Dear Shareholders,

Financial year 2009/2010 was dominated initially by the continuing effects of the global economic and financial crisis. Due to the late cyclical nature of our industry, the first quarters were severely impacted, with the effects of the crisis showing through in revenue and earnings in particular. However, as the economy recovered, order books steadily improved to the extent that we were able to almost completely abandon the short work-week. Thanks not least to the cost savings delivered by our successful restructuring programme, we fully achieved our targets in financial year 2009/2010. At EUR 931.3 million, Group revenue came in slightly ahead of the approximately EUR 900 million forecast in the interim report for the third quarter of financial year 2009/2010. At some EUR 54.2 million, Group operating EBIT also exceeded our guidance range of EUR 45 million to EUR 50 million.

In light of the positive business performance in the past financial year, the Management and Supervisory Boards have jointly decided to propose a dividend of EUR 0.60 per share for financial year 2009/2010 at the Annual General Meeting. This puts the dividend payout ratio at some 42 percent of Group operating net income after tax and marks a return to our policy of distributing a dividend after the crisis last year forced us to suspend payouts. For future years, we intend to retain the same basic policy of distributing attractive dividends according to Group operating earnings.

„We are planning strong expansion of our business in the growth markets.“

In the past financial year, we made good progress towards our goal of building an integrated Demag Cranes Group. As part of our successful restructuring acitivities, we began in May of this year to implement our planned management organisation. Under this structure, managers are responsible for operational functions such as production, sales and services worldwide and on behalf of the entire Group. This has made decision-making processes considerably shorter, eliminated redundancies and significantly increased the efficiency of the Demag Cranes Group. Pooling expertise, in teams which in some cases are new, enables problems to be approached from different angles and facilitates the development of creative solutions. Each individual brings his or her professional experience to the work currently in hand, thereby fostering a new corporate culture based on our subsidiaries’ successful roots. The popularity of employee involvement initiatives, such as Group-wide ideas management and structured interviews aimed at developing our corporate culture, underscores my firm belief that we have chosen a successful path to an integrated group.

Focusing on our customers and their needs is a key element of our strategy. This means devoting even greater attention to customers’ processes and value chains locally based on our global presence and working together with them to develop solutions that promise real added value. In this context, we are expanding the global footprint of activities such as research and development into areas that are the focus of the Company’s growth. In countries such as India, China and South Africa, we have established teams of international engineers who concentrate on the market conditions and customer requirements specific to their region. Growth markets also offer excellent opportunities to establish the Group in the mid-segment product range by offering solutions tailored to customers’ individual requirements. In China, we recently applied for the first Sino-German patent for a mid-segment rope hoist, a major achievement attributable to international teamwork with a clear focus on growth markets.

Our success in these endeavours depends primarily on having a highly motivated team with superlative skills. At this point, I would therefore like to thank our employees for their performance and commitment, particularly in tackling the crisis during the past financial year. A good team is able to switch very quickly from defence to attack. Our team has demonstrated this skill to stunning effect, firstly by successfully implementing a radical and far-reaching restructuring programme to safeguard the Group’s future and, secondly, by focusing fully on translating the burgeoning upturn into commercial success.

This achievement on the part of our team did not go unnoticed outside the Company, either. Back in May of this year, financial investors Cevian Capital acquired more than ten percent of the Company’s share capital, saying that it believed Demag Cranes AG shares were severely undervalued. In the further course of the financial year, the Management Board of Demag Cranes AG received preliminary and conditional non-binding indications of interest from foreign companies regarding a possible takeover. After carefully examining these unsolicited expressions of interest, it decided, in agreement with the Supervisory Board, that further discussions with the relevant parties were not in the interest of the Company or its shareholders.

Under our clear standalone strategy, we are primarily targeting robust business expansion in emerging markets through the launch of new product lines combined with significant growth in profitable service business. Our goal is to become number one in our industry in cash flow and profitability through organic growth and acquisitions. In particular, our successful service activities with the largest installed base of cranes and strongest spare parts business in the industry are an excellent starting point towards this goal.

The Demag Cranes Group has a solid overall financial base. We are practically debt-free and, following our successful restructuring, cost-efficient, too. We are already well positioned in key markets. In recent years, we have honed Demag Cranes’ competitive edge by investing in products that are ready to meet the needs of the future, such as the container transport vehicle driven by a battery-electric drive train, and innovative services.

Given the positive economic outlook, we expect to regain strong rates of revenue growth in the next two financial years. No later than financial year 2012/2013, Group revenue is budgeted to reattain the record level reached in financial year 2007/2008 (EUR 1,225.8 million). The new emerging-market product families mentioned elsewhere are planned to deliver another sharp jump in revenue in financial year 2014/2015.

The changes in cost structure will also allow us once again to attain substantial improvements in operating EBIT. Subject to meeting the revenue target, we expect the Group operating EBIT margin to be back above ten percent as early as financial year 2012/2013. We anticipate that this will rise sharply again with the significant planned revenue growth in financial year 2014/2015. For further details, please see the Forecast Report starting on page 98 at seq.

Yours sincerely,

Aloysius Rauen
CEO