=	Net cash used in investing activities	– 3,011	– 2,056
	Cash flow from financing activities
	+/– Sale/purchase of treasury shares	– 510	320
+	Proceeds from capital increase	0	37
+	Cash repayments of amounts borrowed	8	0
=	Net cash provided by/used in financing activities	– 502	357
	+/– Increase/decrease in cash and cash equivalents	– 754	1,336
+	Cash and cash equivalents at beginning of period	4,927	2,740
=	Cash and cash equivalents at end of period	4,173	4,076

Changes in Shareholders' Equity

01/01 – 09/30/2008

Thsd. EUR	Share capital	Capital reserves	Retained earnings	Accumu- lated profits	Treasury shares	Minority interest	Total
Balance as of December 31, 2007 Purchase of treasury shares	5,637	1,684 – 41	– 149	7,000	– 314 – 411		13,858 – 452
Measurement of financial instruments			– 59				– 59
Currency translation			12				12
Minority interest Net income 2008				1,726		237	237 1,726
Balance as of Sept. 30, 2008	5,637	1,643	– 196	8,726	– 725	237	15,322

01/01 – 09/30/2007

Thsd. EUR	Share	Capital	Retained	Accumu-	Treasury	Minority	Total
	capital	reserves	earnings	lated	shares	interest
				profits
Balance as of December 31, 2006	5,600	1,683	– 324	5,761	– 273		12,447
Capital increase	37						37
Sale of treasury shares		47			273		320
Measurement of
financial instruments			3				3
Currency translation			18				18
Net income 2007				781			781
Balance as of Sept. 30, 2007	5,637	1,730	– 303	6,542	–	–	13,606

Notes to the Consolidated Financial Statements for Q3/2008

This quarterly financial report was prepared using the same accounting policies as in financial year 2007.

Segment Reporting

As of September 30, 2008

	Quarterly report III/ 2008 07/01/2008 – 09/30/2008 EUR thsd.	Quarterly report III/2007 07/01/2007 – 09/30/2007 EUR thsd.	9-month report 2008 01/01/2008 – 09/30/2008 EUR thsd.	9-month report 2007 01/01/2007 – 09/30/2007 EUR thsd.
Automotive Electronics
Revenue	3,884	3,715	11,309	10,293
Segment result (EBIT)	426	330	488	689
Depreciation/amortization	202	316	591	1,040
Segment assets	–	–	7,701	7,445
Segment liabilities	–	–	3,306	2,941
Capital expenditure (not including
long-term investments)	135	232	404	977
Industrial Automation
Revenue	4,802	3,515	13,377	10,507
Segment result (EBIT)	552	239	1,926	1,090
Depreciation/amortization	449	326	1,222	1,097
Segment assets	–	–	9,361	5,994
Segment liabilities	–	–	3,837	2,950
Capital expenditure (not including
long-term investments)	761	308	1,809	1,018
Not distributed
Revenue	–	–	–	–
Segment result (EBIT)	–	–	–	–
Depreciation/amortization	–	–	–	–
Segment assets	–	–	7,063	7,274
Segment liabilities	–	–	1,660	1,217
Capital expenditure (not including
long-term investments)	62	5	212	61
Total
Revenue	8,686	7,230	24,686	20,800
Segment result (EBIT)	978	569	2,414	1,779
Depreciation/amortization	651	642	1,813	2,137
Segment assets	–	–	24,125	20,713
Segment liabilities	–	–	8,803	7,108
Capital expenditure (not including
long-term investments)	958	545	2,425	2,056

The division into business segments in accordance with IFRS 8 is shown in the above table