Annual Report 2005

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$HP Latex Printing Technologies - Neschen$

8 Foreword by the Spokesman for the Executive Board of Directors Dear Sir or Madam, The company has been concentrating on its announced restructuring program in the 2005 financial year. After the low levels of sales achieved in recent years, at the beginning of 2005 we were faced with a decision: we could either focus on recovering a significant and sustained increase in demand or undertake a massive program of restructuring within the Group. After the savings in costs already realised in 2003 and 2004, there were no further significant cost reductions to be made within the existing structures. Consequently, at the beginning of the year the Executive Board of Directors and the Supervisory Board decided to carry out a comprehensive restructuring program rather than to focus on growth. The objective was to significantly reduce the number of staff, to reduce the number of sites and to optimise all business processes within a year. With the improved cost structure and increased competitiveness, it would then be possible to re-establish growth and profitability from 2006. We can now announce that the restructuring program has been carried out successfully. In Europe, the principal measures were completed by October of the financial year. Because of the ownership structures of the joint venture, structural adjustments in the USA could not be made until the first quarter of 2006. In 2005, sales amounted to 136.2 million Euros (previous year 140.3 million Euros). Excluding the foam board company in England which was sold in 2004 and the foam board company in the USA which was shut down in 2005, sales were down 1.7% on the previous year. The drop is primarily due to technical delivery problems in some areas of trading.
Foreword by the Spokesman for the Executive Board of Directors Another reason for the drop in sales was the planned adjustments made to product ranges at NESCHEN AG and SEAL Americas. All in all, we saw a stabilisation of the markets in 2005. The NESCHEN Group made a loss after tax (in accordance with IFRS) of - 9.4 million Euros in the 2005 financial year (previous year - 15.1 million Euros). The one-time expenditures as part of the restructuring program included in this amount to 7.9 million Euros (previous year also 7.9 million Euros). These are mainly connected with the relocation of machinery production to the USA and the subsequent closure of the site at Raalte in the Netherlands, the staff cutbacks at the main production plant in Bückeburg, Germany and the optimisation of business processes. There has been a significant improvement in the result before one-time effects compared with the previous year which has risen by approximately 5.8 million Euros to - 1.4 million Euros. This means that it has not yet been possible to achieve the target of a balanced result before one-time effects. However, the cost structure of the whole group was reduced by a total of approximately 7 million Euros. This was accompanied by an unavoidable 14% reduction in the number of staff to 573 as of 31.12.2005 (previous year: 664). In initiating these measures, the company aims to achieve a positive operating result without affecting the level of turnover or the current gross profit margin. EBIT was - 2.9% (previous year - 6.6%) and EBITDA + 1.8% (previous year - 1.5%) with regard to the total performance. Excluding the one-time expenditures, the EBIT was + 2.9% (previous year - 1.4%) and EBITDA + 6.1% (previous year + 1.6%). It should be pointed out that the company was able to increase the gross profit margin again during the second half of 2005 while carrying out its restructuring program in parallel. This margin had sunk from 46.5% (2003, German Commercial Code) to 43.2% (2004, IFRS) in 2004 on account of increases in the prices of all the raw materials used by the company. It managed to put a stop to this trend by optimising purchasing, pooling raw materials, consolidating product ranges and increasing product prices. As a result of the measures implemented, the gross profit margin was significantly increased during the fourth quarter. The price increases could not be passed onto the market until some time later. Consequently, we have been successful in pushing through price increases in an intensely competitive market in 2005. As far as we are concerned, this shows that despite unsatisfactory results over the past few years, NESCHEN occupies a strong position within the market. 2005 also saw special write-offs being made in order to adjust to current developments within the market and the reduced product mix structure. These special write-offs related to fixed assets, inventories and claims but were well below the write-offs made in 2004. 9
Page 1: Annual Report 2005
Page 4 and 5: 4 Financial Overview HGB IFRS IFRS
Page 6 and 7: 6 Neschen AG · Consolidated Compan
Page 10 and 11: 10 Foreword by the Spokesman for th
Page 12 and 13: 12 Business Units NESCHEN AG has le
Page 14 and 15: 14 Market Strategy NESCHEN AG has h
Page 16 and 17: 16 Restructuring Program the site o
Page 18 and 19: 18 Business Unit “Graphics” The
Page 20 and 21: 20 Business Unit “Graphics” The
Page 22 and 23: 22 Business Unit “Documents” Th
Page 24 and 25: 24 Business Unit “Special Product
Page 26 and 27: 26 Quality Management During the pa
Page 28 and 29: 28 Corporate Governance Code With t
Page 30 and 31: 30 Report of the Supervisory Board
Page 32 and 33: 32 Course of business and Group’s
Page 34 and 35: 34 Profit and Loss Statement During
Page 36 and 37: 36 Profit and loss statement The re
Page 38 and 39: 38 Cash Flow Cash flow as of 31/12
Page 40 and 41: 40 Personnel development As of 31.1
Page 42 and 43: 42 Forecast We plan to achieve sale
Page 44 and 45: 44 Research and Development Approxi
Page 46 and 47: 46 Outlook The past year - 2005 - h
Page 48 and 49: 48 Consolidated balance sheet Conso
Page 50 and 51: 50 Notes relating to the consolidat
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58 Notes relating to the consolidat
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78 Neschen AG balance sheet (in acc
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80 Income statement of Neschen AG F
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82 Imprint Imprint The Annual Repor
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Annual Report 2005

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