Freudenberg & Co. Business Report FY2008

Business Highlights

Financial overview
(in million euros) FY2008 FY2007 Rate of change(%) Factors
Sales 5,050.1 5,341.2 (5.5) -
Profit 176.3 275.2 (35.9) -
Automotive Components (Sales)
Seals and Vibration Control Technology Europe 1,191.1 1,226.2 (2.9) -The financial and economic crisis impacted on sales developments in 2008. While the first nine months of the year brought 4.0 percent growth, mainly as a result of winning market share, there was a sharp fall in orders in the fourth quarter. This applied across all Divisions of Freudenberg Seals and Vibration Control Technology Europe with the exception of the Vibration Control Technology Division where sales of products for the rail and wind power industry rose.
-Despite the economic crisis, the Business Group won new orders from automotive customers in 2008 which were in total only slightly lower than the previous year. The disposal of brake hose activities (Flexitech) impacted on sales. Market share growth in the automotive business is the basis for stable business development going forward.
Freudenberg-NOK General Partnership 841.2 1,003.4 (16.2) -Freudenberg-NOK General Partnership strengthened its capabilities in the oil and gas market through acquisitions. While the divestiture of the automotive brake hose business (Flexitech) reduced sales in 2008, this disinvestment also helped to further diversify its portfolio with less reliance on the automotive industry.
NOK-Freudenberg Group China 138.3 122.1 13.3 -NOK-Freudenberg Group China benefited exceptionally well from sustained growth in both the automotive and the general industry sectors. However, growth in China slowed noticeably in the second half of the year. This was due to lower automobile sales as a result of sharp rises in the cost of fuel, production restrictions on industry as a result of the Olympic Games and the global economic crisis. The company defended its market leadership in the automotive industry and in some general industry segments and even grew market share further for level 1 automotive suppliers. Sales to Chinese automotive customers in particular increased. The launch of new product groups had a positive effect on sales to general industry. Despite the slower pace of business activity in the second half of the year and negative exchange rate developments, profitability was almost on a par with the high level of the previous year. This was achieved through improved process technology, higher productivity, systematic cost management, an increase in local procurement and quality improvements. The special challenge in China lies in the enormous price pressure from customers and competitors.
Vibracoustic Europe 496.8 503.4 (1.3) -While the Business Group reported above-average sales growth of 12.4 percent in the first half of the year compared with the same period in 2007, it could not escape the effects of the collapse in the automotive market during the second half of the year. The negative sales trend of the second half of 2008 has continued into the first months of 2009. The cost-cutting measures already introduced in all Divisions in 2008 will be stepped up further.
Freudenberg Nonwovens 778.2 816.2 (4.7) -Freudenberg Nonwovens was also affected by the very difficult market environment in the 2008 financial year. Average raw material, freight and energy costs rose significantly during the first six months of the year alone. The higher costs could only be partly offset by improvements in productivity and price increases.

-Freudenberg-NOK General Partnership was selected by General Motors Corporation, Detroit, USA, as a development partner for the Chevy Volt, a plug-in electric vehicle which uses over 200 seals in its battery cooling system. The Volt is scheduled for introduction to the mass market in 2010.

-Vibracoustic GmbH & Co. KG developed a special engine-suspension concept for the Tata Nano. The parts are produced by a joint venture, Sigma-Vibracoustic, in the northern Indian city of Mohali. Since March 2007, Vibracoustic has devoted its product-development expertise to solving a particularly tricky problem: insulating the car's body from the vibration of the two-cylinder engine and ensuring modern standard of riding comfort for a vehicle of this class. The Sigma Freudenberg NOK joint venture is the sole supplier of engine and drive train seals for the Tata Nano. (From a press release on Jan. 15, 2008)


R&D Expenditure and Structure
-In 2008, the Company expensed a total of 195.1 million euros for research and development, with more than half of this sum accounted for by the Freudenberg Seals and Vibration Control Technology Europe, Vibracoustic (Europe) and Freudenberg Nonwovens Business Groups. During the year under review, 1,894 associates were employed in research and development throughout the Group, with the regional focus on Germany, where 1,334 associates were involved in research and development.

Product Development
Active vibration exciter
-This Product warns drivers if they inadvertently leave the traffic lane, as happens when drivers are affected by momentary sleep. It has already gone into series production in the premium segment.

Investment Activities

Domestic investment
-Freudenberg Mektec Europa GmbH - a joint venture between the Company and the Japanese NOK Corporation - is moving into a newly built Technology Center, the complex being built in an area of Weinheim Technology Park, by the end of 2008. Its cornerstones will be product development, prototype production and pre-series production of flexible printed-circuit boards (PCBs) for customers in the automotive and other sectors. (From a press release on Jul 29, 2008)