Annual Report 2010 - Frauenthal Holding AG
Annual Report 2010 - Frauenthal Holding AG
Annual Report 2010 - Frauenthal Holding AG
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eference entity. This indicator improved considerably as<br />
compared to 2009.<br />
There were no major defaults during the year under review,<br />
and we expect this risk to remain relatively insignifi cant<br />
in future.<br />
Due to the recovery in the commercial vehicle market we<br />
do not expect our customers to restructure their European<br />
production capacity, and regard related defaults as unlikely.<br />
However changes in companies’ legal structures (e.g.<br />
mergers between some competitors) could lead to changes<br />
in the purchasing practices of major customers in future.<br />
Due to the long development lead times of truck model<br />
ranges, steel springs, and steel and aluminium pressure<br />
vessels are not exposed to short-term technological substitution<br />
risks. In the long term, however, such risks could<br />
arise from the development of new suspension, axle and<br />
braking systems, or the use of plastics or other alternative<br />
materials. There are no defi nite threats of this sort in sight<br />
at present.<br />
To maintain <strong>Frauenthal</strong>’s reputation as a reliable development<br />
partner, action was taken to improve communication<br />
between the fi eld sales force and development staff. All<br />
the information obtained by sales representatives on customers’<br />
expectations now feeds into product development.<br />
We are extending our market shares by stepping up our<br />
product development effort and maintaining our strong<br />
focus on quality. Nevertheless, the possibility that we will<br />
lose part of some customers’ business to our competitors<br />
cannot be ruled out as automotive customers are unwilling<br />
to become dependent on individual suppliers.<br />
Market riSk<br />
Economic trends in Europe are the main determinant of<br />
demand for the truck components produced by the Styria<br />
and Linnemann-Schnetzer groups. The key export markets<br />
for European commercial vehicles are the Near and Middle<br />
East, and Russia; some exports also go to South America.<br />
Political risks (warfare, embargos, coups, etc.) could affect<br />
exports to these regions. Due to the large market shares<br />
Operating Review<br />
of both groups and the framework contracts with truck<br />
manufacturers, swings in the demand for trucks in these<br />
markets have an immediate impact on our sales, and there<br />
is little that can be done in the short term to counteract the<br />
effects. Like other capital goods markets, the market for<br />
trucks is cyclical, and apart from general economic infl uences<br />
it also refl ects the demand for transport services and<br />
movements in interest rates on investment loans.<br />
In <strong>2010</strong> the improved market situation, and the action taken<br />
to scale back capacity in the previous year, led to satisfactory<br />
capacity utilisation at our plants. The management<br />
teams at the various production sites report on capacity<br />
utilisation there on a monthly basis.<br />
In the event of future sharp increases in demand, short-term<br />
capacity bottlenecks could arise. Although the organisation<br />
has reserve capacity, delivery delays cannot be excluded<br />
under such circumstances.<br />
In exceptional cases quality defects can lead to material<br />
fractures or braking system leakages during on-road use<br />
of truck components. Comprehensive quality control and<br />
plant monitoring minimise the probability of such damage,<br />
and potential claims for damages are covered by our<br />
insurance. We regard our insurance cover as adequate,<br />
but in extreme cases it could nevertheless be insuffi cient.<br />
environMental riSk<br />
<strong>Frauenthal</strong> Group companies comply with all environmental<br />
licensing conditions, legislation, orders and notices. Our<br />
employees receive comprehensive health, safety and environment<br />
information and training.<br />
At some of our works there is soil contamination by industrial<br />
waste containing oil, dating back to the 1930s, 1940s<br />
and 1950s. However all of our sites meet the licensing<br />
conditions imposed by the authorities responsible for them.<br />
Soil rehabilitation will have to be carried out at one site<br />
— Styria Ressorts Véhicules Industriels, Châtenois, France<br />
— due to offi cial licensing conditions. Technical reports<br />
and rehabilitation plans are currently being drawn up, and<br />
a provision has been recognised for the cost of the work.<br />
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