PDF, 3.2 MB - Pfleiderer AG

Annual Report 2004
Core Businesses
and Growth Potential

GERMANY p. 29
Core Businesses
and Growth Potential
EASTERN EUROPE p.19
TURKEY p. 63
ASIA p. 41
Pfleiderer AG is bundling its strengths and creating sound financial founda-
tions by focusing on its core competences in its two Business Segments
Engineered Wood and Infrastructure Technology. This is creating the basis
from which Pfleiderer can now pursue its strategy of value-oriented inter-
national growth - a strategy that is already beginning to pay off.
KEY FIGURES FOR GROUP AND SUMMARY OF BUSINESS SEGMENTS

Group Figures Jan. 1 – Jan. 1 – Change
Dec. 31, 2004 Dec. 31, 2003 in %
Sales revenues million euros 901.0 848.2 +6.2
Foreign share % 53.8 49.1 –
EBITDA million euros 87.4 72.2 +21.1
EBIT million euros 50.2 34.9 +43.8
EBT million euros 58.9 –33.6 –
of which EBT continued operations million euros 31.6 17.9 +76.5
of which EBT discontinued operations million euros 27.3 –51.5 –
Result after taxes and minority interests million euros 33.9 –45.8 –
Operative cash flow million euros 86.4 68.9 +25.4
Cash flow after investment activity million euros 91.9 51.5 +78.4
Liquid funds million euros 82.7 67.2 +23.1
Capital expenditure million euros 45.4 31.7 +43.2
Financial liabilities million euros 205.7 323.0 –36.3
Net corporate debt million euros 122.9 255.8 –52.0
Equity ratio % 32.6 17.9 –
ROE = results after minority interests/equity % 14.0 –32.9 –
Capital employed million euros 435.2 423.8 +2.7
ROCE = EBIT/capital employed % 11.5 8.2 –
ROS = net income/sales % 3.5 2.1 –
Sales per employee million euros 0.203 0.193 +5.2
Employees at close 4,429 4,387 +1.0
in Germany at close 2,910 2,914 –0.1
outside Germany at close 1,519 1,473 +3.1
Key Figures per Share Jan. 1 – Jan. 1 – Change
Dec. 31, 2004 Dec. 31, 2003 in %
Earnings per share euros 0.79 –1.07 –
Average number of shares in circulation shares 42,685,000 42,678,146 –
Business Segment Engineered Wood Jan. 1 – Jan. 1 – Change
Dec. 31, 2004 Dec. 31, 2003 in %
Sales revenues million euros 758.9 715.9 +6.0
Foreign share % 56.5 53.4 –
EBITDA million euros 78.9 57.8 +36.5
EBIT million euros 48.4 29.1 +66.3
Employees at close 3,475 3,450 +0.7
Business Segment Infrastructure Technology Jan. 1 – Jan. 1 – Change
Dec. 31, 2004 Dec. 31, 2003 in %
Sales revenues million euros 138.2 124.9 +10.6
Foreign share % 39.6 27.3 –
EBITDA million euros 19.1 18.1 +5.5
EBIT million euros 15.3 15.4 –0.7
Employees at close 861 790 +9.0

Business Segments Overview
Engineered Wood
Carriers Surfaced
Track
Products
Systems
Products:
Raw particleboard
Tongue & groove board
MDF
Customers: Furniture industry, wood trade outlets,
interior designers, building and DIY trade
Production Sites Overview
Europe
Engineered Wood
Germany
Arnsberg
Gütersloh
Leutkirch
Neumarkt
Nidda
Rheda-Wiedenbrück
(in closure)
Poland
Grajewo
Wieruszów
Russia
Novgorod
(being built)
Products:
Melamine-faced chipboard (MFC)
HPL
Postforming elements
Films and surfacings
Infrastructure
Technology
Products:
Railway sleepers
Sleeper systems
Customers: Railtrack
infrastructure operators
Infrastructure Technology
Germany
Brandenburg-Kirchmöser
Coswig
Gernsbach
Langen
Neumarkt
Spain
Constanti
December 2004
Asia
Hungary
Lábatlan
Romania
Buzău
Taiwan
Yang Mei Town
(transferred 2004)

Pfleiderer AG is focusing on its two Business Segments Engineered
Wood and Infrastructure Technology. We are a leading systems supplier
of engineered wood, surface-finished panels and rail sleeper technology.
Pfleiderer Engineered Wood is a preferred partner for the furniture
industry and specialist trade throughout Europe. Pfleiderer track
systems is active in the construction and expansion of state-of-the-art
rail networks throughout the world.
Fulfilling the demands of the market and the needs of our customers
defines the challenge we face and our mission. Our strengths lie in
our technological leadership, our innovative abilities and the quality of
our products. To this, we add a uniquely customer-oriented approach
and the dedication of our employees.
Accepting responsibility for our social and natural environment is part
of our corporate philosophy. As a stock market listed company, our
goal is to achieve a long-term sustained increase in the Company’s
value – to the benefit of our shareholders, employees and the world
we live in.
1
ANNUAL REPORT 2004

55
CONTENTS
Pfleiderer Engineered Wood
is participating in dynamic market
growth in Eastern Europe.
4 Introduction by Board
of Management
8 Report of the Supervisory Board
11 Corporate Governance
2
Interest in Pfleiderer’s share grew considerably
on the capital markets after the
Company’s free float was increased.
20
Pfleiderer Group and Pfleiderer AG
Management Report
20 Market Report
22 Company Report
30 Business Segment Engineered Wood
35 Business Segment Infrastructure Technology
42 Research & Development
43 Capital Expenditure
44 Environmental Protection
45 Organization
46 Personnel
49 Risk Report
53 Marketing and Communication
55 The Pfleiderer Share
59 Post-Closure Report/Outlook

3
35
Pfleiderer Engineered Wood
further increased its foreign
Pfleiderer Group Financial Statements
64 Consolidated Balance Sheet
66 Consolidated Statement of Income
67 Consolidated Statement of Cash Flows
68 Consolidated Statement of Changes
in Shareholders’ Equity
70 Segment Reporting
72 Notes to the Consolidated
Financial Statements 2004
114 Analysis of Group Assets
116 Consolidated Companies
118 Independent Auditor’s Report
Pfleiderer AG Financial Statements
(excerpts)
120 Balance Sheet
121 Statement of Income
122 Analysis of Fixed Assets
CONTENTS
Pfleiderer track systems is scoring
international successes with its ballastless
sleeper technology.
sales share.
30
MANAGEMENT REPORT
BUSINESS SEGMENTS
FINANCIAL STATEMENTS
In Brief
124 Supervisory Board and Board of
Management of Pfleiderer AG
126 Glossary
128 Index
130 Multi-Year Summary
Cover
Group Figures
Business Segments
Production Sites
Review of the Year
Financial Calendar

“Pfleiderer AG’s sound financial basis has given it
more scope to act, enabling it to turn long-term growth
strategies into reality”.
Fiscal 2004 saw Pfleiderer AG take a big step forward on the road to growth and earnings.
Management and employees alike achieved all their targets for the past fiscal year, and in many
cases even exceeded them.
The successful sale of our Poles & Towers operations in the USA and in Europe, as well as the
disposal of other marginal activities, means we have reached the next milestone – the strategic
focus on core competences. The considerable income gained from these disposals have enabled
us to greatly reduce corporate indebtedness again. The equity ratio for the Pfleiderer Group
now stands at over 30 percent. That means that Pfleiderer AG’s sound financial basis has given
it more scope to act, enabling it to turn long-term growth strategies into reality.
Pfleiderer Engineered Wood Improves its Market Position
By acquiring MDF production at the former HORNITEX plant in Nidda, we have closed a strategic
gap in our engineered wood portfolio. Now our brands and marketing companies can offer an
even wider range of products and services to customers. From 2007, the planned new construction
of an MDF/HDF production plant in Poland will further improve our position in this highearning
segment.
4

In closing down the Rheda-Wiedenbrück plant, we have made an active contribution to the
urgently needed consolidation of the engineered wood market in Germany. While this has been
a painful process for those employees affected, it has led to a sustained reduction in production
over-capacity and a marked improvement in prices. Following years of unsatisfactory business in
this market, supply and demand for raw particleboard in Germany have now reached a state of
equilibrium. When taking on and fulfilling orders, Pfleiderer Engineered Wood can now look forward
to achieving adequate value-added.
Pfleiderer Engineered Wood Poland again had a successful year, making an important contribution
to the positive results of the Pfleiderer Group. By increasing our production capacity at our two
sites at Grajewo and Wieruszów, we have strengthened our leading competitive position in what
remains a dynamic market. And towards the end of 2005, our new engineered wood production
plant in Novgorod in Russia starts production. This will give us access to a new market for which
the groundwork has been well laid and which promises to offer attractive growth and development
opportunities over the long term.
Major International Successes for Pfleiderer track systems
Pfleiderer track systems posted record sales in fiscal 2004, as well as winning the biggest single
order in its history. This came from Turkey, to whom we will be supplying around 680,000 sleepers.
As a result, our plants in Hungary and Romania are fully booked up for the next 15 months.
This impressive international success underlines the tradition of competence that Pfleiderer track
systems has built up and expanded as a supplier of sleepers for the rail traffic sector. A holistic
system supplier, Pfleiderer track system’s monolithic track technology for high-speed links has
proved especially successful in Europe and Asia. Now, new strategic alliances are preparing the
way for market entry in India, China and South Korea.
On the Road to Further Growth and Increased Earnings Power
The pleasing progress in operative growth and performance achieved by our enterprise is clearly
borne out by all the financial and operational figures reported in our financial statements for 2004.
Group sales increased by around 6 percent, while the share of foreign business also grew and
now stands at 53.8 percent. That shows that we are on the right track. The improved EBITDA
margin at 10.4 percent and the increased sales margin at 3.5 percent are certainly welcome
figures – although we only see them as an “interim” stage on the road to even greater earnings
power and value added. This we intend to achieve through three strategic routes:
1. by increasing profitability in Germany,
2. exploiting growth potential in Eastern Europe and Russia,
3. entering new markets.
In Germany, market conditions remain stagnant, with no apparent potential for qualitative growth
in the near future. For that reason, continuing to optimize the way we operate while significantly
improving cost structures to achieve higher value added must remain our first priority. One
example of how we can achieve this is the new PHW 2006 project, where employees are actively
participating in a large number of measures being introduced on our sites.
5
INTRODUCTION BY BOARD OF MANAGEMENT

The sustained increase of agreed working hours at Pfleiderer Engineered Wood sites in Germany
is one such important step. This will help offset identified cost disadvantages when facing national
and international competition. As it has proved impossible to reach a company-wide consensus
with IG Metall, we have decided to set up individual agreements with our employees. As a result,
we are guaranteeing jobs up to the end of 2007. However, the only way we can safeguard jobs
in Germany over the long term is by increasing market share and sales.
In Eastern Europe, we intend to use our outstanding competitive position to achieve further growth
coupled with attractive profit margins. The position we achieved by acquiring an early presence
on potentially attractive markets must now be held on to in what have become mature markets.
This we intend to do by offering new products, stronger sales relations and high quality. And
should the right opportunity present itself, we are ready to move into markets outside Europe, too.
Positive Growth in the Company’s Value
Now that we have successfully reduced corporate indebtedness and increased our equity ratio,
our next task is to concentrate our resources and efforts completely on strengthening and
expanding our operative market positions in Germany, Europe and worldwide. For that reason,
once again in fiscal 2004 we have decided to forego paying a dividend. We believe that you,
the shareholders, will agree with this decision. The above average price rise of the Pfleiderer
share over the last twelve months means that you have already participated in the Company’s
value increase. This direction signals a future full of prospects, a future that offers more growth
and greater earnings power. May I therefore thank you for the confidence and trust you have
placed in our Company. This spirit of moving forward together is reflected in the successful partnership
that exists between shareholders, management and employees.
I would also like to express my sincere thanks to all our employees for their dedication and hard
work, the employees’ representatives for their understanding and targeted cooperation, as well
as all our customers and associates for the good and fair dealings we have had and which have
been beneficial to us all.
Pfleiderer AG will make every effort to continue along this road of growth and earnings using
all the means at our disposal – with care, confidence and determination, with entrepreneurial
courage and a sense of responsibility for our values. My colleagues and I, together with all our
employees in Germany and abroad, stand by these words.
Neumarkt, April 5, 2005
Hans H. Overdiek
Spokesman of the Board of Management
6

Dr Jürgen Koch
Member of the Board of Management,
Finance, Infrastructure Technology
Hans H. Overdiek
Spokesman of the Board of Management,
Engineered Wood
Michael Ernst
Member of the Board of Management,
Personnel, Risk Management, IT

8
Ernst-Herbert Pfleiderer
Chairman of the Supervisory Board
of Pfleiderer AG
During the reporting period, and in accordance with its legal and statutory obligations, the Supervisory
Board of Pfleiderer Aktiengesellschaft supervised and advised the Company’s management.
The Supervisory Board was always kept fully informed on all major developments, as well as
on the general course of business. Where approval by the Supervisory Board for decisions and
measures taken by the Board of Management was required – in particular for actions relating
to financial and personnel planning and capital expenditure – the members of the Supervisory
Board carefully examined all the issues at stake and adopted appropriate resolutions based on
the information provided.
The Supervisory Board held four ordinary meetings in March, June, September and December
2004, during which the Board of Management reported in detail about the general state of business
and on current developments. Apart from these meetings, a regular exchange of ideas
took place between the Chairman of the Supervisory Board and the Spokesman of the Board of
Management.

Committees Formed by the Supervisory Board
The Working Committee of the Supervisory Board convened five times in total during the reporting
year – in March, twice in June, as well as in September and December 2004. The Committee
discussed and decided on all transactions and actions which require approval by the Supervisory
Board in accordance with standing orders.
The Audit Committee convened in March and June 2004, as well as in February 2005. On
March 18, 2005, the Audit Committee also reviewed the Financial Statements for fiscal 2004.
The Conciliation Committee, set up in accordance with Sec. 27 (3) Mitbestimmungsgesetz (German
Co-Determination Act), did not convene during the past fiscal year.
Public Auditor
In accordance with the resolution adopted by the General Meeting of Pfleiderer AG on June 15,
2004, the Chairman of the Audit Committee of the Supervisory Board engaged KPMG Deutsche
Treuhand-Gesellschaft Aktiengesellschaft Wirtschaftsprüfungsgesellschaft, Berlin/Frankfurt, (public
auditors) to audit the Financial Statements for 2004 and the management report of Pfleiderer AG,
as well as the consolidated Financial Statements and consolidated management report. In their
audit, the auditors focused on the valuation of continuing and discontinued operations, the impairment
of goodwill and an assessment of latent taxes and risk management.
Financial Statements and Consolidated Financial Statements 2004
The annual Financial Statements of Pfleiderer AG and the consolidated Financial Statements for
year-ending December 31, 2004, as well as the consolidated management report and the management
report for Pfleiderer AG, were audited by KPMG Deutsche Treuhand-Gesellschaft Aktiengesellschaft
Wirtschaftsprüfungsgesellschaft, Berlin/Frankfurt, and all received an unqualified
audit opinion.
The Supervisory Board also reviewed the Financial Statements and consolidated Financial Statements,
as well as the management report and consolidated management report, as drawn up
by the Board of Management. The audit report by the public auditor was made available to all
members of the Supervisory Board in good time. The public auditor participated in the Audit
Committee meeting on March 18, 2005, thereby informing it of the main results of the audit.
No objections were raised by the Supervisory Board following its review of the Financial Statements
of Pfleiderer AG, the consolidated Financial Statements, the consolidated management
report and the management report. The Supervisory Board concurs with the results of the audit
by the public auditor, and duly approves the consolidated Financial Statements and Financial
Statements for fiscal 2004. Accordingly, the Financial Statements have been approved pursuant
to Sec. 172 Aktiengesetz (German Stock Corporation Act).
In view of the Company’s strategic goal to further develop earnings power, the Supervisory
Board concurs with the proposal made by the Board of Management not to pay a dividend for
fiscal 2004.
9
REPORT OF THE SUPERVISORY BOARD

Dependency Report
KPMG Deutsche Treuhand-Gesellschaft Aktiengesellschaft Wirtschaftsprüfungsgesellschaft, Berlin/
Frankfurt, also audited the Dependency Report prepared by the Board of Management relating to
the Company’s dealings with its affiliated companies, as required under Sec. 312 of the German
Stock Corporation Act (“Dependency Report”). The public auditor issued the following opinion:
“Within the terms of our audit and assessment we confirm that
1. the information provided in the Report is correct,
2. the Company did not make excessive payments as part of the transactions mentioned in the
Report.”
The Supervisory Board has also reviewed the Dependency Report drawn up by the Board of
Management. The Supervisory Board raised no objections to the concluding statement made by
the Board of Management and the results of the audit by the public auditor.
Corporate Governance
In accordance with Sec. 161 German Stock Corporation Act, the Board of Management and the
Supervisory Board of Pfleiderer AG issued a declaration in December 2004 stating the extent to
which the Company has complied with the Recommendations of the Government Commission on
the German Corporate Governance Code and the extent to which it will comply in future. Where
exceptions and deviations to the Recommendations occur, full reasons are given (see the section
below, “Corporate Governance”). The Corporate Governance Code drawn up in 2003 for the
Company retains validity.
Personnel
N. Erich Gerlach, member of the Supervisory Board of Pfleiderer AG since 1997, resigned from
office with effect from December 31, 2004. Wolfgang Haupt has since been appointed to replace
him from January 1, 2005. On behalf of all members of the Supervisory Board, I would like to
extend my sincere thanks to Mr Gerlach for his many years of valuable work for the Company.
On behalf of all members of the Supervisory Board, I would also like to thank the Board of Management,
the employee representatives and all employees of our Company for their hard work
and dedication over the last twelve months. I would also like to extend my best wishes to employees
working in those parts of the Company since sold, and wish them every success in their
new companies.
Neumarkt, April 5, 2005
Ernst-Herbert Pfleiderer
Chairman of the Supervisory Board
10

CORPORATE GOVERNANCE
1. Introduction
Principles of Corporate Governance
Pfleiderer Aktiengesellschaft* )
Pfleiderer Aktiengesellschaft commits itself to the following Principles of Corporate Governance.
These principles are designed to ensure that management and supervision of the Company
are transparent, responsible and uphold the objective of increasing the Company’s value. The
Supervisory Board and the Board of Management, as well as all directors and employees of
the Pfleiderer Group, are committed to this objective, which was formally resolved by the Supervisory
Board in its meeting on November 21, 2002. The Board of Management accepts full
responsibility for the observance of these Principles of Corporate Governance.
Pfleiderer’s Principles of Corporate Governance are designed to increase trust among national
and international investors, customers, employees and general public alike regarding the way the
Company is managed and supervised.
Pfleiderer’s Principles of Corporate Governance reflect conditions laid down by law, as well as
defining what constitutes good national and international corporate conduct and how to act appropriately
in the specific markets in which the Company is active.
Pfleiderer’s Principles of Corporate Governance are not immutably fixed, but are part of an
ongoing process. As such, they will be reviewed and revised as law changes, and in keeping with
other national and international developments. Pfleiderer’s Principles of Corporate Governance
will be published on its corporate website and in its annual report.
* ) Principles of Corporate Governance, ensuring good and responsible corporate management and supervision, drafted and adopted
by the Board of Management and the Supervisory Board of Pfleiderer Aktiengesellschaft in January 2003.
11
CORPORATE GOVERNANCE

2. Shareholders and
the General Meeting
3. Board of
Management
Pfleiderer AG has issued registered shares. Each share carries one vote. No “golden shares”
exist.
The General Meeting shall resolve on the appropriation of net income and on the ratification of
the actions of the Board of Management and the Supervisory Board. It elects the public auditors
and exercises all its legal rights.
The Board of Management shall only exercise its authorization to issue new shares without preemptive
rights where the issue does not to exceed 10 percent of subscribed capital. The Company
shall publish all information and reports, including the Agenda of the General Meeting, via electronic
media on the corporate website. The Company offers voting and proxy voting by Internet
to facilitate the personal exercise of shareholders’ voting rights. The Company will arrange a
corporate representative to exercise shareholders’ voting rights in accordance with instructions
received.
In the performance of its statutory duties, the Board of Management is bound to act in the Company’s
best interests and in accordance with the Principles of Good Management. The central
objective of corporate management is the sustained increase in corporate value. The key statistic
used to determine this is EVA (Economic Value Added).
The Board of Management coordinates corporate strategy with the Supervisory Board and is responsible
for its implementation and must select appropriate effective and efficient instruments
to this end. In doing so, it shall implement suitable systems for planning, supervision and risk
management. The Board of Management is committed to acting lawfully and to ensure that all
statutory regulations are upheld throughout the Pfleiderer Group.
The Board of Management shall inform the Supervisory Board regularly about all major issues
affecting the Company relating to planning, business developments or risk. Deviations from any
previous plans or targets must be reported and justified. The Board of Management must also
looks after the social responsibilities of the Pfleiderer Group.
In accordance with Sec. 77, Aktiengesetz (German Stock Corporation Act), all members of the
Board of Management are jointly and severally charged with the running the Company. Terms of
reference regulate the allocation of areas of responsibility for each member of the Board of
Management, and how the members of the Board of Management cooperate. Standing Orders
allocate responsibility for decisions to be taken on matters of fundamental importance by the
full Board of Management. Depending on the magnitude of the decision or the financial transaction
involved, approval must also be given by the Supervisory Board.
The members of the Board of Management must give their full working capacity to the Pfleiderer
Group. They are bound to uphold the Company’s best interests and may not pursue any personal
interests which would conflict with those of the Company. The members of the Board of Management
may not accept payments or other personal advantages from third parties during the
discharge of their duties which would be contrary to the best interests of the Company or its
customers.
12

4. Supervisory Board
The Board of Management accepts specific insider trading rules and commits management as a
whole to comply with these rules.
Compensation of members of the Board of Management is regulated by Sec. 87, Aktiengesetz
(German Stock Corporation Act). Compensation comprises a fixed salary factor plus variable
components. The variable components depend on the financial situation of the Company, the
performance and outlook of the Group, as well as other performance-oriented elements. Stock
options serve as variable compensation components, adding a long-term incentive effect. They
are issued according to a scheme adopted by the General Meeting and Supervisory Board.
Compensation and share holdings must be reported in the annual report. Stock option rights
must be exercised within 3 years of issuance at latest. Insider trading rules are met by setting
periods during which the exercising of option rights is suspended.
The Board of Management of Pfleiderer AG has adopted rules that also apply to senior management
eligible to receive stock options. It must also ensure that compensation for senior management
throughout the Group adheres to these rules.
The members of the Supervisory Board of Pfleiderer AG shall have the requisite expert knowledge,
specific abilities and experience to enable them to fulfil their advisory and supervisory duties
such that corporate targets are achieved. These qualifications shall be taken into account when
accepting nominations for the Supervisory Board. The members of the Supervisory Board must
have sufficient personal time in which to perform their duties.
The Supervisory Board issues Standing Orders. The Chairman of the Supervisory Board shall
maintain regular contact with the Chairman of the Board of Management and with the Board of
Management as a whole, and shall be informed as soon as possible about any major events.
The Chairman of the Supervisory Board shall then inform the members of the Supervisory Board.
In order to improve efficiency, the Supervisory Board has set up a working Committee and an
Audit Committee. The working Committee may take decisions on behalf of the Supervisory Board
in accordance with statutory rules and Standing Orders. The Chairman of the Supervisory Board
is not Chairman of the Audit Committee.
The members of the Supervisory Board shall treat all information relating to their duties as confidential.
Each member of the Supervisory Board is bound to uphold the Company’s best interests.
The Supervisory Board shall be informed of any conflicts of interest which could result from a
consultancy or directorship function with clients, suppliers, competitors, suppliers of capital or
other business associates. Advisory and other service agreements between a member of the
Supervisory Board and the Pfleiderer Group require prior approval by the Supervisory Board.
Remuneration of the Supervisory Board and share holdings of its members are reported in the
Company’s annual report. Representatives of the shareholders and employees are enjoined to
work together on the Supervisory Board in a spirit of consensus.
13
CORPORATE GOVERNANCE

5. Communication and
Information
Preparations relating to nomination of the public auditor, what particular areas of emphasis should
be taken into account during the audit, as well as matters relating to auditor fees, are dealt with
by the Audit Committee. The Audit Committee is also responsible for preparing the audit of the
consolidated Financial Statements including the Management Report.
When communicating with shareholders and the general public, the Board of Management shall
provide transparent information, ensuring that communications are punctual, open, comprehensible
and treat issues fairly. It shall publish all new facts which may arise within the Company’s
areas of activity not known to the public, in particular where these are likely to have a substantial
impact on the share price due to their effect on the assets, financial situation or general course
of the Company’s business. All major financial dates shall be published in advance on the corporate
website.
Information about the Company shall be published electronically, in particular via the Internet.
All publications are available in English.
The Company shall notify on the purchase or sale of Company shares transacted by officers of
the Company or members of their families. These notifications are made on the corporate website
in accordance with the rules of “Directors’ Dealings”.
Neumarkt, January 15, 2003
Pfleiderer AG
14

Declaration of Compliance 2004
Under Sec. 161, Aktiengesetz (German Stock Corporation Act), the Board of Management and
the Supervisory Board of a joint stock company traded on the stock market must issue an annual
Declaration of Compliance. In this declaration, they must disclose to what extent they have
complied and shall comply with the Recommendations of the Government Commission on the
German Corporate Governance Code. In December 2003, the Board of Management and the
Supervisory Board published this declaration on the Company’s website, stating that they are
complying with the Recommendations of the Government Commission on the German Corporate
Governance Code, with the following exceptions:
Article 4.2.3:
Compensation of the Board of Management
Compensation received by the members of the Board of Management of Pfleiderer AG comprises
a fixed component and variable components. As a long-term incentive component, in 2001 the
General Meeting adopted a stock option scheme which runs until June 30, 2006. The stock option
scheme is not capped. No changes are envisaged to the current Scheme as this would require a
new resolution by the General Meeting.
Article 4.2.4:
Publication of individual compensation received
by members of the Board of Management
Compensation received by members of the Board of Management of Pfleiderer AG comprises
a fixed component, variable performance-linked components and components with a long-term
incentive (= stock options). Compensation received by members of the Board of Management
is not reported individually, only the total amount received by the board as a whole. In our opinion,
only the total amount received by the Board of Management is relevant to shareholders making
an assessment. In order to protect the private sphere, the Board of Management and the Supervisory
Board have decided not to report individual amounts of compensation or remuneration.
Article 5.4.1:
Age limit on membership of the Supervisory Board
At present, the Articles of Association of Pfleiderer AG set no age limit on membership of the
Supervisory Board. It is intended that a change to the Articles of Association be made, setting
an age limit of 70 years.
Article 5.4.5:
Publication of individual compensation received
by members of the Supervisory Board
At present, remuneration of the members of the Supervisory Board is a fixed fee. Remuneration
received by members of the Supervisory Board is also not reported individually. Those interested
can see the amount of remuneration as laid down in Article 15 of the Company’s Articles of
Association. This information is published on the website of Pfleiderer AG. Apart from reimbursement
of out-of-pocket expenses, including VAT when incurred in the course of duty, members
of the Supervisory Board receive payment each of 10,500 euros. This amount is payable after
the end of the fiscal year. In the case of the Chairman, this figure is doubled, while Deputy
Chairmen and Chairmen of the Committees receive 1.5 times this amount and members of the
Committees 1.25 times this amount.
15
CORPORATE GOVERNANCE

Article 7.1.2:
Publication of the Annual Financial Statements 2004
Publication of the Annual Financial Statements 2004 will not be made within 90 days of the end
of the fiscal year. Due to the Easter holidays in spring 2005, publication of the Annual Financial
Statements will exceptionally be made at the beginning of April 2005.
Performance-Linked Compensation of the Board of Management
Compensation received by the members of the Board of Management of Pfleiderer AG comprises
a fixed component and variable components. In addition to the variable bonus, members of the
Board of Management may participate in the Company’s Long Term Incentive Plan as a further
variable long-term incentive component. The criteria applied when deciding to award options
depend on the duties and performance of the individual board member, as well as the Company’s
economic state, its success and future perspectives. These factors are calculated using Nopat
and the Economic Value Added of the Group, as well as taking into account personal targets.
In fiscal 2004, the Board of Management received compensation amounting to 3.222 million
euros. This figure includes a variable component of 2.240 million euros. After adjustment for
elapsed options to former board members, in 2004 members of the Board of Management received
a total of 386,260 stock options which can be purchased at own cost.
Stock Option Plan
On July 10, 2001, the Pfleiderer General Meeting approved a stock option scheme which covers
a maximum 4,268,500 no-par value shares (corresponding to 10 percent of capital stock) which
may be issued as part of the Pfleiderer stock option scheme. The Company decides annually
at its own descretion whether a stock option scheme is to be run, who will participate and how
many shares each individual entitled to participate may receive. Stock options are issued on
condition that the person entitled make an own investment in the Company. The stock options
have a currency period of 6 years. The option may only be exercised for the first time 3 years
after it has been granted. The number of stock options is calculated from the amount of the individual’s
own investment in the Company, divided by a base value and then multiplied by a factor
of 12. The base value is determined from the average price of the Company’s share in the months
September through November. Stock options can be exercised when an exercise threshold of
between 110–125 percent of the base value has been reached.
Element
Fixed salary component
Variable components:
Nopat Group
EVA® Group
Delta EVA® to previous year EVA® Group
Personal targets
Hans H. Overdiek Michael Ernst Dr Jürgen Koch
(EVA® is a registered trademark of Stern Stewart & Co.)
16

Stock Option Program 2004 (Continuation of SOP 2001)
Based on the 2001 Stock Option Plan formally adopted by the Company on July 10, 2001, the Stock
Option Plan for 2004 was confirmed on August 10, 2004 by the Board of Management, and on
August 23, 2004 by the working Committee of the Supervisory Board. Accordingly, the Company’s
Board of Management is authorized to grant those entitled to take up the Company’s remaining
non-assignable stock options. In total, 24 members of the Board of Management/senior management
participated in 536,016 options in the SOP 2004. The base value was 6.99 euros. The
exercise price lies between 7.69 euros and 8.74 euros with a weighted average exercise price
of 8.22 euros.
A full list of the stock options granted is shown in the Notes to the consolidated Financial Statements
(pages 92 ff.) of the Pfleiderer Group.
17
CORPORATE GOVERNANCE

EASTERN EUROPE
Poland reported real economic growth of around 6 percent in 2004. The furniture
industry’s share in GDP came to around 2 percent – twice that of the European Union.
Some 4.3 percent of all furniture produced in Europe now comes from Poland.
20 Percent Growth in Poland
Low production and labor costs, highly qualified employees and secure raw material supplies
are the main location advantages for the production of furniture and particleboard in
Poland. Pfleiderer Engineered Wood has increased production capacity at its Polish sites in
order to meet market growth in Eastern Europe. Now, a new plant involving an investment
of around 60 million euros is also under construction in Russia. This will provide a further
important foundation from which we can realize our strategy of international growth.

PFLEIDERER GROUP AND PFLEIDERER AG
MANAGEMENT REPORT
Market Report
Consumption in Germany remains slack
Furniture and engineered wood industries profit from greater foreign demand
Strong international demand in the rail sector
General Economic Conditions
Following several years of slackness, the global economy picked up considerably during the reporting
period, with growth reaching five percent in 2004 according to “ifo”, the German economic
research institute. However, the German Federal Office of Statistics remains somber when focusing
on Germany alone. In this country, economic growth declined by 0.1 percent in 2003. And
despite the fact that a large number of public holidays fell over the weekends in 2004, GDP increased
in that year just 1.7 percent. When adjusted for this “holiday” effect, real growth came
to only around 0.5 percent.
As in 2003, exports proved the major motor for growth for the German economy in 2004. German
exports increased by around 8.2 percent year-on-year, while imports rose by only around
5.7 percent. This said, the German economy still remains in the doldrums. Private consumption,
accounting for nearly 60 percent of demand and thus the single main contributor, fell by a further
0.3 percent in 2004.
Engineered Wood Sector
Developments within Pfleiderer’s most important customer segment – the German furniture
industry – and in particular the kitchen furniture industry – are a major factor for Pfleiderer
Engineered Wood Germany. Looking at fiscal 2004 overall, trade associations reported growth
for the first time after three consecutive years of declining sales. Figures show that sales rose
by 1.5 percent to around 20 billion euros.
20

According to the trade associations, this upturn is almost entirely due to exports. Exports
accounted for around a quarter of all sales and increased in the first nine months of 2004 by
5.9 percent. The German furniture industry’s export quota has doubled in just nine years, and
now stands at 26.2 percent.
But domestic business in the German furniture sector still remains depressed, with growth at just
over one percent. Manufacturers of kitchens and lounge seating reported the strongest growth
within the industry to date. According to the Central Association of German Wood and Plastic
Processors (HDH), sales during the first eleven months of 2004 increased by 4.6 percent compared
to the same period of the previous year. On the other hand, manufacturers of office and
modular furniture complained of falling sales.
Developments in European engineered wood production, which supplies the furniture industry,
took on a similar pattern. According to the European Panel Federation, Brussels (EPF), production
volumes in Europe during the first half of 2004 increased by 7.4 percent compared to the same
period of the previous year. German engineered wood producers also profited from higher foreign
demand. Paralleling production volumes, export demand in the second quarter of 2004 rose overproportionately
by 18 percent over the previous year.
According to the Federal Office of Statistics, exports of raw particleboard from Germany increased
by 25 percent up to October 2004 compared to the same reporting period of the previous year.
The main buyers are Denmark and Poland.
Infrastructure Technology
Business growth in the Business Center track systems, part of the Business Segment Infrastructure
Technology, depends heavily on the capital expenditure plans of Deutsche Bahn AG, Germany’s
rail operator. Industrial growth as a whole also plays a major part in this, as does public spending
on infrastructure projects. Maintenance activity and the expansion of passenger and commercial
rail traffic are further influential factors for the rail sector, both in Germany and worldwide.
The Deutsche Bahn AG is responsible for maintaining and expanding the German rail network
infrastructure. Due to the German budget deficit in 2003, Deutsche Bahn announced that it would
be postponing planned investments, and it appears that this situation will continue into fiscal
2005. However, this development should only have a minor effect on results for Pfleiderer track
systems as weak domestic demand has been offset by export success. Nevertheless, orders in
Germany are expected to be considerably lower in fiscal 2005.
21
MANAGEMENT REPORT MARKET REPORT

Company Report
Corporate portfolio more focused following disposal of Business Center
Poles & Towers and other marginal operations
Pre-tax results for continued operations up by 76.5 percent to
31.6 million euros
Equity ratio improves to 32.6 percent (including minority interests)
Net corporate indebtedness reduced by around 133 million euros to
122.9 million euros
Focusing on Core Competences
In a move to further reduce corporate indebtedness and to strengthen its equity ratio, the
Pfleiderer Group disposed of its Business Center Poles & Towers (both US and European operations)
in fiscal 2004, as well as its Business Units water systems and Wind Energy. In January
2004, Pfleiderer AG and Fuhrländer AG set up a joint holding company to incorporate all onshore
wind energy activities from both sides. In this newly formed company Fuhrländer AG holds the
majority stake and is responsible for managing operations. Under the terms of agreement, the
new joint venture took over with immediate effect all of Pfleiderer Wind Energy’s onshore activities,
including its customer base, patents, licenses and proprietary rights.
In February 2004, the Pfleiderer Group sold its US concrete and steel poles and towers operations
to Valmont Industries, Inc., a world market leader for poles, supports and infrastructure technology.
The transaction included seven concrete and steel pole plants in the USA with annual sales
of over 75 million dollars. The purchase price came to 115 million dollars, of which 105 million
dollars was paid in cash.
The remaining activities of the Business Center Poles & Towers were disposed of in two further
stages. On July 1, 2004, steel tower production for wind converters, with 135 employees based
in Leipzig, was sold to the steel and wind tower construction company SIAG Tube & Tower GmbH,
an affiliate of Schaaf Industrie Aktiengesellschaft, Leipzig. In December 2004, the residual
activities of the Business Center Poles & Towers were sold to financial investors in cooperation
with VTC Partners GmbH. This deal relates to three sites in Germany with 565 employees and
sales of around 80 million euros.
Finally, in November 2004, the Pfleiderer Group signed a contract for the sale of Pfleiderer
water systems GmbH. Formed in 2000, Pfleiderer water systems GmbH employs 33 people and
operates successfully in Germany, Europe, Asia and the USA.
In total, these disposals raised around 43.1 million euros, with a book profit of 51.4 million
euros.
22

Summary of Discontinued Operations
Operations which have been disposed of are shown in the consolidated income statement under
“discontinued operations” in the Financial Statements. The operative results of the Business
Center Poles & Towers’ for its US operations are stated up to March 31, 2004, in accordance with
their respective disposal date. Regarding the German operations of this Business Center, the cutoff
date is November 30, 2004, while Pfleiderer water systems is stated up to December 31, 2004.
In order to make comparison easier, the figures for the previous year have been adjusted in the
consolidated income statement in compliance with US-GAAP.
In the consolidated balance sheet as of December 31, 2004, and for the previous year, assets
and liabilities of discontinued operations are shown under “Assets and Liabilities of Discontinued
Operations”.
Earnings
23
MANAGEMENT REPORT COMPANY REPORT
2004 2003
% of % of
million euros sales million euros sales
Sales revenues 901.0 100.0 848.2 100.0
Foreign share in percent 53.8 49.1
Cost of sales –659.5 73.2 –628.0 74.0
Gross margin 241.5 26.8 220.2 26.0
EBITDA 87.4 9.7 72.2 8.5
Amortization/depreciation write down
of fixed assets and financial assets –37.2 –37.3
EBIT 50.2 5.6 34.9 4.1
Net interest –18.6 –2.1 –17.0 –2.0
EBT continued operations 31.6 3.5 17.9 2.1
Taxes on income
Earnings of continued operations
–9.6 –1.1 –9.3 –1.1
before minority interests 22.0 2.4 8.6 1.0
Earnings of discontinued operations 27.3 3.0 –51.5 –6.1
Taxes on discontinued operations 0.8 0.1 1.7 0.2
Earnings before minority interests 50.1 5.6 –41.1 –4.8
Minority interests 16.3 1.8 –4.6 0.5
Earnings after minority interests 33.9 3.8 –45.8 –5.4

In fiscal 2004, the Pfleiderer Group reported sales of around 901 million euros (2003: 848.2 million
euros). This represents an increase in sales of 6.2 percent compared to the adjusted figures for
the previous year. The continuing internationalization of both Engineered Wood and track systems,
as well as the long sought-after improvement in prices for raw particleboard in Germany, are
decisive factors here. The foreign percentage in Group sales increased by 4.7 percentage points
to 53.8 percent.
Earnings before interest, taxes, depreciation and amortization (EBITDA) increased by 21.1 percent
to 87.4 million euros compared to the previous year. The EBITDA margin rose from 8.5 percent in
2003 to 9.7 percent in 2004. This improvement in margin is an important step, but must be still
further consolidated. In the Business Center Engineered Wood the EBITDA increased by 36.5 percent
to 78.9 million euros. This figure reflects significant increases, both in terms of German
business, as well as for our Polish operations. The Business Segment Infrastructure Technology
also reported a slight increase in EBITDA.
Earnings before interest and taxes (EBIT) as at December 31, 2004 came to 50.2 million euros
(2003: 34.9 million euros). The EBIT margin improved from 4.1 percent to 5.6 percent.
Earnings before taxes (EBT) for the Pfleiderer Group for continued operations came to 31.6 million
euros (2003: 17.9 million euros). Accordingly, the sales margin increased from 2.1 percent
in 2003 to 3.5 percent in 2004, bringing the Group closer to its target of 5 percent. The earnings,
depreciation and amortization and changes in accruals from the announced disposals of
the Poles & Towers and water systems business are reported under discontinued operations.
Following the losses from disinvestments in the two previous years, positive earnings of 27.3 million
euros (2003: –51.5 million euros) from discontinued operations were recorded again in
2004. Overall, the Pfleiderer Group posted pre-tax earnings of 58.9 million euros in 2004, compared
with a loss of 33.6 million euros in 2003.
The Pfleiderer share responded accordingly, with EPS improving from –1.07 euros to 0.79 euro
in 2004.
The ratio of cost of materials to sales adjusted for changes in inventories within the Group rose
to 52.8 percent as at year-ending 2004, compared with 51.1 percent at the end of 2003. Among
others, this reflects changed sales and costs structures in the Business Center track systems.
The proportion of material procured from third parties is higher in the international track systems
business than in domestic business.
The depreciation to sales ratio fell from 4.4 percent in 2003 to 4.1 percent in 2004. This is due
to declining capital expenditure in the period since 2002.
The cost-savings package from the previous year further reduced costs. Personnel expenses,
in particular, fell by around 2 percent to 20.3 percent (2003: 22.3 percent). This particularly
reflects changes made to holding structures following simplification of the Group’s composition.
24

Net Assets and Financial Position
25
MANAGEMENT REPORT COMPANY REPORT
Dec. 31, 2004 Dec. 31, 2003
% of balance % of balance
million euros sheet total million euros sheet total
Cash and cash equivalents 82.7 11.2 67.2 8.6
Inventories 104.6 14.1 101.2 13.0
Other current assets 88.8 12.0 89.0 11.4
Assets of discontinued operations 4.9 0.7 106.4 13.7
Current assets 281.0 38.0 363.8 46.7
Property, plant and equipment 328.3 44.4 299.3 38.4
Intangible assets 93.8 12.7 92.6 11.9
Other fixed assets 36.4 4.9 23.6 3.0
Fixed assets 458.5 62.0 415.5 53.3
Total assets 739.5 100.0 779.3 100.0
Dec. 31, 2004 Dec. 31, 2003
% of balance % of balance
million euros sheet total million euros sheet total
Liabilities and other
short-term liabilities 180.5 24.4 151.3 19.4
Financial liabilities
Liabilities of discontinued
13.6 1.8 49.8 6.4
operations 17.1 2.3 72.5 9.3
Short-term liabilities 211.2 28.5 273.6 35.1
Long-term financial liabilities 192.0 26.0 273.2 35.1
Accruals for pensions 60.4 8.2 57.8 7.4
Other long-term liabilities 34.8 4.7 35.5 4.6
Minority interests 90.2 12.2 44.3 5.7
Long-term liabilities 377.4 51.1 410.8 52.7
Shareholders’ equity 150.9 20.4 94.9 12.2
Total liabilities and
shareholders’ equity 739.5 100.0 779.3 100.0

Net indebtedness of the Pfleiderer Group was reduced considerably in fiscal 2004. It amounted
at the end of 2004 to 122.9 million euros, or 132.9 million euros less than the previous year’s
figure of 255.8 million euros. This reduction is particularly due to the repayment of long-term
financial liabilities, using the proceeds from the disposals and the cash flow from operating
activities of 86.4 million euros (2003: 68.9 million euros).
Shareholders’ equity including minority interests came to 241.1 million euros as of December 31,
2004. The increase of around 101.9 million euros is largely due to an increase in capital following
the issue of new shares in the Polish affiliate Grajewo S.A., in June 2004 in which the Pfleiderer
Group did not participate. The capital increase yielded around 62 million euros, with 1.6 million
new no-par value shares taken up by international and private investors at 180 PLN per share.
The new issue was five-times over-subscribed.
The resulting book profit of 22.7 million euros was used to finance restructuring in Germany,
in particular the closure of the Rheda plant. Aside from this special effect, profits after taxes
posted by discontinued operations added a further 28.1 million euros to the equity increase.
Overall, the Pfleiderer Group achieved a return on capital employed (ROCE) of 11.5 percent.
Thanks to its improved earnings situation, this figure is considerably higher than in the previous
year (8.2 percent). In particular, the Business Segment Engineered Wood posted better earnings,
thereby improving its ROCE to 12.9 percent. The ROCE for the Business Segment Infrastructure
Technology is 27.8 percent.
Calculation 2004 2003
Net indebtedness Financial liabilities – cash and cash equivalents in million euros 122.9 255.8
Leverage Net indebtedness / EBITDA in million euros 1.4 3.5
Equity ratio Equity (incl. minority interests)/ balance sheet total in % 32.6 17.9
Gearing Net indebtedness / equity (incl. minority interests) in % 51 184
Capital employed Net working capital* ) + fixed assets in million euros 435.2 423.8
Return on Capital Employed EBIT/ capital employed in % 11.5 8.2
* ) Certain medium-term liabilities are taken into account when calculating net working capital.
Financing
Refinancing within the Pfleiderer Group is directed at securing the Company’s long-term future.
Long-term liabilities from loans have maturity periods up to 2010 and carry an average interest
change of around 6 percent. Fitch Ratings Ltd., revised its rating in 2004 which was upgraded
in October 2004 from “BB negative outlook” for senior unsecured debt to “BB stable outlook”.
International business is largely conducted using own production plants located within our major
markets. Exports from Germany are mainly invoiced in euros. The proportion of exports billed
in other currencies is low and risks arising from this business are adequately hedged.
26

Derivative Financial Instruments
Derivative financial instruments within Pfleiderer Group are only used solely to hedge against
currency and interest rate risks arising from transactions which are part of the Company’s normal
operations. Hedging activities are generally conducted centrally by Pfleiderer AG and Pfleiderer
Finance B.V. on behalf of the group. Further information is given in the notes to the consolidated
Financial Statements.
Net Assets and Earnings of Pfleiderer AG
As holding company, Pfleiderer AG is responsible for the strategy and management of the
Group. This means that the earnings position of Pfleiderer AG is closely related to the success
of the Pfleiderer Group. As in the previous year, the fiscal year for Pfleiderer AG was marked by
the strategic realignment of the Pfleiderer Group and thus by the effects of divesting specific indirect
and direct holdings. As of January 1, 2004, purchase of electricity was performed directly
via Pfleiderer AG. The electricity was then invoiced at cost to the affiliated companies. Investment
earnings were largely defined by consolidated results from affiliated companies in the Business
Segment Infrastructure Technology and were largely due to the disposal of the Group’s North
American Poles & Towers operations.
The net income for the year of 6.3 million euros was offset by losses carried forward of 29.5 million
euros, resulting in a provisional accumulated deficit of 23.2 million euros.
Liabilities to banks increased due to long-term investments. However, this development was offset
by changes to interest-bearing liabilities to affiliated companies, which were considerably reduced.
At the same time, due to a change in affiliated companies’ capital needs, short-term bank balances
decreased, as did interest-bearing receivables from affiliated companies. Interest-bearing liabilities
to affiliated companies relate in particular to Pfleiderer Holzwerkstoffe GmbH, Pfleiderer
Infrastrukturtechnik GmbH & Co. KG and the Dutch financing company Pfleiderer Finance B.V.,
Deventer/Netherlands. The Dutch financing company refinances itself via the capital markets.
Dividend
As a matter of policy, payment of a dividend depends on the state of the Group’s operating
results and cash flow. In fiscal 2004, the Company focused on successfully reducing its net indebtedness.
We therefore propose that no dividend be paid for fiscal 2004. Nevertheless, our
shareholders have benefited from the remarkable increase in the value of the Pfleiderer shares
they hold.
Dependent Company Report
In its dependent company report on relationships with affiliated companies, Pfleiderer AG made
the following statement for fiscal 2004:
“We hereby declare that our Company received adequate compensation for every transaction with
affiliated companies listed in the report in the light of the circumstances known to us at the time.
No actions were undertaken or waived in the interests of Pfleiderer Unternehmensverwaltung
GmbH & Co. KG or companies affiliated to Pfleiderer Unternehmensverwaltung GmbH & Co. KG.
The Company’s relationship to Pfleiderer Unternehmensverwaltung GmbH & Co. KG terminated
on March 21, 2004.”
27
MANAGEMENT REPORT COMPANY REPORT

GERMANY
GDP in Germany increased by 1.7 percent in 2004. Once again, exports proved to be
the driving force behind the German economy. In the engineered wood sector, export sales
of raw particleboard were up by 25 percent.
Domestic Consolidation
and Export Growth
With a market share of around 21 percent, Pfleiderer Engineered Wood is Germany’s clear
market leader in the field of raw particleboard. Driving forward consolidation of domestic
production capacity has led to a positive stabilization in prices. Due to high foreign demand,
production plants in the industry are now generally running at full capacity. Pfleiderer
Engineered Wood Germany increased its percentage in foreign sales by 3.1 percent to
over 56 percent.

Consolidation in Germany.
Growth in Europe.
Pfleiderer Engineered Wood
is fitting its production
capacities to match growth
on international markets.
Business Segment Engineered Wood
Successful market consolidaton in Germany
Strategic Expansion of production portfolio to include MDF
Expansion of presence in growth markets of eastern Europe
Part of the Pfleiderer Group, the Business Segment Engineered Wood employs 3,475 people at
eight sites in Germany and Poland. Pfleiderer Engineered Wood is a leading manufacturer of
raw particleboard and surface-finished products in Europe. Its recent acquisition of a production
site for MDF (medium-density fiberboard) in Nidda on November 15, 2004 has closed a strategic
gap in its product portfolio. Pfleiderer Engineered Wood can now fully participate in this strongly
growing high-profit segment using its own production capacity in Germany. Overall, Pfleiderer
Engineered Wood reported sales in fiscal 2004 amounting to 758.9 million euros (2003: 715.9 million
euros).
Until mid-2004, the German market for engineered wood experienced intense competitive pressure,
lower prices and weakness within the furniture industry over the last three years. In the light
of this, the Group’s strategy has been to strengthen its independence from the domestic market
Sales by Region of Business Segment Engineered Wood
in % 2004 2003
Germany 43.5 46.6
Other EU countries 41.0 27.7
Rest of Europe 12.9 23.6
Other countries 2.6 2.1
30
Rest of Europe
Other
EU countries
Other countries
Germany

y expanding foreign and export ratios during fiscal 2004 in the first instance. Overall, the share
of foreign and export in sales in the Business Segment Engineered Wood came to 56.5 percent.
The increase of 3.1 percent is particularly due to pleasing developments in the Polish market. The
Business Unit East, with its Polish affiliates Grajewo S.A. and Prospan S.A. saw sales increase
in fiscal 2004 by 19.9 percent to 227.3 million euros, thereby contributing around 30 percent to
overall sales of the Business Segment Engineered Wood. High demand in the Polish furniture
market on the eve of Poland joining the EU on May 1, 2004 helped sustain this dynamic development.
The Business Unit East met this stronger demand by making investments which will increase
both the capacity and quality of production at both sites. Exports of Polish production to
other eastern European states, together with the new production plant currently under construction
in Novgorod in Russia, means that Pfleiderer has increased its foreign sales share in
the Business Segment Engineered Wood overall. This Business Segment is now profiting from
expanding market economies in eastern Europe.
In fiscal 2004, earnings before interest, taxes, depreciation and amortization (EBITDA) for the
Business Segment Engineered Wood came to 78.9 million euros, a considerable improvement of
36.5 percent. The improvement of the EBITDA margin by 2.3 percentage points to 10.4 percent
reflects the improved price situation in the German and Polish particleboard markets in the second
half of the year. Earnings before interest and taxes (EBIT) at year-ending 2004 came to 48.4 million
euros (2003: 29.1 million euros).
In October 2004, Pfleiderer Engineered Wood’s Business Unit West introduced a new program
to further increase profitability through optimized procedures and greater customer utility.
Among others, the “PHW 2006” program analyzes the manufacturing and supply chain, as well
as commercial functions and marketing/sales. Our objective is to harness further potential
for increased profitability by improving the production process and reducing complexity.
Key Indicators of Business Segment Engineered Wood
in million euros 2004 2003
Sales revenues 758.9 715.9
EBITDA 78.9 57.8
EBIT 48.4 29.1
Capital employed 376.8 361.1
ROCE (in %) 12.9 8.1
Sales Revenues
2004
2003
EBITDA EBIT
2004 78.9 million euros 2004 48.4 million euros
2003
31
57.8 million euros
2003
MANAGEMENT REPORT BUSINESS SEGMENTS
29.1 million euros
758.9 million euros
715.9 million euros

Products
Pfleiderer Engineered Wood operates in the engineered wood market, manufacturing raw particleboard,
melamine-faced chipboard (MFC), high-pressure laminate (HPL) and post-forming elements.
Following its take-over of the MDF production plant at Nidda from the HORNITEX Group in November
2004, Pfleiderer Engineered Wood made a strategic extension to its product portfolio. As
a result, it is now able to offer customers a full range of engineered wood products from own
production. The major part of sales in Germany comes from melamine-faced chipboard, which
accounts for 45.5 percent of the sales of the Business Unit West. This is followed by raw particleboard
(including tongue and groove board) which accounts for 21.3 percent.
With its brands wodego®, Thermopal® and Pfleiderer, Pfleiderer Engineered Wood markets
engineered wood carriers. The main products are particleboard, MDF and OSB board, either in
raw form or with various facings in a range of styles and color decors. Pfleiderer manufactures
a wide range of engineered surface structures, board thicknesses, melamine and ABS edgings
are directed at specialist retail outlets, architects, interior designers, shop fitters and furniture
manufacturers. Its focused system of logistics enables it to supply customers within 48 hours.
Sales by Product Group BU West
in % 2004
Raw particleboard incl. tongue and
groove board 21.3
MFC 45.5
HPL 12.9
Elements and accessories 18.2
MDF/HDF 1.4
Other 0.7
Sales by Customer Group BU West
in % 2004
Industry 55.3
Trade 42.1
Other 2.6
32
Elements
HPL
Trade
MDF/HDF
Other
Other
MFC
Raw particleboard
Industry

Production
Pfleiderer Engineered Wood has six production sites in Germany with output and annual sales
of around 2.2 million m 3 of raw particleboard, 65 million m 2 of melamine-faced chipboard,
22.5 million m 2 of high-pressure laminate, 6.3 million m 2 of post-forming elements – and since
November 2004 around 130,000 m 3 of MDF (annual production).
While the German market for engineered wood has been profiting from greater export demand
since mid-2004, increased pressure on plants due to excess capacity, together with downward
price movement, was still being felt in the first half of 2004. The industry responded by greatly
reducing particleboard production capacity in Germany. For its part, Pfleiderer decided to close
down its Rheda-Wiedenbrück plant at the end of November 2004, thereby further reducing overall
domestic particleboard production by 6 percent or around 500,000 m 3 . Major parts of the
production plant are now being used on other sites within the Group.
This move was followed up in the autumn of 2004 when it was decided to consolidate production
at the Gütersloh plant.
Steady ordering in Germany and abroad resulted in production running at a high level in all our
plants during 2004. However, an explosion in the conveyor line at the Rheda-Wiedenbrück plant
led the production closing down there for one week. Nevertheless, Pfleiderer Engineered Wood
was able to complete all existing outstanding orders without major delay by drawing on existing
inventories and using its production capacity at its other sites in Germany.
During fiscal 2004, around 1.39 million m 3 of raw particleboard was produced at the Polish
sites of Grajewo and Wieruszow. In order to adjust Polish production to increased demand in
eastern Europe, raw particleboard production capacity at the Grajewo plant was extended by
around 5 percent, at the same time improving productivity. During the fitting period, deliveries
were maintained from German production plants within the Pfleiderer Group.
Prices
Increased export demand for engineered wood products in the second half of 2004 had a positive
effect on prices for raw particleboard in Germany. Long overdue double-figure percentage
increases were recorded from July 2004 onwards, with the annual average price for raw particleboard
standing at 119.88 euros per m3 . Compared with 110.79 euros per m3 for 2003, this represents
an average increase of 8 percent on the previous year. Prices remained stable in other
product markets that Pfleiderer Engineered Wood serves. While pressure on prices for directfaced
white particleboard became noticeable in 2003, price levels stabilized during 2004. However,
prices for these products still need to catch up.
33
MANAGEMENT REPORT BUSINESS SEGMENTS

Procurement
The Business Segment Engineered Wood sets its procurement strategy to safeguard its supply
base. This entails assuring that supplies meet delivery dates, and are acceptable in terms of
quality, environmental and safety standards, quantity and cost.
Quality requirements and environmental standards defined by the Business Segment Engineered
Wood provide a basis on which suppliers are selected and assessed. Continuous assessment is
carried out on materials and goods to ensure that quality levels remain constant. Pfleiderer pursues
a multi-supplier strategy for its essential materials and sites. This ensures that it remains
independent and can guarantee supplies. In order to avoid any unnecessary stockpiling of inventories
which binds cash, major chemical pre-products and raw materials are supplied on a
“just-in-time” basis. Contracts outlining prices and quantities with major suppliers of chemical
pre-products, ensure that quantities purchased and prices paid remain largely constant as a
factor of planning.
While prices paid for most chemicals remained stable, considerably higher prices were paid for
urea-based glues and paraffin, mainly due to the increase in oil prices.
Energy needed in production is guaranteed at the major production plants in Germany as the
Company runs its own co-generation plants.
Interwood GmbH
The most important raw material used in the production of particleboard is wood. Particleboard
and MDF board require timber, sawmill by-products and used wood. As a procurement, plant
supply and trading organization, Interwood GmbH has an annual trading and transport volume of
around 4 million metric tons. It is supported in this role by its affiliates Heller Holz GmbH and
the joint venture bi.om GmbH & Co. KG.
Legislation in Germany favors the use of renewable forms of energy, promoting the recycling
of used wood. Procurement of wood used in co-generation plants in Neumarkt, Gütersloh, Nidda
and Rheda-Wiedenbrück, as well as material recycling for particleboard production in Germany,
is now bundled into Interwood GmbH. The large volumes involved and the ongoing optimization
of logistics in the procurement process, ensure that every potential means of reducing costs is
applied. Pfleiderer’s daily requirement for timber, sawmill by-products and used wood comes to
around 850 truckloads.
34

Aside from its leading
market presence in
Germany and Europe,
Pfleiderer track systems
has now entered the
Asian market.
Business Segment Infrastructure Technology
Focus on Business Center track systems following successful disposal of
Business Center Poles & Towers and water systems business unit
Project success in Europe and Asia
Strategic cooperation to enter other markets in China and India
Having spun off its Business Units Poles & Towers USA and Europe and the development business
water systems in fiscal 2004, the Business Segment Infrastructure Technology is now focused
on its Business Center track systems. A holistic-oriented service system and engineering provider,
Pfleiderer track systems is a leading supplier of innovative rail track systems for urban and intercity
rail traffic, producing state-of-the-art concrete track and turnout sleepers. Pfleiderer track
systems employs 861 people in sales, engineering and production in nine locations in Germany,
Spain, Hungary and Romania. In presenting the Business Segment Infrastructure Technology,
figures for the previous year have been adjusted for discontinued operations to make comparison
easier. In fiscal 2004, the Business Segment Infrastructure Technology with its Business Center
track systems increased sales by 10.6 percent to 138.2 million euros (2003: 124.9 million euros).
Around 39.6 percent of sales were generated outside Germany. This increase in foreign sales
reflects the successful international growth strategy implemented by Pfleiderer track systems. In
order to strengthen its independence from the German market, Pfleiderer track systems is putting
much effort into expanding its international project business. This particularly relates to its
ballastless track system RHEDA 2000® used in the new construction of high-speed links.
35
MANAGEMENT REPORT BUSINESS SEGMENTS

In addition to the operative results of the Business Center track systems, earnings before interest,
taxes, depreciation and amortization (EBITDA) for the Business Segment Infrastructure Technology
reflect adjustments following the sale of operations, as well as consolidation effects from this
segment. Despite these expenses, EBITDA improved slightly by 5.5 percent in the previous year
to 19.1 million euros (2003: 18.1 million euros). Earnings before interest and taxes (EBIT) came
to 15.3 million euros and were practically stable compared to the previous year (2003: 15.4 million
euros).
Key Indicators of Business Segment Infrastructure Technology
in million euros 2004 2003
Sales revenues 138.2 124.9
EBITDA 19.1 18.1
EBIT 15.3 15.4
Capital employed 54.9 56.0
ROCE (in %) 27.8 27.5
Sales Revenues
2004
2003
EBITDA EBIT
2004 19.1 million euros 2004
15.3 million euros
2003
Products
Pfleiderer track systems has been developing and producing sleeper systems for intercity and
urban rail transportation since 1954. Its customers are the major rail operators, as well as operators
of municipal, underground and tramway networks. Working in close cooperation with
its customers and associates, Pfleiderer track systems offers an allround service, from product
development, design, project engineering, production, supply and logistics through to quality
management.
In addition to its classic monolithic sleeper system for traditional asphalt top-layers – the type
B70 concrete sleeper – Pfleiderer track systems produces a wide range of products to meet
specific requirements. Particularly important here is Pfleiderer’s patented monolithic track system
RHEDA 2000® with which it has had considerable international success. The RHEDA 2000®
technology has proved itself over the last few years in the construction and operation of major
European high-speed rail links. The system is also used in a wide range of special applications,
for example when renovating tunnels, or as RHEDA CITY version for light rail systems such as city
railways and tramways.
36
18.1 million euros
2003
15.4 million euros
138.2 million euros
124.9 million euros

Due to its very low construction height, the RHEDA 2000® offers considerable advantages when
renovating tunnels as it provides greater clearance in existing tunnels. This permits higher train
operating speeds, in turn resulting in better track usage.
Building on its leading position in Germany and Europe, Pfleiderer track systems is now targeting
new markets in the growth regions of central, eastern and south-eastern Europe, as well as
in India, South Korea, China and other south-east Asian countries. In fiscal 2004, the Business
Center was actively involved in the following projects:
In Germany, around 100,000 bi-bloc sleepers for ballastless track were supplied for the new
line between Nuremberg and Ingolstadt. These sleepers were produced “just-in-time” and supplied
directly to the site.
In the construction of the new Amsterdam-Brussels high-speed link (HSL-Zuid) – currently the
biggest rail infrastructure project in Europe – where Pfleiderer track systems will be producing
and delivering around 260,000 sleeper systems based on the RHEDA 2000® technology by the
autumn of 2006. Pfleiderer track systems is also involved in a joint venture with the Dutch construction
company Royal BAM N.V. where it is directly responsible for project design, engineering
and quality management.
Pfleiderer track systems has entered the Asian market where it is involved in the construction
of the new high-speed Taipei-Kaohsiung link in Taiwan. Apart from supplying engineering
services for the planning and construction of major sections of the track, railway stations and
turnouts will be fitted with RHEDA 2000® technology. Around 65,000 meters of turnout sleepers
will come from German production, while some 125,000 track sleepers will be produced in
Taiwan in conjunction with a local partner.
Pfleiderer track systems will be supplying over 680,000 type B70 concrete sleepers for Turkey’s
modernization of the first stretch of the Ankara to Istanbul link. The sleepers will be delivered
from German production, as well as from the Buzău plant in Romania and the Lábatlan plant
in Hungary. This order means that these plants will be running at full capacity for the next
15 months.
An order has been taken from VAE GmbH, Zeltweg in Austria for Pfleiderer track systems to
supply around 20,000 of its RHEDA 2000® ballastless track system turnout sleepers for the
underground “Circle Line” in Singapore by 2008. These sleepers will be supplied by the Coswig
plant near Dresden.
Pfleiderer track systems is extending its presence in the growth markets of China and India
through two cooperative ventures:
In China, Pfleiderer track systems has been a partner in the “German High-Speed Initiative”
since 2003. The Initiative is represented by two competence centers for rail technology in the
capital Bejing and the South-China growth region of Guangdong.
In India, Pfleiderer track systems has entered into a joint venture with Patil Rail Infrastructure
Ltd., the biggest producer of railway sleepers in India. The first project for this newly-formed
joint venture, operating under the name “Patil Pfleiderer track systems Pvt. Ltd.,” will participate
in the construction of a 300-kilometer rail track in the mountainous Kashmir region, and will
also involve the construction of tunnels up to 11 kilometers long.
37
MANAGEMENT REPORT BUSINESS SEGMENTS

Production
Reduced capital expenditure by Deutsche Bahn AG has affected Pfleiderer track systems’ domestic
business. However, production in the German plants during fiscal 2004 was also used in
international projects in Taiwan and the Netherlands, as well as for ongoing domestic business.
Production capacity in the plants in Romania and Hungary is fully booked up for around 15 months
following an order taken to modernize rail links in Turkey.
A plant has been set up with a local partner in Taiwan to produce around 125,000 rail sleepers
as part of the Taiwanese high-speed project. As this project has since been completed. The
plant involved has been dismantled and will be used elsewhere in the region for other projects.
The Business Center track systems produced around 1.2 million track sleepers and around
300,000 meters of rail turnout sleepers at its German production plants in Coswig, Langen,
Neumarkt, Gernsbach and Kirchmöser.
As of December 31, 2004, order books for Germany and abroad were full for the next 6 months.
Quality Management
Maintaining constant high standards of quality for all our products is of fundamental importance,
especially for the rail traffic segment. For many years now, Pfleiderer track systems has been
applying a quality management system to ensure uniform high quality standards for all its products.
The quality management system itself is also subject to continual monitoring and improvement.
Productivity and the quality of work processes are constantly enhanced as a result of
continual improvement monitoring. The quality management system for central units and production
plants in operation for Pfleiderer Infrastructure Technology is certified according to DIN EN
ISO 9001, documenting the high quality standards of our products. Products from Pfleiderer track
systems have an excellent reputation internationally.
Deutsche Bahn AG regularly subjects its goods in to product qualification. Our new plant in
Kirchmöser, Brandenburg, which started production in 2003, has now also received Q1 supplier
status. This matches all Pfleiderer track systems’ other German plants.
Only proven and extensively tested materials subjected to pre-testing from certified suppliers
are used in production by Pfleiderer Infrastructure Technology. Independent accredited organizations
also test our products, in addition own product monitoring performed at various stages
of production.
38

Procurement
In order to take advantage of economics of scale, Pfleiderer Infrastructure Technology has bundled
demand for raw materials, supplies and services used in production. The objective of its procurement
strategy is to tie up as little capital as possible, avoiding high inventory levels, yet at
the same time guaranteeing supply certainty for essential materials used in production. Where
possible, medium to long-term contracts are signed to cover the supply of standard materials.
Its multi-supplier strategy for the main materials and pre-products as well as other items ensures
that Infrastructure Technology is not dependent on individual suppliers. Shifting the call-off of
raw materials for cement production back to the suppliers has effectively reduced inventory storage
time to less than one working day.
Higher prices for steel felt during the reporting period were largely alleviated through existing
long-term contracts, resulting in only moderate rises in total material costs.
39
MANAGEMENT REPORT BUSINESS SEGMENTS

ASIA
Asia’s rapid economic expansion is leading to increasing demand for modern, but
environmentally friendly, traffic systems. In these growth markets, mobility is increasingly
becoming a major competitive factor.
High-Speeding to Asia
Pfleiderer track systems’ technological leadership in rail sleeper systems has brought the
Company a series of international successes. Its contribution to engineering and constructing
the new high-speed link in Taiwan, connecting the cities of Taipei and Kaohsiung, marks its
successful entry into the Asian market. Now new strategic alliances are being forged in China
and India, strengthening Pfleiderer track systems’ presence in these markets and its business
potential in one of the world’s fastest-growing regions.

Research & Development
New “MultiFunctionPanel” successfully introduced
Ballastless “RHEDA 2000®” sleeper further developed to reduce noise
The Pfleiderer Group’s research and development activities are directed at optimizing production
processes and products. Products and services are continually improved in close cooperation
with customers and partners to meet market demands. Some 69 quality managers, laboratory
technicians, product designers and applications specialists were also engaged in research at
development work in the Business Segments Engineered Wood and Infrastructure Technology in
2004. Overall, the Pfleiderer Group spent 2 million euros on research and development during
fiscal 2004 (2003: 2 million euros).
Reseach & Development
2004
2003
Engineered Wood
Research and development activities by the Business Segment Engineered Wood focus on the
use of recycled wood, optimization of the value added chain and continued product development.
The feedback from an ongoing dialogue with customers flows back into research for new types
of surface finishes and facings for the kitchen furniture industry. Pfleiderer Engineered Wood’s
latest development is its MultiFunctionPanel (MFP) from wodego®. With its high flexural and
cross-tension strength, this new carrier is an economic alternative to oriented stranded board
(OSB) for interior outfitters and carpenters. MultiFunctionPanel is strong enough to be used
as a bearing element in interior construction, for flooring or in shop and trade fair stands.
Infrastructure Technology
High demands are placed on all research and development activities in the Business Center track
systems, part of the Business Segment Infrastructure Technology. The high technological standards
of the individual products involved demands a continuous process of innovation and development
of system concepts. One example of this is the optimization of the RHEDA 2000® sleeper system.
The latest development in monolithic track is a mass-spring system. This innovation can be used
in locations with particularly high demands – for example in mountainous terrain, tunnels and stations
or to reduce secondary air noise on neigbouring buildings. The mass-spring system acts
as an elastic element between upper track layer and substructure, effectively reducing vibration.
Absorbing vibration in turn reduces noise levels. At present, around 9 kilometers of ballastless
RHEDA 2000® track in the north-south line in Berlin is being constructed using the mass-spring
system.
42
2.0 million euros
2.0 million euros

The unrelenting development of train is also driving development in track systems, which must
keep pace. Pfleiderer’s city solutions – for example its “Green Track” system for tramways –
are just one example of this. Pfleiderer track systems maintains a constant dialogue with its
customers, particularly with regard to reducing noise levels and in anticipating the aesthetic
demands of city planners.
Capital Expenditure
New plant construction in Novgorod, Russia progressing on schedule
New construction of MDF/HDF plant planned
Capital expenditure by the Pfleiderer Group is directed at the replacement of its assets, as well
as the construction of new production sites and development of new products. Internal feasibility
guidelines ensure that projects are only embarked upon which provide an appropriate return on
capital. In fiscal 2004, the Pfleiderer Group invested 45.4 million euros (2003: 31.7 million euros).
Capital Expenditure
2004
2003
Engineered Wood
The main thrust of capital expenditure in the Business Segment Engineered Wood goes towards
strengthening and expanding the Company’s presence in the growth regions of eastern Europe.
This ensures that Pfleiderer can participate in dynamic market growth and the sustained strong
demand for engineered wood products in this region. Around one third of total investment by
the Pfleiderer Group in fiscal 2004 flowed into the expansion of production capacity at Grajewo
in Poland. Rebuilding the existing raw particleboard press has increased its production capacity
by around five percent. This has been coupled to higher productivity. In 2003, construction work
started on a new plant at Novgorod, Russia, and work on the new particleboard plant is proceeding
on schedule. Following clearance and preparation of the site, the foundation stone was
formally laid in May 2004. Machinery from the Rheda-Wiedenbrück plant, which closed down
production of raw particleboard on November 30, 2004, will be re-used in Novgorod. According
to current planning, production in Russia should start by the end of 2005.
43
45.4 million euros
31.7 million euros
MANAGEMENT REPORT RESEARCH & DEVELOPMENT/CAPITAL EXPENDITURE

In September 2004, Pfleiderer approved an investment project to optimize processing logistics
in HPL production at its engineered wood site in Arnsberg, Germany. The optimized production
planning and control system should result in considerably shorter delivery times and a significant
reduction in inventories. This will do more than just strengthen the competitive position and
market share of Pfleiderer Engineered Wood as a partner for the furniture industry and specialist
trade by speeding up deliveries. By helping to tighten up product ranges, it will also improve the
site’s cost situation in what it is a difficult domestic market. This must also be seen in the light of
a general reduction in production capacity taking place in this market.
In October 2004, Pfleiderer announced that it would start construction work on a new plant to
produce MDF and HDF board. With this project, Pfleiderer Engineered Wood is expanding its
ranges to include MDF and HDF board for the furniture and flooring industry, a move that takes
into account increasing demand for MDF by furniture manufacturers.
Infrastructure Technology
Investment activity by the Business Center Infrastructure Technology focused in fiscal 2004 on
expanding and modernizing existing plants. Production capacity was expanded at Buzău in
Romania and Lábatlan in Hungary in order to cover for new orders taken. This follows an order
taken from Turkey for more than 680,000 sleepers as part of its modernization plan to improve
the track between Ankara and Istanbul. These sleepers will be produced and supplied by both
the above mentioned plants effectively booking up their total production capacity for the next
15 months.
The existing turnout production plant at Kirchmöser, Brandenburg and the sleeper plant at
Coswig have both been modernized.
Environmental Protection
The Group’s environmental protection strategy for fiscal 2004 was based on modernizing its production
plants to ensure that they are state-of-the-art and comply with the requirements of the
German Clean Air Regulation TA Luft 2002. Approval procedures and authorizations for technical
changes by local authorities were carried out at nearly all sites. This has resulted in new or lower
thresholds being set, as well as the need to introduce a comprehensive emissions monitoring system.
An approval procedure was introduced at the Leutkirch site with the objective of reducing
noise levels in the neighborhood. In order to improve air quality in the immediate environment,
management also decided that dust-emitting goods (e.g. sawdust) would no longer be stored
in the open air. These items are now stored in silos. During the same reporting period, the wet
electro-filter used to purify exhaust air from the chip dryer at this site was completely overhauled
at a cost of around 1.1 million euros, achieving a further reduction in emission levels.
44

Further optimization of the energy supply plant at Neumarkt has led to a marked decrease in
CO emissions, while an additional emission threshold level for organic material has been introduced
for its chip dryers, combined with a new continuous monitoring system.
The impregnation units at Plant I in Gütersloh, which no longer complied to the Clean Air Regulation
TA Luft 2002, were decommissioned. After production has moved to Plant III as planned,
exhaust air will be treated using a catalytic purification unit. Sound insulation costing up to 1 million
euros is to be introduced over the next few years in order to improve noise emission levels
near the particleboard plant.
As nearly all Pfleiderer Engineered Wood’s energy production plants run on biomass, they are in
an excellent position to take part in emissions trading and will not need to purchase emission
certificates.
Organization
The organizational structure of the Pfleiderer Group simplified in fiscal 2004 following the disposal
of various business centers. Sale of the Business Center Poles & Towers with its operations
in the USA and Europe, together with the sale of the water systems development business unit,
has simplified the Group’s corporate structure. However, the Group’s basic structure, that of two
main operating segments and a holding company, remains unchanged. Disposing of business
centers has resulted in changes to the Group’s legal structure. Following its acquisition, the Nidda
plant has since joined the other consolidated companies. The full list of companies consolidated
within the Group is given below.
45
Business Segment
Engineered Wood
Business Unit West
Business Unit East
Pfleiderer AG
Business Segment
Infrastructure Technology
Pfleiderer
track systems
Overhead functions
MANAGEMENT REPORT ENVIRONMENTAL PROTECTION/ORGANIZATION
Pfleiderer
Service GmbH

Personnel
As of December 31, 2004, the Pfleiderer Group employed 4,431 people including officers (2003:
5,614). Of these, 1,519 were employed outside Germany. Due to the disposal of both its Business
Units Poles & Towers USA and Europe, as well as the Business Unit water systems,1,177 employees
no longer counted as belonging to the Group as of December 31, 2004. However, the acquisition
of the Nidda plant by the Business Segment Engineered Wood increased the number of employees
by 161.
Pfleiderer is currently providing instruction in 18 commercial and technical occupations at 8 sites
where it offers training. As of December 31, 2004, the Pfleiderer Group employed 155 trainees,
70 of which are training for junior management jobs and 85 for technical occupations.
At present, 77 employees are in pre-retirement part-time work. In 2004, 77 employees celebrated
their 25th anniversary with the Company and 16 employees their 40th anniversary.
As part of the Long Term Incentive Program run by the Pfleiderer Group, 563,016 stock options
were granted during fiscal 2004. The Stock Option Program was adopted at the Company’s
General Meeting in 2001. Further details on the Stock Option Program are given in the notes in
the Financial Statements at the end of this report.
46
2004 2003
As of Dec. 31 (excluding trainees) Domestic Foreign Total Domestic Foreign Total
Continued operations:
AG/Corporate units 16 0 16 28 0 28
Service units 75 2 77 117 2 119
Engineered Wood
Infrastructure Technology
2,492 983 3,475 2,474 976 3,450
(only track systems) 327 534 861 295 495 790
Subtotal Core Operations 2,910 1,519 4,429 2,914 1,473 4,387
Discontinued operations:
Wind Energy 2 – 2 29 21 50
water systems – – – 29 0 29
Poles & Towers USA – – – – 458 458
Poles & Towers Europe – – – 678 12 690
Total 2,912 1,519 4,431 3,650 1,964 5,614

Personnel Development
The Pfleiderer Business Campus is the personnel development platform for the Pfleiderer Group.
Pfleiderer wishes to strategically develop competence levels among its management and employees,
thereby creating competitive advantages. This is done by offering employees target-group
specific multi-stage qualification courses on leadership, motivation, integration and qualification.
The courses and events offered by the Business Campus strengthen identification with the company,
and thus make a significant contribution to the creation of a corporate culture.
Joining Forces for the Future
The most important activity of the Pfleiderer Group during fiscal 2004 in terms of personnel development
was the process of setting up and developing Guidelines for Leadership and Working
Together. Economic conditions are constantly changing and employees face ever new challenges.
In this setting, the Guidelines provide orientation and direction. Created jointly through a series
of intensive workshops, these basic rules act as a guideline as to how employees, managers and
employee representatives work together and interact. All those involved are convinced that personal
performance can be improved at all levels, in all areas and in all tasks, thus strengthening
the Company as it moves forward.
These Guidelines for Leadership and Working Together reproduced here, were developed with
the help of employees at all levels within the hierarchy. Subsequently, the Guidelines were introduced
top-down, ensuring that senior management feels responsible for their implementation.
“Jugend forscht”
“Jugend forscht” literally means “young people do research” and is a competition where young
people can present their own innovative ideas. For the ninth time running, Pfleiderer AG sponsored
the regional round for the Oberpfalz in 2004. Entitled “Suddenly Everything’s Relative”, a
total of 115 schoolchildren and trainees from local companies took part in March 2004, presenting
68 different projects.
“Azubi forscht” – literally “trainees research” – enables Pfleiderer’s own trainees to prepare for
the competition with group projects covering working life and technology. This makes Pfleiderer
unique as a company in that it prepares its trainees during their apprenticeship with key skills
such as the ability to work in teams, how to take a systematic approach to problems, as well as
organizational abilities and other transferable skills.
The youngest winners of the “Jugend forscht” competition are invited to take part in a training
camp organized by Pfleiderer where they meet up with real working life and where they can try
to put their research ideas into practice.
47
MANAGEMENT REPORT PERSONNEL

Pfleiderer Corporate Guidelines for Leadership and Working Together
1. We Stand for a Culture of Leadership Looking to the Future
We treat our staff with respect and lead through personal example. Senior management and staff
see each other as partners, prepared to place demands on each other and provide mutual support.
Acting as partners is in the common interest of the Company. Our self-confidence is based
on our performance and our readiness to learn. Success provides us with confirmation and gives
us strength. Mistakes are an incentive to improve. Being able to criticize and to accept criticism
are major leadership skills. We discuss openly and argue respectfully in order to achieve optimum
results.
2. We are Creating Organizational Structures Suited to our Goals
We are creating clear structures, with clear lines of responsibility for senior managers and staff.
Shorter, more transparent decision paths speed up our operating processes. In order to improve
efficiency, we are reducing unnecessary complexity and optimizing commercial and working
procedures. By working together productively and constructively internally, we are ensuring that
our working procedures are more effective.
3. Performance, Entrepreneurial Thinking and Trust Pay Off
We are strengthening the performance of our senior managers and staff by carefully developing
their competences and careers within the Company. This ensures a sense of commitment to the
Company and greater self-confidence. We support entrepreneurial thinking by delegating goals
and responsibility. The achievement of commonly agreed team targets and individual goals is
rewarded. This is how we are creating a climate of performance, participation and trust. Performance
pays at Pfleiderer. Working together in a spirit of cooperation is essential if the Company
is to succeed. This atmosphere of mutual respect is also the basis with which we deal with staff
representatives.
4. We are Reliable and are Judged on What We Say
We communicate fully, clearly and in good time. We stand by what we say and by our commitments,
and are judged by our actions. Open communication based on mutual respect ensures
that we remain predictable and creates certainty and orientation in our working environment. We
work in a service-orientated manner in the interest of both customers and business associates
alike.
5. We are a Responsible Company
We stand by our key values – innovation, trust, performance, responsibility and identification. We
pass on this enthusiasm to our staff, creating the foundations for economic success that will
ensure that our Company continues to increase in value. We act in the interests of those supplying
us with capital and with a sense of responsibility for our staff and business associates, as
well as towards the environment, the state and society as a whole. We act responsibly with the
corporate assets entrusted to us by our suppliers of capital. We respect those ideas that have
proved themselves and connect them to innovation. In doing so, we are continually expanding
our strengths.
48

Risk Report
Pfleiderer AG’s business policy is directed at continually strengthening its net assets, financial
position and results of operations. As an internationally operating group, the Company is confronted
with a wide range of potential risk situations. Early identification of risk, monitoring and
keeping risk under control while making every use of business opportunities – these are the
main challenges that confront the Board of Management and all employees alike. Accordingly,
the Board of Management and the Supervisory Board ensure that they are kept regularly informed
about risks which could have a serious effect on the development of the Company’s two
Business Segments, Engineered Wood and Infrastructure Technology, or on the Group as a whole.
The Audit Committee of the Supervisory Board was presented with the Risk Management Report
2004 in its meeting on March 17, 2004.
The Company applies a risk management system to identify risk at an early stage, and to assess
and deal appropriately with any major risk or risk which could threaten the Company’s existence.
The risk management system complies with legal requirements and is an integral part of the
Company’s operating and reporting process. The Risk Management System is defined in the Risk
Management Manual which defines
risk identification and assessment,
how to deal with current risk,
new or additional measures to deal with risk and
how risk should be followed up and what measures be taken.
Risk management for the Group is controlled and continually developed by a corporate service
unit. Pfleiderer places particular value on the regular exchange of information with other companies
to ensure that new approaches and ideas flow into the Group’s risk management system.
Apart from the risk management central services unit, individual operating Business Segments
and Units and other central services functions each have nominated a risk manager responsible
for ensuring that the system is upheld within the relevant business or service unit. Apart from
that, senior managers in the Pfleiderer Group are required to ensure that all employees are sensitized
to the need to identify and avoid risks. As well as an instant reporting system which
captures sudden changes in the risk situation, risk officers carry out monthly checks on existing
risk, as well as seeking to identify any new potential risk. The results are compiled in a separate
quarterly report which is presented to the Board of Management and the Chairmen of the Supervisory
Board and the Audit Committee. The current risk management system is also examined
to establish whether it is suitable and effective. This examination is performed by the internal
audit department, as well as by the external auditors.
As in previous years, no risks face the Pfleiderer Group which could be considered either a threat
to its existence, or which could have a major effect on its assets, finances or earnings positions.
The main risks facing Pfleiderer’s activities are given below.
49
MANAGEMENT REPORT RISK REPORT

Economic and Political Risks and Individual Risk Scenarios
The Group expects to draw a large portion of earnings from its eastern European business, particularly
in Poland. Active observation and assessment of political conditions and developments
in Russia, as part of our scheduled entry into that market, will also gain in importance as far
as planning and monitoring own business activities are concerned. The continued weakness in
domestic demand has placed both business segments under stronger competition. Pfleiderer is
answering the pressure on costs and from competition in the domestic market by implementing
cost-saving measures and by increased productivity, as well as by reducing fixed costs and the
concentration of production capacity. The effects relating to these measures have been adequately
taken into account in business planning and do not represent a specific risk. Higher costs in
Germany are being met by increasing and expanding production sites in eastern Europe. Economic
risks facing foreign sales markets which might affect results are expected under certain circumstances
in Poland, although the probability of their occurrence is considered very slight.
The reduced budget available for investment by Deutsche Bahn AG, the German rail operator, is
having an effect on the Business Center track systems, part of the Business Segment Infrastructure
Technology. Expanding business and improving earnings in this Business Segment therefore
depends on further growth in foreign activities involved in the construction of high-speed links
in Europe and Asia. In order to expand in this area, as well as to bolster its innovative and competitive
strengths, this Business Center is expected to make acquisitions and enter into strategic
alliances, such as joint ventures. On the one hand, this offers opportunities, on the other, such
measures require additional organization and personnel involvement.
In the engineered wood sector, continued reluctance on the part of private consumers to spend
on furniture and interior fittings cannot be discounted for 2005, thereby affecting sales and
earnings. Production over-capacity in the particleboard industry, which has hit prices over the
last few years, has been reduced by shutting down the Rheda plant in 2004, with closure first
taking place in August 2005 in some areas. However, the Company believes that this measure
will also reduce pressure on prices for particleboard over the long term.
Operating Risks
No new suppliers are expected to enter the market who could have a significant effect on the
competitive situation in those markets that the Pfleiderer Group serves. Equally, there are no
signs of a process of concentration as far as buyers are concerned, and thus of any risks that
could result. On the other hand, insolvency of individual customers cannot be completely
discounted in any of the markets relevant to Pfleiderer, although this would not endanger the
existence of Pfleiderer AG. In accordance with corporate guidelines, risks of bad debt due to
insolvency have been largely covered by credit insurance.
No risks ensuing from the potential infringement of third party proprietary rights are currently
expected. Nor are any risks anticipated in the field of product development and production
technology, as Pfleiderer is currently using state-of-the-art technology in its Business Segments.
50

Pfleiderer operates production plants which are running mainly continuous lines manned on a
multi-shift basis. The high level of organization and technical complexity involved means that
production stoppages can occur, as well as harboring risks with regard to quality control, environmental
pollution and industrial injury. All this can represent a break in the value added
chain. An active system of preventative maintenance is applied to prevent stoppages and downtime.
Plant is carefully maintained and employees are trained how to operate it. Wood processing
contains an inherent risk of fire and explosion that cannot be entirely excluded. Damage
to machinery and plant, as well as losses due to down-time, have been insured against where
this is economically meaningful. Additionally, all necessary technical and organizational avoidance
measures are applied to prevent such breakdowns occurring, and the Company has also drawn
up contingency and emergency plans to deal with such incidents.
As a matter of corporate policy, the Company is not dependent on any one supplier as a wide
range of raw materials is needed for operations. A multi-source procurement policy has been set
up to safeguard supply. However, in the case of a certain raw materials and pre-products only
a few suppliers exist. The failure, delay, or poor quality of supplies, could result in production
stoppages, having a negative effect on earnings. Pfleiderer has offset these risks by entering
into longer-term supply agreements, as well as setting up a procurement organization which continuously
monitors that raw materials are delivered on time, and are of suitable quality. Price
increases for certain raw materials are currently expected, but this has already been taken into
account in planning. Dependence on the way energy costs develop in future has been specifically
reduced by the use of co-generation plants.
Personnel Risks
Pfleiderer is limiting personnel risks such as fluctuation or loss of know-how, demotivation, poor
qualification and competition for specialists and senior managers through modern personnel
instruments. Attractive systems of compensation, as well as training and updating schemes are
offered in order to bind employees closer to the Company. Potential assessment procedures
ensure that there is an internal supply of successors and that positions are occupied. Close contact
to selected universities supports the recruitment of qualified junior management.
Financial Risks
Pfleiderer understands financial risks to include those risks relating to liquidity and market prices
arising from transactions in the course of normal business and their hedging, as well as risks
arising from financing the Group. As a matter of principle, all financial risks are monitored by the
treasury department using appropriate financial control and monitoring instruments. Debtor
management, which remains the responsibility of the individual operating segments, is also overseen
by the treasury department in this work, ensuring that limits imposed by credit insurance
are maintained – an increasingly important aspect in view of increasing insolvency in the economy.
51
MANAGEMENT REPORT RISK REPORT

No liquidity risk exists at present. The proceeds from the sale of the Business Center Poles &
Towers, capital increases performed in Poland and the use of alternative financing instruments
have resulted in net corporate indebtedness being halved again in 2004. Apart from that, the
Company has sufficient short and long-term credit lines available. The capital market was also
successfully used to place a promissory note loan for 40 million euros in 2004 and to restructure
financial debt. Accordingly, the available volume of credit currently provides the Group with
sufficient financial resources and liquidity.
Market price risks mainly relate to currency translation, interest rates and the market value of
financial assets. Pfleiderer’s risk policy aims to limit fluctuations in results and valuations which
can arise through changes in exchange rates, interest rates or valuations. In view of the relatively
small volume of business conducted outside the euro, PLN and dollar areas together with currency
hedging, no significant exchange rate risks are expected. The danger of an increase in base interest
rates which would affect existing credit lines for the planning period, in turn affecting fixed
operating conditions, can be practically excluded.
Legal Risks
Neither Pfleiderer AG nor its affiliated companies are involved in court or arbitration procedures
which by current assessment could have a major, sustained influence on the economic and
financial position of the Group. The Company maintains its own legal department which ensures
that legally relevant matters are handled correctly throughout the Group in terms of form and
content. This particularly applies to contracts and the conduct of legal procedures, where necessary
bringing in external specialists. In order to cover warranty claims which the Company is
inevitably confronted with in the course of its business, the Pfleiderer Group has set up provisions
and, where economically meaningful, covered such risks through appropriate insurance.
IT and Other Risks
Various measures have been implemented to limit potential risk from IT such as unauthorized
access to, or misuse of, data. These measures extend to employees, organization, applications,
systems and networks. Only standard software from leading suppliers is used to support our
technical and commercial procedures. In the coming fiscal year, we shall be drawing up a Groupwide
guideline on how to deal with information, as well as how to operate information systems
safely. In future, technical security measures such as firewall or virus scanners will be subjected
in future to an annual internal IT security audit.
In order to eliminate and limit environmental risks, environmental officers are employed at
Group and Business Segment levels, and appropriate guidelines have been drawn up. According
to expert opinion, historical contamination may occur at individual production sites. Suitable
monitoring and control mechanisms have been introduced and costs accounted for in planning.
52

Marketing and Communication
The Pfleiderer Group organizes its marketing and communication activities by target group. While
direct communication with the customer and specialist public relations is the responsibility of
the operative segments Engineered Wood and Infrastructure Technology, the central services unit
Corporate Communication organizes contacts with the capital market, the financial press and
employees. Total marketing expenditure in the Business Segments Engineered Wood and Infrastructure
Technology and the central services unit Corporate Communication came to 3.9 million
euros (2003: 5.8 million euros).
Corporate Communication
The activities of the central services unit Corporate Communication are directed at communicating
the Group’s strategic direction and positioning. This information is directed in the first
instance at employees, the financial press and the capital market. Contact to target groups
is achieved through regular publications such as business and quarterly reports, the corporate
website and the employees’ magazine “Imagine”, as well as through broad-based public relations
work.
Engineered Wood
In fiscal 2004, marketing and communication activities by the Business Center Engineered Wood
aimed to optimize the process of communicating with the customer. Following the introduction
of a new brand and sales concept in fiscal 2003, Pfleiderer Engineered Wood now markets its products
and services in Germany through its three brands: wodego®, Thermopal® and Pfleiderer.
Specifically directing products and services at customers in industry, trade and processing ensures
market-driven solutions, convincing quality and reliable delivery service.
The premium brand Thermopal® offers 14 different carrier materials for every type of use. Products
have a wide range of different characteristics depending on application: flame-retardant,
non-inflammable, anti-electrostatic, increased cross-strength, impact-resistant, light-weight and
high-pressure resistant. The wide range of carriers is matched by over 300 different decors and
16 structural surface finishes. Thermopal® customers are national and international companies
from the wood trade, industrialized furniture manufacturers, interior designers and specialist
sectors such as shipbuilders. Distribution is through a network of main distributors.
The Thermopal® image – a well-known traditional brand – was reworked in 2004, and its new
market appearance rigorously implemented. Trade fair stands, product catalogues, brochures and
business equipment have all been updated in line with the brand’s new image. In order to clearly
differentiate itself from the competition, Thermopal® stresses proximity to the customer, advanced
processing methods and an above-average range of designs and decors.
53
MANAGEMENT REPORT MARKETING AND COMMUNICATION

wodego® is the latest brand in Pfleiderer Engineered Wood’s portfolio. Marketed through a network
of around 200 selected dealerships and small to medium-sized industrial customers, the
new brand comprises a comprehensive range of products based on raw particleboard, tongue
and groove board and MDF board, decorative board with 266 different decors, high-pressure
laminate (HPL) and postforming elements. An important part of the new wodego® family is the
traditional Duropal products, featuring worktops and high-pressure facings for heavily used surfaces.
Following its introduction in the German market in 2003, wodego® has since been introduced
in 2004 in the international markets of France, England and the Benelux countries.
Brand Company Target Group
Infrastructure Technology
The international trade fair for national and international suppliers and users of passenger and
goods transportation, “InnoTrans” in Berlin, is the rail industry’s most important marketing platform
for Pfleiderer track systems. The Fair, which ran from September 21 to 24, 2004, was
an ideal showcase for Pfleiderer track systems to present its extensive portfolio of products and
services which cover product development, manufacturing and applications – from engineering
to production, supply, logistics to quality management. The main attraction presented by Pfleiderer
at the Fair was its ballastless sleeper system RHEDA 2000®. This system has proved itself over
the years during the construction and operation of major European high-speed links. It is available
in a wide range of variations and is eminently suitable for specialist applications such as the construction
or modernization of railway tunnels, or as RHEDA CITY, where it is used for urban railways
and tramway networks.
Pfleiderer track systems was also represented and presented internationally at trade fairs in the
Netherlands, Taiwan and China. Main topic at the Dutch Symposium “Switch to Delft”, held from
March 16 to 18, 2004, was the Project “High-Speed Line Zuid” running from Amsterdam to the
Belgian border. Here Pfleiderer track systems is demonstrating its competence in the planning and
construction of this new high-speed link. At the “Rail Solutions Asia” in Taipei, Taiwan, running
from May 12 to 14, 2004, Pfleiderer track systems also featured centrally due to its involvement
in what is currently the biggest infrastructure project in the world, the Taiwan High Speed Rail
(THSR). This project has opened the door to the Asian market for Pfleiderer. From May 26 to 28,
2004, Pfleiderer track systems, together with its partners in the “German High-Speed Initiative” –
Butzbacher Weichen-Systemlieferanten BWG and the Rail Technology Division of Siemens AG,
Transportation Systems, presented their range of products and services in China at the Trade Fair
“Metro 2004”, the 9th “International Exhibition on Metro, Light Rail Transit and High-Speed
Transit” in the South-China metropolis of Guangzhou.
54
Pfleiderer Vertriebs GmbH Furniture industry, Key Account
wodego GmbH Wood Specialist Outlets, Building
Materials Trade, DIY
Thermopal GmbH Wood Specialist Outlets, Interior
Design Outlets, Specialist Industrial
Customers

Share data
ISIN
DE0006764749
Exchange code
PFD 4
Traded at
Frankfurt, Hamburg,
Munich, Stuttgart,
Berlin/Bremen,
Düsseldorf, Xetra
Calc. par value
2.56 euros
Market segment
Prime Standard
The Pfleiderer Share
Increased free float to 87 percent strengthens demand for the
Pfleiderer share in the international capital market
Market capitalization rises in 2004 by around 60 percent
Pfleiderer Share Price Compared to SDAX Index
(January–December 2004)
euros index
9
8
7
6
5
4
3
Share Price Movement
The Pfleiderer share continued to strengthen pleasingly during 2004, moving up by around 60 percent
overall in Xetra trading during the reporting period. After shooting up by around 80 percent
at year ending 2003, the share consolidated during the first quarter of 2004, reaching its lowest
level in February at 3.93 euros. At this point in time, the Pfleiderer Group’s market capitalization
stood at around 167.8 million euros.
During the second quarter of 2004, the share gained from a fundamental restructuring in shareholder
structure. Free float increased to 87 percent following Pfleiderer Unternehmensverwaltung
GmbH & Co. KG reducing its holding to 13 percent. As a result, the share rapidly became
more attractive on the international stock market. The ensuing strong demand for the share,
with turnover increasing daily, resulted in its price rising to 7.70 euros by June 2004.
55
J F M A M J J A S O N D
Pfleiderer share in euros
SDAX index
MANAGEMENT REPORT THE PFLEIDERER SHARE
3400
3250
3100
2950
2800
2650
2500

Key Figures
2004 2003
No. of shares 42,685,000 42,685,000
Market capitalization as of Dec. 31 in million euros 362.40 227.51
Price as of Dec. 31 (Xetra) euros 8.49 5.33
High/low euros 8.52/3.93 5.33/1.65
Dividend euros 0.00 0.00
EPS euros 0.79 –1.07
Av. daily trading 67,623 34,575
During the summer break in the third quarter, profit-taking by some investors following publication
of the first-half figures at the beginning of August pushed the price back, consolidating it for
a while at 6.00 euros during low trading.
However, the fourth quarter saw the share pick up again during higher trading, reaching a peak
of 8.52 euros in December 2004. Market capitalization of the Pfleiderer Group increased to
363.7 million euros, the share having clearly outperformed the SDAX.
Trading in the Pfleiderer Share
Around 17.3 million shares of Pfleiderer AG with a value of 107 million euros were traded in fiscal
2004 in the Xetra electronic trading system and on the floor of the Frankfurt Stock Exchange.
Turnover per trading day averaged 67,623. The weakest month was August 2004 averaging 29,429
shares, while October 2004 was the month with the highest trading, averaging 115,642 shares
per trading day.
Earnings per Share/Dividend
Earnings per share (EPS) are calculated from the Group’s net income/loss for the year divided
by the weighted average of issued shares. In fiscal 2004, the Pfleiderer Group achieved an EPS
of 0.79 euros as against –1.07 euros in the previous year. This result includes one-off earnings
from the disposal of the Business Units Poles & Towers USA and Europe. Accordingly, this report
also shows EPS excluding this one-off effect: EPS for continued operations increased from
0.10 euro in 2003 to 0.13 euro in 2004.
56

Shareholder Structure
As of January 26, 2005, the number of shareholders in the Pfleiderer shareholders’ register stood
at 14,632 shareholders. German investors hold around 49 percent of the shares, British investors
hold around 21.3 percent and Luxembourg investors hold approximate 10.2 percent. The largest
single investor is Pfleiderer Unternehmensverwaltung GmbH & Co. KG, which holds 13.0 percent.
Previously the majority shareholder in Pfleiderer AG with a holding of just on 62 percent, in
March 2004 Pfleiderer Unternehmensverwaltung decided to spread around 48 percent of the
Company’s capital. Thirty international and German institutional investors, including several
leading funds, took up these shares. This means that around 87 percent of Pfleiderer’s capital
stock is now in free float. The relevant notifications in accordance with Sec. 41(2) Wertpapierhandelsgesetz
(German Securities Trading Act) were made and published in due time.
Breakdown of Shareholders According to Notifications Received under Sec. 41 (2)
Wertpapierhandelsgesetz (German Securities Trading Act) as of December 31, 2004
in % 2004
Pfleiderer UV 13.04
Henderson Global Investors 10.66
Capital Group International 7.31
Fidelity International 5.02
FMR Corp. (a Fidelity Company) 5.48
Remaining free float 58.49
Pursuant to Sec. 15a Wertpapierhandelsgesetz (German Securities Trading Act), the Board of
Management and the Supervisory Board and their dependents are obliged to notify the Company
and the German Federal Financial Services Supervisory Office without delay of securities trading
in the Company (Directors’ Dealings) if they exceed the de minimis limit. Such notifications are
published on Pfleiderer’s website at www.pfleiderer.com.
Notification of Directors’ Dealings Pursuant to Sec. 15a Wertpapierhandelsgesetz
Date of deal Notifying person Transaction Volume of deal
30. 09. 2004 Hans H. Overdiek Purchase of 400,000 2,120,000.00 euros
(Spokesman of no-par shares at
Board of Management) 5.30 euros per share
27.12. 2004 Hanno C. Fiedler Purchase of 2,000 16,300.00 euros
(Member of no-par shares at
Supervisory Board) 8.15 euros per share
28.12. 2004 Hanno C. Fiedler Purchase of 2,000 16,400.00 euros
(Member of no-par shares at
Supervisory Board) 8.20 euros per share
57
MANAGEMENT REPORT THE PFLEIDERER SHARE
Remaining
free float
Pfleiderer
Henderson
Capital
Fidelity
FMR Corp.

Investor Relations Activities
Individual and open communication with institutional and private investors is a cornerstone of
Pfleiderer’s communications policy. In view of the changes in shareholder structure during fiscal
2004, numerous national and international roadshows were held in which the Board of Management
explained our corporate strategy. Frequent communication with the capital market takes
place, with regular events for analysts and telephone calls in which the Company’s quarterly
figures are presented, as well as individual talks with investors and analysts held.
The most important contact with our private shareholders is made during the Annual General
Meeting. Around 600 shareholders attended the AGM on June 15, 2004, representing around
33.36 percent of capital stock. Resolutions on the Agenda (ratification of the actions of the
Board of Management and the Supervisory Board, authorization to acquire treasury stock) were
adopted by a majority vote of 99 percent. The General Meeting also appointed KPMG Deutsche
Treuhand-Gesellschaft Aktiengesellschaft Wirtschaftsprüfungsgesellschaft, Berlin/Frankfurt, as
the Company’s new external auditor.
58

Post-Closure Report/Outlook
Pfleiderer Engineered Wood and Pfleiderer track systems both cautious
about domestic business
Further improvements in sales and earnings figures expected in 2005
General Economic Conditions
Leading German economic research institutes are forecasting that GDP in 2005 will grow between
0.8 percent (Institute for Global Economic Research at the University of Kiel/IfW) and 1.3 percent
(Institute for Economic Research Halle/IWH and the Rhineland Westphalia Institute for Economic
Research/RWI). According to the HWWA Institute for Economic Research in Hamburg, the economic
recovery which started in 2004 will continue in 2005, but there will not be “a major upturn”.
Exports will continue to be the economy’s main motor, but potential here will probably much
weaker than in 2004.
The German furniture industry expects a slight improvement in 2005. According to the Association
of German Furniture Manufacturers (VDM), sales should improve slightly, in particular through
exports. However, the positive view of the Association of German Furniture Manufacturers is by
no means universal. Overall, Pfleiderer expects domestic sales for Pfleiderer Engineered Wood
to stabilize. Similarly, the Business Unit East, with its activities in Poland and Russia, is likely to
profit from growth in these economies as their markets continue to expand.
As far as Pfleiderer Infrastructure Technology is concerned, investment planning by Deutsche
Bahn and international infrastructure providers will be decisive in 2005. Reduced government
spending on infrastructure in Germany and lower expectations for operating results by Deutsche
Bahn mean that capital expenditure is likely to be limited. Information from these sources indicates
that spending will be restricted to existing projects. New projects are being postponed until
after 2009. On the other hand, spending by international infrastructure providers on the construction
and expansion of high-speed rail links is expected to remain constant, due to the long-term
planning involved.
Procurement
How procurement conditions for Pfleiderer Engineered Wood change is very much depends on
economic growth and how industry develops in the specific markets involved. In principle, the
bundling of procurement activities for all sites in 2005 is also expected to have positive effects
on purchase prices.
59
MANAGEMENT REPORT POST-CLOSURE REPORT/OUTLOOK

While the prices paid for paraffin and urea-based glue in 2004 moved clearly upwards, supplies
of resins stabilized over the last few months. Nevertheless, tighter supplies are expected, but
this should not lead to shortages. Energy prices are expected to remain at their present high
levels.
Corporate Structure and Personnel
The corporate structure of the Pfleiderer Group is continuously being refined to gain further cost
efficiency. At present, no deep-rooted organizational changes are envisaged.
The number of employees will grow beyond current figures when the new particleboard plant in
Novgorod, Russia, starts production in 2005.
Capital Expenditure
Due to the cautious forecasts on business growth in the domestic market, all spending in the
Pfleiderer Group will be concentrated in the coming year on developing and expanding the
Company’s presence in other growth regions. Overall, planned corporate spending is expected
to come to around 96 million euros.
The biggest investments planned for fiscal 2005 are the new particleboard plant currently being
built in Novgorod, Russia, and the construction of a new MDF/HDF plant. Construction work
on the particleboard plant in Novgorod, Russia, is running according to plan so that production
should start towards the end of 2005.
In fiscal 2005, the Business Segment Infrastructure Technology will be concentrating on strengthening
its international presence in the growth markets of central and eastern Europe, southeastern
Europe, as well as India, South-Korea, China and other countries in south-eastern Asia.
Other Post-Closure Events
On February 8, 2005, Pfleiderer announced that an exclusivity period had been agreed in which it
was carrying out a due diligence on the Kunz Group. This follows on from a letter of intent signed
on December 6, 2004 between Pfleiderer AG and Kunz Holding GmbH & Co. KG, Gschwend, in
which the Pfleiderer Group has an option to aquire the Kunz Group.
60

Future Earnings
How those sectors develop where the Group’s customers are active will largely determine the
way in which sales and earnings develop in the Pfleiderer Group.
There is some guarded optimism among the domestic furniture industry, and this is reflected in
an equally cautious forecast on domestic sales by Pfleiderer Engineered Wood. The fall back in
sales following closure of the Rheda-Wiedenbrück plant will be offset by consolidating the Nidda
plant in 2005. Pfleiderer continues to build on positive growth in the Polish market in recent years
where it assumes that sales and earnings will increase. Should basic conditions affecting sales
remain stable, the Business Segment Engineered Wood can expect steady growth. Definite sales
growth is expected in fiscal 2006 when production in the new particleboard plant in Novgorod
in Russia starts up.
The way in which domestic business develops in the Business Segment Infrastructure Technology
will very much depend on the restrictive spending plans of Deutsche Bahn AG. However, Pfleiderer
has been operating a strategy of greater internationalization over the last few years, so that domestic
business will effect results less than in the past. Current projects are expected to lead to
further low growth in sales and earnings.
Bearing this in mind, Pfleiderer’s management expects sales and earnings for fiscal 2005 to improve
slightly overall. Following a marked improvement in the ratio of EBITDA to net corporate
indebtedness, this will increase marginally due to capital expenditure activity in 2005. However,
the ratio is not to exceed a factor of three.
61
MANAGEMENT REPORT POST-CLOSURE REPORT/OUTLOOK

TURKEY
The Turkish economy reported a strong upturn in 2004. With growth at nearly 7 percent
and inflation at its lowest for the last three decades, Turkey’s economy is consumer-friendly
and welcomes outside investment.
680,000 Sleepers for Turkey
Modernizing national and international rail networks is one of the biggest investment projects
for a common European future. As well as participating in the construction of the Dutch
high-speed link HSL-Zuid/NL, Pfleiderer track systems was awarded the biggest single order
in its history in 2004. The order comprises 680,000 rail sleepers for the Turkish rail operator
TCDD for its “Ankara to Istanbul Railway Rehabilitation Project”. As a result, production
capacity at Pfleiderer track systems’ two plants in Hungary and Romania is fully booked up
for the next 15 months.

PFLEIDERER GROUP FINANCIAL STATEMENTS
Pfleiderer Consolidated Balance Sheet for Fiscal Year Ending December 31, 2004
Assets
‘000 euros Notes Dec. 31, 2004 Dec. 31, 2003
Liquid funds (1) 57,663 67,154
Securities classified as current assets (2) 25,065 0
Receivables and other assets (3) (4) 79,159 80,533
Inventories, net (5) 104,554 101,173
Deferred tax assets (21) 9,108 7,786
Prepaid expenses 499 762
Assets of discontinued operations (17) 4,940 106,388
Current assets 280,988 363,796
Property, plant and equipment, net (6) 328,283 299,279
Intangible assets, net (7) 93,751 92,643
Financial assets (8) 17,625 2,218
Deferred tax assets (21) 16,742 15,759
Other fixed assets (9) 2,143 5,561
Fixed assets 458,544 415,460
Total assets 739,532 779,256
64

Liabilities and Shareholders’ Equity
‘000 euros Notes Dec. 31, 2004 Dec. 31, 2003
Short-term liabilities (10) 123,058 120,294
Financial liabilities (11) 13,640 49,816
Other short-term accruals (12) 54,836 26,738
Deferred tax liabilities (21) 801 2,219
Deferred income 1,794 2,061
Liabilities of discontinued operations (17) 17,090 72,468
Short-term liabilities 211,219 273,596
Long-term financial liabilities (13) (14) 192,037 273,176
Accruals for pensions (22) 60,420 57,825
Deferred tax liabilities (21) 17,902 19,396
Other long-term liabilities 1 0
Other long-term accruals (15) 14,335 11,754
Deferred income (16) 2,495 4,278
Minority interests 90,227 44,338
Long-term liabilities 377,417 410,767
Subscribed capital 109,274 109,274
Additional paid-in capital 10,927 10,927
Revenue reserves 158,862 158,862
Treasury stock 0 0
Retained earnings/accumulated loss –120,326 –163,195
Other comprehensive income –7,841 –20,975
Shareholders’ equity (18) 150,896 94,893
Total liabilities and shareholders’ equity 739,532 779,256
The accompanying notes are an integral part of these consolidated Financial Statements.
65
FINANCIAL STATEMENTS PFLEIDERER GROUP

Pfleiderer Consolidated Statement of Income For Fiscal Year 2004
‘000 euros Notes Dec. 31, 2004 Dec. 31, 2003
Sales revenues 900,978 848,205
Cost of sales –659,459 –628,033
Gross margin 241,519 220,172
Selling expenses (1) –121,636 –113,577
Administrative expenses –78,573 –86,827
Research an development costs –1,984 –2,017
Other operating income and expenses (2) 11,154 16,099
Operating result 50,480 33,850
Net interest (3) –18,616 –17,062
Investment income 810 1,089
Other financial income/loss –1,052 5
Financial result
Earnings of continued operations before taxes
–18,858 –15,968
on income and minority interests 31,622 17,882
Taxes on income
Earnings of continued operations before
(21) –9,599 –9,255
minority interests 22,023 8,627
Earnings of discontinued operations (17) 27,279 –51,498
Taxes on income of discontinued operations 839 1,727
Earnings before minority interests 50,141 –41,144
Minority interests –16,281 –4,618
Earnings after minority interests 33,860 –45,762
Earnings per share (basic) 0.79 –1.07
Earnings per share (diluted) 0.79 –1.07
Earnings of continued operations per share 0.13 0.10
Earnings of discontinued operations per share 0.66 –1.17
Average number of shares outstanding 42,685,000 42,678,146
The accompanying notes are an integral part of these consolidated Financial Statements.
66

Pfleiderer Consolidated Statement of Cash Flows for Fiscal Year 2004
Jan. 1 – Jan. 1 –
‘000 euros Dec. 31, 2004 Dec. 31, 2003
Cash flow from operating activities
Earnings of continued operations before minority interest
Proceeds from issue of shares and repurchase
22,023 8,627
of own shares from consolidated companies –23,412 0
Depreciation and amortization of fixed assets 37,854 37,312
Proceeds from disposal of fixed assets –122 –680
Change in accruals for pensions 2,188 1,021
Change in current assets 22,727 28,244
Change in fixed assets 3,976 15,874
Change in short-term liabilities excluding financial debt 20,410 –1,292
Change in long-term liabilities excluding financial debt
Change in adjustment item for minority interests
–11,150 –15,865
(before current earnings and distribution) 11,886 –4,368
Cash flow from operating activities 86,380 68,873
Cash flow from investing activities
Cash paid for investments in intangible assets –1,752 –2,274
Cash paid for investments in property, plant and equipment –38,387 –31,744
Cash paid for investments in financial assets
Cash paid for acquisition of companies and
–1,668 –619
repurchase of own shares –20,113 0
Cash received for disposal of intangible assets 1,730 1,036
Cash received for disposal of property, plant and equipment 2,267 16,121
Cash received for disposal of finance assets 276 136
Cash received from issue of shares by consolidated companies 63,194 0
Cash flow from investing activities 5,547 –17,344
Cash flow from operating activities after investing activities 91,927 51,529
Cash flow from financing activities
Change in financial liabilities –117,315 –38,118
Change in externally factored receivables –20,560 1,453
Distribution to minority interests –2,555 –1,390
Cash paid for the purchase of treasury stock 0 8
Cash flow from financing activities –140,430 –38,047
Change in cash and cash equivalents
Change in cash and cash equivalents due to
–48,503 13,482
exchange rate fluctuations
Change in cash and cash equivalents due to
–451 8,221
discontinued operations 64,188 –11,747
Change in cash and cash equivalents due to purchase accounting 340 –185
Cash and cash equivalents as of January 1 67,154 57,383
Cash and cash equivalents as of December 31 82,728 67,154
The accompanying notes are an integral part of these consolidated Financial Statements
67
FINANCIAL STATEMENTS PFLEIDERER GROUP

Pfleiderer Consolidated Statement of Changes in Shareholders’ Equity
Fiscal Year 2004
Subscribed Additional
‘000 euros capital paid-in capital
As of January 1, 2004
Change in adjustment item from currency translation
Change in adjustment item from valuation
of financial derivatives
Change in adjustment item from valuation of pensions
Change in percentage holding Poland
Effects from initial consolidation
Earnings after minority interests
109,274 10,927
As of December 31, 2004 109,274 10,927
Fiscal Year 2003
Subscribed Additional
‘000 euros capital paid-in capital
As of January 1, 2003
Treasury stock
Change in adjustment item from currency translation
Change in adjustment item from valuation
of financial derivatives
Change in adjustment item from valuation of pensions
Earnings after minority interests
109,274 10,927
As of December 31, 2003 109,274 10,927
The accompanying notes are an integral part of these consolidated Financial Statements.
68

Comprehensive income
69
Other comprehensive income
Retained Valuation of
Revenue Treasury earnings of Currency financial Valuation of
reserves stock the Group translation derivatives pensions Total
158,862 0 –163,195 –11,726 –7,731 –1,518 94,893
12,221 12,221
1,320 1,320
–407 –407
9,859 9,859
–850 –850
33,860 33,860
158,862 0 –120,326 495 –6,411 –1,925 150,896
Comprehensive income
Other comprehensive income
Retained Valuation of
Revenue Treasury earnings of Currency financial Valuation of
reserves stock the Group translation derivatives pensions Total
158,862 –8 –117,433 4,057 –8,403 –1,488 155,788
8 8
–15,783 –15,783
FINANCIAL STATEMENTS PFLEIDERER GROUP
672 672
–30 –30
–45,762 –45,762
158,862 0 –163,195 –11,726 –7,731 –1,518 94,893

Segment Reporting for Fiscal Year 2004
70
Engineered Wood
‘000 euros Dec. 31, 2004 Dec. 31, 2003
External sales 753,001 698,009
Intercompany sales 5,926 17,913
Sales revenues 758,927 715,922
thereof domestic 329,097 333,247
thereof foreign 429,830 382,675
Foreign share (%) 56.5 53.4
Cost of sales –555,732 –538,282
% of sales revenues –73.2 –75.2
Gross margin 203,195 177,640
% 26.8 24.8
Selling expenses –108,937 –101,915
% of sales revenues –14.4 –14.2
General and administrative expenses –52,579 –51,753
% of sales revenues –6.9 –7.2
Research and development –1,035 –1,324
% of sales revenues –0.1 –0.2
Other comprehensive income and expenses 9,357 6,075
Operating result 50,001 28,723
Interest result –6,577 –8,846
thereof interest expenses –13,242 –11,600
thereof interest earnings 6,665 2,754
Results from participating interests 0 353
Other financial results –1,550 13
Financial result
Results from continuing operations before
–8,127 –8,480
taxes on earnings and income 41,874 20,243
Taxes on earnings and income
Results from continuing operations after
–6,681 –4,848
taxes on earnings and income 35,193 15,395
EBIT 48,443 29,117
% of sales revenues 6.4 4.1
Depreciation and amortization* ) 30,407 28,645
EBITDA 78,850 57,762
% of sales revenues 10.4 8.1
Capital expenditure on assets 39,893 22,903
Average number of employees, excluding trainees 3,475 3,450
Segment assets in million euros** ) 376.8 361.1
*) This position includes all depreciation and amortization on intangible assets, fixed assets and financial assets.
**) Segment assets are calculated from net assets and net working capital. Certain long-term liabilities are taken into account
when calculating net working capital.

Infrastructure Technology Consolidation/other Pfleiderer Group
Dec. 31, 2004 Dec. 31, 2003 Dec. 31, 2004 Dec. 31, 2003 Dec. 31, 2004 Dec. 31, 2003
138,165 121,237 9,812 28,959
6 3,623 –5,932 –21,536
138,171 124,860 3,880 7,423 900,978 848,205
83,501 90,750 416,492 431,462
54,670 34,110 484,486 416,743
39.6 27.3 53.8 49.1
–103,999 –87,796 –659,459 –628,033
–75.3 –70.3 –73.2 –74.0
34,172 37,064 4,152 5,468 241,519 220,172
24.7 29.7 26.8 26.0
–13,559 –12,000 –121,636 –113,577
–9.8 –9.6 –13.5 –13.4
–10,707 –10,922 –78,573 –86,827
–7.7 –8.7 –8.7 –10.2
–952 –698 –1,984 –2,017
–0.7 –0.6 –0.2 –0.2
5,005 1,946 11,154 16,099
13,959 15,390 –13,481 –10,263 50,480 33,850
–2,721 –5,072 –18,616 –17,062
–4,389 –9,877 –24,361 –24,937
1,668 4,805 5,745 7,875
810 13 810 1,089
503 10 –1,052 5
–1,408 –5,049 –9,323 –2,439 –18,858 –15,968
12,551 10,341 –22,803 –12,702 31,622 17,882
–1,199 2,535 –1,720 –6,942 –9,600 –9,255
11,352 12,876 –24,523 –19,644 22,022 8,627
15,261 15,403 –13,486 –9,598 50,218 34,922
11.0 12.3 5.6 4.1
3,799 2,707 2,940 5,960 37,146 37,312
19,060 18,110 –10,546 –3,638 87,364 72,234
13.8 14.5 9.7 8.5
5,184 7,030 310 1,811 45,387 31,744
861 790 93 147 4,429 4,387
54.9 56.0 3.5 6.7 435.2 423.8
71
FINANCIAL STATEMENTS/NOTES PFLEIDERER GROUP

Notes to the Consolidated Financial
Statements 2004
I. Business Units and Description of the Business Enterprise
Following the disposal during the business year of the US concrete and steel poles business,
Newmark International Inc., the production of wind towers at the site in Leipzig and the Poles &
Towers and water systems Business Units, which no longer belong to the defined target market
of the Pfleiderer Group, Pfleiderer Aktiengesellschaft, Neumarkt (hereinafter referred to as
“Pfleiderer AG” or “Company”) is concentrating on its core competences of Engineered Wood
and Infrastructure Technology, the second of which is mainly involved in traffic technology.
Items in the financial statements remaining after the disposal of the discontinued operations are
reported separately in the balance sheet and statement of income.
As in the previous year, activities already sold and deconsolidated during the past business year
are also reported in the comparative figures for the previous year under discontinued operations.
Pfleiderer AG was included in the consolidated financial statements of Pfleiderer Unternehmensverwaltung
GmbH, Nuremberg, until March 22, 2004.
II. Exemption Pursuant to Section 264b HGB (German Commercial Code)
The companies that have applied the exemption rules are marked accordingly in the list of consolidated
companies.
III. Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements of Pfleiderer AG are prepared in accordance with United
States Generally Accepted Accounting Principles (“US-GAAP”). Pursuant to Section 292a HGB
(German Commercial Code), Pfleiderer AG is exempted accordingly from the obligation to prepare
consolidated financial statements in accordance with the HGB. All amounts in the consolidated
financial statements are stated in euros.
From 2005 onwards, the Company will prepare financial statements in accordance with International
Financial Reporting Standards or “IFRS”. The basis for this is provided by the EU Directive
promulgated in 2002 on the application of International Accounting Standards, which makes the
preparation of consolidated financial statements in accordance with IFRS mandatory for all capitalmarket-oriented
companies listed in the EU for fiscal years commencing on or after January 1, 2005.
Certain amounts in the consolidated financial statements and the notes to the consolidated financial
statements for the previous year have been reclassified, to ensure their comparability with
the group structure for the past business year. The prior year presentation has been adjusted to
this extent.
72

Scope of Consolidation
The consolidated financial statements include the financial statements of Pfleiderer AG and all
majority-owned subsidiaries in which it has a controlling interest. All significant subsidiaries in
which the Company has a direct or indirect controlling interest have been consolidated. In addition
to Pfleiderer AG, 24 (2003: 24) domestic and 17 (2003: 20) foreign subsidiaries are included
in the consolidated financial statements in conjunction with the full consolidation. In the
past business year, 7 (2003: 7) subsidiaries were consolidated for the first time, while 9 (2003: 4)
subsidiaries withdrew from the consolidation.
Eight (2003: 11) subsidiaries are not consolidated because their impact on the financial position
and results of the Group is not material.
Number of fully consolidated companies:
2004 2003
Domestic 24 24
Foreign 18 20
Total 42 44
Number of fully consolidated companies accounted for as continuing operations:
Subsidiaries Included in the Consolidated Financial Statements for the First Time:
Newly-established
Pfleiderer Holzwerkstoffe Nidda Verwaltungs-GmbH
Pfleiderer dritte Erwerbergesellschaft mbH
Pfleiderer Holzwerkstoffe Nidda GmbH & Co. KG
Pfleiderer dritte Erwerbergesellschaft mbH & Co. Grundstücksverwaltungs KG
Engineered Fiberglass Products, Ltd.
Other
Pfleiderer OOO
Pfleiderer track systems B.V.
Both the companies reported under “Other” were already established in the previous year, but
were not included in the previous year’s consolidated financial statements due to immateriality.
73
FINANCIAL STATEMENTS/NOTES PFLEIDERER GROUP
2004 2003
Domestic 21 21
Foreign 17 19
Total 38 40

Impact of the Additions to the Scope of Consolidation on Significant Balance Sheet
Items Reported as Continuing Operations:
‘000 euros
Assets
Fixed assets 27,594
Inventories 934
Trade receivables 3,243
Liabilities
Accurals 6,828
Other liabilities 33,056
The sales revenues of the continuing operations increased by 2,304 thousand euros as a result
of the additions to the scope of consolidation.
Principles of Consolidation
The capital consolidation is carried out by the purchase accounting method. In accordance therewith,
the acquisition costs of the acquired interests are set off against the share of the equity
that is attributable to the parent company as of the acquisition date. The difference is assigned
in accordance with the investment holding to the assets and liabilities of the subsidiary up to
their fair value (proportionate revaluation method). Any remaining debit difference is recognized
as goodwill and is tested for impairment in accordance with SFAS 142 (Goodwill and Other
Intangible Assets).
Investments in affiliated companies that are not fully consolidated are measured at acquisition
cost. Investments in associated companies did not have to be accounted for by the equity method,
due to immateriality.
All intercompany receivables and liabilities, revenues, expenses and income, and intercompany
profits and losses, are eliminated on consolidation.
Minority interests are determined on the basis of the stockholders’ equity as of the balance sheet
date, and are reported in the consolidated balance sheet, together with the shares of profits and
losses, under a separate item entitled “minority interests”.
Acquisitions and Disposals/Discontinued Operations
In 2004, the Pfleiderer Group acquired the MDF production location of “Hornitex Werke Nidda
Kunststoff- und Holzwerkstoffplatten GmbH & Co. KG” through its newly established subsidiaries,
Pfleiderer Holzwerkstoffe Nidda Verwaltungs-GmbH, Pfleiderer dritte Erwerbergesellschaft
mbH, Pfleiderer Holzwerkstoffe Nidda GmbH & Co. KG and Pfleiderer dritte Erwerbergesellschaft
mbH & Co. Grundstücksverwaltungs KG (all based in Neumarkt). The acquisition was carried out
by means of a so-called “transferred restructuring”, by which Pfleiderer acquired the assets and
liabilities of “Hornitex Werke Nidda Kunststoff- und Holzwerkstoffplatten GmbH & Co. KG” (asset
deal). First-time consolidation was carried out as of December 31, 2004, so that no earnings of
these companies are included in the consolidated statement of income.
74

The activities of the Poles & Towers Business Center and the water systems Business Unit were
sold during fiscal 2004. The impact of the sale and deconsolidation of these segments on the
consolidated balance sheet and consolidated statement of income is discussed below under IV. 17
“Discontinued operations”.
The balance sheet items of the residual Wind Energy Business Unit, two further companies
engaged in the former insulating materials activities and a company engaged in the former Poles
& Towers activities in the USA are reported separately in the balance sheet as discontinued
operations.
Use of Estimates
The preparation of the consolidated financial statements requires the Board of Management to
make estimates and assumptions, which affect the reported amounts of assets, liabilities, revenues
and expenses in the consolidated financial statements and the disclosure of contingent liabilities.
The actual results may vary from these estimates.
Foreign Currency Translation
The financial statements of the subsidiaries of Pfleiderer AG were prepared in their functional
currency, which was generally their local currency. With the exception of equity, which was
translated at the exchange rate valid at the time of the respective transaction, all balance sheet
accounts were translated to the reporting currency (euros) applying the exchange rates in
force as of the end of the reporting period. Income and expense accounts were translated at the
weighted average rates for the fiscal year. Any differences resulting from the foreign currency
translation are recorded in a separate item under equity (“Other comprehensive income/adjustment
item from foreign currency translation”) until the group company is sold or liquidated.
Average rate at balance sheet date (euro 1 =) Dec. 31, 2004 Dec. 31, 2003
United Kingdom (GBP) 0.7089 0.7070
Poland (PLN) 4.0852 4.7255
Romania (ROM) 38,347.8000 40,146.3000
Russia (RUB) 37.7300 36.8800
Switzerland (CHF) 1.5450 1.5590
Slovenia (SIT) 235.3710 233.8310
Czech Republic (CZK) 30.4300 32.5500
Hungary (HUF) 245.6250 262.1150
USA (USD) 1.3606 1.2610
Ukraine (UAH) 7.0334 6.5137
The main foreign currencies for the Group are as follows:
75
FINANCIAL STATEMENTS/NOTES PFLEIDERER GROUP

Revenue Recognition
Sales revenues are mainly generated from the supply of products and services. These revenues
are recognized net of sales deductions, such as bonuses, cash discounts or rebates, at the date
at which they are deemed under US-GAAP to be realized or realizable and earned. This is generally
the case when persuasive evidence of an agreement exists, delivery has occurred or services
have been rendered, the price is fixed or clearly determinable, and collectability is reasonably
assured.
Revenues from long-term construction-type contracts are considered to be realized once the total
revenue, total costs and the percentage of completion can be determined to a sufficiently reliable
degree (“percentage of completion method”, as primarily defined in SOP 81-1 and ARB 45).
No revenues were generated during the past fiscal year under the percentage of completion
method.
Liquid Funds
Liquid funds comprise cash on hand and at banks, including current deposits with banks with
original maturities of up to three months.
Concentration of Credit Risks
The Group sells a broad range of products and services to a wide circle of industrial and commercial
customers in Germany and abroad. Outside Germany, the Pfleiderer Group is mainly
represented in Europe, Asia, Australia and South Africa. The concentration of credit risks on trade
receivables is already limited alone by the large number of customers. In addition, some of the
receivables are secured by credit insurance.
In the reporting period, about 4 percent (2003: 5 percent) of the total sales revenues were generated
with a single customer. The Company sees no credit standing risk in relation to this major
customer.
The Company invests cash reserves via current accounts at banks and other high quality investments
that can be liquidated at short notice. The Company monitors its credit risk by a regular
check of the credit standing of its investments. In addition, these investments are held exclusively
as deposits or short-term investments.
Receivables
Receivables are stated at net realizable value, i.e. at their face value less specific and general
allowances for doubtful accounts and less decreases in their value (bonuses, cash discounts and
sales deductions). Specific allowances are recorded if receivables are entirely or partly nonrecoverable
or if it is probable that they will not be recovered, and the non-recoverable amount
can be determined with sufficient accuracy. A lump-sum allowance is applied in the Business
Segment Infrastructure Technology to cover the general risk of default on receivables based on
historical experience of past bad debts. Adequate valuation adjustments for bonuses and cash
discounted are deducted on the assets side of the balance sheet.
76

Sales of receivables are treated within the Group in accordance with SFAS 140 (Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities). In accordance
with SFAS 140, a company has to recognize the financial and servicing assets that it controls and
the liabilities that it has incurred and derecognize these financial assets when control has been
surrendered in accordance with the criteria listed in SFAS 140.
The Group treated the receivables transferred under an asset-backed securities program until
June 2004 as a sale of receivables. Thereby, the transfer is only recognized as a sale when the
receivables are beyond the reach of the Company and its creditors. This also applies in the case
of the insolvency or other receivership of the creditor’s assets. In addition, the right to pledge
or exchange the transferred receivables must be surrendered and the entitlement or obligation
to repurchase them must be excluded. Active receivables were transferred and sold under an
asset-backed securities program for the last time in June 2004. All the sold receivables had been
collected and the asset-backed securities program was accordingly terminated by the end of
October 2004.
A factoring program commenced in July 2004 in the Business Segment Engineered Wood. Under
this, the factor purchases the Group’s receivables up to an individual or total limit, and assumes
the risk for the debtor’s insolvency (nonrecourse factoring). This is accounted for in the same
way as the asset-backed securities program described above.
Inventories
Inventories are valued at the lower of cost or market on the basis of individual values or the
weighted average method. The first in-first out method (FIFO) is also used in justified individual
cases. Market value is generally determined by referring to replacement costs. The ceiling for
determination of market value is the estimated selling price in the ordinary course of business
less the estimated costs of completion and the estimated costs necessary to make the sale
(net realizable value). The floor for determination of market value is the net realizable value less
a normal profit margin.
Production costs include direct material and production costs and an adequate portion of the
material and production overheads resulting from the production process.
All foreseeable risks in the inventories resulting from reduced saleability or obsolescence are
reflected by appropriate provisions. Markdowns are recorded for slow-moving items.
Use of Financial Instruments
The Group transacts business worldwide in numerous international currencies, so that it is
generally exposed to exchange rate fluctuations. Pfleiderer uses financial instruments in order
to reduce various kinds of market risks.
77
FINANCIAL STATEMENTS/NOTES PFLEIDERER GROUP

Fair Value of Financial Instruments
The fair value of a financial instrument is the price for which one party would be prepared to
take over the rights and/or obligations from this financial instrument from another party. The
Company has its financial instruments valued by the respective contracting partners, which are
generally banks.
The carrying amount of liabilities from finance leases approximates current market value, applying
the fair value for similar financing. The same also applies to the other financial instruments.
Financial Assets
Financial assets are recognized in accordance with the acquisition cost principle. Impairments
are investigated to determine whether they are permanent. This is assessed on the basis of
available general market data, specific industry and individual company data, which flows into a
plan covering several year applying DCF methods. The duration and the amount by which the fair
value has fallen below the acquisition costs as well as the Company’s intention and the ability to
hold this financial asset also flow into this assessment.
Intangible Assets
Intangible assets acquired for a consideration are capitalized at acquisition cost and amortized
systematically straight-line over their useful lives.
Expenses incurred in connection with the purchase and own development of computer software
used by the Company, including the costs incurred to enable this software to be operated in
the manner intended, are capitalized and amortized systematically over its estimated useful life.
The estimated useful life of software, patents, licenses and similar rights is generally three to
five years. Other useful lives can arise on first-time consolidation of intangible assets that are
acquired as part of a business combination.
Goodwill
Goodwill is capitalized and is tested for impairment at regular intervals (at least once a year) in
accordance with SFAS 142. SFAS 142 requires that goodwill and intangible assets determined to
have an indefinite useful life are no longer systematically amortized, but are tested for impairment
whenever there are indications of this, and, at a minimum, once a year at the same time
each year. The amortization rules under SFAS 142 must be applied to all goodwill and intangible
assets acquired in business combinations after June 30, 2001. Pursuant to SFAS 142, systematic
amortization was to be no longer applied from fiscal 2002 onwards to all other goodwill acquired
on or before June 30, 2001.
78

Property, Plant and Equipment
Property, plant and equipment are reported at historical acquisition or production cost less
accumulated depreciation. Depreciation is recorded straight-line over the normal useful lives of
the assets for the business. In addition to direct material and production costs, the production
costs of assets constructed by the Company itself also include an appropriate portion of the allocable
material and production overheads and, if construction takes place over a longer period
of time, interest on borrowings from third parties during the construction period. Administrative
expenses are only capitalized if they are directly related to the construction process. Maintenance
and repair costs are recognized as expense.
Assets with a finite life are depreciated systematically straight-line pro rata temporis. For reason
of immateriality, low-value items of fixed assets costing individually less than 410 euros are
expensed in full in the year of acquisition in accordance with German accounting practice. Fixed
assets are retired from the balance sheet when they are sold or scrapped, and any gains or
losses are recognized as income or expense at that time.
Systematic depreciation is based on the following useful lives:
Buildings
Years
20–25
Technical equipment and machines 8–16
Other equipment, furniture and fixtures 3–11
Leasehold improvements and leased property, plant and equipment are depreciated over the
normal useful lives for the business or over the rental or lease period, whichever is shorter.
Government Subsidies and Grants
Provided the conditions relating to the investment have been fulfilled, government grants and
subsidies are deducted, when received, on the assets side of the balance sheet from the acquisition
and production cost of the subsidized investments.
Impairment of Long-Lived and Intangible Assets with a Finite Useful Life
Long-lived and intangible assets are tested for impairment whenever events or changed circumstances
indicate that the carrying amount of an asset may not be recoverable. If facts and
circumstances indicate that an asset has been impaired, the carrying amount of the asset is
compared to the future undiscounted cash flows expected to be generated. If necessary, a
write-down to the lower fair value is recognized. The fair value is based on the discounted cash
flows generated by the asset over its useful life.
Leases
Leasing transactions are classified either as capital leases or operating leases. Transactions that
meet one of the criteria of SFAS 13 (Accounting for Leases) are treated in the Group as capital
leases. In accordance therewith, the Group, as the lessee, has to recognize the leased asset and
the corresponding liability in its balance sheet.
79
FINANCIAL STATEMENTS/NOTES PFLEIDERER GROUP

SFAS 13 lists the following criteria:
The lease transfers ownership of the property to the lessee at the end of the lease term.
The lease contains a bargain purchase option to purchase the leased property for considerably
less than its fair value.
The lease term is equal to 75 percent or more of the estimated economic life of the leased
property.
The present value at the beginning of the lease term of the future minimum lease payments
equals or exceeds 90 percent of the fair value of the leased property.
All other leases in which the Group is the lessee must be treated as operating leases, with the
consequence that the lease payments are expensed as incurred.
Stock-Based Compensation
On the basis of SFAS 123 (Accounting for Stock-Based Compensation), the Company has decided
to value the stock options that have been granted in accordance with the intrinsic value based
method in compliance with Accounting Principles Board Opinion 25 (Accounting for Stock Issued
to Employees) and related interpretations. In accordance with APB 25, the difference between
the market price of the Company’s shares at the date of issue of the option and the exercise price
of the subscription price that has been granted is recorded in the personnel expenses. The option
available under SFAS 148 (Accounting for Stock-Based Compensation – Transition and Disclosure)
that was published in December 2002 on transition to the fair value method has not been applied.
The following table provides information on the personnel expenses and the impact that application
of the fair values prescribed by SFAS 123 would have had on earnings (after taxes) and
earnings per share.
Dec. 31, 2004 Dec. 31, 2003
Earnings after minority interests and taxes
Less: Personnel expenses for stock-based compensation
‘000 euros 33,860 –45,762
in accordance with the fair value method ‘000 euros –945 –893
Pro forma earnings ‘000 euros 32,915 –46,655
Earnings per share euros 0.79 –1.07
Pro forma earnings per share euros 0.77 –1.09
Earnings per share (diluted) euros 0.79 –1.07
Pro forma earnings per share (diluted) euros 0.77 –1.09
80

Accruals for Pensions and Similar Obligations
Accruals for pensions and similar obligations are measured in accordance with the projected
unit credit method. A minimum obligation is recognized in some cases, i.e. an amount in excess
of the pension obligations recognized as expense in the past. If no intangible asset has to be
recognized or if there are additional obligations exceeding the amount of the intangible asset,
the amount is offset against equity. Unrealized actuarial gains and losses are amortized in
accordance with the terms of the specific pension plan, but at a maximum over the remaining
period of service or the life expectancy of the beneficiaries.
Other Accruals
Accruals, including accruals for environmental protection measures resulting from legal claims,
local authority regulations or another basis, are set up at the date when it is probable that they
have been incurred and their amount can be reasonably estimated, i.e. when a legal obligation
exists.
Changes to these estimates are recorded in the period in which the change occurs. While the
Company is unable to estimate the impact of future laws, the Group assumes that a final ruling
on these matters will not have a significant impact on the consolidated financial statements.
Advertising Expenses
Expenses for advertising and sales promotion are recognized as expense at their inception. In
the past financial year, expenses for advertising and sales promotion amounted to 3,872 thousand
euros compared with 5,780 thousand euros in the previous year. The expenses fell compared
with the previous year, because the launch of a new brand and selling concept in the Business
Segment Engineered Wood had resulted in higher costs in 2003.
Research and Development Costs
Research and development costs are expensed as incurred.
Deferred Taxes
Deferred tax assets and liabilities are set up for all temporary differences between the tax base
and the consolidated balance sheet and for tax loss carryforwards (“temporary concept”). The tax
rates to be applied are the enacted tax rates that will apply in the periods in which the temporary
differences are expected to reverse. The impact of changes in tax laws on deferred tax assets and
liabilities is recognized in income in the period in which the changes are enacted. Deferred tax
assets are only recognized if it is probable that the related tax benefits will be realized.
When estimating the recoverability of deferred tax assets, the Company considers whether there
is a more than 50 percent chance that they will be realized.
81
FINANCIAL STATEMENTS/NOTES PFLEIDERER GROUP

Comprehensive Income
SFAS 130 (Reporting Comprehensive Income) requires companies applying it to report comprehensive
income and its components (net income after minority interests and other comprehensive
income) separately in the financial statements.
Other comprehensive income comprises income, expenses, gains and losses that are not included
in the group earnings.
Basic and Diluted Earnings per Share
Earnings per share (EPS) were calculated in accordance with SFAS 128 (Earnings per Share).
SFAS 128 requires all companies that have issued common stock to present earnings per share.
Basic earnings per share comprises net earnings (after taxes) divided by the weighted-average
number of common shares outstanding during the period. Common stock equivalents used for
stock option compensation can have a dilutive effect. If a dilutive effect occurs, the diluted
earnings per share must also be shown.
New Accounting Standards
Pfleiderer has applied SFAS 143 (Accounting for Asset Retirement Obligations) since January 1,
2003. This new statement regulates the financial accounting and reporting for obligations associated
with the closure or disposal of items of property, plant and equipment and the associated
retirement costs. It applies to legal obligations associated with closures or disposals of property,
plant and equipment that result from the acquisition, construction, development and/or the normal
operation of the asset. The liabilities are to be recognized at fair value in the period in which
the related payment obligations are incurred, if a reasonable estimate of fair value can be made.
At the same time, the carrying amount of the related asset is increased by the same amount.
This additional amount is amortized again over the remaining useful life of the items of property,
plant and equipment. The liability is adjusted at the end of each period to its current present
value, with an effect on income. Any positive or negative difference compared to its carrying
amount at the time of extinguishing the obligation is recognized as income or expense. Neither
the initial nor the subsequent application of SFAS 143 had any impact on the Company in 2004.
The FASB published Interpretation (FIN) 46, (Consolidation of Variable Interest Entities) in January
2003, and amended this once more in December 2003 as FIN 46, revised in December 2003.
FIN 46 (R) regulates the application of Accounting Research Bulletin (ARB) 51 for the consolidation
of certain entities (VIEs), in which it has a controlling financial interest through means other
than voting rights. FIN 46 (R) provides for the consolidation of a VIE by the primary beneficiary
and the disclosure of significant holdings in VIEs as the non-primary beneficiary. The Company
holds a controlling financial interest in a leasing object company that qualifies as a VIE. Please
refer for further details to VII. 2.
82

1. Liquid funds
2. Securities classified
as current assets
3. Receivables and
other assets
4. Trade receivables
IV. Notes to the Consolidated Balance Sheet
Liquid funds of 57,663 thousand euros were reported as of December 31, 2004 (2003: 67,154
thousand euros). Liquid funds comprise cash at banks, petty cash balances and short-term deposits
with banks with initial maturities of three months or less.
Securities classified as current assets of 25,065 thousand euros (2003: 0 thousand euros)
mainly comprise Polish treasury bonds of 23,263 thousand euros with a term of three months,
which are held for trading (trading securities) and measured at fair value.
‘000 euros Dec. 31, 2004 Dec. 31, 2003
Trade receivables 63,717 61,211
Tax refunds 4,830 8,049
Receivables from affiliated companies 2,270 2,077
Miscellaneous 8,342 9,196
Total 79,159 80,533
The decline in tax receivables is due to the tax assessment notices received in 2004 and the
associated payment of the credit balance to Pfleiderer AG.
The receivables are made up as follows:
‘000 euros Dec. 31, 2004 Dec. 31, 2003
Trade receivables 81,152 75,939
Less: Specific allowance 6,585 5,775
Less: Lump-sum allowances
Less: Adjustments for price reductions,
93 686
sales bonuses and cash discounts 10,757 8,267
Receivables, net 63,717 61,211
All the receivables have a remaining term of less than a year.
Appropriate lump-sum allowances based on historical experience are recorded in the Business
Segment Infrastructure Technology to cover the general credit risk. Valuation adjustments are
recognized in an adequate amount for bonuses and cash discounts.
83
FINANCIAL STATEMENTS/NOTES PFLEIDERER GROUP

5. Inventories
6. Property, plant
and equipment
Receivables of 30,036 thousand euros had been sold as of December 31, 2004 (2003: 45,342
thousand euros). The Group retains rights and insignificant obligations as a result of these sales
(“retained interests”), including the provision of settlement services. The Group only sells receivables
covered by credit insurance. Expenses of 1,460 thousand euros (2003: 1,477 thousand
euros) were incurred in connection with the sale of receivables. Most of these expenses relate
to interest and the costs of assuming the debtor default risk, which are reported in the statement
of income in the financial result.
The inventories are made up as follows:
‘000 euros Dec. 31, 2004 Dec. 31, 2003
Raw materials, consumables and supplies 42,845 43,288
Work in process 3,270 4,109
Finished goods and merchandise 57,743 53,245
Payments on account 696 531
Total 104,554 101,173
The increase in finished goods and merchandise is due, firstly, to building up inventories at the
Rheda-Wiedenbrück site to avoid delivery bottlenecks during the closure process and, secondly,
because sleepers were produced in advance for various foreign Pfleiderer track systems projects
and made available for call-off.
Please refer to the analysis of Group fixed assets with regard to changes in property, plant and
equipment.
Property, plant and equipment are made up as follows:
‘000 euros Dec. 31, 2004 Dec. 31, 2003
Land, land rights and buildings including buildings
on third-party land 145,333 139,154
Technical equipment and machines 152,037 133,352
Other equipment, furniture and fixtures 11,970 12,434
Payments on account and assets under construction 18,943 14,339
Total 328,283 299,279
Depreciation of property, plant and equipment amounted in fiscal 2004 to 33,735 thousand euros
(2003: 34,049 thousand euros), of which 518 thousand euros in the fiscal year (2003: 0 thousand
euros) comprised impairment losses that were recognized in order to write off parts of the
property of the Coswig concrete poles plant that are no longer used. The impairment losses
relate exclusively to the Business Segment Infrastructure Technology.
84

7. Intangible assets
As in the previous year, no interest for building finance on qualifying property, plant and equipment
was capitalized in the Group in fiscal 2004.
Property, plant and equipment of 2,406 thousand euros (2003: 2,463 thousand euros) less
accumulated depreciation of 809 thousand euros (2003: 848 thousand euros) was capitalized
under capital leases. The residual book value accordingly amounts to 1,597 thousand euros
(2003: 1,615 thousand euros).
No individual assets were assigned as collateral in the past fiscal year.
‘000 euros Dec. 31, 2004 Dec. 31, 2003
Licenses, software and patents 7,354 9,831
Goodwill 86,351 82,302
Payments on account 46 510
Total 93,751 92,643
The goodwill comprises 73,252 thousand euros (2003: 69,203 thousand euros) for the Business
Segment Engineered Wood and 13,099 thousand euros (2003: 13,099 thousand euros) for the
Business Segment Infrastructure Technology.
Amortization on intangible assets amounted in fiscal 2004 to 3,048 thousand euros (2003:
3,246 thousand euros). Additions to intangible assets amounted altogether to 1,789 thousand
euros (2003: 2,274 thousand euros).
The Company has tested the impairment of the goodwill reported in the consolidated financial
statements. The impairment tests performed in 2004 did not result in any need to recognize impairment
losses in the consolidated financial statements.
The estimated future amortization on intangible assets, which are still subject to systematic
amortization, is as follows:
‘000 euros
2005 1,993
2006 1,674
2007 1,232
2008 1,123
2009 1,114
Thereafter 218
85
FINANCIAL STATEMENTS/NOTES PFLEIDERER GROUP

8. Financial assets
9. Other fixed assets
10. Short-term liabilities
The breakdown and development of financial assets are presented in the analysis of Group
fixed assets.
‘000 euros Dec. 31, 2004 Dec. 31, 2003
Shares in affiliated companies 538 1,602
Equity investments 45 56
Loans to companies in which equity investments are held 0 169
Other loans 17,042 391
Total 17,625 2,218
The other loans include an interest-bearing loan of 10,000 thousand euros to the purchaser of
the Poles & Towers Europe Business Unit. A further 5,289 thousand euros relates to an interestbearing
loan to a former affiliated company that was sold in 2003, which is being redeemed as
scheduled.
Other fixed assets amount to 2,143 thousand euros in the year under review (2003: 5,561 thousand
euros). An interest-bearing loan of 5,289 thousand euros (2003: 4,846 thousand euros) to
a former affiliated company that was reported here in the previous year was reclassified to the
other loans included in the financial assets.
‘000 euros Dec. 31, 2004 Dec. 31, 2003
Payments on account received on orders 12,598 8,346
Trade payables 75,085 69,701
Liabilities to affiliated companies 592 5,502
Miscellaneous 34,783 36,745
Total 123,058 120,294
Payments on account received in the fiscal year mainly comprise payments on account of
8 million euros for an infrastructure project abroad.
Miscellaneous other short-term liabilities are made up as follows:
‘000 euros Dec. 31, 2004 Dec. 31, 2003
Financial derivatives 9,864 12,116
Other taxes 546 1,463
Corporate income tax 4,633 1,800
Wages and salaries 4,916 5,332
Withheld social security contributions 4,509 5,139
Withheld wage and church tax 3,532 3,968
Payments received on sold receivables 0 1,269
Value added tax 848 454
Other personnel liabilities 123 24
Miscellaneous 5,812 5,180
Total 34,783 36,745
86

11. Financial liabilities
12. Other short-term
accruals
13. Capital leases
The Company’s short-term loan liabilities are made up as follows:
‘000 euros Dec. 31, 2004 Dec. 31, 2003
Other short-term liabilities and short-term portion
of long-term loans 13,129 49,294
Capital leasing 511 522
Total 13,640 49,816
The average interest rate following interest hedging is about 6 percent p.a.
Other short-term liabilities and short-term portion of long-term loans include 2,428 thousand
euros owed to related companies.
‘000 euros Dec. 31, 2004 Dec. 31, 2003
Accruals for obligations to employees 27,944 18,678
Accruals for the production area 3,050 268
Accruals for sales and marketing 112 0
Miscellaneous accruals 23,730 7,792
Total 54,836 26,738
The change in the accrual for obligations to employees mainly relates to an increase in the
accruals for management bonuses and social plan obligations. The increase in the accruals
relates in the amount of 5,164 thousand euros to the Rheda-Wiedenbrück site. The increase in
the accruals for the production area mainly relates to obligations assumed as a result of the
acquisition of an MDF-production location from “Hornitex Werke Nidda Kunststoff- und Holzwerkstoffplatten
GmbH & Co. KG”. The increase under the miscellaneous accruals is mainly due to
provisions for the Rheda-Wiedenbrück site.
The Company entered into lease agreements in 1998 and 1999 for wood-processing machines
for the Polish site and for technical facilities, which are treated as capital leases. Furthermore,
automobile leasing agreements exist at a German site, which are also regarded as capital leases
because of their wording. The future minimum lease payments from lease commitments as of
December 31, 2004 are:
‘000 euros
2005 524
2006 16
Total minimum lease payments 540
Less: Imputed interest 29
Present value of minimum lease payments 511
Less: Short-term portion 496
Long-term portion of lease commitments 15
87
FINANCIAL STATEMENTS/NOTES PFLEIDERER GROUP

14. Long-term liabilities
15. Other long-term
accruals
The Company is primarily financed by long-term loans. These loans generally bear interest based
on variable EURIBOR or LIBOR interest rates. The average interest rate for these loans in fiscal
2004 was approximately 6 percent. Most of the variable interest payments are hedged by interest
swaps.
As of the balance sheet date, the Group had fixed-interest loans with a volume of 18,189 thousand
euros (2003: 38,235 thousand euros) and an average interest rate of 5.3 percent (2003:
5.1 percent). These loans were valued as of the balance sheet date of December 31, 2004 at
19,812 thousand euros (2003: 39,863 thousand euros).
As of December 31, 2004, redemptions of long-term liabilities for the next five fiscal years and
thereafter are as follows:
They include a borrower’s loan note from Westdeutsche Landesbank of 40 million euros with a
five year term.
88
Dec. 31, 2004
Short-term Long-term
Long-term portion of portion of more
‘000 euros amounts up to 1 year than 1 year Dec. 31, 2003
Long-term financial
liabilities (redemption
amounts excluding
capital leases) 193,726 760 192,966 304,232
‘000 euros
2005 760
2006 16,099
2007 38,584
2008 84,023
2009 51,760
Thereafter 2,500
Total 193,726
‘000 euros Dec. 31, 2004 Dec. 31, 2003
Restructuring 1,816 3,254
Environmental risks 3,230 311
Long-service bonuses 3,837 3,794
Pre-retirement part-time work 5,426 4,368
Miscellaneous 26 27
Total 14,335 11,754

16. Long-term
deferred income
17. Discontinued
operations
The restructuring accruals were set up to recognize probable, quantifiable obligations in the
balance sheet.
The accruals for environmental risks relate to possible obligations to recultivate land and remedy
contamination at two locations. This amount includes 3,000 thousand euros for possible obligations
assumed in connection with the acquisition of an MDF plant from “Hornitex Werke Nidda
Kunststoff- und Holzwerkstoffplatten GmbH & Co. KG”.
Long-term deferred income includes the proceeds from the sale of receivables from a lease agreement
that are not due until later years (non-recourse financing). The deferred income is released
to income in installments at the due dates of the corresponding lease payments. The outstanding
residual amount from the non-recourse financing agreement amounted as of December 31, 2004
to 2,495 thousand euros (2003: 4,278 thousand euros). It is subject to interest at the customary
market rates. The agreement expires on May 1, 2007.
In fiscal 2004, the Group sold the water systems, Poles & Towers Europe and Poles & Towers
USA Business Units, and the company, WINDTEC Anlagenerrichtungs- und Consulting GmbH, in
the Wind Business Unit. Furthermore, the onshore activities of Pfleiderer Wind Energy GmbH
were brought into Fuhrländer-Pfleiderer GmbH & Co. KG. This is a joint venture company in which
Fuhrländer AG holds a majority interest and exercises control. Pfleiderer AG has a put option
allowing it to offer its interest to Fuhrländer AG after a period of three years. WINDTEC Anlagenerrichtungs-
und Consulting GmbH was sold in March 2004 to the Gerald Hehenberger-Privatstiftung,
Klagenfurt, Austria.
The water systems Business Unit was sold with economic effect from December 31, 2004 to
Pfleiderer Invest Veranlagungs GmbH, Vienna, which is owned by Hans Theodor Pfleiderer, and
to Wernher Behrendt.
The Poles & Towers USA Business Unit was given up in March 2004 as a result of the sale of
Newmark International Inc., and Pfleiderer Leasing USA Inc., to Valmont Industries Inc., (USA)
and the sale of factory land belonging to Engineered Fiberglass Products Inc., (USA) to CMT
South Carolina LLC, USA. The Poles & Towers Europe Business Unit was given up in December
2004 through the sale of Poles & Towers GmbH & Co. KG, Poles & Towers Verwaltungs-GmbH,
Pfleiderer Energietechnik Verwaltungs GmbH, Pfleiderer Technika Infrastrukturalna Polska Sp.zo.o.,
Pfleiderer Infrastructure S.A.R.L., and Pesa Telekom SAU to LLRR Management GmbH, Munich.
89
FINANCIAL STATEMENTS/NOTES PFLEIDERER GROUP

The assets and liabilities that have remained in the Group are reported in the consolidated balance
sheet under discontinued operations.
The sale of the discontinued operations resulted on an agreed aggregate selling price of
92,623 thousand euros, in a gain of 51,352 thousand euros. This figure does not include possible
proceeds from subsequent purchase price adjustments.
The gain on disposal is arrived at as follows:
‘000 euros
Agreed aggregate selling prices 94,623
Retirement of assets and liabilities of operations sold –43,134
51,489
Expenses from deferred taxes –137
Gain on sale of discontinued operations 51,352
The operative business of the discontinued operations before special effects developed
as follows:
‘000 euros 2004 2003
Sales revenues 118,819 182,375
Expenses –125,401 –177,093
EBIT –6,582 5,282
Net interest –916 –2,174
EBT –7,498 3,108
Taxes 1,623 607
Earnings after taxes –5,875 3,715
Further operative special effects and subsequent expenditure of –17,359 thousand euros were
incurred after tax in 2004 (2003: –53,486 thousand euros) for discontinued operations. This includes
special effects for the Leipzig location of –9,484 thousand euros (2003: –10,677 thousand
euros) and impairment losses of 670 thousand euros (2003: 0 thousand euros) for the complete
write-off of the portions of the land at the Coswig concrete pole plant that are no longer used.
Net interest only includes the net interest of the companies that are included in the discontinued
operations.
90

18. Stockholders’ equity
The following table shows the balance sheet items summarized under the assets and liabilities
of discontinued operations:
‘000 euros Dec. 31, 2004 Dec. 31, 2003
Liquid funds and securities classified as current assets 86 1,540
Receivables and other assets 1,862 23,438
Inventories 41 37,905
Other current assets 278 2,901
Current assets 2,267 65,784
Property, plant and equipment 2,520 34,278
Intangible assets 18 3,317
Financial assets 10 157
Deferred tax assets 125 2,852
Fixed assets 2,673 40,604
Assets of discontinued operations 4,940 106,388
Liabilities 2,958 28,793
Financial liabilities 0 6,680
Accruals 10,871 19,363
Other short-term liabilities 173 2,900
Short-term liabilities 14,002 57,736
Long-term financial liabilities 0 1,206
Accruals for pensions 1,865 6,268
Deferred tax liabilities 427 3,488
Other liabilities 0 609
Other long-term accruals 796 3,161
Long-term liabilities 3,088 14,732
Liabilities of discontinued operations 17,090 72,468
The balance sheet items for both fiscal years relate to the Wind Energy Business Unit, two companies
of the former insulation operations and the Poles & Towers Business Center.
Of the goodwill included in the intangible assets, 3,237 thousand euros relating entirely to the
Business Segment Infrastructure Technology was derecognized in 2004.
The development of stockholders’ equity is presented in the statement of changes in stockholders’
equity, which precedes the notes to the consolidated financial statements.
Subscribed Capital
The capital stock remained unchanged as of the balance sheet date at 109,273,600 euros and
is divided into 42,685,000 shares, each with a nominal value of 2.56 euros. All of the shares have
been issued and are in circulation. Each share carries one vote.
91
FINANCIAL STATEMENTS/NOTES PFLEIDERER GROUP

19. Stock appreciation
rights and stock
option programs
Authorized Unissued Capital
On July 10, 2001, the general meeting of the stockholders authorized the Board of Management,
subject to the approval of the Supervisory Board, to increase the capital stock, once or on
several occasions, by June 30, 2006 by up to 51,200 thousand euros by issuing new shares in
exchange for contributions of cash.
Conditional Capital
The conditional capital, which can similarly be issued by June 30, 2006, amounts to 20,480 thousand
euros.
Further conditional capital of 10,927 thousand euros can also be created in connection with the
Pfleiderer AG stock option scheme.
Additional Paid-In Capital
The Group’s additional paid-in capital comprises the additional paid-in capital of Pfleiderer AG
of 10,927 thousand euros.
Changes in Other Comprehensive Income Recognized in Equity
The following table shows how the valuation of financial derivatives and valuation of pensions
in other comprehensive income has developed:
The Company decides every year at its discretion whether to grant a stock option scheme,
which persons will be eligible to participate and how many stock options each beneficiary will
receive. The stock options are granted to beneficiaries on condition that the beneficiaries also
make a personal contribution. Stock options have a term of 6 years. The stock options may be
exercised for the first time three years after having been granted. The number of stock options
for each beneficiary is based on the amount of the personal contribution divided by the reference
price and multiplied by a factor of 12. The reference price for the Stock Option Programs for 2001
and 2002 is based on the Company’s average share price between September and November, for
the Stock Option Program for 2004 in accordance with the Company’s average share price between
June and August 2004 and for the stock appreciation rights that have already expired, is
based on the Company’s average share price between June and November 2000. Stock options
can be exercised at a subscription price of between 110 percent and 125 percent of the reference
price.
92
2004 2003
Before Tax After Before Tax After
‘000 euros tax effect tax tax effect tax
Financial derivatives 2,112 –792 1,320 817 –145 672
Minimum pension obligation –651 244 –407 16 –46 –30
Total 1,461 –548 913 833 –191 642

Stock Appreciation Rights 2000
Under the stock appreciation rights resolved by the Company on November 14, 2000 and approved
by resolution of the general meeting of the stockholders dated December 5, 2000, the
Company’s Board of Management was authorized to grant the participants up to 1,270,608 stock
appreciation rights in the Company until June 30, 2006. The reference price was 9.73 euros.
The exercise prices lay between 10.70 euros and 12.16 euros, with a weighted average exercise
price of 11.43 euros.
No further rights were exercisable as of the balance sheet date of December 31, 2004.
Stock Option Program 2001
Under the terms of the stock option scheme resolved by the Company on July 10, 2001 (Stock
Option Program 2001) and approved by the Supervisory Board on October 25, 2001, the Company’s
Board of Management is authorized to grant eligible participants up to 4,268,500 non-transferable
options to acquire Company stock. Of the 116 potentially eligible participants at that time,
65 board members and senior executives have participated in SOP 2001 with 1,257,456 options.
The reference price is 7.45 euros. The exercise prices lie between 8.20 euros and 9.31 euros,
with a weighted average exercise price of 8.76 euros.
SOP 2001 can be exercised for the last time as of November 30, 2007.
93
FINANCIAL STATEMENTS/NOTES PFLEIDERER GROUP
2004 2003
Stock appre- Stock apprein
thousands ciation rights ciation rights
Outstanding at beginning of year 0 919
Granted 0 0
Exercised 0 0
Forfeited 0 919
Outstanding at end of year 0 0
Exercisable at end of year 0 0
2004 2003
Stock Stock
in thousands options options
Outstanding at beginning of year 728 1,080
Granted 0 0
Exercised 0 0
Forfeited 202 352
Outstanding at end of year 526 728
Exercisable at end of year 131 0

Stock Option Program 2002 (continuation of SOP 2001)
The Stock Option Program 2002 was confirmed by the Board of Management on September 10,
2002 and by the working Committee of Supervisory Board on September 20, 2002 on the basis
of the Stock Option Program resolved by the Company in 2001 and adopted on July 10, 2001
(SOP 2001). In accordance therewith, the Company’s Board of Management is authorized until
June 30, 2006 to grant eligible participants the remaining non-transferable options to acquire
Company stock. Altogether 40 board members and senior executives have participated in SOP
2002 with 983,544 options. The reference price is 4.67 euros. The exercise prices lie between
5.14 euros and 5.84 euros with a weighted average exercise price of 5.49 euros.
SOP 2002 can be exercised for the last time as of November 30, 2008.
Stock Option Program 2004 (Continuation of SOP 2001)
The Stock Option Program 2004 was confirmed by the Board of Management on August 10,
2004 and by the working Committee of Supervisory Board on August 23, 2004 on the basis of
the Stock Option Program resolved by the Company in 2001 and adopted on July 10, 2001 (SOP
2001). In accordance therewith, the Company’s Board of Management is authorized until June 30,
2006 to grant eligible participants the remaining non-transferable options to acquire Company
stock. Altogether 24 board members and senior executives have participated in SOP 2004 with
563,016 options. The reference price is 6.99 euros. The exercise prices lie between 7.69 euros
and 8.74 euros with a weighted average exercise price of 8.22 euros.
SOP 2004 can be exercised for the last time as of August 31, 2010.
94
2004 2003
Stock Stock
in thousands options options
Outstanding at beginning of year 780 984
Granted 0 0
Exercised 0 0
Forfeited 166 204
Outstanding at end of year 614 780
Exercisable at end of year 0 0
2004 2003
Stock Stock
in thousands options options
Outstanding at beginning of year 0 0
Granted 563 0
Exercised 0 0
Forfeited 0 0
Outstanding at end of year 563 0
Exercisable at end of year 0 0

20. Derivative financial
instruments
As permissible under SFAS 123, the Company records the stock options using the intrinsic value
based method from APB 25 (Accounting for Stock Issued to Employees). All options were issued
at an exercise price in excess of the market price as of the issue date. The Company accordingly
did not report any personnel expenses in connection with these subscription rights.
SFAS 123 requires the disclosure of adjusted pro-forma information on the Group’s net income
for the year, reported as if the Company had accounted for the employees’ subscription rights
applying the fair value method. The fair value of these subscription rights granted for the 2001,
2002 and 2004 plans was estimated as of the date on which they were granted using the Black-
Scholes method based on the following assumed weighted averages: risk-free interest rate of
4.7 percent for 2001, 4.4 percent for 2002 and 3.4 percent for 2004; volatility of 42.0 percent
for 2001, 54.8 percent for 2002 and 48.6 percent for 2004, expected dividend yield as of the
valuation date of 2 percent for 2001, 2002 and 2004 and a weighted average life expectancy of
the subscription right of six years.
No plans for stock options exist that were not approved by the stockholders’ meeting.
Stock Appreciation Rights of Pfleiderer Grajewo S.A. and Pfleiderer Prospan S.A.
A separate bonus plan for executives at the Polish companies, Pfleiderer Grajewo S.A. and
Pfleiderer Prospan S.A., was issued in addition to the Stock Option Programs at Pfleiderer AG.
The Company resolved the price appreciation program on November 2, 2004. The reference
price is 167 PLN. The exercise barrier is 120 percent of the reference price. The qualifying period
ends at midnight on October 31, 2006. The Pfleiderer Grajewo S.A. share price as of December 31,
2004 was 200 PLN. No personnel expenses resulted from these stock appreciation rights in 2004.
Stock apprein
thousands ciation rights
Outstanding at beginning of year 0
Granted 81
Exercised 0
Forfeited 0
Outstanding at end of year 81
Exercisable at end of year 0
Derivative financial instruments are used to hedge interest and foreign currency positions with the
aim of minimizing the risks resulting from fluctuations in exchange rates and market interest
rates. The corporate guidelines state that such risks must generally be hedged. Only marketable
interest derivatives and forward exchange contracts that are concluded with banks of first class
standing are used for this purpose. Derivative financial transactions are restricted to the hedging
of the operative business and the related financing. The Company does not conduct any derivative
financial transactions for speculative purposes.
95
FINANCIAL STATEMENTS/NOTES PFLEIDERER GROUP
2004

Interest swaps are held to hedge interest risks. These instruments are used to hedge variable
liabilities denominated in euros.
The following interest derivatives had been entered into as of the balance sheet date:
Forward exchange contracts are concluded to hedge fluctuations in the rate of the US dollar,
Swiss franc, pound sterling and Polish zloty against the euro. Hedging covers both recorded
transactions and future transactions considered highly likely to occur.
The following forward exchange contracts had been entered into as of the balance sheet date:
The notional volumes are the reference values of interest swaps and the purchase and selling
amounts of the forward exchange contracts measured with the forward rates as of the balance
sheet date.
Interest derivatives are valued by the contractual partner on the basis of the discounted flow
of funds that result from the difference compared with the development of the market interest
rates (mark to market valuation). The valuation of the forward exchange contracts corresponds
to the losses or gains that would otherwise be realized if the transaction was settled as of the
balance sheet date.
The notional volume and fair value of the derivative financial transactions as of the balance
sheet date were as follows:
96
Dec. 31, 2004 Dec. 31, 2003
Notional Notional
‘000 euros volume volume
Interest swaps 122,710 237,630
Interest caps 0 6,741
Total 122,710 244,371
Dec. 31, 2004 Dec. 31, 2003
Notional Notional
‘000 euros volume volume
Exchange rate hedges of current or recognized transactions 17,742 11,710
Exchange rate hedges of expected cash flows 0 3,442
Total 17,742 15,152
Dec. 31, 2004 Dec. 31, 2004 Dec. 31, 2003 Dec. 31, 2003
Notional Notional
‘000 euros volume Fair value volume Fair value
Interest derivatives 122,710 –9,864 244,371 –13,601
Forward exchange contracts 17,742 110 15,152 293
Total 140,452 –9,754 259,523 –13,308

Derivative financial instruments are reported in the balance sheet at fair values under other
assets or other liabilities.
In accordance with SFAS 133, (Accounting for Derivative Instruments and Hedging Activities),
derivative financial transactions are accounted for as follows:
If forward exchange contracts are used to hedge the fair value, both the changes in the value of
the derivatives and also the contrary changes in the hedged items are recognized in earnings
for the period. If they are used to hedge foreign exchange risks on future payments (cash flow
hedges), changes in fair value are reported as a component of other comprehensive income
(outside earnings) until the transaction is settled.
In the 2004 business year, 110 thousand euros from forward exchange contracts were recorded
in the other operating income, and 3,820 thousand euros from cash flow hedges in connection
with interest swaps were recorded as interest expense.
Where interest swaps or interest caps are used to hedge future cash flows (cash flow hedges),
the development of the fair value is treated as a change in equity and reported under comprehensive
income (component of equity). In the case of interest derivatives, which in accordance with
SFAS 133 are not regarded as being sufficiently effective to hedge the cash flow, the gain or loss
is recognized immediately in the statement of income as interest expense or interest income.
Financial derivatives were valued as of the balance sheet date in accordance with SFAS 133 as
follows:
The residual term of the interest derivatives essentially corresponds with the term of the underlying
financing transaction and lies between three and five years. The average term is four years.
The residual term of the forward exchange contracts lies between one and five months.
97
Dec. 31, 2004 Dec. 31, 2004 Dec. 31, 2003 Dec. 31, 2003
Notional Notional
‘000 euros volume Gain or loss volume Gain or loss
Recognized in equity 133,610 –9,864 228,420 –12,096
Recognized in earnings 6,842 110 31,103 –1,212
Total 140,452 –9,754 259,523 –13,308
Market volume Market volume Dec. 31, 2004
due within due in more
‘000 euros 1 year than 1 year Total
Interest derivatives 0 122,710 122,710
Forward exchange contracts 17,742 0 17,742
Total 17,742 122,710 140,452
FINANCIAL STATEMENTS/NOTES PFLEIDERER GROUP

21. Deferred taxes
The Group’s exposure from derivative instruments is limited to the risk that the counterparty will
be unable to fulfill its obligations. The maximum default risk for the Group cannot exceed the
positive fair values of the derivatives. In the case of forward exchange contracts, the maximum
risk is the exchange rate fluctuation of the hedged amounts.
In accordance with SFAS 109 (Accounting for Income Taxes), deferred tax assets and liabilities
are recognized for the estimated future tax effects resulting from temporary differences between
the reported carrying amounts of assets and liabilities and their tax bases and secondly as a
result of tax loss carryforwards.
Taxes on income for the Group are made up as follows:
‘000 euros
Current taxes
2004 2003
Germany 2,795 –104
Abroad
Deferred taxes
10,476 6,578
Germany –4,837 662
Abroad 1,165 2,119
Total 9,599 9,255
Long-term deferred taxes were recognized on the basis of an overall tax rate of 37.5 percent
(2003: 37.5 percent). This rate is calculated assuming a corporate income tax rate (including the
solidarity surcharge) of 26.4 percent (2003: 26.4 percent) and an average trade tax burden
at the German companies of 11.1 percent (2003: 11.1 percent). Short-term deferred taxes that
are expected to reverse in the following year are also calculated applying an overall tax rate
of 37.5 percent (2003: 37.5 percent). This rate is determined based on a corporate income tax
charge (including the solidarity surcharge) of 26.4 percent (2003: 26.4 percent) and an average
trade tax burden of 11.1 percent (2003: 11.1 percent). Changes in tax rates resulted in deferred
tax expense in 2004 of 0 thousand euros (2003: deferred tax income of 11 thousand euros).
The computations for foreign companies are based on their respective local tax rates.
98

The following table reconciles the expected income tax expense to actual income tax expense.
The expected income tax expense is computed by multiplying the pre-tax earnings by the overall
tax rate applicable for the respective business year:
‘000 euros 2004 2003
Group earnings before taxes 31,622 17,882
Expected tax expense at a tax rate of 37.5% (2003: 38.8%)
Increase/decrease in tax expense due to:
11,858 6,938
Tax-rate differential with non-German countries –7,078 –2,987
Changes in tax rates 0 –11
Non-deductible operating expenses 5,282 352
Tax-free income –1,318 128
Prior year taxes 7,053 –3,123
Non-deductible foreign source taxes 0 1,113
Additions to valuation adjustment on deferred taxes
Special impact from definition of continuing and
10,625 30,676
discontinued operations –7,188 –23,756
Tax effects at the consolidation level –9,131 0
Other –504 –75
Actual tax expense 9,599 9,255
As of December 31, 2004, the Group has loss carryforwards for German corporate income tax
of 302,262 thousand euros (2003: 276,393 thousand euros), for German trade tax of 237,179
thousand euros (2003: 204,257 thousand euros) and for foreign taxes of 3,894 thousand euros
(2003: 6,261 thousand euros). Under German tax law as applicable as of the balance sheet
date, domestic losses can be carried forward without limit as to time or the amount. Of the foreign
loss carryforwards, 1,171 thousand euros may be used until 2008.
Valuation adjustments of 92,136 thousand euros (2003: 83,242 thousand euros) have been
recorded against deferred tax assets, mainly for tax loss carryforwards, if realization within a
foreseeable period of time is uncertain because of the circumstances or the legal situation and
the available information. The current assessment with regard to the recoverability of deferred
tax assets can change, depending on the earnings situation in future years, and necessitate higher
or lower valuation adjustments. Changes in German tax legislation with regard to the utilization
of loss carryforwards (minimum taxation) have been taken into account in the assessment of the
recoverability of deferred tax assets on loss carryforwards.
99
FINANCIAL STATEMENTS/NOTES PFLEIDERER GROUP

Deferred tax assets and liabilities from valuation differences on balance sheet items are made
up as follows:
‘000 euros Dec. 31, 2004 Dec. 31, 2003
Intangible assets 7,036 8,116
Property, plant and equipment 7,778 8,879
Financial assets 378 4,335
Inventories 1,407 540
Receivables 1,992 2,059
Sundry assets 640 781
Accruals for pensions 2,911 2,569
Other accruals 10,753 3,648
Liabilities 3,513 4,649
36,408 35,576
Tax loss carryforwards 106,278 94,937
142,686 130,513
Valuation adjustments –92,136 –83,242
Deferred tax assets 50,550 47,271
Intangible assets 8,243 8,102
Property, plant and equipment 32,958 34,352
Financial assets 0 0
Inventories 124 270
Sundry assets 125 1,305
Accruals for pensions 0 27
Other accruals 1,305 593
Liabilities 381 324
Sundry liabilities 267 368
Deferred tax liabilities 43,403 45,341
Deferred tax assets, net 7,147 1,930
100

22. Pensions and similar
obligations
Deferred tax assets and liabilities, net, are reported as follows:
‘000 euros
Deferred tax assets
Dec. 31, 2004 Dec. 31, 2003
Current 9,108 7,786
Fixed
Deferred tax liabilities
16,742 15,759
Short-term 801 2,219
Long-term 17,902 19,396
Deferred tax assets, net 7,147 1,930
Total deferred taxes resulting from matters that were recognized in equity during the past business
year amount to 4,557 thousand euros (2003: 5,082 thousand euros). No deferred taxes
were set up on translation differences recognized in equity resulting from the consolidation of
foreign subsidiaries.
Deferred tax assets of 3,452 thousand euros (2003: 4,163 thousand euros) were capitalized for
changes in financial derivatives recognized in equity.
Deferred tax liabilities from the recognition of the adjusting item from valuation of pensions
amounted in the reporting period to 1,114 thousand euros (2003: 919 thousand euros).
Pfleiderer grants defined benefit obligations to eligible employees in individual cases. In addition,
historical obligations still exist under various pension plans that provide retirement, disability
and surviving dependents’ benefits. The pension plans were closed for new entrants at the latest
as of May 31, 1986. Obligations similar to pensions exist at certain foreign companies with nonrecurring
rights that are also reported under the accruals for pensions.
Accruals for pensions for the fiscal years ended December 31, 2004 and 2003 are made up as
follows:
‘000 euros 2004 2003
Accruals for pensions 59,916 57,553
Obligations similar to pensions 504 272
Accruals for pensions and similar obligations 60,420 57,825
The accumulated benefit obligation ignoring future salary increases amounted in the reporting
period to 59,309 thousand euros (2003: 61,507 thousand euros).
101
FINANCIAL STATEMENTS/NOTES PFLEIDERER GROUP

The benefits under defined benefit plans mainly depend on the employee’s length of service, age
and salary. The costs and obligations resulting from defined benefit plans are calculated on the
basis of actuarial reports, applying the projected unit credit method. This method sets the past
service of the employee in relation to the date of valuation, and therefore includes estimates
with regard to future salary trends. The reports as of December 31, 2004 include the following
assumptions:
in % 2004 2003
Discount rate 5.5 5.5
Rate of salary increases 3.0 3.0
The discount rate applied roughly approximates the interest rate achievable as of the valuation
date on top quality fixed-interest securities with the same maturity period. The annual rate of
salary increases is used to calculate the pension benefit obligations.
The components of pension cost for the years ended December 31, 2004 and 2003 were
as follows:
‘000 euros 2004 2003
Service cost 599 959
Interest cost 3,206 3,267
Amortisation of net actuarial gains (losses) 28 30
Amortisation of prior service cost 127 341
Total 3,960 4,597
102

The following table explains the change in the benefit obligations as reported in the consolidated
financial statements as of December 31, 2004 and 2003:
‘000 euros 2004 2003
Benefit obligation at beginning of year 60,880 60,247
Service cost 599 959
Interest cost 3,206 3,267
Benefits paid –3,577 –3,423
Actuarial gains –1,030 –294
Retrospective plan amendments 64 127
Business combinations 300 0
Disposals and transfers –92 –3
Benefit obligation at end of year 60,350 60,880
Unrecognized actuarial loss –3,351 –5,754
Unrecognized prior service cost –64 –127
Amount recognized in the balance sheet 56,935 54,999
The following amounts are reported in the Company’s consolidated balance sheet as of
December 31, 2004 and 2003:
‘000 euros 2004 2003
Intangible assets 64 98
Accruals for pensions 59,916 57,553
Accumulated other comprehensive income 2,917 2,456
Pension costs, net 56,935 54,999
The following table shows the pension benefits in the reporting period and in the previous year,
and for those expected over the next five years (not discounted):
‘000 euros
Pension benefits paid
2003 3,423
2004 3,577
Expected pension benefits
2005 3,650
2006 3,723
2007 3,798
2008 3,874
2009 3,951
2005–2009 18,996
103
FINANCIAL STATEMENTS/NOTES PFLEIDERER GROUP

1. Selling expenses
2. Other operating
income/other
operating expenses
3. Net interest
V. Notes to the Statement of Income
The selling expenses of 121,636 thousand euros (2003: 113,577 thousand euros) include freight
out of 52,031 thousand euros (2003: 46,748 thousand euros).
Jan. 1 – Jan. 1 –
‘000 euros Dec. 31, 2004 Dec. 31, 2003
Other operating income 48,609 26,152
Other operating expenses 37,455 10,053
Total 11,154 16,099
Other operating income/other operating expenses include the proceeds from the dilution gain
of 22,699 thousand euros from the increase in capital in Poland. They also include proceeds
of 3,588 thousand euros from the reversal of specific and lump-sum allowances for doubtful accounts.
Foreign exchange gains of 3,070 thousand euros are also reported here. The expenses
mainly result from provisions of 16,998 thousand euros for closure costs for the Rheda-Wiedenbrück
site, expenses of 5,257 thousand euros for allocations to accruals and foreign exchange
losses of 4,688 thousand euros.
Jan. 1 – Jan. 1 –
‘000 euros Dec. 31, 2004 Dec. 31, 2003
Other interest and similar income 5,745 7,875
Interest and similar expenses 24,361 24,937
Total –18,616 –17,062
Other interest and similar income primarily includes interest income on invested funds. The
interest expense results from financial liabilities, interest in connection with hedging transactions
and expenses of 3,820 thousand euros from the dissolution of interest swaps.
VI. Notes to the Consolidated Statement of Cash Flows
The cash and cash equivalents in the cash flow statement comprise the sum of the balance
sheet items, liquid funds and securities classified as current assets.
Interest payments in the fiscal year 2004 amounted to 19,707 thousand euros (2003:
21,039 thousand euros). Payments for taxes on income amounted to 11,587 thousand euros
(2003: 14,185 thousand euros).
104

1. Contingent liabilities
VII. Other Disclosures
Contingent liabilities are recognized below at nominal values:
million euros Dec. 31, 2004 Dec. 31, 2003
Guarantees and letters of comfort 32.7 10.7
Warranty obligations 1.4 29.1
Discounted notes 0.0 0.9
The Group has provided the purchasers with guarantees on a customary scale in connection with
various business disposals. The Company does not currently expect any significant claims under
these guarantees.
Long-term supply obligations to a power plant operator at fixed prices exist in the Business
Segment Engineered Wood. A possible risk to the earnings as a result of these prices is deemed
improbable.
Furthermore, credit institutions have issued guarantees in favor of customers, suppliers and other
contractual partners of the Group totaling of 41.8 million euros (2003: 40.5 million euros), and
corresponding guarantee lines are available. These mainly comprise guarantees under warranties
and guarantees in connection with the contingent liabilities from disinvestments.
No accruals have been set up for the above contingent liabilities, because the probability that
the risks will occur is deemed to be low.
The Group provides warranties for certain products. The amount of the potential warranty claims
is based on the sales of these products and the records relating to past warranty claims.
Under a factoring program for the financing of trade receivables of 30.3 million euros, Pfleiderer AG
is liable for the verity of the receivables sold. The receivables sold are covered in full by commercial
credit insurance, so that a claim from this is not expected.
‘000 euros
Balance as of January 1, 2004 0
Warranties issued during the reporting period 2,769
Claims during the past business year 0
Balance as of December 31, 2004 2,769
Accruals for warranty obligations developed as following during the past business year:
The application of FIN 45 does not result in any further disclosable matters.
105
FINANCIAL STATEMENTS/NOTES PFLEIDERER GROUP

2. Other financial
commitments
The Group is leasing property, plant and equipment under rental and leasing agreements that do
not qualify under US-GAAP as capital leases, but as operating leases. Additionally, the Group has
entered into contracts for the maintenance of property, plant and equipment and for various
services. Expenses under rental and leasing agreements reported in the statement of income
amount to 19,199 thousand euros (2003: 18,954 thousand euros).
The following table shows the future (non-discounted) minimum payments under non-cancelable
leases with an initial or remaining term of more than a year as of December 31, 2004:
‘000 euros
2005 25,314
2006 36,784
2007 11,798
2008 10,732
2009 5,849
After 2009 13,856
Total 104,333
The Group carried out sale and leaseback transactions in fiscal 2004 in which in the main two
plants were sold and then leased back under an operating lease. The total volume of these
transactions amounted to 51 thousand euros.
Together with a related party, the Group holds a controlling financial interest in a leasing object
company that qualifies as a VIE. Since the Group is not the primary beneficiary of the VIE, the
leasing object company has not been included in the consolidated financial statements. The
object company was formed on August 29, 1999, and is engaged in the acquisition, sale, letting
and leasing of property, plant and equipment and the performance of all related business. The
unaudited balance sheet total of the object company (under HGB) amounts as of December 31,
2004 to 43,653 thousand euros. The maximum potential loss for the Group from the participation
in the VIE amounts to some 5,300 thousand euros. The realization of a loss from the participation
in the VIE is not expected.
Between 2000 and 2003, Pfleiderer AG and its subsidiaries sold several large plants worth a total
of 76,909 thousand euros to the object company and then leased them back again. These lease
agreements qualify as operating leases under US-GAAP. Most of the lease agreements run until
the end of 2006. The lease expenses for the years from 2005 until the end of the contractual
terms are disclosed under the other financial commitments.
As of December 31, 2004, the Group had purchase commitments of 66,092 thousand euros
(2003: 41,007 thousand euros).
106

3. Pending litigation
and claims
4. Transactions with
related parties
5. Directors’ Dealings
6. Corporate
Governance
The Company is involved from time to time in litigation in the ordinary course of business. The
Company is not aware of any matters that could have a significant negative impact on its results
of operations, liquidity or financial position.
Pfleiderer Unternehmensverwaltung GmbH & Co. KG held a substantial investment in Pfleiderer AG
(subsidiary) until March 22, 2004 and was thus a related party to the Group. The Group had business
relations with this company and its subsidiary, Pfleiderer Leasing GmbH & Co. KG, Delitzsch,
both in the current and the prior financial year. The extent of the business relations in 2004 was
as follows:
‘000 euros 2004 2003
Interest income 0 10
Income from cost allocations 7,138 5,051
Expenses from cost allocations 7,654 795
Rental expense 2,567 3,395
The expenses for power purchased from Pfleiderer Energietechnik Verwaltungs-GmbH, Neumarkt,
amounted in 2004 to 988 thousand euros (2003: 12,067 thousand euros).
Pursuant to Section 15a, German Securities Trading Act, members of the Board of Management
and the Supervisory Board and members of their families are obliged to report to the Company
and the German Federal Financial Services Supervisory Office without delay information about
any securities trading relating to the Company (Directors’ Dealings) that exceed a minimum limit.
These notifications are published on Pfleiderer AG’s website at www.pfleiderer.com.
On September 30, 2004, Hans H. Overdiek (Spokesman of the Board of Management) announced
that he had acquired 400,000 shares in Pfleiderer AG from Pfleiderer Unternehmensverwaltung
GmbH & Co. KG at a price of 5.30 euros per share.
Hanno C. Fiedler (a member of the Supervisory Board) acquired 2,000 shares at a price of
8.15 euros per share on December 27, 2004, and a further 2,000 shares on December 28, 2004
at a price of 8.20 euros per share.
The Board of Management and the Supervisory Board have issued the statement of compliance for
the year 2004 in accordance with Section 161 of the German Stock Companies Act on the recommendations
of the German Corporate Governance Code Commission and have published this
on the Company’s website. Pfleiderer AG has reported in detail on the subject of Corporate
Governance in the chapter of the annual report entitled “Principles of Corporate Governance
Pfleiderer Aktiengesellschaft” (see pages 11 to 17).
107
FINANCIAL STATEMENTS/NOTES PFLEIDERER GROUP

7. Personnel expenses
8. Relief in accordance
with Section
264b HGB
Total personnel expenses in the past business year amounted to 183,262 thousand euros
(2003: 189,375 thousands euros).
The breakdown of employees as of December 31, 2004 was as follows:
‘000 euros 2004 2003
Senior management 29 25
Junior management, clerical 1,377 1,349
Production, manual 3,023 3,013
Total 4,429 4,387
The following partnerships have applied the relief available under Section 264b HGB:
Pfleiderer dritte Erwerbergesellschaft mbH & Co. Grundstücksverwaltungs KG
Pfleiderer Holzwerkstoffe GmbH & Co. KG
Pfleiderer Holzwerkstoffe Nidda GmbH & Co. KG
Pfleiderer Infrastrukturtechnik GmbH & Co. KG
Pfleiderer Dämmstofftechnik International GmbH & Co. KG
Pfleiderer Leasing GmbH & Co.
VIII. Segment Reporting
For segment reporting purposes as defined by SFAS 131 (Disclosures about Segments of an
Enterprise and Related Information), the Group is engaged in two Business Segments, Engineered
Wood and Infrastructure Technology (see consolidated segment reporting preceding the notes
to the consolidated financial statements). The Business Segment Engineered Wood produces raw
particleboard and processed products. The Business Segment Infrastructure Technology mainly
generates its revenues with products for track systems technology and the manufacture of concrete
sleepers. The Poles & Towers Business Center, which was sold during the past business
year, is no longer reported. Transactions between the segments are mainly carried out at market
prices.
108

Geographical Information
Sales Revenues by Region
Sales revenues by region are as follows:
Jan. 1 – Jan. 1 –
‘000 euros Dec. 31, 2004 Dec. 31, 2003
Germany 416,492 431,462
Other EU countries 348,595 215,920
Rest of Europe 98,707 181,471
Other countries 37,184 19,352
Total 900,978 848,205
Segment Assets by Region
Property, plant and equipment by region are as follows:
Jan. 1 – Jan. 1 –
‘000 euros Dec. 31, 2004 Dec. 31, 2003
Germany 196,852 201,615
Other EU countries 118,992 6,956
Rest of Europe 12,439 90,708
Total 328,283 299,279
IX. Earnings per Ordinary Share
The following table shows the earnings per share:
2004 2003
Net earnings for the year after minority interests ‘000 euros 33,860 –45,762
Average number of outstanding shares number 42,685,000 42,678,146
Basic earnings per share euros 0.79 –1.07
Diluted earnings per share euros 0.79 –1.07
Earnings per share of continuing operations euros 0.13 0.10
Earnings per share of discontinued operations euros 0.66 –1.17
Stock options granted to members of the Board of Management and employees under SOP 2001
did not have a dilutive effect, and were therefore not included in the calculation of diluted earnings
per share.
Under SOP 2002, 105,862 shares have a dilutive effect. The minor dilutive effect did not result
in any difference between diluted earnings per share and basic earnings per share.
109
FINANCIAL STATEMENTS/NOTES PFLEIDERER GROUP

1. Board of Management
2. Supervisory Board
X. Management Remuneration/Stock Held by Board Members
The total remuneration of the Board of Management amounted in fiscal 2004 to 3,222 thousand
euros (2003: 3,834 thousand euros). The remuneration of the past business year includes a variable
portion of 982 thousand euros (2003: 982 thousand euros).
Pension obligations to former members of the Board of Management and their surviving dependents
amount to 3,917 thousand euros (2003: 3,916 thousand euros). No remuneration was paid
to former members of the Board of Management during the 2004 business year (2003: 145 thousand
euros).
After adjusting for options to former members of the Board of Management, members of the
Board of Management were granted 386,260 options to subscribe for stock in 2004 (2003: 0)
under Pfleiderer AG’s Stock Option Program, in return for making an own contribution. On the
basis of the amount of personal contributions for the 2004 Stock Option Program, the Company
does not intend to grant members of the Board of Management any further options (2003: 0).
Members of the Board of Management hold 442,680 shares (2003: 36,380).
The total remuneration paid to members of the Supervisory Board amounted in 2004 to
152 thousand euros (2003: 152 thousand euros).
Members of the Supervisory Board hold a total of 17,683 shares (2003: 1,045 shares).
XI. Subsequent Events
The Company announced on February 8, 2005 that a due diligence review is currently in progress
at the Kunz Group within an exclusivity period. The basis is provided by a letter of intent signed
by Pfleiderer AG and Kunz Holding GmbH & Co. KG, Gschwend, on December 2004 on the possible
acquisition of the Kunz Group by Pfleiderer.
XII. Deviations in Accounting, Valuation and Disclosure Obligations
under Section 292a HGB (German Commercial Code)
The consolidated financial statements of Pfleiderer AG have been prepared in accordance with
US-Generally Accepted Accounting Principles (US-GAAP) as applicable as of the balance sheet
date, applying the exemption available under Section 292a HGB from the requirement to prepare
financial statements in accordance with the German Commercial Code (HGB).
The main differences between the accounting, valuation and disclosure requirements under
US-GAAP compared with those under the HGB are as follows:
110

1. Leases
2. Valuation of
inventories
HGB does not stipulate explicitly how lease transactions should be treated. German companies
therefore generally fall back on the leasing decrees issued by the tax authorities when deciding
on how to account for leases. Applying tax criteria to lease agreements generally has the effect
that leased assets are recognized in the lessor’s balance sheet.
Comprehensive rules (especially SFAS 13) exist under US-GAAP on accounting for lease transactions.
As a matter of principle, a distinction is drawn between capital leases and operating leases,
depending on which party bears the significant rewards and risks from the use of the leased
assets and can thus be regarded as their economic owner. The lessee must capitalize the leased
asset if he is regarded as the economic owner, and the lessor must capitalize it in the event of
an operating lease.
Under HGB, inventories are valued as of the balance sheet date, in accordance with the strict
principle of the lowest value, at the lower of cost and market or a lower fair value. The fair value
of raw materials, consumables and supplies is generally based on the replacement values on the
procurement market and, for work in process and finished goods, by the inverse method starting
off from the net proceeds of sale on the sales market.
Under US-GAAP, inventories are valued at the lower of cost or market on the basis of individual
values or applying the weighted average method. The FIFO method (first in-first out) is also applied
in justified individual cases. Market value is based as a matter of principle on the replacement
value. The ceiling for determination of market value is the estimated selling price in the ordinary
course of business less the estimated costs of completion and the expected costs necessary to
make the sale (net realizable value). The floor for determination of market value is net realizable
value less a normal profit margin.
The production costs also include, in addition to direct material and production costs, an appropriate
share of the material and production overheads caused by the production process.
All foreseeable risks in the inventories that have resulted from diminished usability or obsolescence
were reflected by appropriate write-downs. Markdowns were recorded for slow-moving
items.
111
FINANCIAL STATEMENTS/NOTES PFLEIDERER GROUP

3. Derivative financial
instruments
4. Costs of rasing
capital
5. Stock options
6. Foreign currency
translation
7. Accounting for
and amortization
of goodwill
There is no binding approach under HGB to accounting for and the valuation of derivative financial
instruments, so that they are valued taking into account the historical cost, realization and
prudence principles.
US-GAAP, on the other hand, requires all original and derivative financial instruments to be measured
at fair value. Under certain restrictive conditions, US-GAAP requires that hedging be recognized
in the balance sheet, with the consequence that fluctuations in the fair value of financial
instruments used for hedging purposes are not recognized directly as expense or income, but
are deferred temporarily under equity. The criteria for recognition of hedging in the balance sheet
depend on the nature of the hedged item and the hedging instrument. If the criteria for recognition
of hedging in the balance sheet are not fulfilled, fluctuations in the fair value of derivatives
must be recognized as expense or income in the period in which they occur.
Under German law, costs of raising capital must be recognized as expense and may not be offset
against the proceeds of increases in capital. Under US-GAAP, costs of raising equity, such as
issuing costs incurred in conjunction with an initial public offering, less the related income tax
effects, are deducted from the gross proceeds of the funds raised, thus reducing the additional
paid-in capital.
No prevailing opinion has developed to date in Germany on the treatment of the issuance of
stock options to employees. Under US-GAAP, stock options are mainly dealt with in APB 25 and
SFAS 123. Under APB 25, stock options are valued in accordance with their intrinsic value and
under SFAS 123 in accordance with their fair value. The Company applies APB 25 for accounting
for stock options, in accordance with which the intrinsic value is based on the difference between
the exercise price and the higher current market price.
Whereas under HGB, non-hedged foreign currency receivables and liabilities are valued at the
exchange rate on the transaction date or the less favorable rate in each case as of the balance
sheet date, US-GAAP requires in accordance with SFAS 52 (Foreign Currency Translation) that
all foreign currency receivables and liabilities are valued at the closing rate as of the balance sheet
date, with the consequence that unrealized exchange gains are also recognized as income.
Under German commercial law, goodwill acquired for a consideration must be capitalized and
amortized over its expected useful life. If the goodwill results from first-time consolidation, it
is offset in full against equity in the year in which it arises. Goodwill must be written down, for
instance, if the future earnings situation is not expected to be positive. An impairment loss is
regarded as justified under the aspect of the prudence principle.
112

8. Discontinued
operations
Under US-GAAP, goodwill is similarly capitalized, but systematic amortization is no longer permitted.
Instead, SFAS 142 requires an impairment test to be carried out at least once a year.
Section 246 (2) HGB (German Commercial Code) prohibits the offsetting of expenses and income
and assets and liabilities. This has the consequence that discontinued operations may not be
reported separately in the financial statements.
Under US-GAAP on the other hand, SFAS 144 (Accounting for the Impairment or Disposal of Long-
Lived Assets) requires items in the statement of income and the balance sheet to be adjusted for
the effect of discontinued operations. The adjusted figures must be reported in separate items
as income or loss from discontinued operations in the statement of income and as assets and
liabilities from discontinued operations in the balance sheet.
XIII. Development of Group Fixed Assets
The development of the Group fixed assets can be seen from the analysis enclosed with these
notes.
Neumarkt, February 22, 2005
Hans H. Overdiek Dr Jürgen Koch Michael Ernst
113
FINANCIAL STATEMENTS/NOTES PFLEIDERER GROUP

Analysis of Group Assets
Acquisition and production costs
Change in
Currency consolidated Reclassifi- Dec. 31,
‘000 euros Jan. 1, 2004 translation group Additions Disposals cations 2004
I. Intangible assets
1. Franchises, trademarks,
patents and licenses
and similiar rights and
licenses to such rights 37,851 288 – 629 –4,241 692 35,219
2. Goodwill 148,150 – 6,904 1,114 –3,969 – 152,199
3. Payments on account 510 – – 46 – –510 46
186,511 288 6,904 1,789 –8,210 182 187,464
II. Property, plant and equipment
1. Land, land rights and
buildings including
buildings on
third-party land
2. Technical equipment
232,042 6,975 6,105 742 –364 3,919 249,419
and machines
3. Other equipment, furniture
530,472 23,371 6,828 5,021 –5,865 22,777 582,604
and fixtures
4. Payments on account and
56,383 1,250 197 2,029 –3,849 1,139 57,149
construction in progress 14,974 385 1,745 30,595 –1 –28,017 19,681
833,871 31,981 14,875 38,387 –10,079 –182 908,853
III. Financial assets
1. Shares in affiliated
companies 3,257 –1 – 149 –234 26 3,197
2. Equity investments
3. Loans to companies
in which investments
74 – – 15 – –26 63
are held 169 – – – –169 – –
4. Other loans 391 1 – 11,504 –77 5,2891) 17,108
3,891 – – 11,668 –480 5,289 20,368
1) Transferred from current assets to financial assets due to changes in maturity dates.
1,024,273 32,269 21,779 51,844 –18,769 5,289 1,116,685
114

Accumulated amortization/depreciation/write-downs Net carrying amount
Change in
Currency consolidated Dec. 31, Dec. 31, Dec. 31,
Jan. 1, 2004 translation group Additions Disposals 2004 2004 2003
–28,021 –271 – –3,048 3,475 –27,865 7,354 9,831
–65,848 – – – – –65,848 86,351 82,302
– – – – – – 46 510
–93,869 –271 – –3,048 3,475 –93,713 93,751 92,643
–92,886 –2,910 –39 –8,527 276 –104,086 145,333 139,154
–397,121 –15,867 –232 –21,975 4,628 –430,567 152,037 133,352
–43,949 –1,014 –16 –3,230 3,030 –45,179 11,970 12,434
–635 –100 – –3 – –738 18,943 14,339
–534,591 –19,891 –287 –33,735 7,934 –580,570 328,283 299,279
–1,654 – – –1,005 – –2,659 538 1,602
–18 – – – – –18 45 56
– – – – – – – 169
– – – –66 – –66 17,042 391
–1,672 – – –1,071 – –2,743 17,625 2,218
–630,132 –20,162 –287 –37,854 11,409 –677,026 439,659 394,140
115
FINANCIAL STATEMENTS PFLEIDERER GROUP

Consolidated Companies as of December 31, 2004
Pfleiderer AG Neumarkt
Business Segment Engineered Wood
FH Frischholz GmbH Korbach 100.00%
Fideris Spanplatten AG St Gallen (CH) 100.00%
FOLS Sp.zo.o. Warsaw (PL) 100.00%
Heller Forstservice GmbH Korbach 100.00%
Heller Holz GmbH Korbach 100.00%
Interwood GmbH Neumarkt 100.00%
Jura Belgium BVBA Hoogstraaten (B) 100.00%
JURA-Spedition GmbH Neumarkt 100.00%
Pfleiderer dritte Erwerbergesellschaft mbH
Pfleiderer dritte Erwerbergesellschaft mbH & Co.
Neumarkt 100.00%
Grundstücksverwaltungs KG Neumarkt *) 100.00%
Pfleiderer Grajewo S.A. Grajewo (PL) 60.27%
Pfleiderer Holzwerkstoffe GmbH & Co. KG Neumarkt *) 100.00%
Pfleiderer Holzwerkstoffe International GmbH Neumarkt 100.00%
Pfleiderer Holzwerkstoffe Nidda GmbH & Co. KG Neumarkt *) 100.00%
Pfleiderer Holzwerkstoffe Nidda Verwaltungs-GmbH Neumarkt 100.00%
Pfleiderer Holzwerkstoffe Vertriebs-GmbH Neumarkt 100.00%
Pfleiderer Holzwerkstoffe Verwaltungs-GmbH Neumarkt 100.00%
Pfleiderer Industrie Ltd. Macclesfield (GB) 100.00%
Pfleiderer OOO Velikii Novgorod (RUS) 60.27%
Pfleiderer Prospan S.A. Wieruszów (PL) 34.17%
Thermopal GmbH Leutkirch 100.00%
wodego AG St Gallen (CH) 100.00%
wodego B.V. Deventer (NL) 100.00%
wodego GmbH Neumarkt 100.00%
wodego S.A.S Reims (F) 100.00%
Non-consolidated companies:
Jura Polska Sp.zo.o. Dabrowa Gornicza (PL) 100.00%
Laminat Sp.zo.o. Grajewo (PL) 47.22%
MSG Musterservice GmbH Neumarkt 100.00%
Pfleiderer erste Erwerbergesellschaft mbH Neumarkt 100.00%
Business Segment Infrastructure Technology
Engineered Fiberglass Products, Ltd. Birmingham (USA) 100.00%
Pfleiderer Consulting GmbH Neumarkt 100.00%
Pfleiderer España S.A. Constanti (E) 100.00%
Pfleiderer Infrastrukturtechnik GmbH & Co. KG Neumarkt *) 100.00%
Pfleiderer Infrastrukturtechnik Verwaltungs-GmbH Neumarkt 100.00%
Pfleiderer Lábatlani Vasbetonipari Rt. Lábatlan (H) 86.00%
116

Pfleiderer track systems B.V. Deventer (NL) 100.00%
Pfleiderer Wind Energy GmbH Neumarkt 100.00%
S.C. Travertec srl Brasov (RO) 100.00%
Travipos S.A. Constanti (E) 51.00%
Non-consolidated companies:
German track systems Projektgesellschaft mbH GTS Neumarkt 100.00%
Patil Pfleiderer track systems Pvt. Ltd. Secunderabad (IND) 55.00%
Swiss track systems AG Zolfingen (CH) 48.70%
Other
Pfleiderer Dämmstofftechnik International GmbH & Co. KG Neumarkt *) 100.00%
Pfleiderer Dämmstofftechnik Verwaltungs-GmbH Neumarkt 100.00%
Pfleiderer Finance B.V. Deventer (NL) 100.00%
Pfleiderer Leasing GmbH & Co. Neumarkt *) 100.00%
Pfleiderer Leasing Verwaltungs-GmbH Neumarkt 100.00%
Pfleiderer Service GmbH Neumarkt 100.00%
Non-consolidated companies:
Pfleiderer Energietechnik Verwaltungs-GmbH Neumarkt 100.00%
*) Companies opting out under Section 264b HGB as of December 31, 2004
117
FINANCIAL STATEMENTS PFLEIDERER GROUP

Independent Auditor’s Report
We have audited the consolidated Financial Statements, comprising the balance sheet, the income
statement and the statements of changes in shareholders’ equity and cash flows as well as the
Notes to the Financial Statements prepared by Pfleiderer Aktiengesellschaft, Neumarkt, for the
business year from January 1 to December 31, 2004. The preparation and the content of the
consolidated Financial Statements in accordance with Generally Accepted Accounting Principles
in the United States of America (US-GAAP) are the responsibility of the Company’s management.
Our responsibility is to express an opinion on these consolidated Financial Statements based on
our audit.
We conducted our audit of the consolidated Financial Statements in accordance with German
auditing regulations and generally accepted standards in Germany for the audit of Financial Statements
promulgated by the Institut der Wirtschaftsprüfer (IDW). Those standards require that we
plan and perform the audit such that it can be assessed with reasonable assurance whether the
consolidated Financial Statements are free of material misstatements. Knowledge of the business
activities and the economic and legal environment of the Group and evaluations of possible
misstatements are taken into account in the determination of audit procedures. The evidence
supporting the amounts and disclosures in the consolidated Financial Statements is examined
on a test basis within the framework of the audit. The audit includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall
presentation of the consolidated Financial Statements. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated Financial Statements give a true and fair view of the net assets,
financial position, results of operations and cash flows of the Group for the business year in accordance
with Generally Accepted Accounting Principles in the United States of America.
Our audit, which also extends to the group management report prepared by the Company’s
management for the business year from January 1 to December 31, 2004, has not led to any
reservations. In our opinion on the whole the group management report provides a suitable
understanding of the Group’s position and suitably presents the risks of future development.
In addition, we confirm that the consolidated Financial Statements and the group management
report for the business year from January 1 to December 31, 2004 satisfy the conditions required
for the Company’s exemption from its duty to prepare consolidated Financial Statements
and the group management report in accordance with German law.
Nuremberg, February 25, 2005
KPMG Deutsche Treuhand-Gesellschaft
Aktiengesellschaft
Wirtschaftsprüfungsgesellschaft
Zehnder Rupprecht
External auditor External auditor
118

119

PFLEIDERER AG FINANCIAL STATEMENTS (EXCERPTS)
The following is a excerpt of the Financial Statements of Pfleiderer AG as drawn up and audited
pursuant to the German Commercial Code (HGB). This excerpt does not comply with Sec. 328 (2)
HGB. A copy of the full Financial Statement can be ordered from Pfleiderer AG, Investor Relations,
Ingolstädter Strasse 51, 92318 Neumarkt, Germany.
Pfleiderer AG Balance Sheet as of December 31, 2004
Assets
‘000 euros Dec. 31, 2004 Dec. 31, 2003
Fixed assets
Intangible assets 1 0
Property, plant and equipment 68 62
Financial assets 261,068 273,925
Liabilities
‘000 euros Dec. 31, 2004 Dec. 31, 2003
Stockholders’ capital
Subscribed capital 109,274 109,274
Capital reserve 10,927 10,927
Revenue reserve 50,621 50,621
Retained earnings –23,178 –29,520
120
261,137 273,987
Current assets
Receivables and other assets 58,059 59,697
Treasury stock 0 0
Cash and cash equivalents 55,417 59,376
113,476 119,073
Deferrals
Discount 984 0
984 0
Total assets 375,597 393,060
147,644 141,302
Accruals
Accruals for pensions 6,436 6,365
Other accruals 14,082 9,002
20,518 15,367
Liabilities
Financial liabilities 59,760 22,971
Other liabilities 147,675 213,420
207,435 236,391
Total stockholders’ equity and liabilities 375,597 393,060

Pfleiderer AG Statement of Income 2004
Jan. 1 – Jan. 1 –
‘000 euros Dec. 31, 2004 Dec. 31, 2003
Income from investments 33,027 24,584
Depreciation of financial assets 0 –4,263
Expenses from absorption of losses from affiliated companies 0 –26,745
33,027 –6,424
Income from other securities and long-term loans 0 103
Other interest and similar income 8,797 6,179
Interest and similar expenses –19,334 –13,989
121
FINANCIAL STATEMENTS PFLEIDERER GROUP
–10,537 –7,707
Holding performance 22,490 –14,131
Other operating income 17,800 16,660
Personnel expenses –5,321 –6,898
Amortization and depreciation of fixed assets –30 –18
Other operating expenses –27,020 –23,793
Result from ordinary operations 7,919 –28,180
Extraordinary expenses 0 0
Taxes on income –1,404 –1,340
Other taxes –173 0
Net income 6,342 –29,520
Losses carried forward –29,520 0
Withdrawal from capital reserve 0 0
Withdrawal from revenue income 0 0
Retained earnings –23,178 –29,520

Analysis of Fixed Assets of Pfleiderer AG 2004
122
Acquisition or production costs
Reclassifi-
‘000 euros Jan. 1, 2004 Additions Disposals cations Dec. 31, 2004
I. Intangible assets
Franchises, trade marks, patents and licenses
and similar right and licenses to such rights 0 2 0 0 2
0 2 0 0 2
II. Property, plant and equipment
Other equipment, furniture and fixtures 102 36 4 0 134
102 36 4 0 134
III. Financial assets
1. Investments in affiliated companies 349,160 48 22,905 0 326,303
2. Loans to affiliated companies 0 0 0 0 0
3. Equity investments 28 0 0 0 28
4. Other loans 0 10,000 0 0 10,000
349,188 10,048 22,905 0 336,331
349,290 10,086 22,909 0 336,467

Accumulated amortization/depreciation/write-downs Net carrying amount
Reclassifi-
Jan. 1, 2004 Additions Disposals cations Dec. 31, 2004 Dec. 31, 2004 Dec. 31, 2003
0 1 0 0 1 1 0
0 1 0 0 1 1 0
40 29 3 0 66 68 62
40 29 3 0 66 68 62
75,263 0 0 0 75,263 251,040 273,897
0 0 0 0 0 0 0
0 0 0 0 0 28 28
0 0 0 0 0 10,000 0
75,263 0 0 0 75,263 261,068 273,925
75,303 30 3 0 75,330 261,137 273,987
123
FINANCIAL STATEMENTS PFLEIDERER GROUP

IN BRIEF
Supervisory Board and Board of Management of Pfleiderer AG
Committees Formed
by Supervisory Board
Working Committee
Ernst-Herbert Pfleiderer (Chairman)
N. Erich Gerlach
(until December 31, 2004)
Hanno C. Fiedler (from January 1, 2005)
Wolfgang Rhode
Audit Committee
Dr Manfred Scholz (Chairman)
Ernst-Herbert Pfleiderer
Wolfgang Rhode
Conciliation Committee
Ernst-Herbert Pfleiderer (Chairman)
Frank Kratzsch
Wolfgang Rhode
Dr Manfred Scholz
Additional Offices Held by Members
of the Supervisory Board
Ernst-Herbert Pfleiderer
Chairman of the Supervisory Board
of Pfleiderer AG
General Manager of Pfleiderer Unternehmensverwaltung
GmbH & Co. KG,
Neumarkt – from May 28, 2004
Member of the following comparable
German Advisory Board:
Advisory Board of Pfleiderer Unternehmensverwaltung
GmbH & Co. KG,
Neumarkt, (Chairman) – until
May 21, 2004
Wolfgang Rhode* )
1st Deputy Chairman of the
Supervisory Board
Executive member of the Managing
Board of IG Metall
124
Dr Manfred Scholz
2nd Deputy Chairman of the
Supervisory Board
General Manager of MS Verwaltungs
GmbH, Augsburg
Member of the Supervisory Boards
in the following companies:
Citigroup (Member of German
Advisory Board)
ASSTEL Lebensversicherung AG,
Cologne (Chairman)
Württembergische Hypothekenbank
AG, Stuttgart
Drei Mohren AG, Augsburg
Gothaer Lebensversicherung AG,
Göttingen (Chairman)
Gothaer Versicherungsbank VvaG,
Cologne
Gothaer Finanzholding AG, Cologne
Member of the following comparable
German Advisory Board:
Advisory Board of Pfleiderer Unternehmensverwaltung
GmbH & Co. KG,
Neumarkt, (Deputy-Chairman) –
until May 21, 2004
N. Erich Gerlach
(until December 31, 2004)
Business Consultant, General
Manager Business Integration
Service, Friedrichsdorf
Member of the following comparable
German Advisory Board:
Advisory Board of Pfleiderer Unternehmensverwaltung
GmbH & Co. KG,
Neumarkt – until May 21, 2004
Reinhard Hahn* )
Trade Union Secretary, Managing
Board of IG Metall, Frankfurt/Main
Wolfgang Haupt
(from January 1, 2005)
Businessman, Düsseldorf
Member of the Supervisory Boards
in the following companies:
HSBC Trinkhaus & Burkhardt KGaA,
Düsseldorf
HSBC Trinkhaus & Burkhardt Immobilien
GmbH, Düsseldorf (Chairman)
Trinkhaus Private Equity Pool I
GmbH & Co. KGaA, Düsseldorf
(Chairman)
Trinkhaus Secondary GmbH & Co.
KGaA, Düsseldorf (Chairman)
Member of the following comparable
German Advisory Board:
Partners Committee of
Karl Otto Braun KG, Wolfstein
(Deputy Chairman)
Frank Kratzsch* )
Chairman, Works Council of
Pfleiderer Holzwerkstoffe
GmbH & Co. KG, Arnsberg plant
Hans Theodor Pfleiderer
Member of the Board of Management
of P&V Holding Aktiengesellschaft,
Vienna
General Manager of Pfleiderer Unternehmensverwaltung
GmbH & Co. KG,
Neumarkt – from May 28, 2004
Member of the following comparable
German Advisory Board:
Advisory Board of Pfleiderer Unternehmensverwaltung
GmbH & Co. KG,
Neumarkt – until May 21, 2004
* ) Elected by the employees

Hanno C. Fiedler
Chairman of the managing board
of Ball Packaging Europe GmbH,
Ratingen
Executive Vice President of Ball Corporation,
Broomfield, Colorado, USA
Member of the following comparable
German Advisory Board:
Advisory Board of Pfleiderer Unternehmensverwaltung
GmbH & Co. KG,
Neumarkt – until May 21, 2004
Dresdner Bank AG, Düsseldorf
(Advisory Board)
Member of the Supervisory Boards
in the following companies:
Thyssen Krupp Stahl AG, Duisburg
Howaldtswerke-Deutsche Werft AG,
Kiel
Member of the following comparable
foreign Advisory Board:
Ball Corporation, Broomfield,
Colorado, USA
Robert J. Koehler
Chairman of the Board of Management
of SGL Carbon AG, Wiesbaden
Member of the Supervisory Board
of the following company:
Wacker Chemie GmbH, Munich
Benteler AG, Paderborn (Chairman)
AXA Lebensversicherung AG, Cologne
Heidelberger Druck AG, Heidelberg
Member of the following comparable
German Advisory Board:
Advisory Board of Pfleiderer Unternehmensverwaltung
GmbH & Co. KG,
Neumarkt – until May 21, 2004
125
Rainer Stracke* )
Member of the Board of Management
of Pfleiderer Prospan S.A.,
Wieruszów, Poland
Member of the Board of Management
of Pfleiderer Grajewo S.A.,
Grajewo, Poland
Manfred Schmidt* )
Works Council Chairman, Pfleiderer
Holzwerkstoffe GmbH & Co. KG,
Neumarkt plant
Josef Rugge-Fechtelpeter* )
Works Council Chairman, Pfleiderer
Holzwerkstoffe GmbH & Co. KG,
Rheda-Wiedenbrück plant
Chairman of Central Works Council,
Wood-Based Panels
Additional Offices Held by Members
of the Board of Management of
Pfleiderer AG
Hans H. Overdiek
Spokesman of the Board of Management
Business Segment Engineered Wood
Member of the Managing Board
of Pfleiderer Holzwerkstoffe
GmbH & Co. KG
Member of the Managing Board of
Pfleiderer Unternehmensverwaltung
GmbH & Co. KG – until May 28, 2004
IN BRIEF SUPERVISORY BOARD AND BOARD OF MANAGEMENT
Member of the following comparable
foreign Advisory Board:
wodego B.V., Deventer, Netherlands
Pfleiderer Industrie Ltd., Macclesfield/Cheshire,
UK
Pfleiderer Grajewo S.A., Grajewo,
Poland, Chairman of the Supervisory
Board
Pfleiderer Prospan S.A., Wieruszów,
Poland, Chairman of the Supervisory
Board
Michael Ernst
Member of the Board of Management
Personnel, Legal Affairs, Risk Management,
IT
Member of the Supervisory Boards in
the following companies:
Incon AG, Taunusstein (Deputy
Chairman)
Member of the following comparable
foreign Advisory Board:
Pfleiderer Finance B.V., Deventer,
Netherlands
Dr Jürgen Koch
Member of the Board of Management
Finance
Business Segment Infrastructure
Technology
Member of the Managing Board of
Pfleiderer Unternehmensverwaltung
GmbH & Co. KG – until May 28, 2004
Member of the following comparable
foreign Advisory Board:
Pfleiderer Finance B.V., Deventer,
Netherlands
Pfleiderer Grajewo S.A, Grajewo,
Poland
* ) Elected by the employees

Glossary
Technical Glossary
Ballastless track
Rail track frequently constructed on a
load-bearing asphalt sub-layer. This type
of track is mainly used for high-speed
rail links. Where asphalt is used as a
sub-layer, concrete sleepers are laid
directly on the asphalt. Alternatively, a
concrete sub-layer can be used. In this
case, bi-bloc concrete sleepers are
integrated into the concrete sub-layer.
The main advantages of ballastless
track: high stability and low maintenance.
Carrier material
Wood-based materials which serve as
the base for decorative surface facings
(HPL, melamine-faced chipboard). The
preferred materials are raw particleboard
and MDF.
Combined heat-power plant
Also known as co-generation plant.
A decentralized plant for generating
energy, supplying Pfleiderer with electricity
and production heat, particularly
used in the production of wood-based
board (Pfleiderer’s “Central Energy
Unit”).
Contipress
A twin-band press used in the continuous
production of particleboard, MDF or
laminates. As the process is continuous,
after pressing the board must be cut
to a pre-defined length using a diagonal
saw. The twin-band press enables both
thickness and width of the material to
be pre-set, so that the production line
can then run using a wide variety of
base materials.
126
EPF
European Panel Federation – the industrial
association of the engineered
wood industry in Europe, with offices
in Brussels. Among others, the EPF
publishes an annual report describing
international developments in the engineered
wood industry.
HDF – High-Density Fiberboard
Engineered wood-based board consisting
of wood fibers soaked in glue which
are then pressed together under heat
at very high compression. Preferred
carrier material where high load-bearing
properties and thin material thickness
are required (e.g. laminated flooring).
HPL – High-Pressure Laminate
High-pressure laminate consists of
several layers of core paper and a decorative
face layer. The paper layers are
impregnated with phenol and melamine
resins and then compressed under
heat. This surface material is extremely
durable and is ideal for furniture and
interior surfaces subject to heavy wear
(e.g. kitchen worktops).
MDF – Medium-Density Fiberboard
Wood-based board comprising wood
fibers impregnated with glue and compressed
under heat. This material has
a homogeneous structure and very
smooth surface. It is especially used
for three-dimensional furniture fronts,
as well as for varnished or high-gloss
surfaces.
MFP – MultiFunctionPanel
MultiFunctionPanel is an engineered
wood board with facing and middle layers
made of slender random-direction
stands. MFP has high cross and longitudinal
tensile strength, making it particularly
suitable as a construction material
for trade fair stands or interior fixings.
MFC – Melamine-Faced Chipboard
Particleboard with a finished surface,
faced with melamine (decorative paper
soaked in melamine resin). Using heat
and pressure, the melamine film is
compressed onto the board to give a
durable plastic top surface.
OSB – Oriented Strand Board
Engineered wood board made of
glue-soaked slender wooden strands
arranged lengthwise and crosswise
in layers to form a mat which is then
compressed under heat. This board
has a high bending strength, making it
suitable for construction purposes.
Particleboard/Chipboard
Particleboard is produced by combining
wood chips and/or smaller particles of
other similar material (flax, hemp) with
resin-based glue. The chips and particles
are then hot pressed into board.
Postforming elements
This comprises particleboard or MDF
board, faced with a layer of HPL. The
facing is moulded around the edges
of the carrier board at a pre-defined
radius. This is done by heating the HPL
facing and then moulding it mechanically.
Rail track sleeper
Two main types of sleeper are used in
track construction. Monolithic sleepers
are made of pre-stressed concrete
and are capable of withstanding high
loads – this type of sleeper is frequently
constructed on a classic ballast sublayer.
The bi-bloc sleeper, on the other
hand, comprises two separate nonreinforced
concrete units connected
together by a steel grid. This type of
design is mainly used when constructing
RHEDA 2000® ballastless track.

Economic Glossary
Asset deal
Describes the acquisition of companies,
or parts thereof, by assigning all or
specific assets and liabilities of a company
by way of singular succession. The
opposite of a share deal, where only
shares in the company are transacted.
Capital employed
The entire capital employed in the
company, i.e. fixed assets plus current
assets, less provisions (excluding
provisions for pensions), and liabilities
(excluding financial liabilities).
Cash flow
A measure used when analyzing balance
sheets, companies and shares in
order to assess a company’s financial
strength and profitability. The cash flow
defines the inflow of liquid funds to a
company from sales and other sources
over a certain period.
Derivative financial instruments
Derivative financial instruments are
used to hedge against and minimize
risks arising when transactions are
exposed to potential changes in
currency exchange rates or market
interest rates. Hedging is performed
using swaps, options or futures.
Discontinued operations
According to US-GAAP business segments
which are ear marked for
disposal or separation are shown separately
under “discontinued operations”
in the income statement and balance
sheet.
127
EBITDA
Earnings before interest, taxes, depreciation
and amortization. EBITDA describes
a company’s profit margin and
is a key figure when assessing its earnings
power.
EBIT
Earnings before interest and taxes.
EBT
Earnings before taxes.
EPS
Earnings per share. Consolidated earnings
divided by the weighted number of
shares.
IFRS – International Financial
Reporting Standards
The International Financial Reporting
Standards have been drafted to ensure
that corporate financial reporting and
publication standards are comparable
worldwide. From 2005, all capital market
holding companies listed on a regulated
stock market within the EU are
obliged to draw up their financial statements
in accordance with IFRS rules.
In 2003 and 2004, Pfleiderer AG compiled
its financial statements according
to US-GAAP (United States Generally
Accepted Accounting Standards). As
from 2005, the Company will be
accounting according to IFRS rules.
Impairment test
A test for determining whether an intangible
asset (or goodwill) has depreciated
in value based on future discounted
cash flow.
IN BRIEF GLOSSARY
Long Term Incentive Program
A motivation program geared to the
long term to encourage staff loyalty,
incorporating schemes to allow employees
a share in the success of the
company.
ROCE
Return On Capital Employed.
Stock options
Form of remuneration entailing the
issue of subscription rights to members
of management and employees,
conferring on them the right to acquire
shares in their own company, provided
they achieve certain goals under certain
conditions.

Index
A
ABS Asset Backed Securities 77
Accruals 81, 87, 89, 101
Affiliates 74
Assets 114, 122
Auditor’s report 118
B
Balance sheet 64
Ballastless track 35, 37, 54
Biomass power plants 45
Board of management 12, 15
Business campus 47
C
Capital expenditure 43
Cash flow 67
Co-generation plant 51
Communication 53
Consolidated companies 45, 73
Corporate Communication 53
Corporate development 20, 21
Corporate governance 11
Cost of materials 24
Current assets 83, 104
Currency translation 75
D
Delivery times 44
Depreciations 67, 70, 79, 84, 85,
115, 121, 123
Developments within
the industry 44, 50
Discontinued
operations 23, 74, 89, 113
Disinvestments 105
Dividend 56
128
E
Earnings 23, 27
Economy 20
Employees 22, 30, 35, 46
Energy supply 34, 45
Engineered wood 20, 24, 26, 30,
43, 53
Environmental protection 44
EVA Economic Value Added 12, 16
Export 20, 26, 31, 33, 59
F
Financial developments 22
Financial position 25, 107
Financial statements 64, 65
Fixed assets 79, 82, 84, 106
Forecast 59
Furniture industry 20, 30
Future 47, 61
G
General Meeting 58
Gross domestic product 20, 59
H
Holdings 82
I
Income statement
Infrastructure
66, 104, 121
technology 21, 35, 42, 44, 54
Intangible assets 78
Interest result 90, 104
Internationalization 24
Interwood 34
Investor Relations 58
IT 52
J
“Jugend forscht” 47
K
Key figures/ratios 56, 130, 131
L
Leadership 48
Liabilities 27, 74, 86, 88, 105
Licenses 22, 78
Liquidity 51, 107
Logistics 34, 36, 54
M
Management report 20
Marketing 53
MDF Medium-
Density Fiberboard 30, 32, 34, 43
MFC Melamine-Faced
Chipboard 32
N
Net income 27
Net indebtedness 22, 26, 52
Newmark International, Ltd. 72, 89
O
Onshore 22, 89
Organization 45
Overall economic developments 59

P
Particleboard 30, 32, 34, 43, 54
Payment of dividend 27
Personnel 46, 60, 51, 108
Personnel development 47
Poles & Towers 22, 24, 35
Prices 30, 33, 34, 56
Procurement 34, 39
Production, productivity 33, 38, 43
Products 32, 36
Q
Quality 31, 53
Quality management 38, 54
R
Rail sleepers 38
Rail traffic 36
Reducing costs 34, 50
Restructuring 26, 89
Research and development 42
Result 66, 121
RHEDA 2000® 35, 42, 54
Risk report
ROCE Return On
49
Capital Employed 26
S
Sales revenue 24, 30, 35
SDAX 55
Segment reporting 70, 108
Share 55, 56
Shareholders’ equity 68, 91
Shareholders’ structure 57
Share price movement 27, 55
Sleeper production 44
Statement of cash flows 104
Stock Option Program 92
Supervisory Board 12, 107, 110, 124
Supervisory Board report 8
Supply chain 31
129
T
Taxes 81, 98
Technology 36
Thermopal® 32, 53
track systems 21, 35, 42, 54
Traffic 35
Training 46, 47, 51
U
Used wood 34
US-GAAP 23, 72, 76, 106, 110
V
Value added 42, 51
W
water systems 22, 35, 45, 46, 89
Wind Energy 22
wodego® 32, 54
IN BRIEF INDEX

Multi-Year Summary
130
2004 2003 2003 2002 2001
as of proforma as of as of as of as of
‘000 euros (US-GAAP) Dec. 31, 2004 Dec 31, 2004 1) Dec 31, 2003 Dec 31, 2002 Dec 31, 2001
Balance sheet ratios
Assets
Current assets
Liquid funds and short-term securities 82,728 67,154 68,735 58,255 61,914
Inventories 104,554 101,173 133,716 114,397 192,909
Other current assets 88,766 89,081 108,806 157,245 277,439
Assets of discontinued operations 4,940 106,388 14,731 35,045 –
Fixed assets
Property, plant and equipment 328,283 299,279 331,054 381,546 580,326
Intangible assets 93,751 92,643 95,950 102,435 70,401
Financial assets 17,625 2,218 2,231 2,072 3,841
Other fixed assets 18,885 21,320 24,033 36,440 –
Liabilities and stockholders’ equity
Accruals
Accruals for pensions 60,420 57,825 62,414 61,263 56,275
Other accruals 69,171 38,492 46,396 41,306 105,560
Financial liabilities 205,677 322,992 329,465 365,488 565,310
Other liabilities 146,051 148,248 169,935 194,798 236,787
Liabilities of discontinued operations 17,090 72,468 31,816 23,314 –
Stockholders’ equity and minority interests 241,123 139,231 139,230 201,266 222,898
Balance sheet total 739,532 779,256 779,256 887,435 1,186,830
As share of balance sheet total
Fixed assets (asset intensity) 62.0% 53.3% 58.2% 58.9% 55.2%
Current assets 38.0% 46.7% 41.8% 41.1% 44.8%
Stockholders’ equity including minority interests 32.6% 17.9% 17.9% 22.7% 18.8%
Financial debt 27.8% 41.5% 42.3% 41.2% 47.6%
Ratios
Property, plant and equipment
financed by equity 73.5% 46.5% 42.1% 52.8% 38.4%
Fixed assets financed by equity 52.6% 33.5% 30.7% 38.5% 34.1%
Fixed assets and inventories financed by equity 42.8% 27.0% 23.7% 31.6% 26.3%

Income ratios
Sales revenues 900,978 848,205 1,020,900 1,028,432 1,427,386
Foreign share in percent 53.8 49.1 48.8 48.4 44.5
EBITDA 87,364 72,234 85,385 109,460 175,270
Amortization/depreciation –37,146 –37,312 –57,753 –60,566 –87,056
EBIT 50,218 34,922 27,632 48,894 88,214
Interest incl. income from other securities –18,596 –17,040 –16,284 –15,265 –36,836
EBT of continuing operations 31,622 17,882 11,348 33,629 51,378
Taxes on income –9,599 –9,255 –9,305 –13,200 –15,942
Earnings of continued operations
before minority interests 22,023 8,627 2,043 20,429 35,436
Earnings from discontinued operations 27,279 –51,498 –44,964 –52,452 –
Taxes on income from discontinued operations 839 1,727 –1,777 –3,000 –
Earnings before minority interests 50,141 –41,144 –41,144 –35,023 35,436
Minority interests –16,281 –4,618 –4,618 –4,641 –4,476
Earnings after minority interests 33,860 –45,762 –45,762 –39,664 30,960
Personnel expenses 183,262 189,375 233,949 251,091 337,866
Earnings key ratios
EBITDA in percent of sales 9.7% 8.5% 8.4% 10.6% 12.3%
EBIT in percent of sales 5.6% 4.1% 2.7% 4.8% 6.2%
EBT of continued operations in percent of sales 3.5% 2.1% 1.1% 3.3% 3.6%
EBT of continued operations after taxes
before minority interests in percent of sales 2.4% 1.0% 0.2% 2.0% 2.5%
Ratios per share
Average number of shares outstanding 42,685,000 42,678,146 42,678,146 42,673,784 42,685,000
Earnings per share 0.79 –1.07 –1.07 –0.93 0.39
Financial position
Ratio of EBIT to sales 0.06 0.04 0.03 0.05 0.06
Capital employed in million euros 2) 435.2 423.8 484.3 562.7 767.4
Operative cash flow in million euros 3) 38.5 46.3 62.1 83.3 123.3
1) Figures adjusted to changed consolidated structure as of Dec. 31, 2004, to enable better comparison.
2) Capital employed without capital tied up in discontinued operations.
3) Earnings from continued operations including depreciation and changes in accruals for pensions.
131
2004 2003 2003 2002 2001
as of proforma as of as of as of as of
‘000 euros (US-GAAP) Dec. 31, 2004 Dec 31, 2004 1) Dec 31, 2003 Dec 31, 2002 Dec 31, 2001
IN BRIEF MULTI-YEAR SUMMARY

Turnover rates
Turnover of inventories 8.6 8.4 7.6 9.0 7.4
Turnover of receivables 14.1 13.9 13.0 10.8 5.2
Turnover of capital employed 2.1 2.0 2.1 1.8 1.9
Profitability after taxes on income
Return on equity 4) 9.1% 6.2% 1.5% 10.2% 15.9%
Return on total working capital 4) 11.2% 6.5% 4.6% 7.0% 10.0%
Return on sales 4) 2.4% 1.0% 0.2% 2.0% 2.5%
Profitability before taxes on income
ROCE 11.5% 8.2% 5.7% 8.7% 11.5%
CFROCE 19.9% 16.3% 12.8% 14.8% 16.1%
Number of employees at balance sheet date
(excluding trainees) 4,429 4,387 5,535 5,647 9,185
Average number of employees
(excluding trainees) 4,295 5,623 5,623 5,691 9,220
4) Based on earnings of continued operations before minority interests.
132
2004 2003 2003 2002 2001
as of proforma as of as of as of as of
‘000 euros (US-GAAP) Dec. 31, 2004 Dec 31, 2004 1) Dec 31, 2003 Dec 31, 2002 Dec 31, 2001

Financial Calendar 2005
April 7, 2005
Balance Sheet Press Conference, Munich
April 8, 2005
DVFA Analysts’ Conference, Frankfurt/Main
May 3, 2005
Publication of Three-Month-Report 2005
June 14, 2005
Annual Shareholders’ Meeting
August 2, 2005
Publication of Six-Month-Report 2005
November 8, 2005
Publication of Nine-Month-Report 2005
Imprint
Publisher
Pfleiderer AG, Neumarkt
Responsible:
Corporate Communication
Concept and Design
3st kommunikation, Mainz
Photography
Stefan Wildhirth, Offenbach
Typesetting
Knecht GmbH, Ockenheim
Print
Societätsdruck, Mörfelden
This annual report is published
in German and English. In case
of discrepancies, the German
version shall prevail.

Review of the Year
2004
February
Pfleiderer AG sells its US concrete
and steel towers business bundled in
its affiliate Newmark International,
Inc., and uses the income from the
sale and book gains to strengthen
its equity base.
February
Pfleiderer Engineered Wood presents its new brand wodego®
for the first time to the visitors at the ZOW 2004 trade fair.
The Thermopal® brand appears with a new corporate design.
May
Pfleiderer track systems starts delivery and assembly of
sleepers using its ballastless RHEDA 2000® technology for the
new construction of the Dutch high-speed link HSL-Zuid/NL
running from Amsterdam towards Brussels.
March
Pfleiderer Unternehmensverwaltung
reduces its holding in Pfleiderer AG
from just on 62 percent to around
14 percent. The broad spread of
shares among international and
German investors considerably
increases Pfleiderer’s free float.
June
Following an increase in capital by
Pfleiderer Grajewo S.A., the Pfleiderer
Group nets around 62 million euros
in new equity. The Polish affiliate
uses the income from the issue to
expand its production plants in
Poland and for construction of a
new plant in Russia.

July
Pfleiderer track systems wins the
biggest single order in its history
to supply 680,000 rail sleepers to
Turkey, which is modernizing its
Ankara – Eskischir rail link.
May
Pfleiderer Engineered Wood celebrates the laying of the foundation
stone for construction of a new plant in Novgorod, Russia.
The new plant is due to start production at the end of 2005.
October/November
Pfleiderer Engineered Wood takes
over MDF production at the former
HORNITEX site at Nidda and decides
to build a new MDF/HDF plant in
Poland. This will round off its product
portfolio and further expand its
market position in Europe.
September
Pfleiderer track systems presents its wide range of products and services
at InnoTrans 2004. Its products and services range from engineering
and production, supply and logistics to quality management – covering
all phases of development, production and application.
November/December
Following the sale of the Business
Unit Poles & Towers Europe,
Pfleiderer AG reaches a further
milestone towards focusing its
corporate strengths on its Business
Segments Engineered Wood and
Infrastructure Technology.

Contact
Pfleiderer AG
Ingolstädter Strasse 51
92318 Neumarkt, Germany
E-Mail: info@pfleiderer.com
Internet: www.pfleiderer.com
Corporate Communication
Tel. +49 (0) 9181/28 - 84 91
Fax +49 (0) 9181/28 - 606
Pfleiderer AG
Annual Report 2004