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2.7 Management report on the Group Expected developments and and associated opportunities and and risks risks The restructuring restructuring of of Marine Systems helped reduce risks in in the the business area. In the event of an economic slowdown, the risk potential on all markets can be expected to increase. On the one hand there are risks of bad debt and project deferrals if customers find access to financial resources restricted. On the other hand competition is likely to grow more intense, leading to further price pressure. Elevator Technology manages these risks with professional project management and extensive customer credit screening. Customer retention management, high service quality and efficiency programs additionally help contain the risk of increasing price pressure. Plant Technology – Political developments in key sales regions such as North Africa and the Middle East as well as fluctuating raw materials prices can influence the project situation. In addition, financing problems for customers continue to exist which could lead to project deferrals or cancellations. We counter specific risks from large long-term contracts and technically complex orders – above all through results-oriented project and claims management, intensive project controls and intensified project management. Owing to continued investment restraint in some markets and the emergence of above all Asian competitors, prices and conditions are subject to fiercer competition on the global markets. This could impact margins on future projects. Components Technology – To lessen the risk of dependency on individual markets, the business area is expanding its customer base and strengthening its international presence, especially in Asia. In the wind energy sector there are risks of order deferrals or cancellations as a result of lending restraint. At the same time prices are coming under increasing pressure as a result of the fierce competition. This price pressure is also evident in the automotive components business. To counter the associated risks Components Technology has initiated extensive cost-reduction and productivity-enhancement programs. These risks on the sales markets are accompanied by a significant risk on the procurement markets if steeply rising material prices cannot be passed on fully or without delay to customers. We are countering this risk by framing customer contracts accordingly. Further general risks in the business area relate to the impact of changes in exchange rates. In addition, technological innovations and improvements can weigh on earnings. On top of this there are potential risks from unexpected yield and quality problems and the associated warranty obligations. The business area uses production and quality assurance systems to avoid or limit such risks as far as possible. Marine Systems – The measures carried out in the prior year to restructure the business area were driven further forward in the reporting year, leading to a further reduction in the associated risks. With the delivery of the megayacht “Eclipse”, the risks from the yacht-building business are essentially limited to the handling of warranty claims and any remaining points. Current risk scenarios encompass among other things the political developments in key customer countries in the Middle East and North Africa. In addition, there remains a capacity utilization risk at the Hamburg and Kiel locations should the planned disposal of our civil shipbuilding operations fail. 118
Management report on the Group 2.7 Management report on the Group Expected developments and associated opportunities and risks 118 | 119 Stainless Global – In addition to the usual cyclical risks and fluctuating raw material prices, the stainless operations mainly face risks associated with the existing overcapacities in Europe as well as import and price pressure from Asia. Stainless has numerous measures in place to counter these market risks. For example it is further strengthening the value chain towards the higher-margin end-customer business, intensifying customer relationships, expanding custom services and improving its quality and delivery performance. These measures are supported by newly developed applications for stainless steels and nickel alloys, innovative products made from these materials, and modern, cost-saving process technologies. Significant production cutbacks, administrative cost savings and further cost-reduction and efficiency-enhancement measures will additionally strengthen the business area’s position. The construction of the stainless steel plant in Calvert/USA is proceeding in line with the revised schedule. Intensive project controls and regular reporting ensure detailed risk assessments; all risks are identified and communicated. In a difficult financial environment there is a risk that the carve-out of the stainless operations, as intended under the strategic development plan, will result in lower disposal gains than originally planned. To minimize this risk we are continuously monitoring the market environment and pursuing several options, including an IPO, a spin-off, and a sale. In particular in view of the current volatility of the capital markets, it cannot be ruled out that further fair value adjustments may be necessary in connection with the carve out of the business area. No threat to existence of Group The overall risk situation at <strong>ThyssenKrupp</strong> continues to be manageable. Our continuous risk management activities with tailored risk control in all business operations play a key role in this. The existence of the Group is secured.
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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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