Letter to our Shareholders

2010 marked the return of growth and to a major improvement in profitability. After a difficult year 2009, ending for the first time ever with an operating loss and a large volume decline, we had no alternative but to lead the Group through major changes. Our efforts resulted in a consolidated turnover of CHF 1'280 million, or +21% compared to 2009, and an operating profit of CHF 61.3 million or, on a like for like basis (underlying), a loss of CHF 4.3 million. The Group’s net profit reached CHF 49.3 million or, on a like for like basis (underlying), a loss of CHF 1.8 million, compared to an operating loss of CHF 175.2 million, a net loss of 160.7 million, and a volume decline of 35.4% in 2009. We put all our energy into achieving this successful turnaround. Having started 2010 with a weak backlog, we were helped by a steady increase in order entries during the first semester. Since January 1, 2010, the Group has operated with three Business Units – Sheet-fed, Web-fed and Services. The consolidated turnover of CHF 1'280 million includes the following elements: an organic growth of CHF 298 million; the change in the scope of consolidation with a negative impact on sales of CHF 13 million with the sale, in October, of Atlas Converting Equipment Ltd in Bedford/UK and its brands Atlas and Titan; the negative exchange rate evolution of the Euro, the Dollar and the Pound which put a huge pressure on our Group with a negative impact on sales of CHF 60 million. The folding carton, corrugated board and flexible material industries contributed to the growth in turnover as they recovered from the 2009 crisis. The Business Unit Sheet-fed gained 31% versus 2009, while the Business Unit Web-fed increased by 23%, and the Business Unit Services improved by 6.4%. However, the extreme exchange rate fluctuations which started in July 2010 had a considerable impact on the growth of our turnover and profitability, resulting in price pressure as our competitors fought to keep market share. In 2010, the economic climate has improved globally although the recovery rate was slower than expected. In our markets the investment mood remained volatile and governments were not giving clear signals as to whether they would continue to support the economy. North America has shown strong signs of recovery, while the economic climate was very unbalanced throughout Europe. The growth rate in emerging countries has not compensated the volume reduction in industrialized countries. The operational excellence program, which is part of the “Group Transformation Program”, focused on several aspects: sales and services activities; streamlining of development activities; lean production and right sizing of production footprint or, creating more value for customers with fewer resources; back office and the rollout of common enterprise resource planning (ERP) system. Although priorities and volume growth slowed down the pace of savings, the major transformation programs we have been pursuing in 2010 are going well. We must, however, keep the momentum and continue to look for additional savings and areas where we can improve our profitability. To achieve this objective, we have developed a Group project management approach to ensure the adequate allocation of resources and priorities, to better focus our efforts, to maximize impact, and to provide clear accountabilities to management. This should allow us in 2011 to reach the target set at the beginning of the program. Knowing that exchange rates will remain quite volatile in the future, it is essential that we continue our Group transformation. Some major events marked 2010. In March, the Board of Directors agreed to invest CHF 180 million in project TEAM (“Tous Ensemble à Mex”, e.g. the move from Prilly to new premises in Mex). In September, the official inauguration of the extension works offered a concrete view of what was still a dream or an abstract idea in the mind of many people. This project, once completed, will be the symbol of Bobst Group technological leadership and a strong motivator for our employees. Our aspiration is to develop a passion for excellence in a highly efficient work environment, fully integrated in a splendid region and respectful of the surrounding nature and of our ecological values. TEAM is deeply linked to project PHOENIX (lean organization in everything we do) whose objectives are to: systematically eliminate waste from the date we receive the customer order until the equipment is delivered, accepted and paid for; introduce the lean production concept and have it adopted by all departments; maximize customer satisfaction by focusing all our efforts on reducing total lead time. PHOENIX is key to the Company’s future improvement of profitability and requires that we all stand as one behind this project. This is an accelerator of change and offers the unique opportunity to create common platforms and modules using standard components, to develop a supplier network, and to build up adequate competences and skills which are the motor for growth and competitiveness. Our customers deserve the best from our Group. Another milestone in the life of the Group was the Competence ‘10 open house held in Mex/Switzerland in September. It was a tremendous success, attracting 626 companies and more than 2'000 visitors from 57 countries. With the topic of “Towards Zero Fault Packaging” in the background, we presented six world premieres to enthusiastic customers, hoping that the interest shown will materialize in orders during 2011. In October, we sold Atlas Converting Equipment Ltd, Bedford/UK and its flagship brands Atlas and Titan to its management. At the same time, we acquired 65% of Gordon Ltd, one of the leading players in China in the corrugated board and folding carton industries. With this acquisition, we aim to reinforce the Bobst Group strategy and presence in China and in other emerging countries of the world, thus demonstrating our determination to become a leading player in this growing segment. The Group Executive Committee will undergo changes which were decided this year but will be effective in April 2011. We welcome Mr. Stephan März, who will join Bobst Group on April 1, 2011, to take over the Business Unit Services. We continue to actively work at a local level on the development of our services activities to stay close to the needs of our customers. As we wish to become business partners with our clients, with trend setters and to interact better with our markets, Mr. Claude Currat will lead, as Senior Vice President Global Accounts, the essential task of sharing with Bobst Group our customers’ strategy requests, thus demonstrating our commitment to the markets by being attentive and receptive to evolution in the industry. At the forthcoming Annual General Meeting of Shareholders of May 4, 2011, the mandates of Messrs. Thierry de Kalbermatten and Christian Engel, will come to an end. Mr. Christian Engel will not present himself for re-election. He has been a Board member since 2001. The Board thanks him for his longstanding membership and his valuable contribution over the years. In agreement with the Board of Directors, Mr. Thierry de Kalbermatten will be proposed for re-election. 2011 will remain a year economically and politically filled with prospects and uncertainties. While we pursue the transformation program, we anticipate that the positive trend will continue. However, our development will still be influenced by the volatility of currencies. Based on the 2010 results, the Board of Directors will recommend no dividend payment, allowing our Group to strengthen the equity. Bobst Group continues to invest in the acquisition and development of know-how and skills, and is recognized as a company dedicated to training with an excellent reputation in this field. The site of Lausanne in Switzerland hosts approximately 250 apprentices under a dual (theoretical and practical) training concept, and other sites of the Group such as Shanghai/China, Pune/India, Itatiba/Brazil, and Fischer & Krecke in Bielefeld/Germany share the same concept. Bobst Group’s objective is to become a center of excellence for this type of dual education. By defending the quality of its training, Bobst Group remains true to its motto “Knowledge and People”, and contributes to support the industry. We are pleased to have in our ranks experienced, talented, and valuable people who have faith in our values and in the future of our Company. In this fast changing world, our objectives cannot be reached without our people, who live and transmit a passion for excellence and who strive to give our customers full satisfaction. We thank them for their hard work and commitment. We also thank our customers and shareholders for their continued loyalty and support.
Charles Gebhard	Jean-Pascal Bobst
Chairman of the Board	Chief Executive Officer