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Preussag: Restrained start to 1st quarter 2002

As expected, the first three months of Preussag<.>`s 2002 financial year started in restrained fashion…

As expected, the first three months of Preussag<.>`s 2002 financial year started in restrained fashion.

With respect to the current tourism summer season, the situation is however improving from month to month. In total, the decline in bookings across the Group to the end of May is compared to minus 8.5 per cent in April. The tourism division was primary affected by the different national economic situations. The shortfall in bookings in the German market at 14.2 per cent is therefore the largest compared to the previous year. Business in the UK is much better, and bookings rose further here after Easter as well and the shortfall in bookings is now only 2.7 per cent.

Summer 2002 is currently performing better throughout the Group than the previous winter, says Preussag AG executive board chairman Dr. Michael Frenzel. The tourism business is developing very differently in each of the source markets. This confirms that we chose the right course with our pan-European strategy. The cost measures we introduced will help us to stabilise our results.

The ongoing divestment programme moved ahead. Following the approval of the EU Commission to the sale of the Fels group to Haniel, and the German cartel authority`s approval to the sale under suspensive conditions at the beginning of April 2002, the contracts were closed at the beginning of May 2002. The sale of building engineering is therefore almost complete.

The current structural changes in the German oil and gas industry also have an impact on some of the business of Preussag Energie operated in consortium with German partners. This includes the participations in former Deminex projects held in consortium with Veba Oel. Veba Oel has now sold its exploration and production activities. As a consequence, the Group is entitled to a pro rata share of the disposal proceeds resulting from this transaction. A preliminary amount was to be realised in the 1st quarter.

The disposal proceeds from the Deminex holdings and the Fels group result in another significant reduction in net debt in the 2nd quarter 2002.

The 1st quarter report presented today reveals that the economic weakness in large parts of the world has also had a clear impact on the performance of the individual divisions.

Group turnover in the 1st quarter reached Euro 4.0 billion, 14 per cent short of last year`s level which posted Euro 4.7 billion. Adjusted for the divestments in the previous year, the decline is around eight per cent. The results by divisions at minus Euro 29 million also fell short of the previous year`s level (previous year: Euro 25 million). The tourism and logistics divisions in particular were not able to maintain the previous year`s performance because of the unfavourable economic environment.

The result generated by tourism was seasonally negative in the 1st quarter 2002 as well because of the regularly lower level of the winter business and advance expenses for the summer season. In addition, the restraint in bookings for the 2001/2002 winter season had a knock on effect in the 1st quarter. Increasing business at the end of the season could only partly compensate for the shortfall in the period after 11 September. At Euro 2.1 billion, tourism turnover was down year-on-year, whereby the source markets and destinations were affected to different degrees. At minus Euro 168 million, the tourism result overall was weaker than the previous year.

In the logistics division, container shipping clearly felt the downturn in world trade and posted a turnover of Euro 901 million, down six per cent year-on-year. At euro 14 million, the result generated by the logistics division was lower than last year`s strong reference period.

In the energy sector, crude oil prices remained lower than the same quarter the previous year despite recovering since the beginning of the year. Due to the decline in crude oil prices compared to the previous year, the energy sector posted a turnover of Euro 114 million, down around 24 per cent year-on-year. The energy sector generated a good result again, however, at Euro 59 million, it fell below last year`s figure because of the decline in crude oil prices and a reduction in results from participations.

In the central operations segment, interest charges declined. Another positive effect was from the claim for a pro rata share in the disposal proceeds of oil and gas projects involving the former Deminex. Overall, the Other sectors posted a result of plus Euro 66 million (previous year: minus Euro 36 million).

The Group profit for the year was minus Euro 83 million (minus 74 million after results attributable to minority interests).

Overall, the first months of the new financial year were characterised to a large extent by the weak economic environment. A tangible lack of consumer confidence in the German market influences the performance forecasts in the tourism sector in particular. A relatively high proportion of late bookings complicates the forecast for the 2002 financial year. Logistics and energy will also not be able to match the excellent quality of the results the previous year. Improvements in central operations, cost reductions, and the omission of the industrial activities, which still had a negative effect on results in 2001, provide an opportunity of generating an overall result by divisions for the whole of 2002 that approaches the previous year`s performance.