Annual Report 2010 - Frauenthal Holding AG

Business performance
All three divisions performed well or very well during the
year under review. Thanks to the restructuring programmes
and resultant cost reductions, and a 48 % jump in revenue,
the Automotive Components Division posted solid
earnings. The Wholesale Plumbing Supplies (SHT) and Industrial
Honeycombs divisions both recorded revenue and
earnings growth. In what we flagged as a “year of consolidation”
from the outset, the Frauenthal Group returned
EBIT of EUR 21.7m, reversing a large part of the setback
suffered in 2009. The equity ratio climbed from 28.3 % to
30.8 %. The gradual recovery of the European commercial
vehicle sector, combined with the normalisation of inventories
of unsold trucks, buoyed output in the Automotive
Components Division. Commercial vehicle registrations in
the EU rose by a moderate 8 %. The Wholesale Plumbing
Supplies Division again defied a stagnant market to deliver
a sound 3.5 % growth performance. The Industrial
Honeycombs Division made the most of the rebound in
the commercial vehicle market. Revenue from catalysts for
diesel motors surged by 174 %, resulting in EBIT of EUR
10.9m – by far the best result in its history. Our philosophy
of spreading risk, through a diversified group structure,
again showed its worth. All three divisions succeeded in
laying the foundations for steady and profitable growth.
trading environment
From the second quarter of 2010 onwards, the world economy
gradually pulled out of the 2009 recession. The EU
marked up growth of 1.8 %, with 1.7 % forecast for 2011.
This was not enough to make up the ground lost in the
2009 downturn, when the European economy shrank by
4.2 %. The pace of expansion was faster in the USA, where
estimated growth of 2.7 % in 2010 more than offset
the 2.6 % contraction in 2009. The European pacemaker
was Germany, where growth rates of 3.5 % and 2.2 %
were projected for 2010 and 2011, respectively. An unusual
feature of the current economic climate is the fact
that the CEE economies are not expected to significantly
outperform those of Western Europe. The Chinese and
Indian economies both expanded by about 10 % in 2010.
Industrial production – an important factor for the com-
Operating Review
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mercial vehicle sector – was up by 7 % in the EU in 2010.
Employment revived in 2010, and the recession did not
lead to a surge in unemployment as feared.
Economic stabilisation policies (bank bail-outs and stimulus
programmes) have prevented a collapse and restored
a measure of confidence in the financial system, but led
to budget crises in many countries. This will be the main
destabilising factor in 2011 and beyond, as government
spending cuts and tax increases are likely to hit growth.
While the overall investment climate is positive, there is
a high risk of setbacks, as investment confidence is still
weak in many industries. The transport sector, and hence
the commercial vehicle industry, are among these sensitive
areas of the economy.
Nevertheless, the recovery in many key industries gained
traction more rapidly than expected.
Short-term interest rates reached a low in the second quarter,
with the one-month Euribor at about 0.4 %. In the
course of the year this benchmark rate climbed to around
0.8 % as a result of the European Central Bank’s monetary
policy. Most financial analysts regard further increases as
unlikely, at least in the first half of 2011. Long-term interest
rates firmed moderately in the second half of 2010. The
five-year swap rate advanced from a low of 1.9 % to about
2.3 %. The risk of a further rise in 2011 is seen as greater
than with short-term rates.
The recent strengthening of the US Dollar exchange rate
should have a positive effect on the European export sector.
Despite the economic upturn the uncertainties involved in
business planning are greater than in the pre-crisis period.
Because of the heavy public deficits there is a constant
danger of upheavals on financial markets that could affect
the real economy. Due to the diversification of our business
activities potential economic reverses in some countries do
not pose a major threat. However, the growing volatility of
market expectations – especially in the commercial vehicle
sector – calls for increased flexibility, and more rapid responses
to swings in demand. This was one of the objectives of
the restructuring of the Automotive Components Division’s
production network.
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