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2.7 Management report on the Group Expected developments and and associated opportunities and and risks risks The “Steel in Transition” program helps Steel Americas contain risks. The “Steel in Transition” program helps Steel Americas contain risks. Specific risks for our operations Steel Europe – Risks going forward for the business area include in particular risks on the sales and procurement markets as well as risks from exchange-rate fluctuations and emissions trading. If the economic situation deteriorates, the risk of customer insolvencies increases. High capacity utilization increases the risk of production losses. To contain the risk of cyclical demand fluctuations, the business area optimizes its costs in all areas, adjusts production promptly, and concentrates on high-end market segments subject to lower cyclicality. To mitigate the risk of customer insolvencies, Steel Europe monitors the situation intensively and uses all the options available to safeguard deliveries, for example through commercial credit insurance facilities or adjusted payment conditions. Quality and supply risks are minimized through the ongoing optimization of our value chains. A business and technical risk controlling system for property insurance is an integral component of the risk management process. Additional investment and maintenance budgets are available to further optimize fire prevention. The risks of other business interruptions are reduced by ongoing preventive maintenance, modernization and investment. In the event of business interruptions, business continuity plans are in place which specify measures for remedying damages. Steel Americas – Alongside risks on the sales and procurement markets and risks from exchange rate fluctuations, the risks in this business area include risks in connection with the ramp-up and operation of facilities and production operations. At the two major Steel Americas plants in Brazil and the USA, delays or quality problems could still occur in the further course of the ramp-up. However, thanks to intensive controls and tight risk management as well as regular risk meetings and reports, all material risks are immediately identified and suitable countermeasures initiated. Our efficient claims management system ensures that all claims of our contractual partners are properly handled and managed. <strong>ThyssenKrupp</strong> is involved in legal, arbitrational and out-of-court disputes in connection with the construction of the melt shop and coke plant in Brazil which could lead to compensation payments. Operating risks which may occur in connection with the ongoing ramp-up are minimized by tailored and coordinated ramp-up periods, the careful selection and training of new employees, and the use of know-how from the Steel Europe business area. In close cooperation with the Steel Europe business area – in the joint “Steel in Transition” program – Steel Americas is working to contain the price and volume risks in the procurement of raw materials and the implementation of the premium strategy. This involves for example the transfer of best practice knowledge and the use of synergy effects. Both these measures also reduce cost risks from consumption variances as well as risks in the winning of target customers and the corresponding certification processes. At the same time price and sales risks are reduced by expanding the customer base and accessing premium market segments. In addition we are adapting the startup of the final units and the slab and coil production operations in line with the economic situation. 116
Management report on the Group 2.7 Management report on the Group Expected developments and associated opportunities and risks By improving customer retention, Elevator Technology lessens the the risk of losing maintenance units. 116 | 117 To counter the risks of currency effects such as an increase in the value of the Brazilian Real, which would negatively impact the competitiveness of our plant near Rio de Janeiro, we have introduced a wide range of measures to both expand sales in Brazilian currency and reduce the share of costs incurred in Brazilian currency. Materials Services – The business area counters the risks associated with providing materials services for customers throughout the world with a wide range of measures. Inventories are optimized by systematic improvements to net working capital management. Cost-reduction measures help increase efficiency and cost-effectiveness. These measures are supported by continuously improved logistics and efficient management tools. Cyclical risks are countered by our worldwide presence, broad customer base and high degree of diversification. The resultant wide spread of risks also applies to bad debt risks, which are additionally limited by the use of hedging instruments. Together with other companies in the sector, the Materials Services company <strong>ThyssenKrupp</strong> GfT Gleistechnik GmbH is involved in investigations by the Federal Cartel Office into anticompetitive agreements in sections of the rail business. The responsible public prosecutor’s office is carrying out investigations into several former employees. The official and internal investigations continue. Risks exist with regard to a possible fine and potential claims for damages from customers. With the support of external lawyers, we are working intensively on further clarifying the matter and are cooperating with the authorities. The necessary personnel actions have been taken. We wrote to our main customers and informed them that antitrust infringements had occurred. Extensive further measures have been and will be taken to contain the risks in connection with the incident. Elevator Technology – The risk situation of Elevator Technology is mainly determined by two factors: the different areas of business and the international reach of the business activities. In the service and modernization business we have implemented customer retention strategies to lessen the risk of losing maintenance units. Continuous efficiency-enhancement programs help offset rising personnel and procurement costs where these cannot be passed on in full to customers. The new installations business is exposed to cyclical risks due to its close links with the construction sector. However, longer project lead times in this business mean that downturns can be identified in good time to take countermeasures, e.g. capacity cutbacks. In addition, targeted project management measures help contain risks in the processing of major projects. Thanks to the regional distribution of our business activities, many of the risks are balanced because the markets in which Elevator Technology operates are in different growth phases. Exchange-rate risks are hedged as far as possible with corresponding financial instruments and are additionally mitigated by settling sales and costs congruently.
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Annual Report 2010/2011 At the cent
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Our mission statement We are Thysse
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Our capabilities Material We combin
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Making tomorrow possible Our engine
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Letter to shareholders Dr.-Ing. Hei
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Letter to shareholders To assist ou
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