Annual Report 2010 - Frauenthal Holding AG

In the power station catalyst business (Industrial Honeycombs
Division), we expect the current high order backlog
to continue with only minor fluctuations, and honeycomb
production capacity to be well utilised. There are encouraging
project pipelines in Europe, the USA and Korea. Enquiries
from China declined sharply in 2010, as power station
operators there are still attempting to obtain electricity price
increases to compensate them for investing in SCR plants.
China’s new five-year plan may shed some light on future
developments. We expect orders to continue to come in
from China in 2011, but at a significantly lower level than in
2009. The global market situation will be strongly affected
by aggressive bidding by some competitors, which we expect
to bring prices down.
An issue that calls for ever closer attention is raw material
price trends. Production of one of our heat exchanger
components (which forms only a small part of revenue) has
had to be suspended due to the explosion in the price of
cerium (a rare earth). The price of tungsten, an important
raw material for the Industrial Honeycombs Division, is still
climbing. While acute supply shortages are not anticipated,
rising prices are still a problem, as they cannot always be
passed on to customers and therefore squeeze margins. We
see revenue from diesel catalysts increasing, with volume
growing in line with the commercial vehicle market. The first
contracts for our new plate catalysts, launched in 2010, were
concluded last year and will be fulfilled in 2011. Expanding
production capacity and increasing management resources
will be high priorities. As part of the growth strategy mapped
out in 2010, the Industrial Honeycombs division aims to create
the conditions to profit fully from the expected medium
and long-term growth of the market for NOx catalysts.
In the Wholesale Plumbing Supplies Division, the opening
of the Innsbruck outlet marked a major step forward in the
roll-out of a nationwide sales and service network. Given
the current poor conditions in the construction sector, we
expect the price war in the contract business to continue. The
prognosis for the market as a whole in 2011 is for growth at
the rate of inflation. The promised public sector projects have
not revived the building market, and no change is expected
in 2011. However the situation in the commercial building
market should start to brighten in 2012. The division has
realistic prospects of moderate growth in a flat market in
2011, due to its strong market position and high service
Operating Review
standards. The focus for 2011 will be on fine tuning the
product range, logistics processes and pricing.
For Automotive Components, 2010 was a year of consolidation
and accelerated product development. For the other
two divisions, the focus was on continued growth – above
all in earnings. We attained these objectives. 2011 will be a
year of preparation for further rapid growth. One of the keys
to this will be sound long-term financing. We are weighing
the option of floating a new bond issue before the current
EUR 70m issue matures on 30 June 2012 carefully, so as
to be ready to move if the situation on the capital market
is favourable. Numerous growth opportunities have been
identified by the Automotive Components and Industrial
Honeycombs divisions. Investment will therefore rise sharply
in 2011 and beyond, and this and the anticipated growth
in volume will increase the need for finance. As part of our
growth strategy, we will again be on the look-out for potential
acquisitions that are a good strategic fit for existing
businesses. However, growth by acquisition is not our main
priority at present.
In 2010, orders and growth returned to pre-crisis levels. Almost
60 % of the ground lost in 2009 was made up in 2010.
In all business divisions, we laid the groundwork for further
progress in 2011 and thereafter.
Vienna, 15 March 2011
Hans-Peter Moser
Member of the Executive
Board
Frauenthal Holding AG
Martin Sailer
Member of the Executive
Board
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