MEDION AG
Medion AG: Change of Outlook

Ad hoc announcement transmitted by DGAP – a company of EquityStory AG. The issuer is solely responsible for the content of this announcement. —————————————————————————— While MEDION performed on the whole as planned in the first half of 2006, new orders at the end of the third quarter and, in particular, for the crucial fourth quarter have not met expectations. It had been anticipated in the spring that demand for consumer electronics would begin rising due to the World Soccer Cup. While certain segments did see increased demand, overall demand remained below the high expectations at the start of the year for the entire sector. End consumers showed particular restraint in purchasing IT/multimedia products in the summer of 2006. This resulted in a further increase in competition among manufacturers and retailers as well as additional pressure on prices and margins due to the high number of articles on the market. Moreover, uncertainty regarding the demand trend led to even more cautious ordering from our major customers. Consequently, both order quantities and, in particular, the price points calculated in connection with projects have fallen below expectations in the second half. Against this backdrop, it can be expected that sales in the fourth quarter especially will be 20% to 30% below the projections made at the start of 2006. Instead of the approx. €2.0 billion originally forecast, sales for 2006 as a whole should range between approx. €1.5 billion and €1.7 billion. Despite the fact that costs have been below forecast, operating earnings are expected to be €15 million to €25 million below the planned figure due to the sales-related decrease in the gross margin. Operating earnings will presumably be positive in the single-digit million euro range. In addition, earnings will be negatively impacted by special factors. Extreme price pressure and an oversupply of goods in the market have led to a considerable deterioration of the general conditions for second-hand marketing of returns and service products. Furthermore, even though other operating expenses have decreased noticeably, they are still at a high level and are spread over a lower revenue basis due to the decline in sales. The Management Board has therefore decided to counter these risks by increasing provisions for warranties and writing down inventories. The magnitude of the additional risk provisions stated in the annual financial statements cannot yet be precisely estimated. However, the Management Board expects to recognize additional expenses of between €80 million and €90 million in the income statement. MEDION’s cost reduction program, which was initiated in 2005 and expanded in 2006, is on the whole showing better results than planned, as it has been possible to implement the cost cutting measures decided on more quickly than expected. The resulting cost savings are expected to exceed the amount forecasted for 2006 by approximately €5 million. In view of the decreased sales and earnings basis, the cost savings program will be implemented even more stringently. The restructuring costs to be incurred for fiscal 2006 have been estimated at approx. €5 million. MEDION’s goal is to achieve efficient structures for reaching medium-term sales of between €1.3 billion and €1.5 billion. The Management Board therefore anticipates that, in aggregate, sales of the MEDION Group for fiscal 2006 will decline to between €1.5 billion and €1.7 billion, resulting in earnings before taxes and interest of between €-75 million and €-95 million. It should be taken into account that these earnings will reflect considerable non-cash expenses of between €80 million and €90 million for risk provisions recognized in the balance sheet in the form of increases in provisions for warranties and inventory write-downs. After taxes on these earnings, the MEDION Group will close the year with a loss of approximately between €45 million and €60 million. Even taking into account the loss of approximately between €45 million and €60 million now expected for 2006, the MEDION Group still has positive equity capital of more than €370 million that will make up nearly 50% of total assets. The Company’s cash position has been well in the black nearly the entire year. It was merely necessary to take out short-term bank loans on a weekly basis for targeted financing of individual large projects, for example the Christmas business. The MEDION Group continues to enjoy sound financing conditions for further business expansion. Investor Relations +49-201-8383-6500 (c)DGAP 02.10.2006 ————————————————————————— Language: English Issuer: MEDION AG Am Zehnthof 77 45307 Essen Deutschland Phone: +49 (0)201 8383-6500 Fax: +49 (0)201 8383-6510 E-mail: aktie@medion.com WWW: www.medion.com ISIN: DE0006605009 WKN: 660 500 Indices: SDAX Listed: Geregelter Markt in Frankfurt (Prime Standard); Freiverkehr in Berlin-Bremen, Hannover, Düsseldorf, Hamburg, München, Stuttgart End of News DGAP News-Service —————————————————————————