ElringKlinger AG Business Report FY2007

Business Highlights

Financial overview (consolidated)

in million Euros FY2007 FY2006 Change
in %
Sales 607.8 528.4 15.0% -
Earnings before Taxes 114.9 87.6 31.2% -
OE segment
Sales 435.5 374.0 16.5% The OE segment displayed the most dynamic growth in FY2007, boosting sales by 16.5% to EUR 435.5 million. It accounted for 71.1% of the Group sales

Business overview by segment

All area of business contributed to the year-on-year increase in sales. Growth was driven mainly by the introduction of new products and applications, but also by buoyant demand for products within the existing portfolio.
The Shielding Technology division supplied an increasing number of complex heat shields for application in the exhaust tract for oxidation catalytic converters, diesel particulate filters and turbocharger.
The Cylinder-head Gaskets division succeeded in extending its sales with the help of gaskets featuring coined stopper system. Cylinder-head gaskets for car diesel engines and commercial vehicles generated significant growth.
The Specialty Gaskets division produced double-digit growth, mainly through business in the area of transmission control plates and gaskets used in the exhaust tract.
The Elastomer Technology/Modules division benefited from growing demand for weight-reduced modules made of plastic.

New Company Establishments
- In 2007, the Company founded ElringKlinger Automotive components Pvt. Ltd., Ranjangaon, India as well as ElringKlinger Engineered Plastics Commercial, Qingdao, China.
- The new enterprise located in China was founded as a subsidiary of ElringKlinger Kunststofftechnik GmbH, with express purpose of prospecting the highly attractive Chinese market in its capacity as a local sales unit for engineered plastics.

- In July 2007, the Company acquired a further 7.5% interest in PTFE specialist ElringKlinger Kunststofftechnik GmbH, Bietigheim-Bissingen, and thus now has an overall holding of 74.5% in the subsidiary. In fiscal 2006, ElringKlinger Kunststofftechnik GmbH generated sales revenues amounting to EUR 58.8 million and earnings before taxes of EUR 11.4 million. In Bietigheim-Bissingen and Heidenheim, ElringKlinger Kunststofftechnik GmbH develops and markets products and components made of high-performance PTFE (polytetrafluoroethylene), which is particularly resistant to heat and chemicals.


R&D Expenditure

(in million EURO) 2007 2006 2005 2004 2003
R&D Expenditure 29.8 26.0 24.3 22.9 19.7

- There are 252 members (approx. 7.0% of the workforce) were employed in the R&D area. The R&D costs in relation to sales remained at 4.9%.
-The Company concentrated its R&D activities at German sites within the Group and mainly focused on the facility in Dettingen/Erms.
- The main focus in 2007 was expanding the New Business Areas division in which fuel cell components and an innovative diesel particulate filter concept were developed. Approximately EUR 3.4 million were spent on developing these activities.

Product development
New components for exhaust cleaning
With regard to cutting exhaust emissions, the Company develops specialty gaskets, DeNox modules and heat shields to meet the requirements of catalytic converters, particulate filters and SCR (selective catalytic reduction) system. Higher temperatures and exhaust recirculation rates as well as dynamic relative movements demand a new approach and new materials for gaskets deployed for example in the exhaust manifold and the turbocharger.

Third generation of metal-layer cylinder-head gaskets
The Company develops cylinder-head gaskets that correspond with the trend towards higher ignition and injection pressures as well as the emergence of alternative fuels.

Shielding technology
The Shielding Technology division focuses on solutions for exhaust recirculation, turbocharger and catalytic converters, and develops complex shielding systems, some of which feature integrated sensors.

Elastomer Technology/Modules
The Company develops lightweight components made of high-performance plastics, which leads to scale back the overall weight of vehicles and lower fuel comsumption.

Fuel cell components
New Business Areas division develops fuel cell components. Significant progress was made as regards the production of high-temperature SOFC (Solid Oxide Fuel Cell) stacks. This type of fuel cell is capable of converting energy carriers such as petrol, diesel, natural gas or biogas into electrical energy in highly efficient manner.
Within the area of PEM (Proton Exchange Membrane) low-temperature fuel cells, which in the long term are likely to be used in drive train application, the Company succeeded in developing bipolar plates, as well as extending its coating methods and integrated sealing systems.

Investment Activities

(in million EURO) 2007 2006 2005
Capital expenditure 90.9 49.1 54.7

- The company invested in the expansion of production plants at its subsidiaries and affiliated companies. The main focus in this area was in Asia, Mexico and ElringKlinger Kunststofftechnik.

- The Company spent around EUR 3.5 million to establish a facility located in Ranjangaon, India, spanning approx. 4,000 square meters. It hopes to serve the rapidly growing vehicle market via its local operations. Additionally the Company completed a number of far-reaching facility extension projects in Changchun, China and Changwon, South Korea.

- The main focus in the Cylinder-Head Gasket division was on rebuilding the facility in Runkel previously destroyed by fire. The company built a new replacement facility spanning 5,000 square meters and also purchased new machinery for manufacture of cylinder-gaskets.

- The Specialty Gaskets division
bought a new 125-ton press for the production of exhaust gaskets. Moreover, a dynamic hot-gas test stand was installed for the purpose of assessing individual assemblies featuring high-performance specialty gaskets used in exhaust systems.

- Owing to significant business growth in the heat shielding, the Shielding Technology division established a new production and logistics center as well as fully automated high bay storage facilities for 6,000 pallets in Langenzenn, Germany.

- The Elastomer Technology/Modules division
put a new production facility into service in Dettingen/Erms. It manufactures weight-reduced polyamide modules with integrated sealing system such as cam covers, oil pans and gearbox end-shield covers.

- The New Business Areas division was expanded in 2007 with investment of approx. EUR 2.0 million for plant and laboratory equipment. A new fuel cell test stand was installed in order to optimize production processes relating to fuel cell stacks. Existing laboratory-based production is currently being industrialized. In addition, the Company invested in the first production unit for diesel particulate filters based on entirely new process-engineering specifications in Dettingen/Erms.

Plan for 2008
- The Company plans to invest approx. EUR 39 million during 2008. The focus will be on streamlining production and logistics processes as well as extending capacity levels.
- The capital expenditure at the Company's subsidiaries and affiliated companies will also be on measures aimed at raising efficiency as well as on the purchase of machinery and equipment needed for the expansion of production capacities in response to newly acquired projects.
- The total investment for land, buildings, machinery, plant and intangible assets is likely to be EUR 65 and 70 million.