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26 CONSOLIDATED FINANCIAL STATEMENTS, MANAGEMENT REPORTEconomic framework conditionsGlobal economy. In 2006, the upswing of the global economycontinued with growth of worldwide real gross domesticproduct (GDP) of approx. 4%. While the pace of expansionslowed down slightly over the previous year, it stillexceeded the trend growth rate. The reason for this islargely due to the fact that the upturn lost some of its momentumin the industrialized countries. In the USA, in particular,economic momentum decreased in the past year.This is, on the one hand, due to the tightening of the monetarypolicy from an expansive to a neutral rate and, on theother hand, to the weaker real estate market, which has inthe past resulted in a strong rise of private assets in households,thus stimulating consumption, in particular. Japan’sstrong upturn also declined distinctly over 2005. Risingcorporate investments and the noticeable extension of privateconsumer spending were unable to compensate forflagging impulses from abroad and strongly declining investmentsby public authorities. China and India continuedto sport strong economic growth. The slackening of theboom in China that observers have been anticipating forsome time, still has not occurred and investments continuedat a high rate. In 2006, the investment volume of theIndian national economy was strong, particularly in the industrialsector. It was the first time in years that the economyonce again improved markedly in the euro zone andunderwent an upturn. Both foreign and domestic demandtriggered considerable momentum, as fixed asset investments,in particular, were strongly extended. Investmentsin construction rose distinctly and private consumption increasedslightly. For the first time in a long while, Germany’seconomy also gained significant impetus. Whileexports rose strongly, the economy was this year againlargely fueled by domestic demand.The market for digital security and contactless identification.In 2006, the market for digital security and contactlessidentification – also referred to as the TECURITY ® market– was characterized by the rising interest of many governmentsand authorities in electronic identification documents,to meet the general demand for more security andflexibility. Apart from the EU directive for passports andtravel documentation, which committed the EU memberstates to introduce electronic passports by mid-2006, theVisa Waiver program was a further stimulus for conversion.In this program, 27 participating states had made a commitmenttoward the USA to introduce – by October 2006 –an electronic passport with integrated chip that is capableof storing both personal and biometric data. In August, forexample, Portugal and Slovenia, alongside other states,started the public issue of electronic passports. A largenumber of other states are planning to introduce it in thenear future. A rise in demand was also observed amonginnovative card applications, for example ID cards, driver’slicenses and debit cards with EMV chip: Spain ended itspilot phase for the first decentralized ID card project andcommenced the implementation of further personalizationsystems nationally. As Spanish authorities are able now toissue fully functional ID cards on-site, citizens no longerhave to schedule lengthy waiting periods from applicationto receipt of the ID card.Global market interest in the RFID technology has alsoconsolidated. Although the explosive growth forecast byseveral research institutes in respect of the year under reviewdid not materialize, partly due to delays in the introductionof new chip generations, the use of the RFID technologystill gained ground worldwide in 2006. Apart fromlarge trade chains – Wal Mart announced its decision toextend RFID to a further 500 stores and 300 suppliers – numerousother industries and companies have recognizedthe benefits of contactless identification as a key to greaterefficiency and economy, particularly in the areas of logisticsand supply chain management, and have thus pushedahead the use of RFID. While, until recently, the applicationof this technology was hardly noticed in everyday life, RFIDhas since gained greater publicity, due to its growingrange of applications: contactless readable tickets communicatewith RFID access control systems, e.g. at the FI-FA World Cup 2006, some hospitals are already using radiochips for patient identification and several libraries useSmart Labels for the identification of books, documentsand CDs. On a region by region basis, Asian countries, inparticular, displayed major interest in the RFID technologyin 2006. The greatest volume in RFID technology so farwas requested from China, which intends to introducemore than 125 million contactless readable RFID ticketsfor its railway system.The market growth of the semiconductor industry has increasedfurther. Whilst the semiconductor sector grew ata rate of approx. 7% in 2005, it recorded a growth of approx.9.4% in the 2006 calendar year, according to the calculationsof SIA (Semiconductor Industry Association).Here again, a regional shift of market share toward theAsian countries was recorded.Business developmentOrder income and order backlog. With the order incomeof EUR 161.5 million achieved in the 2006 financial year,the Mühlbauer Group lags the previous year’s value (PY:EUR 165.0) by only a slight 2.1%. On 31 December 2006,the order backlog dropped 3.1% to EUR 79.2 million (PY:EUR 81.7 million). At 89.1%, the foreign share of presentorders increased only slightly over the previous year (PY:88.6%) and amounted to EUR 70.6 million (PY: EUR 72.4million). Domestic orders declined 7.2% against the previousyear’s value, from EUR 9.3 million to EUR 8.6 million.The percentages were determined on the basis of the exact figures and may differ from the rounding figures
CONSOLIDATED FINANCIAL STATEMENTS, MANAGEMENT REPORT27Consolidated order income and order backlog in EUR million200150100500165.0200581.7161.52006order incomeorder backlog79.2The core business area SmartID contributed EUR 92.6 millionto order income. Compared to the previous year (PY:EUR 101.6 million) this corresponds with a decline of 8.9%,which can be rated positively, in view of the efforts to compensatethe temporary stagnation in the Smart Label areawith technology solutions for the production and personalizationof security-oriented ID systems – also referred to asCards & TECURITY ® , in brief. At the same time, further significantreference orders on the personalization of electronicpassports with biometric data were signed withSlovenia and Portugal. Furthermore, important ID cardprojects were concluded with Norway and Spain, whichrecommend us to other states as a reliable partner of governmentsand authorities. The order backlog on 31 December2006 dropped 4.3% over the previous year, fromEUR 63.4 million to EUR 60.7 million.In the 2006 financial year the area Semiconductor RelatedProducts slightly lagged the order income of the previousyear, at EUR 38.7 million (PY: EUR 39.2 million). While demandfor the product lines Flip Chip technology and Visionsystems was greater than in the year before, the productline OEM experienced a downturn, due to the increasingshift of production by our customers to Asia. Mühlbauer iscounteracting this trend with the development of productioncapacity in Malaysia, which commenced in the 2006 financialyear. Furthermore, the disposal of the coating technologyarea in the middle of the 2006 financial year resultedin considerably lower order income in this product line.The order backlog, however, remained virtually unchangedat EUR 12.3 million (PY: EUR 12.5 million).In the past financial year, Traceability, in particular, benefitedfrom the high demand for components for the trackingof products and modules. It recorded order income of EUR13.2 million. This represents a distinct increase of 21.5%over the previous year (PY: EUR 10.9 million). In contrastwith this industry in general, Mühlbauer has thus succeededin extending its position. As a result of the fact thatsales in the 2006 financial year exceeded order income,the order backlog dropped 24.0% year-on-year, to EUR 1.9million (PY: EUR 2.5 million).Precision Parts recorded strong growth in order income inthe 2006 financial year and, at EUR 17.0 million, achieved27.2% higher orders year-on-year (PY: EUR 13.3 million).The company’s longstanding competence in the productionof highly complex modules for highly sensitive industriesand the further extension of the company’s comprehensiveand flexible production concept – together with excellentquality and adherence to deadlines – renders theproduct area a much sought-after partner for the productionof highly precise parts and components. At the yearendthe order backlog was 29.4% above the previousyear’s value of EUR 3.3 million and amounted to EUR 4.3million on 31 December 2006.Sales 1 . In the 2006 financial year sales of the MühlbauerGroup rose by 8.7%, from EUR 148.1 million to EUR 160.9million. All four areas – SmartID, Semiconductor RelatedProducts, Traceability and Precision Parts & Systems –contributed to this growth.Sales development by applications in EUR million10080604020086.891.8SmartIdentification35.639.4SemiconductorRelated Products10.913.7Traceability14.82006200516.0Precision Parts& SystemsIn the core business area SmartID growth was primarilyachieved with the technology solutions of the product lineCards & TECURITY ® for the production and personalizationof security-oriented identification documents. Salesgrowth in the Smart Label product line was, however,somewhat lower than in the previous year, due to temporaryovercapacities and the resultant interim stagnation.Despite this, sales rose by 5.7% to a new record high ofEUR 91.8 million (PY: EUR 86.8 million).Semiconductor Related Products pushed sales from EUR35.6 million by 10.7% to EUR 39.4 million. While the strate-1Sales figures are the gross values before subtraction of any deductions on sales proceeds of EUR 0.2 million (PY: EUR 0.2 million)The percentages were determined on the basis of the exact figures and may differ from the rounding figures
Page 1 and 2: Annual Report 2006
Page 3 and 4: This annual report is dedicated to
Page 5 and 6: TABLE OF CONTENTS01Table of Content
Page 7 and 8: INTERVIEW WITH THE CEO03foundation
Page 9 and 10: INTERVIEW WITH THE CEO05No matter o
Page 11 and 12: COMPANY PROFILE07
Page 13 and 14: COMPANY PROFILE09RFID technology ha
Page 17 and 18: COMPANY PROFILE13In times of extrem
Page 21 and 22: COMPANY PROFILE17At Mühlbauer, Ser
Page 23 and 24: THE MÜHLBAUER SHARE19Extensive dia
Page 25 and 26: CORPORATE GOVERNANCE21The remunerat
Page 27: CONSOLIDATED FINANCIAL STATEMENTS23
Page 32 and 33: 28 CONSOLIDATED FINANCIAL STATEMENT
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76 CONSOLIDATED FINANCIAL STATEMENT
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78 CONSOLIDATED FINANCIAL STATEMENT
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80 REPORT OF THE SUPERVISORY BOARDR
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82 SEVERAL YEARS OVERVIEWSeveral ye
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84 TECHNICAL GLOSSARYAdhesive Film
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86 FINANCIAL GLOSSARYBalance sheets
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IMPRINT:Published by: Mühlbauer Ho
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