Annual Report 2007 - Muehlhan AG

ManaGeMent divisions share group ManageMent report Group Consolidated FinanCial stateMents
DISCUSSION OF THE INDIVIDUAL RISKS
Risks from the market environment
and competitors
our markets are subject to potential risks from the introduction
of new technologies, changing customer requirements,
increasing competition from market participants
from related industries or services, and entry into new
market cycles. the Executive board monitors the relevant
markets throughout the world systematically with regard to
these risks, and is in constant contact with the managing
directors and regional managers who work on-site in order
to assess the developments.
in the case of transportation of liquid bulk goods, especially
oil and gas, there is the basic substitution risk that current
maritime traffic will be replaced by pipelines. against
the background of recent geopolitical developments and
the increasingly important security issues in the producing
countries, the great flexibility of ships compared to pipelines
is of growing importance. as such, ships may continue
to be the number 1 means of transportation in this
product segment. for all other goods, maritime traffic will
also remain the dominant means of transportation for the
next few decades from today’s perspective, because of all
the means of transport, ships are and will remain by far
the most energy-saving, inexpensive and environmentallyfriendly
way to move goods and humans.
Company strategic risks
Muehlhan is pursuing a growth strategy, the implementation
of which is based on the availability of various resources.
in addition to capital, above all this includes
skilled employees who can arrange for and transact additional
business at existing and new locations. both in
the oil & Gas offshore sector as well as in Ship repair,
this resource can limit growth. therefore, by means of
its polish company in Gdansk, at the end of 2006 the
Muehlhan Group began to provide to polish employees
technical and linguistic training for deployment with
oil & Gas offshore so as not to be dependent only
on existing resources in this market. a corresponding
approach is analogously planned for the Ship repair
market. through the issuance of the bonds and the initial
public offering of Muehlhan aG, the amount of capital will
not be a resource that puts the growth strategy at risk.
Ship Newbuilding and Ship repair are industries that are
often used by up-and-coming national economies with
low labour costs to increase their gross domestic product.
therefore, in principle it is conceivable that the business
in which Muehlhan is developing will be imitated by other
national economies. Experts presume this will occur first in
the countries Vietnam, brazil and india. these are countries
in which Muehlhan is not yet represented by subsidiaries at
the present time. the risk that such a market development
with the dislocation of new construction and repair activities
will come to pass is minimised by Muehlhan by tracking
developments in these countries very closely, and by
starting business operations there itself when there is the
possibility of a long-lasting profitable entry into the market.
to the extent possible, in doing so several fields of business
are developed at the same time in order to spread the
overhead costs over the broadest contract base possible.
for example, in the countries mentioned, a simultaneous
entry into the business fields Ship repair and oil & Gas
offshore is conceivable.
Economic performance risks
in the last few years, prices of copper and other raw
materials that are used in the coating substances have
markedly increased. this led to an increase in the price
of these substances. Muehlhan is not affected directly,
because in most cases the coating substances are purchased
by the customers, or the costs are passed on
directly with a handling fee. there is also no risk that
a further increase in prices of raw materials used will
lead to a substitution of the coating substances and
application technology that are used, because there are
no technolo gical alternatives.
Where technically possible, Muehlhan uses steel grit for
surface preparation blasting. Muehlhan would have to deal
with a price increase for the materials used for operations
directly – but only to a very limited extent due to the ability
to recycle the material. there would continue to be a
price advantage over a non-reusable material such as
copper slag.
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