Hella KGaA Hueck & Co. Business Report FY2006-07

Business Highlights

Financial overview

(in million euros) FY2006-07 FY2005-06 Rate of
Sales 3,667 3,394 8.0%
Net profit 22 (21) -

The Company has firmly sustained its growth path of the past years in fiscal year 2006-07, in relation to this, the favorable economic and industry-specific development had a positive impact. After sales growth of 10.5% in the previous year, sales have been increased again by a further 8.0% to now 3.7 billion euros in the fiscal year 2006-07. The growth is shared by all three business divisions - Lighting, Electronics and Aftermarket - and was achieved in all regions in which the Company operates around the world.

The main reason for the operational success in the fiscal year 2006-07 was the improvement program Lion (Light On), which was launched in April 2006 with the aim of returning the Business DIvision Lighting to profitability on a sustainable basis. Lion is an all-embracing program with initiatives for cost reductions, quality improvements and sales growth. The program targets on an improvement of 300 million euros in 3 years.

Sales by Segment
(in million euros) FY2006-07 FY2005-06 Rate of
Lighting 1,535 1,396 10.0%
Electronics 1,025 1,102 (7.0%)
Aftermarket 1,094 881 24.2%


13 13 -


3,667 3,395 8.0%

The Company exceeded its targets for the fiscal year 2006-07. This was mainly on account of the resourcing success of its improvement program "Lion".

In this business division, the Company won over 800 million euros of new business.

In fiscal year 2006-07, the Electronics division was able to continue smoothly the success of previous years. Electronics sales -adjusted by the Lighting Electronics business, which has been assigned to the business division Lighting since this fiscal year - increased by more than 9%.

In this business division, the Company won over 1.4 billion euros of new business.

All of the Company's joint ventures in the Electronics division kept up the positive development of the past years.

- Behr -Hella Thermocontrol GmbH (BHTC) continued its solid course of growth, and expanded its market position through innovative products and successful acquisitions in the USA, Europe and China.

-HSL Electronics Corporation, its joint venture with SL in Korea, grew by 26% and continues to provide an excellent basis for the marketing of its complete portfolio in the Korean market.

-Intedis GmbH, its joint venture with Leoni AG, was able to further strengthen its market position as a development service provider for vehicle electric systems through internal reorganization.

Sales by Geographic Area
(in million euros) FY2006-07 FY2005-06 Rate of
Germany 1,898 1,815 4.6%
Rest of Europe 1,062 959 10.7%
NAFTA 464 455 2.0%
Asia-Pacific 243 166 46.4%
Total 3,667 3,395 8.0%

The use of both its efficient production and development facilities in Eastern Europe had a beneficial effect in this region.

A small increase was achieved in NAFTA, although at +2% it was below market trend. A key business focus in this region was to secure profitability rather than pursue further short-term growth.

The sales achieved there grew by more than 36% compared with the previous year. As a result of the full consolidation of the Indian production companies for the first time, consolidated sales in Asia rose by a further 10%.

The Company is providing exterior and interior lighting systems for the seven-passenger 2007-model Citroen C4 Picasso multi-purpose vehicle (MPV), sold in Europe.The Citroen C4 Picasso has the Company's dynamic-bend headlights and taillights with light emitting diode (LED) technology. (From a press release by the company on Jan. 24, 2007)

The Company is providing exterior and interior lighting for the 2007-model BMW 5 Series. The Company, working in collaboration with BMW engineers, has developed the 5 Series' front headlights and combination rear taillights. The Company also supplies the car's headlight power-washing system, interior lighting and reading lamps.(From a press release on Apr. 11, 2007)

The Company has purchased Enko Automotive GmbH. Based in Schortens, Germany, Enko Automotive is a developer of sensor and body electronics hardware and software for the automotive industry. Enko and the Company have collaborated on projects since 1999. The acquisition of Enko allows the Company to strengthen its position in the fields of electronics and light-based driver assistance systems. (From a press release on Mar. 5, 2007)


R&D Structure
More than 3,000 engineers and technicians work in research and development throughout the Company group.

Although R&D activities are mainly concentrated in Germany, the Company has continued to expand the international network. The Eastern European and Asian regions in particular were a special focus in the fiscal year 2006-07. Additional development locations were built up or expanded first and foremost in the Czrech Republic and Romania, as well as in China and India.

R&D expenditure

(in million euros) FY2006-07 FY2005-06 Rate of
Employees 3,117 2,886 8.0%
R&D Expenditure
-Lighting 119.3 97.7 22.1%
-Electronics 145.3
166.6 (12.8%)
-Aftermarket 20.2 21.3 (5.2%)
Total 284.8 285.6 (0.3%)
as a % of sales 7.8% 8.4% -

*1 : Excluding Lighting Electronics for the first time

R&D Developments in FY2006-07
The Company has introduced a new ultrasonic, electronic parking assistance technology -- an automated parallel parking system. Designed to eliminate the frustration and anxiety that most drivers experience when faced with the need to parallel park between two vehicles. (From a press release by the company on Oct. 31, 2006)

The Company developed "Top View", a system that makes it possible for the driver to get a bird's eye view of his or her vehicle on the display intended for this purpose, and therefore to maneuver without danger. The technology uses cameras, each with an aperture angle of 180 degrees, installed on the rear, the front, and the right and left side mirrors. Top View uses the individual images from these cameras to generate a new image which shows the entire car from above. (From a press release on Mar. 22, 2007)

Technology Alliance
The Company has partnered with Volkswagen and two other supplier companies to develop a electronic control unit (ECU) for future Volkswagen vehicles. During the next year, the partnership will combine the vehicle electronics know-how of VW, the Company, NEC Electronics of Europe and 3SOFT, which is Elektrobit's automotive software unit, to test the new ECU in a VW Passat limousine to see how it will behave in real-world conditions. The ECU will be compatible with AUTOSAR (AUTomotive Open System ARchitecture) software. The Company will supply ECU hardware and software applications for the project.(From a press release on Oct. 5, 2006)

The Company and Chinese automotive manufacturer Geely, have signed a letter of intent to jointly work on the development of automotive electronics components and systems. Under the agreement, it will provide Geely with technical support packages for vehicle body electronics. (From a press release on May 14, 2007)

New Products
One of the Company's central innovation fields are so-called "light-based driver assistance systems". The Company will be starting series production of a headlamp with an adaptive cut-off line for the first time in 2008. The special feature of this is that headlamp range is continuously adjusted between low beam and high beam, according to the situation. In this way, oncoming vehicles are not dazzled, and ilumination is optimized in every driving and traffic situation.

Automatic distance regulation (ACC = Adaptive Cruise Control) from the Company has gone into series production as an option in the 2007 model year Chrysler 300C. The system is based on an infrared light sensor, and ensures that the distance to the vehicle driving in front remains constant. (From a press release on May 23, 2007)

Investment Activities

Capital Expenditure (FY2006-07)
The capital expenditure of over 200 million euros was mostly in machines, equipment and other operating equipment.

Investments in FY2006-07

The Company's joint venture HBPO with Behr and Plastic Omnium continues to benefit from the trend among vehicle manufacturers to increasingly outsource design, development, assembly and logistics for the complete vehicle frontend. To meet growing demand, HBPO has increased production capacities in Canada, Japan, Korea and the Czech Republic.

The Company has opened a new electronics factory in Timisoara, Romania. Hella Electronics Romania S.R.L. will produce electronic components and systems such as pedal sensors, xenon ballasts, heating-control units and overhead-control units. The new 12 million USD factory covers a usable space of approximately 88,200 square feet, with a production space of 51,600 square feet. The factory will initially employ 200 people. Employment is expected to increase to nearly 400 in 2007. In addition to its manufacturing operations, the Company is establishing a development group for body-electronic products at the Timisoara location. (From a press release on Oct.11, 2006)