AnnuAl report 2006

REFINING                ADVANCED COATINGS                WATCHES AND JEWELRY                ELECTROTECHNICS             

IntroductIon

Foreword 3

Metalorinbrief 6

Highlights2006 8

dIvIsIonal actIvItIes

Refining 10

AdvancedCoatings 12

WatchesandJewelry 14

Electrotechnics 16

FInancIal statement

Preciousmetalprices 18

Financialyear2006report 20

Consolidatedbalancesheet 21

Consolidatedstatementofincome 22

Consolidatedstatementofcashflows 23

Consolidatedstatementofchangesinequity 24

Groupcompanies 25

TheoperatingcompaniesoftheMetalorGroup 26

Governingbodies 28

Table of conTenTs

annual reporT 2006

2

Foreword

inprovidingenhancedlinesofcredit

duringtheyearallowingustosus-

taintheorganicgrowthinnetsales

over2005.Allfourbusinessunits

exceededthepreviousyearsresults.

Thisresultcamefromthemetal

prices,grossmarginimprovement

duetomoreefficientmanufacturing,

andcontrolofoperatingcosts.Inthe

TechnologyProductsunitsignificant

shiftsinthemarketplaceforplatinum

basedpharmaceuticalshaveoccurred

andweareconsideringachangein

strategy.

Theshareholdingofthecompany

didnotchangesignificantlyduring

theyear.Anemployeeshareholding

DearShareholders,

LadiesandGentlemen,

Theworldofcommoditiesandpre-

ciousmetalscontinuedinavery

positivedirectionduring2006forall

participantsinthevaluechains.

Miners,refiners,fabricatorsandin-

vestorsallhadpositive,andsome

recordresultsfortheyear.Supply

constraints,strongfundamentalde-

manddrivenbyAsia,andpositive

investorsentimentcontributedthe

mosttothebuoyantmarkets.The

volatilityofmetalpriceswereasig-

nificantchallengetoboththetreasury

andoperatingdivisionsofMetalor.

Wearehappytoreportthatourbusi-

nessmodelswereflexibleenoughto

copewiththefluctuations.Thehigher

pricesevencontributedtoincreases

inmargins.Wearealsopleasedwith

theresponseofourbankingpartners

3

planwasinstitutedand3.5%ofthe

companyshareswereboughtfrom

thetreasurysharesavailable.Itisfore-

seenthatthisprogramwillcontinue

in2007.

Theeventsandsituationsdescribed

aboveresultedinaconsolidatedoper-

atingmarginof14%ascomparedto

9%in2005.Thesaleofmetalsheld

inownstocksduringtheperiodcon-

tributedCHF7millioncomparedto

the2005saleoffinancialinvestments

whichgeneratedCHF27million.Net

profitfor2006isCHF36millionas

comparedtoCHF41millionin2005.

Thecompanyhasachievedasignifi-

cantstepinperformanceascompared

topreviousyearsasnowthebulkof

netprofitisgeneratedbyoperating

activities.

4

RevenuegrowthinCHFtermsforthe

fourbusinessunitswas17%ahead

of2005.Fromageographicalstand-

point,inlocalcurrencytermsthere

wasgoodgrowthinallsubsidiaries

exceptItaly,wheretheRomefactory

wasclosed,andSingaporedueto

continuedshrinkageofleadframe

manufacturing.

advanced coatIngs

Netsalesincreased8%ascompared

to2005.Europeanoperationswere

restructuredwiththeDutchandGer-

manservicecentersconsolidated

intotheUK.Theproductionfacilities

ofItalywereclosedandproducts

transferredtotheSwisssiteinMarin.

TheUSplatingbusinessreturnedto

profitabilitywithaslightlyreduced

businessbaseafterabusinessmodel

change.ThestrongdemandinAsia

forpreciousmetalchemicalsforthe

electronicsindustryandgainsinmar-

ketshareforpowderscontributedto

increasesinmargin.Lateintheyear

along-termsupplyagreementwas

signedwithamajorcustomerwhich

willresultinamajorcapitalprogram

intheSuzhouChinafactory.

electrotechnIcs

TheElectrotechnicsactivitiesachieved

a19%revenuegrowthanda80%

improvementinoperatingresults

during2006.Thissubstantialim-

provementinmargincomesfrom

improvedmanufacturingefficiencyas

aconsequenceofcapitalprogramsin

2005,processinnovationandmarket

sharegains.TheChineseplantisnow

workingandisreceivingitsfirstor-

dersfrommultinationalcompaniesin

China.

reFInIng

TheRefiningDivisionprofitedwell

fromhighvolumesprocessedthrough

theMarinfacility,theturnaroundof

theUSArefinery,andstrongdemand

inHongKong.TheUSAalsomanaged

toincreasemarketshare.Netsales

were41%aheadof2005.Designs

werecompletedforacapitalprogram

budgetsfor2007reflectthisgeneral

optimismwithsomechallenginggoals

for2007.

TheBoardofDirectorsandtheMan-

agementwouldliketotakethis

opportunitytoexpressoursincere

appreciationtoallourclients,finan-

cialandbusinesspartners,andshare-

holdersfortheircontinuedsupport.

Aspecialthanksgoestoallourem-

ployeesaroundtheworldwhohave

workedhardduring2006toachieve

thisgreatresult.

MartinBisang

ChairmanoftheBoardofDirectors

Dr.ScottMorrison

ChiefExecutiveOfficer

dertocopewiththevolatilityinmetal

prices.

ProsPects For the Future

Mostcurrenteconomicforecastspre-

dictsimilargrowthtrendsformost

worldmarketswithsomeweakening

intheUSA.Itisourexpectationthat

metalpriceswillremainatlevelsnear

theaverageof2006butwithvolatil-

ityacontinuingissue.Currentorders,

customerforecastsandtrendsforthe

electronicssectorinAsiawouldsup-

portastronggrowthforouract-

ivitiesinthisgeographicalarea.For

thefourbusinessunits,newproduct

developmentwillcontinuewithR&D

atadivisionallevel,andtheTech-

nologyProductunitwillfocusona

fewmediumterminnovations.Our

5

in2007toincreasePGMrefiningca-

pabilityattheMarinrefinery.Termsof

salewereadjustedduringthemetal

pricespikeearlyintheyear.

watches and Jewelry

Thisdivisionhadanotheryearof

growthwithnetsalesincreasing11%

from2005.Theluxurygoodsand

highendwatchmarketscontinuedto

showgoodgrowth.Thesupplyofal-

loystothejewelrymarketsinEurope

wasflatfortheperiod.TheSwiss

watchindustryistrendingtowardsin-

ternalizationwhichimpactedbaselev-

elsofbusiness.Marketdiversification

madeupthisdeficit.Pricingmodels

werechangedearlyintheyearinor-

a global grouP

Foundedin1852inLeLocleinthe

heartofSwitzerland’swatchmaking

industrywhichwasthenrapidly

expandingatthetime,the“preliminary

rollingfactory”ofMartindePury&Cie

providedservicestothewatchmakers

oftheregion.Theseincludedthe

operationofagoldsmelterandthe

manufactureofwatchcases.Forover

140yearsthesmelterwasinthehands

ofbankers–theBanqueduLocle

between1864and1918,andthen

from1918to1998theSociétéde

BanqueSuisse(SBS),whichgaveitthe

name“MétauxPrécieuxSAMetalor”.

Metaloreventuallyoutgrewitsbanking

andwatchmakingroleandin1950

begantoofferservicestoanumber

ofotherindustriesacrosstheworld,

whichhaveacommonneedfor

preciousmetals.

metalor In brIeF

reliabletechnologyhasattractedthe

leadingnamesinindustry,fosteringthe

developmentofnewmarketsegments

forpartnerslookingforprecious-metal

basedinnovation.

Metalorhasfourdivisions,each

correspondingtoagroupofspecific

markets:Refiningfortheprocessingof

preciousmetalsandthemanufacture

ofingots;AdvancedCoatingsfor

electronicanddecorativeapplications;

WatchesandJewelry,whichincludes

jewelryandluxurywatchproducts

andElectrotechnics,servingthe

electricalcontactsmarket.Atpresent

theMetalorGroupincludessome17

companiesonfourcontinentswitha

totalstaffworldwideof1191.

RelocatedtoNeuchâtelin1947the

MetalorGroupcontinuedtogrowand

expand,addingnewfactoriesinFrance

andtheUnitedStatestoitsnetwork,

followedbyChina.Metalor’sindustrial

destinywasfurtherstrengthenedin

1998whenagroupofSwissinvestors

fromindustryacquiredamajority

shareholding.AsofApril2001the

name“MetalorTechnologies”became

partofthecorporatelogo

ofallGroupcompanies.

InnovatIon and qualIty

Theknow-howwhichMetalor

hasdevelopedovertheyears,the

exceptionalqualityofitsproductsand

itsabilitytoanticipatemarkettrends

andrequirementshaveearnedthe

companyareputationforexcellenceall

overtheworld.TodayMetalorsupplies

preciousmetalsandadvancedmaterials

topartnersinindustriesasvariedand

demandingaselectronics,electrical

engineering,andthemanufacture

ofluxurywatches.Thecompany’s

abilitytoinnovateandcomeupwith

6

2006 2005 2004 2003 Netsales(excludingPMvalue,inCHFmillion) 290.5 247.9 270.4 270.1 EBIT(inCHFmillion) 40.4 21.4 17.3 2.1 Netprofit(inCHFmillion) 36.3 40.8 24.5 23.7 HeadcountFTE(December31) 1191 1151 1288 1335

Dark grey:countriesinwhichthe

MetalorGroupispresentthroughitssubsidiaries.

Key statIstIcs

7

reFInIng dIvIsIon

contInued success

TheRefiningDivisionenjoyedyet

anotheryearofgreatsuccess.

Benefitingfromthestrongprecious

metalmarket,largergeographical

coverageandawiderrangeof

customers,Metalor’sthreerefineries

havereceivedrecordvolumesofscrap

forrefining.Acampaignontechnical

andlogisticalimprovements,andthe

installationofnewrefiningprocesses

havecontributedtothereductionof

metalthroughputtime.

SuccessfulrestructuringintheUSA

refineryallowedittotakefullbenefit

fromthegoodmarketwhilekeeping

costsundercontrol.Refineriesin

SwitzerlandandinHongKong

continuedtheirstrongperformance.

Metalorstartedarefiningcircuitin

Suzhouandsuccessfullyrefineditsfirst

batchofgoldjustbeforetheendof

theyear.

hIghlIghts 2006

advanced coatIngs dIvIsIon

Further develoPments In the Far east

In2006,theAdvancedCoatings

Divisioncontinuedtofollowthe

evolutioninthemarkets.Itpursuedits

consolidationwithinEuropeandthe

USAandalsothedevelopmentofits

activitiesintheFarEast.

ProductioninEuropehasbeen

consolidatedinMarinaftershutting

downofactivitiesinRomeand

Noisy.Ontheotherside,production

capabilitiesofourSuzhouplanthave

beenexpandedtogoldproductsand

proprietaries.

R&Dplatingactivitieshavebeen

consolidatedinSingapore,and

businessrelationswithkeycustomers

andpartnershavestrengthened.

8

watches and Jewelry dIvIsIon

contInued ImProvements to better serve customers and bolster sales

Continuedimprovements,tobetter

serveitscustomers,remainedthefocus

oftheWatchesandJewelryDivisionin

2006.Thequalityassuranceprograms

introducedduringtheyearhave

allowedproductiontoreactspeedily

toconstantlytighteningcustomer

qualityspecifications.Theacquisition

ofcuttingedgesoftwaretoassistin

newproductdevelopmentconsiderably

reducedtimetomarket.

Salesin2006benefitedfromapositive

trendinthewatchindustry,asdemand

increasedforeverlargerandheavier

watchcasesinpreciousmetals.The

expansionofthedivisionintonew

luxurysegmentsotherthanwatches

provedtobeasuccess.Asaresult,

investmentsintomachinecapabilities

wereimplementedtosustainthis

growtharea.

electrotechnIcs dIvIsIon

contInuous ImProvement In 2006

TheElectrotechnicsDivision

experiencedtwosignificant

accomplishmentsin2006:increasein

Chineseoperationsanddoubledigit

growthinEurope.

InChina,wearenowabletooffer

ourfullproductrangewithafast

increasingChinesecontent.Also,we

areevaluatingtheopportunitiesto

godownfurtherintothevaluechain.

Furthermore,thebuildingofasecond

plantisbeingstudiedtoaccelerateour

developments.

InEurope,oursustainedprofitable

growthisagreatrewardforalltheET

employeeswhoaremakingeveryeffort

toreachcustomerserviceexcellence

dayafterday.Asanexampleour

RedwitzsiteinGermanyhasbeen

recognizedas“preferredsupplierof

theyear”bySiemensRegensburgin

2006.

9

relIable PerFormance

meetIng customers’ needs

TheRefiningDivisionspecializesin

recoveringgold,silverandplatinum

groupmetalsfromawiderangeof

preciousmetalbearingmaterials.

Dependingonpreciousmetalcon-

tent,thesematerialscouldbeeither

highgrademetallicsuchasgoldand

silverdore,platinumgroupbullion,

karatscrapanddentalscrapetc.,or

lowgradematerialssuchaswork-

shopwastes,manufacturingswarf,

spentmetalcatalyst,electroplated

metallicscrapandelectronicsscraps

etc.Thematerialsmaybesourced

frombanks,mines,collectors,dealers

andindustriesusingpreciousmet-

als.Oncereceivedattherefinery,the

materialsarefirstevaluatedtodeter-

minethepreciousmetalcontent.The

preciousmetalsarethenseparated

fromimpuritiesintherefiningpro-

cesses.Finemetalsareeventually

convertedtobullionproductswhich

areaccreditedwithLBMA,TOCOM,

COMEX,Dubaiandothermajormar-

kets,andspecialtyproductssuchas

highpuritygold(above99.999%

pure),silverpowder,platinumand

palladiumsaltsetc.tomeettheneeds

ofcustomersfromhigh-technologies

sectors.

TheRefiningDivisionoperatesthree

refinerieslocatedinSwitzerland,USA

andChina,respectively.Inaddition,it

hasevaluationcentersandsalesof-

ficesaroundtheworldtobringextra

conveniencetocustomers.Nomat-

terwherethecustomersarelocated,

ourproactiveandexperiencedsales

teamsarecloseenoughtodeliverdis-

tinctivefullrefiningservicesstarting

fromacceptanceofmaterialstofinal

settlement.

the quest For excellence

MaintainingitsreputationofSwiss

Excellenceisthetoppriorityforthe

RefiningDivision.Continuousefforts

havebeenmadetoshortenevalu-

ationandrefiningthroughputtime,

Metalor Refining Division operates the most advanced

precious metal refining facilities in the world. With more

than 150 years of history in precious metal refining and

strong focus on customer service, the Refining Division

is recognized both for its reliable services and for its

high quality products supplied to electronics and jewelry

industries around the world

10

refining Division

11

maximizepreciousmetalrefining

yieldsandcutcosts.Majorinvest-

mentsonnewrefiningtechnologies

inrecentyearshaveimprovedeffi-

ciencyandfurtherstrengthenedour

competitiveadvantage.

TheevaluationserviceoftheRefining

Divisionishighlyefficient,fastand

accurate.Evaluationcentersusually

performsamplingandaquickanaly-

sisforrapidsettlementwithcustom-

ers.Thefinalanalysisisperformedin

oneoftherefineries.Highlyskilled

assayersandchemistsguarantee

thehighaccuracyoftheresult.The

qualityoftheanalyseshasledto

MetalorbeingappointedanOfficial

RefereebytheLondonBullionMarket

Association.

TheRefiningDivisionappliesthe

highestethicalstandardsinitsbusi-

nessrelations.Continuousinvest-

mentonnewprocessingtechnologies

enablesustomakefulluseofour

industrialcapacitywhileintegrating

environmentalprotectionconsid-

erationsaswellasensuringsafety

standardsthatareproperlyadapted

tothefieldofrefining.Wehave

achievedQualityStandardISO14001

forEnvironmentalSystemsandISO

9001:2000forManagementSystems.

contInuous eFForts

Thesignificantimprovementin

speed,qualityandproductivityin

theRefiningDivisioninrecentyears

hasonlybeenpossiblethankstothe

effortsmadebyitsstaffmembers.

Withenthusiasm,theyhavedemon-

stratedthatperseveringwithastrat-

egyaimedatcustomersatisfaction

surelyleadstosuccess.

exPerts

guaranteed results !

Bysupplyingpreciousmetalsin

variousforms,MetalorAdvanced

Coatingsensureshightechnical

performanceintermsofwearresis-

tanceandconductivityforelectronic

products(connections,printedcir-

cuits,semi-conductors).Italsogives

aremarkablypleasingappearanceto

decorativeproducts(watches,jew-

elry,leathergoodsandspectacles).

Theseindustriesarecharacterizedby

highlycompetitivetradingconditions.

Theythereforeseekpartnerssuchas

Metalorthatareableworldwideto

meetalltheirneeds,andguarantee

astandardoftechnicalassistancefor

theirincreasinglydemandingrequire-

ments.

global PosItIonIng

TheAdvancedCoatingsDivision

develops,manufacturesanddistrib-

utessalts,processes,powders,pastes,

targets,preciousmetalcompounds

andcatalystsbasedonpreciousmet-

alssuchasgold,platinum,silver

andrhodiumatitsproductionsites

setupinEurope,theUSAandAsia.

Inordertomonitorandrespondto

changesindemand,Metalorhas

movedintotheindustrialheartof

China,whereaproductionsitefor

preciousmetalschemicalshasbeen

establishedalongwithameltingshop

andanalysislaboratoryinSuzhou,

closetoShanghai.Thisplantnotonly

servesthelocalmarketbutisalso

inlinewiththepolicyofdeveloping

AdvancedCoatingsoperationsinthe

AsiaPacificArea.

Know-how and Product develoPment

Thesalesforcesworkinginthemain

markets,backedupbylocaland

regionaltechnicalsupport,enableus

12

The Advanced Coatings Division of Metalor delivers

innovative solutions in electroplating, powders and flakes.

These products are used in a wide variety of businesses

such as general electronics, semiconductor, decorative and

multi-disciplinary industrial sectors.

13

aDvanceD coaTings Division

toofferacomprehensiverangeof

powders,flakes,pastes,compounds,

salts,solutionsandprocessesbased

onpreciousmetals.Metalorprovides

apracticalresponsetoitscustomers’

ongoingconcernsaboutcost-cutting

byofferingproductsandprocesses

thatcallforfewerpreciousmetals

andbyspeedingupproductiontimes,

thusreducingrequirementsformate-

rials.Alwaysreadytoprovideguid-

ancetocustomersonnewprocess

developments,Metalorkeepsanear

tothegroundinitsmarketsinorder

todirectitsoperationstowardsprom-

isingareas.TheAdvancedCoatings

DivisionhasISO9001:2000aswell

asISO14001certificationandguar-

anteesthesuperiorityofitsproducts,

whicharedistinguishedbytheirtop

quality,theirstabilityovertimeand

theirunequalledreliability.

a sIngle Partner

Thedivisionreliesontherenowned

expertiseoftheMetalorGroupinthe

fieldoffinepreciousmetalsinorder

toensurehigh-qualitysaltproduction

(gold,silver,palladium,platinumand

rhodium).Thisproximityalsoenables

ittobuildarealpartnershipwithits

customersbyprovidingacompre-

hensiveservice,coveringtheentire

cycleofrecoveringandrefiningscrap

containingpreciousmetals.Ongoing

technicaltrainingandthecommit-

mentofallthestaffovertheyears

haveenabledustoprovideaperson-

alizedserviceinallmarkets,thuscon-

tributingtothesuccessofMetalor

AdvancedCoatingsoperations.

multIPle IndustrIal sKIlls

InnovatIon, qualIty and servIce as a vehIcle For growth

Preciousmetalsintheluxurymar-

ketscontinuetoattractdemand

aroundtheworld.Eachyearseesthe

appearanceofnewdevelopments

andtrends,goingfromyellowtored

andwhitegold,platinumandmore

recentlypalladium.Overtheyears,

persistentinnovationhaspositioned

Metalorasabenchmarksupplierto

theluxurySwisswatchmakingindus-

try.TheResearchandDevelopment

departmentcontinuallydevelopsnew

alloysinresponsetomarketdemand

aswellasindividualcustomerneeds.

Furthermore,industrializationisguar-

anteedbyateamofskilledengineers

transformingthenewalloysinto

semi-finishedandfinishedproducts.

Thankstoourabilitytodeliverawide

rangeofpreciousmetalalloysinvari-

ousshapesandsizes(tubes,cases,

washers,wires,sheets,profilesetc.),

Metalorhasemergedasthepreferred

partnerofleadingwatchbrandsand

jewelers.Alongwithquality,reliability

andcustomerservicehaveremained

thefocusofourorganization.This

approachhasallowedthecompany

toenterotherareasofgrowthsuch

asluxurytelephonesandfinished

jewelry.Tosupportthisactivity,the

divisionhasrecentlyinvestedinnew

machinery.

The Watches and Jewelry Division specializes in

developing, manufacturing, selling and distributing

precious metal alloys in the form of semi-finished and

finished products for the watch-making, jewelry and

other luxury markets.

14

WaTches anD JeWelry Division

15

eFFIcIency and relIabIlIty to suPPort our customers

Risingpreciousmetalpricescoupled

withevershorterleadtimesare

puttingconsiderablepressureon

manufacturingandsupplychains.

AtMetalor,theredesigningofmate-

rialflowshasallowedproduction

processestospeedupconsiderably.

Greaterefficiencyandflexibilityhave

beenreachedbydelegatingresponsi-

bilityanddecisionmakingtoautono-

mousshopfloorunits.Byadopting

aqualityassuranceprocess,anum-

beroftheseunitshaveconsistently

improvedin-housequality.Lastbut

notleast,investmentsinmachinery

andsoftwarehavehelpedusreduce

drasticallythe“timetomarket”of

newproducts.

Thedivisionoffersitscustomersa

refiningservicefortheirmanufactur-

ingscrapaswellasmanagingtheir

preciousmetalaccounts.Thereli-

abilityofthisserviceistheresultof

acombinationofknow-howand

uniqueskillsthatisprovingtobeof

paramountimportancetoourcus-

tomers.

comPlete solutIons

exPertIse In metallurgy

TheElectrotechnicsDivisionis

renownedforitsabilitytoconvert

silverforthepurposeofproducing

mainlypseudo-alloys,eitherbyextru-

sionordie-compaction.Electrical

contactsareoftenmulti-layeredand

combinethepropertiesofsilverwith

thoseofothermaterials(tungsten,

graphite,tinoxide,nickel,etc.)in

ordertoensurehighelectricalcon-

ductivityandstrongresistanceto

erosionandwelding.Thisexpertise

inmetallurgyiscombinedwithsig-

nificantknow-howinmanufacturing,

mixingandcompactingpowders.

MetalorElectrotechnicsiscontinually

reviewingitsproductrangeandthus

offersover2000typesofsemi-

finishedproducts,rivets,tips,assem-

bledcontactsandslidingcontacts.

guaranteed PerFormance

MetalorElectrotechnicscontributes

tothesafetyanddurabilityofelectri-

calappliances(switches,contactors,

circuit-breakers,relays)intendedfor

marketssuchaselectricaldistribu-

tion,automation,transportation

(automotive,aerospace,railways)

andhousehold.Thequalityofthe

ElectrotechnicsDivision’sproducts

resultsinhightechnicalperformance

andrenownedreliability,makingit

apreferredsupplieroflargeworld

groupsintheelectricalindustry.

Metalorisimprovingitsproductiv-

ityeveryyearbyautomatingits

productionlinesandisalsoexpand-

ingitsproductrange.Thecontinu-

ousupgradingofskillsisachieved

throughasustainedResearchand

Developmentefforttodevelop

newmaterialsornewprocessesfor

exampleinthefieldofbrazingand

welding.

a comPlete PartnershIP

Thankstoanorganizationbasedon

multidisciplinaryteamsandflexiblepro-

ductioncapacitiesbothinEuropeand

Asia,MetalorElectrotechnicsisasup-

plieroftotalsolutions,inpartnership

withitscustomers.TheElectrotechnics

Divisionispresent,directlyorindirectly,

Metalor’s Electrotechnics Division converts silver metal into

electrical contacts, improving the safety and durability of

electrical apparatus throughout their working life. The

division meets the increasing demands of the electrical

industry with its expertise in metallurgy, its organizational

flexibility and its desire to innovate, working in partnership

with its customers.

16

elecTroTechnics Division

17

inover50countriesinordertomeet

theparticulardemandsofmanycus-

tomersinamarkethavingdistinctchar-

acteristicsineachregionoftheworld.

Priorapprovalofmaterialsbythecus-

tomerisastagethatcallsforclose

relationshipsatalllevelsandadvanced

methodsofelectricaltesting.Allthe

researchanddevelopment,produc-

tion,andsalesteamscancallonmany

yearsofexperienceinthesecertifica-

tionprocesses.MetalorElectrotechnics

thereforeworksincollaborationwithits

customersfromthefirststagesofthe

developmentofnewproducts.Itpro-

videsthemwithadviceandexpertise,

throughtheprocessofdesigningnew

applications.Thecombinationofskills

inelectricaltesting,appliedresearch

andmetallurgyhasenabledMetalorto

developinnovativeproductsbasedon

AgCW,AgCWC,AgFe,AgZnO,CuCr,

CuW,CuCandAgSnO2.

TheElectrotechnicsDivisionalsooffers

theintegratedmanagementoflogisti-

calflowsinlinewithitscustomers’

needsinordertoensurejust-in-time

productavailability,makingconsign-

mentstocksavailableforitscustomers.

Metalorkeepsabreastofchangesin

theindustrybysupportingcustom-

ersintheirtechnicaldevelopmentsas

wellasinthegeographicalexpansion

oftheirproductioncapacity.Metalor

Electrotechnicsoffersthuslong-term

co-operationtoitspartners,basedon

continuousResearchandDevelopment

work,improvementinmanufacturing

processesandinvestmentinpeople

andmachinery.Theendcustomergains

benefitsfromalltheseaspectsthrough

reliableanddurableproducts.

PrIce trend For gold chF/Kg 2006 PrIce trend For gold chF/Kg 2002-2006

PrIce trend For sIlver chF/Kg 2006 PrIce trend For sIlver chF/Kg 2002-2006

PrIce trend For PlatInum chF/Kg 2006 PrIce trend For PlatInum chF/Kg 2002-2006

PrIce trend For PalladIum chF/Kg 2006 PrIce trend For PalladIum chF/Kg 2002-2006

18

PrecIous metal PrIces

Numbersandfiguresasusedinthesechartsaboveareonlyindicativeanddonotreflectactualquotesormarketprices.

©UBSAG2006

MeTalor Technologies inTernaTional sa

FInancIal statement

Consolidated financial statementsAs of December 31, 2006

19

FInancIal year 2006 rePort

20

Theyear2006wasinfluencedby

strongfluctuationsinthepricesof

preciousmetals.Theoverallincrease

ofpriceshadapositiveimpacton

theprofitabilityofourbusinessbutit

leadtoasubstantialhigherfinancing

demandforinprocessmaterial.The

preciousmetalfinancinglinesfrom

ourmajorbankingpartnerswere

adaptedtomeetourneeds.

TheconsolidatedsalesoftheMetalor

Group,withouttheintrinsicvalue

ofthepreciousmetal,amounted

toCHF290.5millionwhichis17%

higherthanthepreviousyear.The

operatingresult(EBIT)increasedfrom

CHF21.4milliontoCHF40.4million

in2006.TheoperatingcostswereCHF

7.6millionhigherthantheprevious

year.Thisincreaseismainlydueto

bonusprovisionsasaresultofthe

goodprofitabilityofthecompanyin

2006.Excludingthisimpactoperating

costsremainedonthesamelevelas

in2005.ThenetincomeofCHF36.3

millionincludesanon-operatinggain

ofCHF3.6millionwhichwasmainly

generatedbythesaleofapartofour

ownpreciousmetalsinventoriesand

areversalofarestructuringprovision

whichwasnotfullyutilised.As

previouslymentionedhighermetals

pricesalsoledtoaCHF2.6million

increaseininterestcostfromlease

lines.ThevacantfactorybuildinginLa

Chaux-de-Fondswassoldduringthe

year.Majorinvestmentsweremade

tofurtherincreasethesecurityofour

sitesinNeuchâtelandMarin.

•TheRefining Divisionperformed

wellinalllocations.After

restructuringtheUSAoperations

wereprofitablein2006.Overallthe

divisionrecorded41%moresales

thanthepreviousyear.

•TheAdvanced Coatings Division

performedaboveexpectations

insalesandprofitability.Lower

operatingcostsandimproved

marginsleadtoaboveaverage

profitability.Therestructuringofour

Italianactivitieswereaccomplished

atlowercoststhanprovisionedin

thepreviousyear.

•TheWatch and Jewelry Division

increaseditssalesvolumeby

11%.Theprofitabilityimproved

toasatisfactorylevelandmet

ourexpectations.Asubstantial

amountofbusinesswasgenerated

withordersnotcomingfromthe

traditionalwatchindustry.

•TheElectrotechnics Division

continuedastronggrowthinsales

andprofitability.Theturnover

increasedby19%andtheEBIT

reached12%.TheChinese

operationstartedmanufacturing

operations.

In2006adividendofCHF2000

pershare(CHF18.5millionintotal)

waspaidtotheshareholders.The

shareholder’sequityatyear-end2006

amountedtoCHF352.3million

or67%ofthetotalbalancesheet

value.Ashareholdingprogramfor

keyemployeeswasimplementedand

327treasurysharesweresoldto29

employees.Thetotalnumberofshares

remainsunchangedat10000.

TheBoardofDirectorsproposesa

dividendpaymentofCHF2500per

share(CHF23.8millionintotal).

TheGrouphasanetcashpositionof

CHF25.5millioneffective31.12.2006.

21

consolIdated balance sheet as oF december 31, 2006(withcomparativefiguresasofDecember31,2005)

inCHF1000 31.12.2006 31.12.2005

ASSETS

Cashandcashequivalents 30466 56420Tradereceivables,net 284162 213270Otherreceivables 10253 17330Inventories 72965 70551Prepaidexpensesandaccruedincome 2797 3166

Current assets 400 643 360 737

Financialassets 1995 1766Property,plantandequipment 116729 120551Intangibleassets 944 1107Deferredtaxassets 2408 2584

Non-current assets 122 076 126 008

ToTAl ASSETS 522 719 486 745

lIABIlITIES AND SHAREHolDERS’ EQUITY

Tradepayables 68940 70934Otherpayables 19272 11601Provisionsforliabilitiesandcharges 29118 25488Short-termborrowings 6037 4544Accruedexpensesanddeferredincome 12078 8304

Current liabilities 135 445 120 871

Long-termborrowings 24 103Provisionsforliabilitiesandcharges 7909 2515Deferredtaxliabilities 27065 26286

Non-current liabilities 34 998 28 904

ToTAl lIABIlITIES 170 443 149 775

Sharecapital 800 800Sharepremium 27456 25809Retainedearnings 328762 315968Treasuryshares (4742) (5607)

Shareholders’ equity 352 276 336 970

ToTAl lIABIlITIES AND SHAREHolDERS’ EQUITY 522 719 486 745

22

consolIdated statement oF Income For the year endIng december 31, 2006(withcomparativefiguresfortheyearendingDecember31,2005)

inCHF1000 2006 2005

Net sales (excluding precious metal) 290 452 247 852Costofgoodssold(excludingpreciousmetal) (161761) (149480)

Gross profit 128 691 98 372

Sales and logistics (37 737) (34 957)Finance and administration (36 764) (31 640)Other operating costs (10 095) (10 445)Operatingcosts,total (84596) (77042)Precious-metalleasingfees,net (5157) (2567)Otheroperatingincome 1505 2613

operating result before precious-metal price fluctuations 40 443 21 376

Recoveryofprovisionforprecious-metalpricefluctuations 2282 4666

operating result after precious-metal price fluctuations 42 725 26 042

Financialincome 10618 11357Financialexpenses (12976) (12919)

Financial result (2 358) (1 562)

Non-operatingincome 9592 32096Non-operatingexpenses (6030) (13562)

Non-operating result 3 562 18 534

Income before tax 43 929 43 014

Currentincometax (6443) (3409)Deferredtax (1153) 1173

NET INComE 36 333 40 778

23

consolIdated statement oF cash Flows For the year endIng december 31, 2006(withcomparativefiguresfortheyearendingDecember31,2005)

inCHF1000 2006 2005

Incomebeforetax 43929 43014Depreciation,amortizationandprovisions 22763 21806Lossonsalesoffixedassets 1638 –Workingcapitalchanges,net (53556) (37723)Deferredtaxeschanges,net (198) 104Incometaxpaid (3903) (3819)

Cash flows from operating activities 10 673 23 382

Purchaseoffixedassets (14849) (16908)Proceedsfromthesaleoffixedassets 1052 1305Proceedsfromthesaleoflong-termfinancialassets – 29750ProceedsfromthesaleofDentalassets – 5596Cashcontributedtospin-offDental – (14263)Paidrestructuringexpenses (3811) (4080)

Cash flows from investing activities (17 608) 1 400

Changeinshort-termborrowings 1493 (2471)Changeinlong-termborrowings (79) (2045)Saleof/(acquisitionof)treasuryshares 555 1385Dividendpaid (18478) (5319)

Cash flows from financing activities (16 509) (8 450)

Effectsofexchangeratechangesoncashandcashequivalents (2510) 1852

Change in cash and cash equivalents (25 954) 18 184

Cashandcashequivalents,atbeginningofyear 56420 38236

CASH AND CASH EQUIVAlENTS, AT END oF YEAR 30 466 56 420

24

consolIdated statement oF changes In equIty For the year endIng dec. 31, 2006(withcomparativefiguresfortheyearendingDecember31,2005)

Cumulative Share Share Accumulated translation Goodwillon TreasuryinCHF1000 capital premium profits adjustement acquisitions shares Total

2006

Totalequityasof1.1 800 25809 334595 (8013) (10614) (5607) 336970Spin-offDental – – – – – – –Reductionofsharecapital – – – – – – –Profitfortheyear – – 36333 – – – 36333Dividend – – (18478) – – – (18478)Acquisitionofownshares – – 43 – – (43) –Saleofownshares – 1647 (908) – – 908 1647Exchangedifference – – – (4196) – – (4196) ToTAl EQUITY AS oF 31.12 800 27 456 351 585 (12 209) (10 614) (4 742) 352 276

2005

Totalequityasof1.1 1123 25344 314185 (16494) (10614) (4264) 309280Spin-offDental (225) – (18699) – – 790 (18134)Reductionofsharecapital (98) – (7886) – – 7984 –Profitfortheyear – – 40778 – – – 40778Dividend – – (5319) – – – (5319)Acquisitionofownshares – – 11536 – – (11537) (1)Saleofownshares – 465 – – – 1420 1885Exchangedifference – – – 8481 – – 8481 ToTAl EQUITY AS oF 31.12 800 25 809 334 595 (8 013) (10 614) (5 607) 336 970

grouP comPanIes(Asof31stDecember,2006)

Share capital Group ConsolidationCompany name Headquarter Currency (1 000) interest method*

Metalor Technologies International SA Neuchâtel,Switzerland CHF 800 N/A F

Metalor Technologies SA Neuchâtel,Switzerland CHF 11750 100% F

Metalor Finance SA Neuchâtel,Switzerland CHF 40400 100% F

Metalor Finance (Curaçao) N.V. Curaçao,N.A. CHF 10 100% F

Metalor Technologies (UK) Ltd. Birmingham,UK GBP 150 100% F

Metalor Technologies (Iberica) SA Barcelona,Spain EUR 822 100% F

Metalor Technologies USA Corporation NorthAttleboro,USA USD 1 100% F

Metalor USA Refining Corporation NorthAttleboro,USA USD 1 100% F

Metalor Technologies (Hong Kong) Ltd. HongKong,China HKD 3501 100% F

Metalor Technologies (Hong Kong) Ltd.Taiwan Branch Taipei,Taiwan TWD 5000 100% F

Metalor Technologies (Hong Kong) Ltd.Korean Branch Seoul,SouthKorea KRW 2960089 100% F

Metalor Technologies (Suzhou) Ltd. Suzhou,China USD 2100 100% F

Metalor Technologies (France) S.A.S. Courville,France EUR 5079 100% F

Metalor Technologies (Deutschland) GmbH Stuttgart,Germany EUR 767 100% F

Metalor Technologies (Italia) S.R.L. Milan,Italy EUR 100 100% F

Metalor Technologies (Sweden) AB Boras,Sweden SEK 100 100% F

Metalor Technologies (Singapore) PTE Ltd. Singapore,SG SGD 100 100% F

*F=FullConsolidation

25

the oPeratIng comPanIes oF the metalor grouP(AsofDecember31,2006)

legend

HeadOffice

Divisions

Refining

AdvancedCoatings

WatchesandJewelry

Electrotechnics

26

swItzerland

metalor Technologies International SAAvenueduVignobleCH-2009NeuchâtelPhone +41327206111Fax +41327206625www.metalor.comE-mail:corporate@metalor.com

metalor Finance SAAvenueduVignobleCH-2009NeuchâtelPhone +41327206111Fax +41327206601

metalor Technologies SADivisionsAvenueduVignobleCH-2009NeuchâtelPhone +41327206111Fax +41327206605Fax +41327206614

DivisionsRuedesPerveuils8CH-2074MarinPhone +41327206111Fax +41327206602Fax +41327206612

DivisionGeneva officeRuePré-Bouvier29CH-1217MeyrinPhone +41227832098Fax +41227832088

unIted states

metalor Technologies USA CorporationDivision255JohnL.DietschBoulevardNorthAttleboro,MA02763,USAPhone +15086998800Fax +15086951603

metalor USA Refining CorporationDivision255JohnL.DietschBoulevardNorthAttleboro,MA02763,USAPhone +15086998800Fax +15086951603

Divisionlos Angeles office650SouthHillStreetSuite811LosAngeles,CA90017-1754,USAPhone +12136247687Fax +12136245532

Peru

metalor USA Refining CorporationSuccursal del PeruDivisionAv.ProduccionNacionales278Edif.HermesUrbLaVillaChorillosLima09PeruPhone +5112515456Fax +5112525472

sPaIn

metalor Technologies (Ibérica) SADivisionsBolivia202-204E-08018BarcelonaPhone +34933030112Fax +34933073795

DivisionC/Albasanz14bis,1°GE-28037MadridPhone +34913757480Fax +34913044142

France

metalor Technologies (France) S.A.S.DivisionRuedesAquées,BP29F-28190Courville-sur-EurePhone +33237237844Fax +33237237467

Division11,rueLouisAulagneBP63F-69922OullinsCedexPhone +33472663210Fax +33478869068

DivisionImmeubleP.H.Spaak12-14,rueJulesFerryF-93110Rosny-sous-BoisPhone +33148125100Fax +33148125119

Division53,rueLafayetteF-75009ParisPhone +33140230029Fax +33140230198

germany

metalor Technologies (Deutschland) GmbHDivisionsKronacherStrasse66D-96257RedwitzPhone +499574624803Phone +499574624800Fax +499574624804

the netherlands

metalor Technologies (Deutschland) GmbHThe Netherlands BranchDivisionWeegschaalstraat3NL-5632CWEindhovenPhone +31402911265Fax +31402911266

chIna

metalor Technologies (Hong Kong) ltd.DivisionsSuite1705-9,TheMetropolisTower10MetropolisDrive,HungHomKowloon,HongKong–ChinaPhone +85225214131Fax +85228451791

metalor Technologies (Suzhou) ltd.Divisions8ZhaoYangRoad,LoufengEastZoneSuzhouIndustrialParkJiansuProvinceChina215123Phone +8651265936181Fax +8651265936171

Shanghai liaison officeDivisionsNo3Building,800ShenfuRoadXinzhuangIndustryParkMinhanhDistrictShanghaiChina201108Phone +862154423060Fax +862154420790

Dongguan liaison officeDivisionsUnitB213,WanbaoChengErhuanEastRoadChangan,DongguanGuangdongProvinceChina523856Phone +8676985443938Fax +8676985443933

south Korea

metalor Technologies (Hong Kong) ltd.Korean BranchDivision8F.ShinhanBldg.2-42Yangjae1-dong,Seocho-guSeoul,SouthKorea,137-886Phone +8225753848Fax +8225752641

taIwan

metalor Technologies (Hong Kong) ltd.Taiwan BranchDivisions6F,101Rei-HuStreetNei-HuTaipei,TaiwanR.O.C.Phone +886277207775Fax +886277200303

sIngaPore

metalor Technologies (Singapore) PTE ltd.Division67TechParkCrescentTUASSingapore638074Phone +6568631600Fax +6568630102

thaIland

metalor Technologies (Singapore) PTE ltd.Bangkok Representative officeDivisionPrimeStateMiniOffice79/4Moo2,5thFloorSrinakarinRoad,NongbornPravejBangkok10260ThailandPhone +6623660719Fax +6623660720

27

unIted KIngdom

metalor Technologies (UK) ltd.Divisions74WarstoneLaneUK-BirminghamB186NGPhone +441212363241Fax +441212363568

Division104-105SaffronHillUK-LondonEC1N8HBPhone +442074055298

Fax +442074054844

denmarK

metalor Technologies (UK) ltd.Denmark BranchDivisionsVestreGade6BrøndbyøsterDK-2605BrøndbyPhone +4536480088

Fax +4536480055

sweden

metalor Technologies (Sweden) ABDivisionSagagatan22S-50635BorasPhone +4633444250

Fax +4633444260

Italy

metalor Technologies (Italia) S.r.l.DivisionsViaG.DiVittorio28I-20068PeschieraBorromeo(Milano)Phone +39025165181Fax +390255301021

board oF dIrectors

MartinBisang

RichardRobinson

Hans-JuergSchaer

DanielSchlatter

RobertLombardini

Chairman

Vice-Chairman

Member

Member

Member

corPorate management

DrScottMorrison

FredyHiltmann

DrYuxingShang

JacquesMichel

MartinBless

DrJeanFournier

ChristineTsai

KennethBeilstein

ChiefExecutiveOfficer

ChiefFinancialOfficer

GeneralManagerRefiningDivision

GeneralManagerAdvancedCoatingsDivision

GeneralManagerWatchesandJewelryDivision

GeneralManagerElectrotechnicsDivision

GeneralManagerGreaterChina

GeneralManagerUSA

audItors

28

HansIsler

DanielHumbel

Ernst&YoungLtd.,Geneva,Switzerland

Ernst&YoungLtd.,Geneva,Switzerland

governIng bodIes(AsofDecember31,2006)

© Copyright Metalor 2007. All rights reserved. Except as permitted by law, no part of this document may be reproduced or transmitted by any process or means without the prior consent of Metalor.

The Metalor logo, the Metalor© name and all product names referred to herein are the registred trademarks and trademarks of the Metalor Group of companies.

No guarantee nor warranty of any kind is given as to the information contained herein, including but not limited to accuracy, completeness, merchantability or fitness for a specific purpose. Metalor shall not be held liable for loss or damage which may result from reliance on the information contained herein.

Published by Metalor Technologies International SA,Avenue du Vignoble, 2009 Neuchâtel, Switzerland.

This annual report is available in English and French.

Design: > graffiti-communication.chPhotos: Metalor / > graffiti-communication.chPrint: IDM, Imprimerie des Montagnes, La Chaux-de-FondsEdition: English 1800, French 2000

CS – 0001EN / 02.2007 – 1800

REFINING                ADVANCED COATINGS                WATCHES AND JEWELRY                ELECTROTECHNICS             

Metalor Technologies International SAAvenue du Vignoble, CH-2009 Neuchâtel, Tel. +41 (0)32 720 61 11, Fax +41 (0)32 720 66 25info@metalor.com, www.metalor.com