Following the financial crisis in 2008 and the resulting economic crisis in 2009, 2010 is also destined to be a very difficult year for the global paper industry. In the 2009 calendar year we were confronted with reduced sales; in the first quarter of 2010 we battled, above all, with the price of raw materials. From their lowest level of USD 480/t in March 2009, pulp prices had risen to USD 890/t by May 2010. If the paper industry does not succeed in passing this cost increase on to the
markets, then financial results are bound to collapse, triggering further consolidation in the industry.
As far as our products are concerned, Thermal Papers was the only division to raise its prices during that first quarter. But all of the divisions
raised their prices on 1 May 2010. The Board believes that we will be faced with rising costs for raw materials throughout the whole of 2010,
especially for pulp, but also for chemicals and freight, and that we will only be able to pass on a certain proportion of this increase by raising our selling prices. As already mentioned, the selling prices of almost all our products worldwide have been raised in May, and we are planning further increases in the months of June / July 2010.
As well as higher prices for market pulp, there has been a general shortage of fibre caused by a sharp increase in demand in many parts of the world for pellets and wood to fuel the growing number of biomass power stations. In addition, the earthquake in Chile caused what will be at least a temporary reduction in the availability of pulp from that region, leading to a bottleneck in supplies and quotas being fixed for manufacturers.
We must and we will work with determination towards securing the future of our company. A large part of this will be to consistently develop
our strategy for thermal papers on an ongoing basis. The most important project in the Koehler Group has been and still is to secure our position as the world’s market, cost and quality leader in the field of thermal papers at the point of sale. The investment in a production facility of Koehler Thermal Papers in the USA, our most important
export country, planned for the second quarter of this year, has been delayed again, first and foremost by the continued risks relating to
market development. We are currently working on several projects with different aims, all of which involve the magnitude of our additional
capacity and aim at avoiding excess capacity should the market develop weakly.
In order to build up our market leadership in the thermal labels segment, we have spent €9 million on a new online coating plant for

PM 1 in Kehl, which was successfully put into operation in March this year.
Another important aspect of our corporate planning will be preparing our factories in Oberkirch, Kehl and Greiz for the future. This edition of
Koehler Rundschau reports on projects, such as the modernisation of paper machine 1 in Kehl and the construction of our own power station in Greiz.

The results we achieved in the first quarter of this year are reassuring. Helped by the slight reinvigoration of the economy, we managed to achieve and go beyond our sales volumes and turnover targets during the first three months, we avoided shortening employees’ working times in all of our divisions and we achieved a positive result for all
of the divisions, although in total this result was below target and below the first quarter of the previous year.
The development of our newest subsidiary, the Katz Group, whose turnover and earnings were higher than expected, was especially pleasing and their new, innovative products (in addition to the beer coasters) promise further positive results. The Weisenbach factory is being considerably invested in, including in the field of energy, aimed
at increasing production performance and reducing costs. We will be using 2010 to optimise production processes in the Katz Group. Our aim is to produce 2 billion beer coasters in Europe and 1.5 billion in the USA. We also want to expand our point-of-sale applications. We are very confident that we can achieve our results target for 2010.
Our ‘Shaping Our Future Together’ project, whose two most important components are TWIKS and K-PRO, will give us uniform and transparent processes along our entire supply chain. The aim is to
introduce an MES (manufacturing execution system), which, combined with the business processes in the ERP system (which relates to commercial aspects), will provide us with an improved overview of material demands and cost situations.
The success of our ‘Chancen PuR’ project (Pure Opportunities – Profitability and Efficiency), which identified and implemented considerable savings, demonstrates that strict cost monitoring is crucial to the continued success of the Koehler Group.
Working together with our motivated employees, we will continue the projects we have started systematically and consistently in order to sustainably achieve the success we desire for our company, and to continue to develop Koehler as a successful family enterprise in the long term.

Kai Furler

CEO