Consolidated Annual Report 2012 and Single-Entity ... - PVA TePla AG

opportunities. Leading research institutes continue to see
significant growth potential in these areas. Additional sales
opportunities also arise from product range expansion,
whether involving in-house developments or, as has often
been the case in the past, through the acquisition of companies
possessing interesting technologies.
One key risk in the markets in which PVA TePla operates
is the risk of fluctuations in customers’ investment activities
and in the overall global economy. This risk is reduced
by diversifying the range of products and services across
different sectors including semiconductors, photovoltaics,
tool making and hard metal technology, the production of
high-quality metals and ceramics, the automotive and aerospace
industries, and the electrical and electronic engineering
sectors. The effects of cyclical, foreseeable fluctuations
in market volume are primarily offset by increasing
or decreasing outsourcing levels, although unexpectedly
high demand can give rise to production bottlenecks. The
strategy of maintaining a relatively low level of vertical integration
allows rapid response in this regard. The PVA TePla
Group also provides high-quality contract processing work
– such as plasma treatment, high-vacuum brazing and heat
treatment of components – in which greater customer demand
has historically been seen in times of generally restrained
capital expenditure. The semiconductor business in
particular – a key segment for the Group – is highly cyclical
in nature, and for that reason involves major risks as well
as opportunities. The semiconductor industry in recent decades
has enjoyed average annual growth rates well above
those of most so-called old economy industries; however,
this average includes periods of both robust growth and
recession. Although the future condition of the general
global economy is not entirely certain, analysts predict global
GDP growth of 3.2% for 2013, with a further rise in
2014 to 4.0%. Although the threat of a global recession
in the wake of the debt crisis in the established industrialized
countries is not acute, further economic trends and
particularly the investment activities of many companies
remain unclear. The economic development of emerging
markets – an extremely important market for PVA TePla
Group – has suffered considerably under the debt crisis
of industrialized countries and the resulting reduction in
export opportunities. Weakening growth rates in emerging
markets are evidence of this problem. Incoming orders
were low during 2012 in nearly all business units. In the
Industrial Systems division, the focus of business in recent
years has clearly been on sintering hard metals, with a high
percentage in China. In 2011, this division had its best year
in the Company’s history with regard to both sales revenue
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and incoming orders. Due to the weaker economy, including
in China, and the considerable increase in capacity in
the hard metal area in recent years, demand decreased
significantly in 2012. Customers are cautious about making
large investments and numerous investment decisions are
being postponed. Nevertheless, negotiations are underway
with customers about a larger number of interesting
projects, making it likely that demand will recover in 2013.
Incoming orders in the Semiconductor Systems division
were also very subdued in 2012. Growth rates in the semiconductor
market fell significantly short of expectations.
In addition, capacity in systems for growing silicon crystals
was likewise significantly increased in the past, meaning
that customers’ willingness to make further investments
has come to a standstill. But in the current fiscal year, demand
for high-purity silicon (floatzone material) and silicon
carbide for high-performance electronics is likely to increase
sharply again. Demand for plasma and analysis systems
is correlated with trends in semiconductor markets (e.g.
MEMS, LED, OLED/PLED, IGBT). Demand in these areas
was initially quite good in the first half of 2012, but cooled
during the latter half of the year. Further growth for these
products of PVA TePla is expected again in 2013 due to the
anticipated growth in the semiconductor market and newly
developed applications for plasma systems in the life science
/ industrial sectors.
Significant overcapacity in the solar market and sharp declines
in sales prices across the entire supply chain of the
solar industry resulted from significant investments to expand
capacity, particularly by Chinese providers. Market
analysts assume that worldwide production capacity for
solar modules, at 60 GWp, is approximately twice as high
as the corresponding demand. The entire solar market is in
upheaval. According to market observers, the number of
manufacturers declined from over 750 in 2010 to less than
150 by the end of 2012. It is expected that this consolidation
will continue in 2013. However, it is also expected that
prices for solar modules will stabilize starting in the middle
of the year due to declining overcapacity and a pickup in
demand. According to forecasts, China will be the main
growth market in 2013 for photovoltaic installations, with
new construction projects of more than 6 GW. This means
that in 2013, China will surpass Germany for the first time
with regard to the number of new solar power systems
constructed. The photovoltaic market in the US is expected
to continue growing strongly as well. In Europe, too, the
chances of more new photovoltaic installation projects are
fairly good due to the numerous incentive systems in place
Management and Group Management Report