Abstract from Board of Directors' Annual Report - 4

With regard to the lead company in the Group, Coster Tecnologie Speciali S.p.A., production was within the normal range with notable improvement in sales of aerosol valves, spray pumps and dispensers.

However, operating margin decreased, due to substantial increases in the cost of raw materials, components and energy, with stable or diminished sales prices. Sales of machines improved. Substantial investments were made during the year to modernize plants and restructure property.

As far as subsidiaries are concerned, excellent results in terms of both increased turnover and profits have been achieved by Coster Aerosols Ltd. (UK) and Coster GmbH (Germany); good results also for Robertpack B.V. (Holland); despite substantial growth in turnover, profits earned by Coster USA and Coster Packaging (Argentina) were penalized by the disadvantageous exchange rate.

Profits of Coster subsidiaries in Asia have grown; Coster S.à.r.l. (France) and Costertec S.A. (Spain) had a light reduction in both turnover and profits due to the contraction in sales to perfumery market.

The extraordinary investments associated with the restructuring, modernization and enhancement of Coster Group production units were essentially completed during the financial year 2006. The units most heavily impacted by this investment program were the factories Coster 1, Coster 2, Costerplast and Coster Packaging S.A.

The Group has invested heavily in upgrading the means of production and has achieved improvements in quality in the majority of its production units. A new multi-year investment programme was approved, to begin in the first half of 2007; planned investments target new products and modernization of the means of production.

The Technical Office at Calceranica al Lago (Trento) runs the R&D operations for the Aerosol Division, while the Technical Office of the Machine Division in Pero (Milan) is dedicated to filling machines and equipment.

Considerable time and resources were absorbed by intense R&D activity in 2006, as in previous years.
New products have been designed and current products improved; some of these new products are currently in production, others are scheduled to go into production shortly. A high proportion of R&D activities has been dedicated to experimentation with new manufacturing processes.