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Dr. Till Reuter, chief executive officer

Dr. Till Reuter (41) has been the ceo of kuka Aktiengesellschaft since October 1, 2009. After studying business administration at the University of St. Gallen in Switzerland, law at the University of Konstanz and earning a doctorate in St. Gallen, he started working as a business lawyer in New York / usa and São Paulo / Brazil (1995 – 1997). Dr. Reuter subsequently joined the renowned law firm Shearman & Sterling in Frankfurt and Düsseldorf (1997 – 1999). From 1999 on, he worked as an investment banker for Morgan Stanley, Deutsche Bank and Lehman Brothers, before founding his own company. Dr. Reuter has been President of the Executive Board of the holding company Rinvest ag in Pfäffikon / Switzerland, since 2008.

The year 2009 was one of major change for kuka. The economic crisis demanded extraordinary measures; above all it required all those responsible for the company to close ranks. The Executive Board, the Supervisory Board and employee representatives of kuka are once again pulling together. kuka now has a stable and long-term oriented group of shareholders, which is something not seen by this company for over thirty years.

The successful capital increase only five weeks after the new Executive Board took office in November 2009 is thus a clear indication of the confidence the financial markets have in the sustainability of our company. We have since then also been able to extend our bank financing. We also installed a leaner management structure in the operating divisions last fall. And finally, we have started to put in place the new “Advanced Robotics” section. The Executive Board has thus established the basis for kuka’s future in only six months.

kuka emerged from fiscal 2009 relatively well thanks to its motivated employees; better than many other German mechanical and plant engineering companies, and better than our Japanese competitors in the robotics segment:

• with a decline in orders received and sales compared to last year of just under 30 percent each,
• an order backlog that will again sustain our activities for five months,
• an operating result that came in within the adjusted target range and
• a debt load that is stable and remained low.

We adjusted operating capacity as necessary to match the substantially lower demand and took advantage of this opportunity to examine our internal processes and operating procedures. By systematically cutting our fixed cost components, we were able to significantly reduce our breakeven threshold. The savings are an investment in the higher earnings we will see when the economy rebounds. In total, we were able to save € 70 million during the financial year just ended, more than half of which is permanent.

Crises can be only overcome with motivated employees, for they especially bear the brunt during such times. This is why we choose socially responsible ways to adjust capacities, such as reduced working hours, salary concessions and voluntary severance agreements. For the most part, layoffs for operational reasons were avoided. But this in no way precludes the need to cut costs further. Our cost reduction program will be intensified in 2010.

During the current financial year, the focus is and will be on our future product portfolio. kuka’s core business is based on the automotive industry and its advanced technical specifications, and it will continue to represent an important part of our business in the future. But it is also clear that we will more aggressively apply the expertise we have won from our technology leadership position in robotics and robot-based plant engineering and construction to related sectors (general industry) outside the carmaking industry. Already today, we receive more than half of our robotics business orders from various general industry sectors: from the food industry and mechanical engineering companies to entertainment and health care technology. Especially the latter represents considerable untapped market potential. We are planning to pool parts of our research and development activities in the new “Advanced Robotics” section in order to be able to penetrate established and new markets with new products and applications faster.

kuka Systems has also already built a second pillar in various general industry markets to complement its automotive industry business. As the world’s number one in car body production, kuka has highly advanced process expertise in robot-supported automation of manufacturing solutions. Sectors such as aircraft and rail vehicle manufacturing, solar and agricultural machinery industries have recognized this productivity improvement potential and are increasingly using it. Our aim is to make kuka a technology company that supplies robot-based solutions globally for a wide range of general industry applications.

In order to achieve this goal, we will continuously invest in new products and applications. Accordingly, our research and development expenditures were again higher in fiscal 2009. You will be able to marvel at one of our very important achievements in a few weeks at the world’s largest robot trade fair, automatica, to be held in Munich in June: the new generation of kuka industrial robots.

A groundbreaking milestone for robotics is the sensitive lightweight robot, which opens the door to completely new applications for supporting factory workers or providing personal services. We developed this “sensing” robot together with the German Aerospace Center. We will make it ready for serial production. kuka’s lightweight robot has already successfully passed a beta test in automotive serial manufacturing, producing more than 15,000 rear axle differentials.

The year 2009, with its major changes at all levels, was an especially challenging year for kuka employees. But what we have achieved to date is clearly noticeable. I want to thank you, also on behalf of the entire Executive Board, from the bottom of my heart. I also thank our business associates and shareholders, who have placed their confidence in us, and whose trust we continue to need. We are working hard to continue to justify this trust in the future.

Sincerely,

Dr. Till Reuter
Chief Executive Officer