Zapf Creation - Setting free a childrens imagination.

27 Feb 2009

Zapf Creation Group: 2008 business performance affected by weak fourth quarter

• Consolidated sales and earnings weaken in fourth quarter after three good quarters
• Increased efforts in developing innovative products

Roedental, February 27, 2009 – The Zapf Creation Group, Europe's leading manufacturer of play and functional dolls, today announced that its sales and earnings in 2008 developed in line with the adjusted guidance published by its Management Board in December. According to preliminary, unaudited figures, consolidated sales came in at € 104.4 million in the 2008 financial year, which is 5.5% below the previous year's figure of € 110.5 million. The decline is partly due to negative currency effects. As was the case with many competitors, business performance was increasingly affected by the strong global economic downturn. Major markets saw severely restrained demand on the part of the company's trading partners especially in the fourth quarter, a period that is of great importance to the toy industry because it includes the Christmas business.

Consolidated earnings before interest and taxes (EBIT) in the financial year just ended totaled € 0.9 million after € 5.7 million in 2007. Adjusted for restructuring and one-off items, consolidated EBIT amounted to € 0.8 million (2007: € 6.0 million). The Group's net loss for the year was € 5.8 million. This compares to a net loss of € 2.7 million in the previous year.

The complete conversion of subordinated shareholder loans into equity as part of the Group's long-term financing significantly raised the Zapf Creation Group's equity ratio to 24.5% at the end of 2008 (December 31, 2007: 12.5%). Net liabilities (including shareholder loans) as of the balance sheet date were € 28.0 million, compared to € 32.9 million at the end of 2007.

Given that it is currently almost impossible to predict consumer demand in the core markets of the Zapf Creation Group, the Management Board at this point will not make a statement regarding sales and earnings for 2009.

Stephan F. Brune, CEO of Zapf Creation AG, commented: "After three positive and successful quarters, the Zapf Creation Group unfortunately was unable to escape the increasingly negative market effects in the fourth quarter of 2008. We expect the market environment to remain difficult in 2009. This is why we have further increased our efforts in developing innovative products. The 2009 ToyAward, which we won for one of our new product lines at this year's Nuremberg Toy Fair, validates our strategy of pursuing the development of new and creative play concepts. In doing so, we will increasingly address new target groups too. In addition, our focus will be on strict cost control, targeted margin improvement and moderate geographic expansion."

Key figures for the Zapf Creation Group (IFRS, preliminary)

Further information:
Frank Elsner / Jens Heinen
Frank Elsner Kommunikation für Unternehmen GmbH
Tel.: +49 (0) 5404 - 91 92 0
Fax: + 49 (0) 54 04 91 92 29

Zapf Creation AG is Europe's leading manufacturer of play and functional dolls with accessories. Among Zapf Creation's best known brands are Germany's best-selling functional doll BABY born®, 15 million of which have been sold worldwide since 1991, plus Baby Annabell® and CHOU CHOU. All these branded toys have in common the highest standards of design, quality, safety and play value. Headquartered in Roedental, Germany, Zapf Creation was founded by Max Zapf in 1932 and went public in April 1999 (ISIN 0007806002). For further information, please visit: www.zapf-creation.com.

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