Annual report 2003

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Creating the new Umicore A year of great change 2003 saw a significant change in the size and structure of the Umicore Group. First and foremost there was the PMG acquisition which gave the Group a whole new dimension. At the same time, Umicore prepared the carve-out of the copper business so that it could function as a free-standing company and allow it to contemplate new partnership. The sales and marketing function also saw the transfer of the third party trading and agency business to a new joint venture, Traxys. Finally, Umicore reviewed all its corporate and support functions, in order to ensure maximum cost effectiveness and their alignment with the new overall structure of the Group. This led, amongst others, to the full decentralization of the engineering function. Bringing together two successful organizations The relative size and respective strengths of Umicore and PMG meant that Umicore approached the integration as the bringing together of two successful organizations more than as a simple acquisition. A determined effort was made to retain best practice in a number of areas while reinforcing decentralised decisionmaking wherever possible. During the due diligence period, considerable attention was devoted to preparing the integration process. This allowed Umicore to communicate to members of the senior management team their role within the new organization on the day the transaction was completed. The two most senior executives at PMG – Martin Hess and Pascal Reymondet – took up positions in Umicore’s Executive Committee. > > > Advanced Materials Engineered Metal Powders Specialty Oxides & Chemicals Electro-Optic Materials Precious Metals Services > > Precious Metals Refining Precious Metals Management *Umicore Copper has been reconfigured as an independent business group Precious Metals Products & Catalysts > > > > > Automotive Catalysts Technical Materials Jewellery and Electroplating Precious Metals Chemistry Thin Film Products Umicore The new organizational chart shows the way in which the former PMG activities and Umicore have been aligned within the reporting segments of the new Umicore. Working together for a smooth integration An integration committee was set up in early July to oversee the integration process. Special project groups were established in order to work on all major aspects related to the integration from harmonizing the accounting and reporting systems to unifying the IT infrastructure. Although operational and cultural differences existed between the old Umicore and PMG, it became apparent that such differences were outweighed by many similarities in approach and working practices. By the end of the year the majority of the projects had been completed as expected. Reaping the first benefits Primary emphasis was placed on ensuring that the operational benefits of such a merger would become apparent as soon as possible. Reductions in working capital requirements of some ¤ 80 million were realised by the end of the year which equates to more than 10% of the purchase price of the PMG operations. Another priority was to integrate the metals management functions and to determine the shape of the combined sales and marketing network. This was largely exceeded already in the first months after the closing of the transaction. The most challenging task, > > > > Zinc Copper* Building Products Zinc Alloys & Chemicals Zinc Smelting Padaeng 47% > > > > Corporate & Investments Corporate & Support Services Research Development and Innovation (Incl. Fuel Cells) Traxys Other Investments Former Umicore activities Previously part of PMG Amalgamation of previous PMG and Umicore
however, was in reconfiguring a precious metals refining operation that had notable overlaps between the Hoboken and Hanau sites. The new structure of the combined refining operation was defined by the end of the year. Although this led to 30 job losses at Hanau the new configuration places the business on a better development footing for the future and allows Umicore to build on the respective strengths of both operations. Workforce breakdown by business group Advanced Materials 12% Precious Metals Services 10% Precious Metals Products and Catalysts 28% Zinc 25% Copper 15% Corporate and Investments 10% Geographical spread of Umicore´s workforce (including associates) Belgium 28% France 10% Germany 12% Other Europe 17% North America 4% Latin America 7% Asia (other) 9% China 7% South Africa 6% In keeping with the company’s desire to find equitable solutions to all issues involving restructuring and workforce reductions, all these changes were brought about after a process of dialogue and negotiation with the respective workforce representatives. A broader R&D portfolio A new configuration for human resources The new Umicore now has 11,470 employees in fully consolidated companies and some 3,618 in associated companies and joint ventures. It has also taken on an even more international profile. The integration of PMG also added significantly to the weight of Umicore significantly strengthened its presence in terms of the Group’s research and development efforts. Umicore can now production facilities and personnel in Germany, Latin America and rely on a R&D team of more than 500 people. A centralized North America. Research Development and Innovation function (RDI) based in Olen, Belgium, manages an extensive pipeline of research and development projects at Group level and in support of many of the business units. This centralised function also contains a Venture Unit, which acts as an incubator for promising new initiatives, and an ideation function, Umagine, which seeks to generate innovative products or processes and business solutions from within the company. In September 2003 a new Human Resources Management (HRM) organization was established in line with the operational and cultural needs of the new Group. The global HR structure encompasses 35 countries and 105 different locations and this warranted a more decentralized approach than had been the case in the past. Responsibilities now largely rest with the HR functions at country or regional level while the corporate HR function guides Although the centralized function supports R&D at business group the overall policy formulation, management development and level where required, a significant research and development effort is carried out within the business units themselves. This is HR networking. notably the case in the area of Automotive Catalysts where extensive development and testing is carried out in conjunction with customers in order to ensure optimum product specification in a sector driven by rapidly evolving and ever more stringent standards for vehicle emissions. The Umicore Group’s overall R&D spend on a full year basis is set to increase from ¤ 30 million prior to the acquisition to some ¤ 75 million. A strong spirit Change can often prove a difficult process, particularly for those directly affected by job cuts and restructuring measures. However, the changes that have been brought about at Umicore during 2003 have enjoyed a high level of support throughout the Group. The reconfiguration process during the last six months of the year involved tight deadlines and a heavy workload for many within the new Group. That the company was already able to meet most of its integration targets by the end of the year was a result of Focus on competitiveness excellent teamwork and high levels of dedication from a large In order to safeguard the cost competitiveness of its smelting and refining operations, a number of other restructuring measures were announced during 2003. The workforce at the Olen site is being reduced by 127 full time equivalents, in parallel with the carving out of the copper activities in a separate entity. This is number of teams. Many of these teams were made up of people who would have been strangers at the outset. This suggests that coherent and clear targets, coupled with honest communications, helped to break down any perceived cultural barriers in the coming together of two organizations. mainly the result of the streamlining of the central site support Umicore has changed significantly over the course of twelve functions. Umicore’s central engineering function was also months with a far larger product offering, a wider geographic dissolved, resulting in the closure of the Louvain-la-Neuve office. reach and a workforce that has increased not only in numbers but At the beginning of 2004 a plan was also unveiled to improve the cost structure within Umicore’s zinc smelting business. It is envisaged that the programme will enable cost reductions of some ¤ 14 million by 2006 and will result in a workforce reduction of some 136 people – primarily in the support functions of the smelting facilities at Auby (France) and Balen (Belgium). also its diversity in terms of skills, backgrounds and nationalities. Because of this, the new Umicore approaches 2004 in confident mood and buoyed by a strong spirit and sense of common identity and purpose. 06 | 07
Page 1 and 2: Annual report 2003 Umicore’s germ
Page 3 and 4: Umicore is the world leader in coba
Page 5 and 6: Adapting the Group’s structure De
Page 7: Contribution to Recurring EBIT (1)
Page 11 and 12: Sigurd ADLER, Vice President & Gene
Page 13: packaging materials, precious metal
Page 16 and 17: Sales by Business Line Engineered p
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Page 21 and 22: 1| Precious Metals Services is the
Page 23: Source of Materials in 2003 (Expres
Page 26 and 27: Geographical Breakdown of Business
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Page 31: 120 116 112 108 104 100 96 Share %
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Page 43 and 44: Some industry terms & definitions A
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Page 47 and 48: Belgian GAAP IFRS 1999 2000 2001 20
Page 49 and 50: while the growth in primary supply
Page 51 and 52: Compensation of the Executive Commi
Page 53 and 54: Jean-Luc Dehaene, 63 Independent no
Page 55 and 56: Hugo Morel, 53 Executive Vice-Presi
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Umicore: a worldwide presence Vanco
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Dividends Starting 21 April 2004 If
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Annual report 2003

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