Annual Report 2010 - Frauenthal Holding AG

52 Annual Report 2010
Operating Review
European demand for heavy goods vehicles in 2010 varied
widely from region to region. Sales were up by 21.4 % in
Germany – the largest EU market and the main growth
driver. Demand jumped by 5 % in the United Kingdom,
but only edged up in Italy and Spain. Registrations were
up by 8.4 % across the EU as a whole, lifted by the pickup
in freight volumes – particularly in the long-haul segment,
which is closely linked with industrial output. Rising
haulage rates have also helped strengthen the finances of
the hard-hit transport sector. Low interest rates and manufacturers’
discounts were a further incentive to invest.
The improvement was not felt until the end of the second
quarter, but has steadily accelerated since then. As it likely
that there is still an investment backlog, moderate growth
in European demand for new vehicles is likely to continue
in 2011.
The overall EU commercial vehicle market expanded by
8 %, with the light vehicles segment (up by 8.7 %) driving
growth.
Production and revenue in the Automotive Components
Division tracked the normalisation of inventories of unsold
vehicles in the first half of 2010. Following dramatic inventory
run-downs in 2009 European manufacturers started to
replenish their stocks as they geared up for recovery. It was
only towards the end of the second quarter that production
and demand came back into balance. Vehicle exports
bounced back by well over 50 %, following the almost
complete collapse of deliveries to CEE and Russia in 2009.
The Industrial Honeycombs Division put in another strong
performance in 2010, doing particularly well from the recovery
of the commercial vehicle market. Revenue from
diesel catalyst sales soared by 174 %, playing a key role
in the significant improvement in divisional earnings. The
power station catalyst business is driven by environmental
regulation and energy demand. Replacement parts, which
already account for about 20 % of sales in this product
group – the division’s main line of business – are growing
in importance. Revenue grew by 13 % to EUR 79.4m, and
capacity was fully utilised. Demand for power station catalysts
was consistently strong, with new projects in Europe
and replacement orders from the USA especially buoyant.
Chinese business again made a major revenue contribution,
accounting for 35 % of the total. However, order intake
from China slipped sharply owing to persistent uncertainty
about future environmental legislation. The plate catalyst
plant was commissioned at the start of the year. The first
step for this technology, which is new the division’s range,
was a trial installation at a client’s facility. The usual long
project lead times meant that the first contracts for the
product were not won until near the end of the year.
The main factors that influence the performance of our
Wholesale Plumbing Supplies Division (SHT) are construction
activity in Austria, and the willingness of private
households to invest in renovation, and renewing plumbing
and heating systems. In 2010 the division once more
overcame a flat market, to register respectable growth of
3.5 %. This again chiefly reflected robust private renovation
demand, while sales slumped in the fiercely competitive
contract business fell sharply as commercial building shrank
for the third year in a row. There were no signs of an upswing
in public sector orders. The integrated service, logistics
and sales centre opened in Innsbruck in mid-2010 has
boosted SHT’s market share in western Austria, where it is
still underrepresented. The improvement in the division’s results
was almost exclusively attributable to volume growth,
and with no let-up in fierce price competition gross margins
were unchanged from 2009.
Changes in liquidity
Despite the 18.7 % growth in revenue liquidity needs were
no higher at year end. Net borrowings including the bond
were down by EUR 2.2m at the end of reporting period.
The strong operating profit before working capital changes
of EUR 29.2m compensated for the increase in working
capital caused by higher output. As consolidation was our
overriding objective in the year under review investment
dropped sharply to EUR 9.3m. No dividend was paid in
2010. We continued to widen our banking relationships
and found new financiers abroad. At year end unused credit
lines totalled EUR 94.3m. Finance costs decreased because
of low interest rates.