Annual Report 2005

10
Foreword by the Spokesman for the Executive Board of Directors
In order to improve liquid assets from internal
financing, inventories were successfully optimised
throughout all the companies as a result
of commitment shown by all involved.
After several years of high investment, the
company succeeded in keeping investment at
a low level as planned. In 2005, investments
amounted to 1.4 million Euros (previous year
3.7 million Euros) thus well below write-offs at
6.4 million Euros. Because of our advanced
technology and large production capacities,
we will be able to keep new investments at
this level over the next few years without
adversely affecting our market position or
competitiveness.
The balance sheet total dropped to 92.5 million Euros (previous year 101.6 million Euros) with
the reduction in inventories (by 3.6 million Euros to 16.7 million Euros) and the reduction in
tangible fixed assets (by 4.4 million Euros to 33.9 million Euros).
In the past financial year, losses in the USA have been reduced from 5.5 million Euros (2004)
to 3.3 million Euros while turnover has increased by 3.5% to 37.7 million Euros. The financial
development in the USA has indeed still been unsatisfactory. However in 2005 and during
the first quarter of 2006, a series of measures were implemented which has set the path for
further financial improvement in the future. These measures included relocating the machine
manufacturing facility from the Netherlands to the USA, closing the plant in Wichita, merging
the sales companies and making changes to the product range.
One of the advantages of carrying out production in the USA is that business is now significantly
less susceptible to exchange rate developments and as a result of implementing various
measures, the gross profit margin has increased to 32.9% of the turnover (previous year
30.9%). We expect to see the effect of all the measures carried out in the USA on results from
the third quarter of 2006.
In accordance with the German Commercial Code, NESCHEN AG has made losses of 12.6
million Euros (the deficit from the previous year was 9.6 million Euros). These include a capital
injection of 8.5 million Euros for the NESCHEN Corporation in the USA which was used to
balance out the losses sustained there and was immediately included under expenditure. The
operating losses made by NESCHEN AG (in accordance with the German Commercial Code)
for the past financial year amount to 1.6 million Euros (previous year - 3.0 million Euros).