Progress-Werk Oberkirch AG: PWO accelerates restructuring of Oberkirch site

Ad hoc announcement pursuant to Article 17 MAR

PWO accelerates restructuring of Oberkirch site

- Oberkirch site to focus even more strongly on its core competencies

- Voluntary program successfully completed

- Further adjustment in staff number by around 120 to 150 employees resolved

Oberkirch, December 29, 2020 - As early as in the fall of 2018, PWO had already initiated comprehensive and long-term programs for efficiency enhancements and process improvements at all its locations. These were complemented by extensive adjustments in 2020 due to the effects of the corona pandemic. It was not possible, however, to carry out the compulsory redundancies at the Oberkirch location until December 31, 2020, due to a supplementary collective agreement which includes job security. Therefore, in order to make the necessary staff adjustments, we first launched a voluntary program, which has now been successfully completed. Under this program, around 200 employees will leave the site; the vast majority by the end of 2020. Around half of these employees are permanent employees and the other half are temporary employees.

At the same time, the Oberkirch location must place an even stronger focus on its core competencies. Nevertheless, as staff costs in Germany, as an industrial location, have risen sharply on a continuous basis in recent years, some current series productions are strongly burdened by high labor costs. These higher costs can no longer be sufficiently offset by productivity measures. Furthermore, our customers have relocated an ever-growing portion of their production to Eastern Europe, resulting in a change in the locations to which PWO delivers. We must therefore also consider relocating production to Eastern Europe in order to avoid losing existing series productions. We are already extremely competitive in that region through our fast-growing plant in the Czech Republic. For this reason, at today's meeting, the Executive Board decided to further adjust the capacities of the Oberkirch site to bring it in line with the expected future level of capacity utilization.

This adjustment will include, among others, a further reduction in staff by 120 to 150 employees, mainly from the permanent workforce in the production area. The Executive Board is striving for the most socially responsible implementation of this plan as possible in consultation with the employee representatives and will begin negotiations on this shortly. The expected costs for this reduction in staff numbers, which will result in an additional burden on EBIT in the 2020 fiscal year, will presumably be in the upper single-digit-million euro range. The anticipated savings of EUR 9 million is expected to fully materialize in the 2022 fiscal year for the first time. The preliminary figures for the 2020 fiscal year are not yet available and will be published as scheduled on February 24, 2021.

In focusing on its core competencies, the Oberkirch site will be further strengthened technologically. With the tools offered by the Internet of Things, modern, data-driven manufacturing can be implemented even faster. This will increase competitiveness by reducing the use of resources on an ongoing basis while further improving process efficiency and manufacturing quality, which is ultimately the prerequisite for future growth.

Disclaimer: EBIT is not a performance measure under IFRS. Information on the calculation of this figure can be found on page 19 of the 2019 Annual Report, which is available on the Company's website at https://www.progress-werk.de/en/investors-press/news-publications/reports/annual-report-2019/.

Progress-Werk Oberkirch AG
The Executive Board
End of the ad hoc announcement