Results second quarter/first six months 2002

*) The figures given in this report are unaudited.

Results second quarter 2002
During the second quarter revenues increased to euro 826 million (+2%). On an autonomous basis there was a 2% decrease. Although the decline in sales of machines stabilised, there are still no clear signs of the trend starting to move upwards again. A higher gross margin (41.3% as against 41.0% in 2001) and slightly higher operating expenses (attributable in full to acquisitions) resulted in an operating income (EBIT) of euro 57 million, more than 2% higher than in 2001; EBITDA increased by 3%.
Income after taxation was 11% higher than in the corresponding period of the previous year.

Results first six months 2002
Operating income (EBIT) was in line with previously published expectations, whilst net income was slightly higher.
Revenues amounted to euro 1,625 million, an increase of almost 3% on the equivalent period of 2001. This increase was the result of positive exchange rate effects (+1%) in the first quarter and acquisitions (+4%). On an autonomous basis revenues were 2% down on those of 2001. Machine sales were 14% lower on aggregate; however, higher revenues from software and services largely compensated for this decrease. This picture is practically identical in all Business Units; the autonomous decrease in revenues was 2% in Document Printing Systems and 5% in Wide Format Printing Systems, whilst in Production Printing Systems there was no change in autonomous revenues.

The gross margin as a percentage of revenues went up from 40.9% in 2001 to 41.1%. Positive exchange rate influences were reduced by mix effects (the increased importance of Facility Services) and by volume effects. In total the gross margin increased by euro 20 million.

Operating expenses rose by more than 4%, but this was attributable to acquisitions that took place after mid-2001. If these acquisitions are excluded, there was a slight decline in operating expenses (-1%). This reflects the initial benefits of the restructuring operation and of stringent cost control. Operating income (EBIT: euro 112 million) was 2% lower than in 2001. This is an improvement compared to the first quarter. EBITDA increased by 1% to euro 209 million. Financial expense (net) was lower than in 2001 and tax charges were higher. On balance net income increased by 1% to euro 54 million. Net income per ordinary share of euro 0.50 nominal amounted to euro 0.62 (2001: euro 0.60).

The restructuring programme is on schedule and the expectation is that the targeted savings of euro 35 million will be achieved in 2002. The number of job reductions already realised as part of the restructuring operation amounts to 341, which is equivalent to 32% of the target figure for the end of 2003.
Of the planned reduction in unprofitable low-volume analogue machines, 22% of the target of euro 50 million by the end of 2004 has meanwhile been achieved.
The outsourcing of the lease activities in Scandinavia is proceeding according to plan. Outsourcing in the rest of Europe has been delayed because the contractual conditions require extra carefulness.

Results Strategic Business Units
In all Strategic Business Units the consequences of the weaker economic climate are making themselves felt. Investments are being postponed and this is leading to lower sales of machines. The lower machine sales are largely being compensated for by increased revenues from software and services.
In geographical terms there are no significant exceptions to the picture outlined above.
Océ has maintained its market position in all strategic market segments.

In Document Printing Systems (DPS) revenues rose during the first six months by more than 1% to euro 763 million; on an autonomous basis there was a decrease of 2%. Machine sales were down by 9% on the previous year. Sales of the Océ CPS700 colour printer are proceeding according to plan.
The increase in revenues from Facility Services continues to be most satisfactory (+26%, of which 19% autonomous).
Operating income in DPS before R&D expenditure was euro 63 million (2001: euro 72 million), with the assets of DPS amounting to euro 1,623 million (2001: euro 1,772 million).

Production Printing Systems (PPS) had a good first six months. Revenues rose by 1% to euro 395 million. There was no autonomous increase in revenues. Sales of machines were down by 17%. The order portfolio is stable but still at too low a level. Operating income of PPS before R&D expenditure was euro 75 million (2001: euro 72 million); the assets of PPS amounted to euro 578 million (2001: euro 655 million).

In Wide Format Printing Systems (WFPS) revenues in the first half of the financial year were euro 467 million (+6%). On an autonomous basis revenues decreased by 5%. Machine sales were 18% lower than in 2001.
The integration within Display Graphics of the businesses that were acquired (e.g. Rastergraphics and Onyx Graphics) is progressing smoothly. Despite the integration expenses and the amortisation of goodwill arising upon acquisition, the operating income of WFPS before R&D expenditure rose by euro 5 million to euro 75 million (2001: euro 70 million). The assets of WFPS amounted to euro 807 million (2001: euro 818 million).

Geographical spread of activities
During the first six months revenues in North America rose to 43% of total revenues; for Europe this figure was 51%.
The influence of the economic climate does not differ significantly in these regions. Particularly in the United States and the Netherlands the results are developing favourably.

Balance sheet and cash flow
Total assets were euro 237 million lower than in 2001. This decrease is the net result of the consolidation of acquired businesses (+ euro 72 million), exchange rate effects (- euro 145 million) and autonomous reductions (- euro 164 million).
Particularly the decrease in trade accounts and lease debtor receivable and the decrease in inventories are continuing unabated.
Interest-bearing loans decreased by euro 164 million to euro 1,073 million. Free cash flow (i.e. cash flow before financing activities but after acquisitions) amounted to euro 94 million positive.

Prospects
Because of the continuing adverse investment climate revenues are expected to be at the same level as in 2001.
The influence of a lower exchange rate for the US dollar will depress the result.
Thanks to a reduced cost level the expectation is that operating income for 2002 will be at least equal to that of 2001.
Net income will work out higher than in 2001.

Océ N.V.