News
Annual Press Conference
"Productivity improvements were a significant factor in the growth in profit," said Dr. Peter Bettermann, Speaker of the Freudenberg Management Board, at the Annual Press Conference held in Weinheim on Friday.
Sales growth was achieved in a business environment that is becoming increasingly difficult. The global economic situation in 2007, which was otherwise strong, was subdued by a further rise in oil prices, the continued shortage of raw materials, a drop in the value of the dollar compared with the euro and the crisis in the financial sector. Growth in the USA lost some of its dynamism, among other things as a result of the sales problems of US automakers, while gross domestic product (GDP) in the eurozone rose by 2.6 percent. Freudenberg benefited from growth in the Eastern European EU states (plus 6.4 percent) and strong economic growth in China (11.5 percent) and India (8.7 percent).
In the 2007 financial year, Freudenberg made significant progress in further developing its portfolio.
The Freudenberg Building Systems Business Group was sold to a consortium of German financial investors and is currently successfully repositioning on the market as nora® systems GmbH. The sale of the Flexitech Division (brake hoses) to the long-standing partner Meiji Flow Systems Co., Ltd., Kaisei-machi, Japan, and Mitsubishi Corporation, Tokyo, Japan, was realized with effect from January 2008.
On the other hand, Freudenberg Nonwovens acquired two smaller filter manufacturers, Spasciani Air Filter S.p.A. of Italy and Filtration Engineering Ltd., Cheshire, United Kingdom, thus strengthening its position in the European market for cartridge filters. In the Professional Division, Freudenberg Household Products acquired 80 percent of the Canadian market leader S. Marino Manufacturing Ltd., Concord, Canada. Freudenberg has strengthened its position in the oil and gas market through the acquisition in 2007 of TBS O-Ring & Seal Specialist Ltd., Aberdeen, Scotland, and in January 2008 of the Norwegian seals and service provider Vestpak AS of Stavanger, Norway. Further, the remaining shares in Corfina Industriale were acquired, and the business operations of the Burgmann Industries Automotive Division were integrated.
"We are systematically expanding our activities in certain segments of the general industry sector, such as oil and gas, heavy hydraulics, aerospace and medical technology", Dr. Bettermann underlined in his report.
For the current financial year, Freudenberg expects further positive development despite a flagging global economy. Once again, continuous improvement processes as well as efficiency enhancement and cost reduction efforts will play a key role. Growth in Asia, especially in China and India, will compensate for the weak US automobile market.
Another objective of the Freudenberg Group is to secure a higher return on capital employed. In view of the rising cost of raw materials and energy, efforts to save material and reduce CO2 emissions have been further intensified. This also includes the improvement of processes in and between all units of the Group. For example, corporate units working throughout the world are to cooperate more closely in the seals business. Especially in the USA, business with general industry is to be strengthened with a view to winning greater market shares.
Year-on-year, sales by the Freudenberg Group rose by 6 percent or 288 million euros to 5.341 billion euros, the highest ever figure in the company's history. Adjusted for exchange rate effects, acquisitions and disinvestments, sales rose by 378 million euros or 7.5 percent.
Profit from operations rose by 26 percent to 384 million euros. Apart from growth in sales, the profit from the sale of the Building Systems Business Group was a key factor. The balance of other income/expenses rose by 23 million euros, chiefly as a result of this transaction.
Consolidated profit rose by 56 million euros to 275 million euros.
At 4.628 billion euros, the total assets of the Freudenberg Group rose year-on-year by 158 million euros. The rise of 3.5 percent in the balance sheet total is chiefly due to the increase in non-current assets, particularly as a result of the purchase of the remaining shares in the Corfina Group, and the results from associated companies.
In absolute terms, equity increased by about 80 million euros to 2.140 billion euros. The equity ratio was 46.2 percent. Net debt (including partners' accounts) rose by 2 million euros to about 627 million euros.
Cash inflow from operating activities amounted to 407 million euros, significantly higher than cash outflow from investing activities (- 319 million euros), which rose to a higher level. Cash outflow from financing activities totaled 47 million euros, remaining at an average level compared with the last few years.
Freudenberg continued its globalization strategy with a view to participating in growth on the emerging markets of Asia and Eastern Europe. In addition to the roofing membrane plant of Freudenberg Politex in Zavolzhie (near Nizhny Novgorod/Russia), which opened in 2006, Eagle Burgmann opened a service centre for the seal market there in mid-2007. An engine air filter plant was established at Nove-Mesto, Slovakia. Various investments were made in China; operations started at the two new plants for special lubricants and release agents in Qingpu, 40 km from Shanghai, and a new production facility for headliners was developed at nearby Suzhou. New air spring plants are currently under construction at Nyiregyhaza, Hungary, and Yantei, China. Furthermore, the Group reinforced its nonwovens activities in Korea and Brazil with new facilities.
On December 31, 2007, the Freudenberg Group employed 34,330 associates, 804 more than at the end of the previous year. Personnel developments in the regions where Freudenberg is active varied. The decline in headcount of 498 or 4 percent to 11,266 in Germany is mainly due to the sale of Freudenberg Building Systems (about 800 associates in Germany).
In the European Union (excluding Germany), the payroll increased by 1,049 to 10,182. In Asia, the headcount (including a pro-rata share in associates employed by Freudenberg joint ventures) rose by 417 to 3,170, in South/Central America there was an increase of 50 to 1,452. The headcount in the Africa/Australia region remained almost unchanged at 355 (2006: 353). The headcount in North America declined by 158 to 7,357.
In 2007, the Freudenberg Group invested more than 200 million euros in research and development. During the year under review, about 1,900 associates were employed in research and development throughout the Group. The main regional focus continued to be Germany, where 1,323 associates were involved in these activities.
"Freudenberg innovations bring added value for our customers and commercial success for the Group," said Dr. Martin Stark, Member of the Management Board. Examples include automotive products contributing to CO2 reduction, such as friction-reduced and improved seals, weight-saving interior trim materials and large-surface circuit boards to replace wiring harnesses. Diamond-coated mechanical seals also allow customers in the oil and gas industry to significantly extend the service life of their plants.
The objective is to significantly expand the share of sales generated by new products through the use of innovative materials. With this aim in mind, the Business Groups cooperate closely with customers and the central research and development units investigate and develop applications for new business areas and markets.
"Continuous innovation for and together with our customers is the key to our success", Dr. Martin Stark explains. "The development of the engine mount and seals for the Tata Nano low-cost automobile is the best example." The manufacturer Tata had involved Freudenberg in development from a very early stage and Freudenberg succeeded in meeting cost targets by redesigning products.
At 27 million euros, the Freudenberg Group investment in technical occupational safety remained at a high level also in 2007. Under the special long-year program to improve machine safety, the machines at 150 production sites and many service sites are being improved. The cost of further environmental protection optimization measures rose to more than 9.4 million euros.
As a consequence of the "We all take care" environmental protection and occupational safety initiative and other activities at all levels in the Freudenberg Group, the number of accidents per 1,000 employees resulting in more than three days' absence (accident rate) fell for the sixth successive year; the accident rate is now just below 4 (2006: 4.3).
Cornelia Buchta-Noack
Freudenberg & Co. KG
External Communications
Phone +49 6201 - 80-4094
Fax +49 6201 - 88-4094
cornelia.buchta-noack@freudenberg.de
Markus Rademacher
Freudenberg & Co. KG
External Communications
Phone +49 6201 - 80-4049
Fax +49 6201 - 88-4049
markus.rademacher@freudenberg.de
Contact Freudenberg Group North America:
Cheryl Eberwein
47690 East Anchor Court
Plymouth, Mich. 48170-2455
Office: +1 (734) 354-5373
Cell: +1 (248) 767-1068
Fax: +1 (734) 451-0043