Business year 2004:
MEDION AG - growth abroad

Essen, 17 March 2005
− In business year 2004 MEDION AG has successfully carried on its internationalization strategy. Compared to the previous fiscal year sales abroad went up by 6.7 % to reach EUR 1.075 bn. Thus the foreign exposure of group turnover increased by 6.5 percentage points to 41.0 % now.

In total, MEDION achieved sales of EUR 2.624 bn. in business year 2004 (previous year: EUR 2.924 bn.). Growth abroad has not sufficiently compensated for the weak domestic consumption and the decreasing order volumes in Germany.

Due to the lower turnover, a reduced gross margin and higher transport, logistics and service costs earnings before taxes and interest (EBIT) amounted to EUR 90.1 M. Group net earnings shrank from EUR 103.1 M the year before to EUR 50.7 M. Earnings per share fell from EUR 2.13 to EUR 1.05. Equity capital rose from EUR 439.1 M to EUR 456.0 M in fiscal year 2004. As a consequence, MEDION can dispose of a further improved equity base. Cash flow from ordinary activities matched EUR 65.0 M versus EUR 75.3 M the year before.

Management and supervisory board will propose at the annual shareholders’ meeting to pay out a dividend of EUR 0.55 per share (previous year: EUR 0.70) for fiscal year 2004.

In Germany, MEDION achieved turnover of EUR 1.549 bn. versus EUR 1.916 bn. in 2003. However, in the remaining parts of Europe MEDION has been able to raise sales by 6.1 % from EUR 921.7 M to EUR 978.2 M. In overseas markets turnover climbed by 13.0 % from EUR 86.0 M to EUR 97.2 M, of which EUR 46.4 M referred to the U.S. and EUR 50.8 M to the Asia-Pacific region.

In the last business year MEDION employed 1,504 people on average worldwide (2003: 1,092 employees), with 1,247 of them working in Germany. The creation of 95 new jobs abroad, where MEDION employed 257 employees on average in 2004 reflects MEDION’s ongoing progress on international markets.

In fiscal year 2004, the individual sales proportions of the various group activities have nearly remained stable. With sales of EUR 1.919 bn. the PC/multimedia sector generated 73.1 % of total sales (previous year: EUR 2.091 bn.; 71.5 %). EUR 642.3 M or 24.5 % referred to the entertainment and household electronics division (2003: EUR 778.4 M; 26.6 %), while the telecommunications sector covered EUR 62.7 M or 2.4 % of group sales (2003: EUR 54.7 M; 1.9 %).
Outlook 2005
Aside from the expansion of foreign activities, MEDION will pursue the development of new business areas in 2005. Within this strategy and alongside the marketing of digital media MEDION’s efforts will - above all - focus on innovative products for the “digital home” sector as well as the acquisition of new client groups and distribution channels.

It is true that MEDION has been able in the first months of 2005 to achieve pleasing sales successes particularly in the field of digital mobile products and flat screen TVs, however, in total and from today’s point of view a sustainable revival of consumer climate in Germany in the current year cannot be expected. As a consequence, total sales in the first quarter will probably be around 19 % below the high level of the previous year’s quarter. Besides, gross margin will also fail to reach the level of the first quarter in the year 2004. This trend is accompanied by a still relatively high level of operating expenses so that first quarter earnings will drop at a greater pace than sales.

In order to raise profitability MEDION will accelerate the measures which had been introduced in 2004 for optimizing the cost structure. By means of an active cost management it is our target to optimize particularly service and logistics costs.

For the year 2005 once again, the retail industry associations do not expect an improvement of consumer climate in Germany. On some foreign markets as well there are signs of difficult economic conditions, exacerbated by limited forward visibility as to the margins which can be achieved in the market as well as the US dollar/euro parity.

In view of the multitudinous uncertainties, we are not able at this early stage to provide any reliable estimate of the Group’s expected business performance in 2005. Of course, we will be doing our outmost to make the best possible use of the market opportunities presenting themselves to MEDION.