Thyssenkrupp AG Business Report FY2005-06
Business Highlights
(in million euros) | FY2005-06 | FY2004-05 | Rate
of change (%) |
Factors |
Overall | ||||
Sales | 47,125 | 42,927 | 9.8 | (1) |
Income before tax | 2,623 | 1,677 | 56.4 | (2) |
Automotive | ||||
Sales | 8,045 | 7,867 | 2.3 | (3) |
Income before tax | (174) | 118 | (247.5) | (4) |
Sales by Automotive Segment |
||||
Body | 2,853 | 2,866 | (0,5) | (5) |
Chassis | 3,657 | 3,459 | (5.7) | (6) |
Powertrain | 1,679 | 1,700 | (1.2) | (7) |
Consolidation | (144) | (158) | - | - |
Factors
(1)
-Order intake and sales rose sharply. Orders from continuing operations
climbed to 50.8 billion euros, 17% higher than a year earlier. New
orders therefore showed a greater improvement than expected a year
ago, with above all the materials business in the Steel, Stainless
and Services segments performing better than predicted.
-Sales from continuing operations rose by 10% and reached record
highs at 47.1 billion euros. Strong demand and higher prices for
carbon and stainless steel flat products increased sales at Steel
and Stainless more sharply than planned. Services also clearly exceeded
its targets thanks to the strong materials markets. The volume of
business at Automotive, Technologies and Elevator was slightly higher
than anticipated.
(2)
-In addition to the outstanding business performance and successful
efficiency enhancement programs, the portfolio optimization improved
the quality of the Group窶冱 earnings. Consolidated earnings were
2,623 million euros, 946 million euros or 56% higher than its good
prior-year income.
(3)
-Order intake decreased by 3% to 7.9 billion euros. Sales were slightly
higher than the prior year at 8.0 billion euros, due to significant
growth in the systems business, additional volumes and price-related
growth at the North American foundries as well as increased sales
from ongoing contracts. In addition, new production lines began
operation in a large number of Automotive companies.
(4)
-The Automotive segment returned a loss of 174 million euros, compared
with a profit of 118 million euros a year earlier. The loss was
mainly due to restructuring expense and impairment charges on goodwill
and property, plant and equipment. The impairment charges resulted
primarily from the initiation of the disposal of the North American
body and chassis business, but also from the deterioration in the
situation in Germany for body lines and tool/die making. Non-recurring
expense for restructuring and impairment charges amounted to 339
million euros. This was set against disposal gains of 35 million
euros.
-Operating profits in the Body business unit, i.e. disregarding
non-recurring expense, fell short of the prior-year level. This
was mainly due to declining workloads at the North American and
French stamping plants and higher scrap prices at the American foundries.
-The Chassis business unit increased its operating income, thanks
to improved operating performances at the British stamping plants
and in the areas of steering and suspension.
-The Powertrain business unit failed to match the high operating
earnings of the previous year. Profits were impacted by the development
of the exchange rate for the Brazilian real against the us dollar.
(5)
-In the Body business unit, sales in 2005/2006 were almost level
with the previous year at 2.9 billion euros. The North American
foundries of ThyssenKrupp Waupaca benefited from continuing strong
demand for trucks. Demand was particularly strong for products for
medium and heavy trucks as well as construction and agricultural
equipment. ThyssenKrupp Umfortmtechnik began production of stampings
for a new van and a luxury class vehicle. Sales of the Body business
units were severely impacted by the collapse in demand for sport
utility vehicles, previously very popular in the usa. This resulted
in significant volume decreases in the North American stamping plants.
Business at ThyssenKrupp Sofedit was impacted by lower demand from
French automobile manufacturers. The decrease in sales at ThyssenKrupp
Drauz Nothelfer was due to lower market volumes as well as stiffer
competition on the European production equipment market.
(6)
-The Chassis business unit increased its sales by 6% to 3.7 billion
euros in the reporting period. This development was due among other
things to a significant increase in systems business. As well as
the start of production of axle assembly plants in Leipzig and Mexico,
the three plants of ThyssenKrupp Budd Systems in London, Columbia
and Fowlerville recorded significantly higher orders. At ThyssenKrupp
Umformtechnik, ThyssenKrupp Presta SteerTec USA and ThyssenKrupp
Bilstein Suspension, new orders from various German auto manufacturers
went into production. ThyssenKrupp Tallent Chassis also reported
increasing order numbers. Sales of the business unit were adversely
impacted by lower orders from us manufacturers in particular. Divestments
also had a negative effect on sales.
(7)
-The Powertrain business unit achieved sales of 1.7 billion euros.
Favorable factors were the start of production on various crankshaft
and camshaft orders, price increases in South America, and exchange
rate effects. In the Transmission & Driveline Components business,
numerous programs were launched for German, French and American
auto manufacturers. Lower truck output and massive competition in
the area of 4-cylinder car crankshafts had a negative impact on
sales.
Acquisitions
-During 2005/2006, the Company increased its shareholding in Liaoyang
KS Automotive Spring, a manufacturer of coil springs, from 30% to
60%. In addition, the Company purchased the remaining shares in
ThyssenKrupp Presta SteerTec held by DaimlerChrysler.
Divestitures
-In June 2006, ThyssenKrupp Budd Company announced the sale of its
aluminum castings operations as part of a restructuring plan announced
earlier this year. ThyssenKrupp Stahl Company, a subsidiary which
produces aluminum castings at foundries in Kingsville and Warrensburg,
Mo., has been sold to an equity holding concern. Sale price was
not disclosed. ThyssenKrupp Stahl employs 813 people. The sale of
the aluminum castings operation is in line with restructuring plans
ThyssenKrupp AG of Germany announced for its North American automotive
segment. Speyside Equity LLC, a Delaware company, now owns the stock
of ThyssenKrupp Stahl as well as other industrial investments.
-In July 2006, ThyssenKrupp Budd Company announced the sale of its
plastics materials manufacturing and molding operations to Continental
Structural Plastics of Bingham Farms, MI. Sale price was not disclosed.
-The operations of the Automotive segment are being realigned. The
reasons for this are the restructuring requirements of the body
and chassis business, especially in North America. On October 16,
2006, an agreement was signed to sell the North American body and
chassis operations with sales of around 1 billion euros and 3,500
employees to the Canadian company Martinrea International, Ontario.
Factory Closure
-In May 2006, ThyssenKrupp Budd Company announced plans to
phase out its Detroit manufacturing plant. The plant makes metal
stampings and assemblies such as roofs, doors, fenders, tailgates,
liftgates and body side panels for cars, trucks and sport utility
vehicles. Company officials said the phase-out will begin within
the next several weeks and final shutdown could be completed by
the end of the year. ThyssenKrupp Budd has seen a decline in orders
which has created open capacity and the company is looking at ways
to consolidate its manufacturing base. The company cited competitive
pressure as one of the reasons for the phase-out.
Environmental Activity
Overall:
- In addition to the 412 million euros spent on operating pollution
control equipment and the 30 million euros invested in environmental
protection, all segments took numerous measures to reduce their
consumption of energy and raw materials. As raw material and energy
prices are high, these measures also helped improve profitability.
-The Steel segment was honored with Volkswagen AG窶冱 Environmental
Award. As well as its environment- friendly production operations,
the award was mainly in recognition of the Company's innovative
solutions to help reduce emissions from cars. These include weight-optimized
parts which reduce fuel consumption. ThyssenKrupp Steel was named
as one of Volkswagen窶冱 Sustainability Partners and thus joined a
circle of suppliers who have committed to the objectives of sustainability.
Automotive:
-For the production of modern injection valves used in car engines,
a sleeve was developed using the material Pernifer 36Z which displays
virtually no thermal expansion even at temperatures up to 200ツーC.
This guarantees the functionality of the injection valves - which
is key to low-emission engines - in all load and temperature ranges.
-Resource conservation and energy savings were also to the fore
at Automotive. In the future, production shops will be heated utilizing
the waste heat from furnaces, which was previously unused. Heating
oil consumption will also be lowered using a heat pump. Water consumption
has been reduced in a hardening shop by redesigning the cooling
circuits. A new forging technology introduced at ThyssenKrupp Metallurgica
Campo Limpo in Brazil allowed a combination of improved production
precision, compliance with strict emissions standards and weight
reduction. The Company also set up an 窶彳nvironment school窶 specially
for students from schools in the area to raise their awareness of
nature.
Combination of Automotive and Technologies
-The Technologies segment is now also a market partner for high-quality
vehicle components and systems following the combination of its
automotive business with the Technologies segment effective October
01, 2006. This integration focuses its automotive activities on
core businesses with sustainable earnings potential and concentrates
its innovation and marketing capabilities. As part of the planned
realignment, its body and chassis activities in North America with
around 1 billion euro sales and 3,500 employees were sold on October
16, 2006. The sale is to be closed by the end of 2006.
- In other regions the Company remains on expansion track. In China
it has prepared the acquisition of the activities of the crankshaft
manufacturer Tianrun, and further moves will follow on this auto
market of the future. Following the integration of Automotive into
Technologies, the ThyssenKrupp Group will in the future comprise
the five segments Steel, Stainless, Technologies, Elevator and Services.
Outlook
-The Company expects a predominantly favorable trend on the customer
markets of importance to ThyssenKrupp. The prospects for the world
steel market in particular remain generally positive. World demand
for rolled steel will grow by around 5% in 2007, driven mainly by
the emerging countries of Asia and Latin America and the CIS states.
In Europe and the NAFTA region demand is expected to remain steady
or fall slightly due to the somewhat subdued economic outlook and
the expected reduction of stocks. However, steel consumption is
expected to increase further. Output will rise primarily in the
emerging countries - especially China, India and Brazil - as major
new capacities go into operation. The situation on the raw material
and energy markets will remain tight on the whole, keeping steel
production costs at a high level or pushing them even higher.
-The Company expects the automotive market to remain a growth market
overall. For 2007 it expects worldwide production to grow by 2%
to 70.5 million vehicles. However, the new production capacities
are increasingly being installed in the emerging Asian countries
and in Central and Eastern Europe. These countries could once again
significantly expand their vehicle production in 2007. In the NAFTA
region, Western Europe and Japan, volumes will decrease slightly.
As a result of weaker domestic demand, German auto production is
expected to fall to 5.7 million cars and trucks.
R&D
R&D Expenditures
(in million euros) | FY2005/2006 | FY2004/2005 | FY2003/2004 |
Basic research and development |
241 | 186 | 191 |
Customer-related development* |
230 | 266 | 182 |
Technical quality assurance |
272 | 281 | 275 |
Group Total |
743 | 733 | 648 |
R&D Structure
Groupwide Cooperation
-The Company aims to extend its technology lead, as it continuously is developing new products and processes in collaboration with other segments in the Group. This Group-wide cooperation creates synergies and gives the Company competitive advantages which the Company uses to the benefit of its customers.
One example of such cooperation is the hydroforming process, in which tubular steel parts are precision shaped by internal fluid pressure. This process delivers numerous technical advantages for chassis components. Specialists from Group's Automotive and Steel segments work together on the development of ultra-light auto bodies.
-Its Automotive and Steel segments have joined forces with Bertrandt, one of Europe's leading engineering companies, to form a joint competency team covering the entire auto development chain as well as major areas of vehicle production.
New Product Development
-October 2005, the Company has commenced promotion activities in Japan for "New Steel Body", the steel-made white body of approx. 30% less weight. Effective use of high tensile steel, hollow parts and production techniques as laser beam welding is its distinctive feature. It will soon be commercialized in Europe and the company expects demand from automakers in Japan. The Company will develop new customers in cooperation with its partner, JFE Steel Corporation. It will also make efforts to reach a larger customer base in Asia.
- New DuoPML steering system: This is an electro-hydraulic system which delivers decreasing steering assistance with increasing speed and offers greater convenience in terms of lane-holding and parking assist features.
- Chassis area: the Company
developed an air supply system for the air suspension in a German
sport utility vehicle. Work also started on the preliminary development
of an independent suspension system for a new track chassis. The
Company made further improvements to the functions of the DampMatic
damping system. The Automotive segment's ability to reduce weight
were augmented by the development of a fiber ceramic piston rod,
ultrahigh-strength springs, and split tubular stabilizers.
- Camshaft/crankshaft product area: The Company made further
improvements to its lightweight camshafts and - in collaboration
with an engine manufacturer- brought its Presta Delta Valve Control
system to the production stage. This continuously variable valve
control system reduces fuel consumption and exhaust emissions while
significantly enhancing driving enjoyment through higher engine
efficiency.
For a German automotive OEM, the Company is currently developing
a new differential gear module intended mainly for trucks. A further
development is a lightweight differential with an aluminum housing.
2006 JSAE Automotive Engineering Exposition |
<Chassis Parts> |
Investment Activities
Capital
expenditures (in million euros) |
FY2005-06 | FY2004-05 |
Automotive | 448 | 480 |
Total | 2,077 | 1,903 |
Automotive invested 448 million euros in the reporting period, with depreciation at 323 million euros. The focus was again on capacity adjustments to meet new customer orders.
Body business unit
-In the Body business unit, welding capacities in the UK were expanded to fill an order for stampings and welded parts from a Japanese auto manufacturer. ThyssenKrupp Waupaca expanded its melting capacities in the USA to permit further sales growth. In France, ThyssenKrupp Sofedit increased its capacities with a second hot stamping line. At ThyssenKrupp Umformtechnik, a newly built body stamping plant began operation in Bielefeld, while in Ludwigsfelde investment was carried out to expand the stamping and assembly lines.
Chassis business unit
-In the Chassis business unit, the welding, stamping and assembly lines were adapted to meet new orders. ThyssenKrupp Automotive Tallent expanded its welding and assembly capacities in the UK for the production of front and rear axle components of a large car platform. In Germany, ThyssenKrupp Umformformtechnik began building new production lines for subframes and control arms. In India, stamping capacities for the Asian market are being expanded. ThyssenKrupp Automotive Systems invested in new production lines for the manufacture of axle components in Brazil. ThyssenKrupp Presta also adapted and expanded its production lines to meet new orders for steering columns and steering gears. ThyssenKrupp Bilstein did likewise for the production of shock absorbers, stabilizers and springs.
Powertrain business unit
-In the Powertrain business unit, ThyssenKrupp Gerlach modernized and expanded its production capacities for forged crankshafts. An induction hardening facility is being built for the production of large crankshafts. Investment was also carried out in North America and Brazil to increase crankshaft production capacity. This unit is setting up a company with a partner in China to move into the production of forged truck crankshafts on the Asian continent. ThyssenKrupp Presta invested in new production lines to meet orders for assembled crankshafts. A new assembly and grinding facility is being set up at the Chemnitz location. ThyssenKrupp Prazisionsschmiede also expanded its production capacities to meet encouragingly high demand for warm forged differential bevel gears.
-May 2006, ThyssenKrupp Umformtechnik GmbH inaugurated a new stamping shop for automotive body parts at its Brackwede plant. The new production area, specializing in the processing of high-strength steels and large exposed and structural parts, took just under a year to complete. 40 new jobs have been created.This extension of 10,800 m2 to the site's capacities for exposed panels and large body parts includes a blanking line, a stamping line with robotic links plus - a technical highlight - a fully automated packing system for the stamped parts. The investment is a sign of the company's commitment to Germany as a production location. The skills and dedication of the workforce, their quality awareness, capacity for product and process innovations, problem-solving competency and flexibility tipped the balance in favor of expanding the Brackwede site in Bielefeld. A further important factor is its proximity to customer production facilities. Especially for large, thin-walled stampings this minimizes the risk of transit damage. The new shop will allow just-in-time and just-in-sequence supply directly to OEM assembly lines.