First half 2004: Significant increase in orders received, sales and operating earnings - development and market introduction of new system generations at Display Technology detract from overall Group profitability.

Pfäffikon SZ, August 17, 2004 - During the first half of 2004, Unaxis recorded total sales of CHF 1,007 million (H1 2003: CHF 759 million), a rise of 33 percent versus the previous year. The volume of orders received rose by 43 percent to CHF 1,090 million (H1 2003: CHF 763 million) in the face of a cyclically related moderation in Q2 2004 order flow. The company’s first half 2004 operating profit (EBIT) amounted to CHF 37 million, representing a clear improvement in comparison to the prior-year period (H1 2003: CHF 1 million). Included in the latter figure are restructuring expenses in the amount of CHF 10 million attributable, among other things, to the consolidation of certain Optics’ activities and the integration of ESEC. Operating earnings were also significantly impacted by the development and market introduction of Display Technology’s latest system generations. Net profit for the first half of 2004 amounted to CHF 22 million (H1 2003: CHF –14 million). With net liquidity at June 30, 2004, of CHF 608 million and a shareholders’ equity ratio of 60 percent, Unaxis has a solid balance sheet.

In the rapidly growing Asian region – primarily Taiwan and China – Unaxis broadened its activities and managed to record a 62 percent year-on-year sales increase during the period under review. Accounting for a 48 percent share of total sales, Asia for the first time now represents the company’s most significant market. Although the 33 percent sales increase in the USA was also gratifying (share of total: 17 percent), Europe recorded only a modest 5 percent rate of growth (share of total: 34 percent).

Semiconductor Equipment segment: 
Display Technology weighs on results

The Semiconductor Equipment segment received orders amounting to CHF 391 million during the first half of 2004, a 146 percent increase versus the prior-year period (H1 2003: CHF 159 million), while sales rose by 75 percent to CHF 359 million (H1 2003: CHF 205 million). Operating earnings (EBIT) of CHF –23 million also witnessed an improvement (H1 2003: CHF -55 million). At Display Technology, the development and introduction of its new generation 6 and 7 systems marked the first half of 2004. Unaxis received an order from the industry’s market leader to build the systems for the first flat panel display production line of the latest generation. That assignment involved tremendous technological challenges. Due to the expedited delivery time required by the customer, development of the equipment took place at the same time it was being manufactured. That heightened the risk as well as the related development and production costs and, as a consequence, placed a heavy burden on the Semiconductor Equipment segment’s first-half results. In contrast, Wafer Processing made significant progress during the first half of 2004, and market demand in most of its areas of business activity has recovered in comparison to the prior-year period. The division proved its competitiveness by winning a major order from Taiwan for 300mm CLUSTERLINE deposition systems, as well as by successfully introducing the new MASK ETCHER IV for structures smaller than 65 nanometers. Assembly & Packaging (ESEC) enjoyed a continuing high level of demand during the first half of 2004, with orders and sales at the division more than doubling versus the comparable prior-year period. In the area of die bonding, Assembly & Packaging (ESEC) expanded its leading market position even further, mainly due to strong sales of the new Die Bonder 2008hS (high Speed). The ’Tsunami’ wire bonder achieved good results in numerous evaluation runs. However, owing to the long purchasing process, its sales figures – which account for a 22 percent share of total systems sales – have yet to meet expectations.

Data Storage Solutions segment: Course of business maintained at high levels

The Data Storage Solutions segment continued its gratifying development during the first half of 2004. However, due to the cyclical business trend, the CHF 124 million worth of orders received fell short of the high prior-year total (H1 2003: CHF 172 million). Sales increased by 14 percent to CHF 143 million (H1 2003: CHF 126 million), and operating earnings (EBIT) of CHF 21 million also stood slightly above the previous year’s level (H1 2003: CHF 19 million). In the wake of last year’s boom in all DVD formats, customers have begun to reduce their investments in this area as the result of excess capacity. A pickup in the market is not anticipated prior to the fourth quarter of 2004 and, given these market conditions, Unaxis has adjusted its own production capacity accordingly. Initial units of the ‘Fusion’ DVD-R replication lines, newly developed in collaboration with Mitsubishi Chemicals, were installed and qualified at the facilities of leading manufacturers. Moreover, for the exploitation of DVD+R DL (dual layer) technology, Data Storage Solutions has entered into yet another strategic alliance with a leading technology partner, a move that will further strengthen the segment’s competitive position.

Coating Services segment: Market expansion leads to increase in sales

Coating Services (Balzers) continued the implementation of its growth strategy during the first half of 2004. Both sales and operating earnings recorded increases to CHF 182 million (H1 2003: CHF 160 million) and CHF 31 million (H1 2003: CHF 26 million), respectively. In the early part of the year, Coating Services opened its first coating center in China. Seven additional centers are currently being established in Japan, Argentina, Canada, Brazil, Hungary, Mexico and the USA. They should commence operation during the second half of the year. Moreover, the segment for the first time has outfitted a completely prefabricated mobile coating center. The introduction of a new aluminum-based generation of coatings for high-performance lathes has exceeded expectations.

Vacuum Solutions segment: Focus on core business continues

Triggered by a recovery in demand for information technology and analytical equipment, the market for vacuum technology developed favorably during the first half of 2004. Vacuum Solutions received orders valued at CHF 186 million, roughly unchanged from the previous year (H1 2003: CHF 187 million), and managed to increase sales by 9 percent to CHF 185 million (H1 2003: CHF 169 million). Especially in the USA and Asia, Vacuum Solutions (Leybold Vacuum) was able to benefit from an increase in demand. Its operating earnings of CHF 5 million fell short of the prior-year level (H1 2003: CHF 6 million). Among the ongoing measures aimed at achieving a substantial improvement in profitability are the total rejuvenation of entire product families, the already completed construction of a highly efficient technology and production center in Cologne (Germany), as well as the extensive expansion of pump production at the Tianjin (China) facility. First-half highlights at the product level were the successful introduction of the new ScrewLine ‘dry’ pump for industrial applications, as well as qualification of the innovative MAG 2700 FAS turbo-molecular pump.

Components and Special Systems segment: Clearly improved operating results

Components and Special Systems managed in the first half of 2004 to more than double its amount of orders received to a total of CHF 208 million (H1 2003: CHF 81 million), as well as to increase sales to CHF 139 million (H1 2003: CHF 97 million). Operating earnings (EBIT) improved by 47 percent to CHF 15 million (H1 2003: CHF 10 million). At Optics, all business areas benefited from the gratifying market trend, whereas Projection Display once again enjoyed the strongest surge in demand. Accordingly, production capacity at the Shanghai (China) and Golden (USA) facilities was expanded. Moreover, the activities in Geisenheim (Germany) will be discontinued and, by year’s end, integrated into the existing sites in Balzers (Liechtenstein), Shanghai and Golden. Thus going forward, Optics will concentrate its production activities at one site per continent. In the first half of 2004, Space Technology (Contraves Space) was impacted by the postponement of the planned Ariane rocket launch and delays in European Space Agency (ESA) programs. March 2, 2004, marked the successful launch of Europe’s ‘Rosetta’ comet space probe, which has a mass spectrometer on board developed by Contraves Space. The signing of a development agreement for the payload fairing of Europe’s new Vega launch vehicle represented another significant success.

Outlook

Following a phase of strong investment activity in IT-related areas, the coming months are likely to witness a slower pace of investment among certain customer groups as the result of temporary overcapacity. Data Storage Solutions and Assembly & Packaging (ESEC) in particular are likely to feel the impact of that development. However, based on anticipated demand, the Coating Services (Balzers) and Vacuum Solutions (Leybold) segments, and especially the Optics division of the Components and Special Systems segment, should continue their gratifying trends. Unaxis will continue to attach high priority to measures aimed at reducing costs and strengthening the company’s competitive position. Owing to the aforementioned developments foreseen for the second half of 2004, Unaxis reckons that its sales and EBIT will remain roughly in line with the results achieved in the first half of 2004, hence lower than previous expectations. The markets in which Unaxis is involved continue to be attractive. From today’s vantage point, Unaxis expects that 2005 will see a further increase in the company’s sales and earnings.

Media representatives and securities analysts, please note:

Media round table to be held today, Tuesday, August 17, 2004, 10:30 am, Hotel Widder
At a media conference being held today, CEO Heinz Kundert and CFO Kaspar Kelterborn will discuss Unaxis’ first-half results and address any questions participants may have. The conference will be held in the German language.

Analysts telephone conference to be held today, Tuesday, August 17, 2004, 2 pm
In a telephone conference being held today, CEO Heinz Kundert and CFO Kaspar Kelterborn will discuss Unaxis’ first-half results and address any questions participants may have. The conference will be held in the English language.

 This media release is based on information currently available to management. The forward- looking statements contained herein could be substantially impacted by risks and influences that are not foreseeable at present, so that actual results may vary materially from those anticipated, expected or projected.