E_mg_GB_03_vorne-29_3_04

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22 STRATEGY 2003 was the year of mg’s fundamental strategic reorganization Following its Annual Shareholders’ Meeting at the beginning of June 2003, the new management at mg technologies ag started to thoroughly reorganize its strategy. The first step was to conduct a comprehensive review of the business and its inherent risks. The main task here was to clean up the company’s balance sheet and identify business potential. The findings of this review were as follows: • mg’s two-pronged strategy – based on its Engineering and Chemicals divisions – is strategically and financially no longer feasible. • Without radical measures, the Group’s excessive debt cannot be sufficiently reduced out of its free cash flow alone; it does not possess the resources needed to grow the business. • The Group’s structures – with their six holding companies and excessive costs – have to be adjusted. • The industrial plant engineering business is proving a considerable drain on resources – not least because of huge problems caused by pre-existing contracts that need to be resolved. • More conservative accounting policies need to be adopted and the Group’s debt paid down in order to provide mg with a sound platform for profitable, dynamic growth.
MANAGEMENT SHARE STRATEGY SPECIAL SECTION MANAGEMENT REPORT FINANCIAL STATEMENTS FURTHER INFORMATION Four cornerstones of mg’s new strategy On October 2, 2003, mg’s Executive Board – with the backing of the Supervisory Board – decided on the key aspects of the restructuring program, which was initiated immediately. This reorganization also addresses the criticism leveled at mg by the financial markets, namely that it suffers from being an industrial conglomerate that has redundant, costly holding-company structures: The Group’s new structure will be centered on the activities of the GEA Group: specialty mechanical engineering, especially process engineering and components. The company will focus on the food, milk-processing, pharmaceutical and petrochemical industries. The Chemicals division – comprising Dynamit Nobel and solvadis – will be sold for the best-possible price in 2004. This will pay down the Group’s debt and place it on a sound footing for future expansion through organic growth and acquisitions. In line with the new strategy, the current holding-company structures are being considerably simplified and streamlined. This will considerably improve our efficiency and cut costs in the short term. A much leaner industrial plant engineering business – comprising the subsidiaries Lurgi, Lurgi Lentjes and Zimmer – rounds off the mg Group’s new structure. Swift implementation of initiatives in 2003 In October 2003, mg began the first stage of its restructuring by streamlining the Group’s holding company and winding up the holding companies of Lurgi, Lurgi Lentjes and solvadis. The launch of a competitive tender process for the Chemicals division involved approaching several potential bidders as early as November. The first indicative offers had been received in December. Chemicals trading company Safic-Alcan was sold with effect from January 2004. The GEA Group, the future core of the mg Group, took the first steps towards optimizing its portfolio by acquiring Goedhart, the market leader in refrigeration, with effect from January 1, 2004. Radical restructuring of industrial plant engineering begun At the beginning of 2004, mg started to implement the second stage of its restructuring. The subgroups Lurgi and Lurgi Lentjes in the industrial plant engineering business play a key role in this strategy. This involves setting aside risk provisions for problem contracts, settling long-running lawsuits and adjusting capacities. It will also mean concentrating on proprietary technologies with sustainable market potential and being more selective in the acceptance of new business. These measures will help to substantially cut costs and, consequently, lower the break-even thresholds so that the industrial plant engineering business can be returned to profitability as quickly as possible in 2004/2005. This will involve cutting around 500 jobs by January 2006. 23
Page 1 and 2: “2003 was a year of transition fo
Page 3 and 4: Consolidated Key Figures 2003 RESUL
Page 5 and 6: Creating freedom for action CONTENT
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mg's mission is to ensure sustainab
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MANAGEMENT AKTIE STRATEGIE SONDERTE
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Key Figures for the mg Group RESULT
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