Financial Overview

(in million euros)

	FY2009	FY2008	Rate of Change (%)	Factors
Net Sales	1,522	2,055	(26)	1)
EBIT	(187)	62	-	-

Factors
1)
-The Company generated sales of 1,522 million euros in fiscal 2009. This corresponds to a year-on-year decline of 533 million euros (26%), which is mainly attributable to the economic crisis that has significantly impacted the automotive industry. This fall in sales is largely consistent with the 26% decline in automotive production in the core Triad markets which are of relevance to the Automotive sector. The falls in sales compared with 2008 attenuated continually over the course of the year, from 41% in the first quarter, to 34% in the second quarter, reaching 21% in the third quarter. The first return to sales growth of 1% took place in the fourth quarter. However, this was in comparison to the low level in the same quarter of the previous year that had already been hit by the crisis.

Contracts

-Hit by the negative development on the national and international automotive markets, the order intake as at the balance sheet date stood at 1,496 million euros, following 2,057 million euros in the previous year.

R&D Expenditure

(in million euros)

	FY2009	FY2008	FY2007
Total	113	138	126

 

R&D Activities

-Research and development activities in the Automotive sector were strongly influenced by the sustained trends in the automotive industry, including the curbing of CO2 emissions, the introduction of tighter emissions standards such as Euro 6, cost reductions thanks to state-of-the-art manufacturing procedures and optimized products, as well as extended environmental requirements such as zero-lead bearings.

Technological Alliance

-In Jan. 2009, the Company and Metaldyne Corporation, an Asahi Tec company, have signed an agreement to jointly develop and market power cylinder systems. Under the agreement, no equity is being exchanged and both parties will remain equal and independent operations. (From a press release on Jan 29, 2009)

 

Product Development

Air pump and secondary air valve product line
-The secondary air pump and secondary air valve product lines developed at Pierburg in response to the increasing demand for high-performance systems for fulfilling the future US emissions limits SULEV (Super Ultra Low Emission Vehicle) and PZEV (Partial Zero Emission Vehicle) have been optimized further. In particular, the development of the side channel pump has seen an improvement in response times and a reduction in the noise levels of the secondary air system. Vehicles engineered to such standards emit up to 90% fewer emissions than the average new vehicle.

Actuators: fourth-generation modular system
-In the field of actuators, Pierburg has launched a fourth-generation modular system offering a cost-effective, high-quality concept encompassing throttle and control valves as well as actuators for intake manifolds and electrical exhaust gas flaps. This concept covers both passenger car and commercial vehicle applications. Among other things, it features non-contact, low-cost ECO sensor technology. A space-optimized swirl flap application has now entered series production. The actuator kit has been extended to include a range of new applications with a view to gaining a foothold in the booming market for turbochargers.

CWA electrical coolant pump
-One of the main focuses was on development work on the range of CWA electrical coolant pumps, which now includes a 400 W variant. The third generation of this system will enter series production from the start of 2011 and will be used to cool four- and six-cylinder engines for a renowned German automotive manufacturer. What makes this development special is that the installation space remains unchanged even though the system has twice the output.

Capital Investment

(in million euros)

	FY2009	FY2008	FY2007
Total	70	146	148

-As a consequence of the impact of the global economic crisis in the international automotive industry, the Company adjusted its capital expenditure planning and invested 70 million euros in FY2009. Despite the difficult situation, a suitable amount of funds were invested in future oriented projects and necessary plant replacements.

Investments in Germany

-In Germany, the Company primarily invested in expanding capacity for the production of electrical divert-air valves and production facilities for new actuator and cooler projects.

-Capital expenditure in the Pierburg Pump Technology division in Germany concerned the acquisition of customer and project-related manufacturing facilities for electric coolant pumps as well as the expansion of capacity for the production of water circulation pumps.

-At its German sites, KS Pistons primarily invested in expanding the features of individual products, making these traceable (data matrix) and new tools.

KS Plain Bearings division
-In the KS Plain Bearings division, capital expenditure on production processes was associated with increased requirements on the part of customers as regards the cleanliness of plain bearings systems. As well as the conversion of production machinery and the initial casting phase using belt casters, various items of machinery were also purchased.

KS Aluminium Technology division
-At the Neckarsulm site, the KS Aluminium Technology division assembled a production facility for cylinder heads. Casting machines and equipment for the gravity die-casting procedure were installed. Funds were also invested in the processing of prototypes and several projects aimed at increasing productivity and improving quality.

Investments outside Germany

<Europe>
-In Spain and the Czech Republic, preparations were made for the processing of a large order for an EGR cooler module.

-At the French site, two further production lines were set up for water and vacuum pumps.

-In Livorno in Italy, capacity was expanded for the production of variable oil pumps.

-Capital expenditure at the site in France related to technical modifications to one production plant in order to manufacture a piston for Renault Nissan and the optimization of the production layout by implementing a different machinery arrangement, in addition to facilities to produce a piston for Ford. -In Trmice in the Czech Republic, the expansion of the production line for a piston for Jaguar was a central focus.

<USA>
-Capital expenditure in the USA served to expand production capacities for EGR systems.

-In the USA, the production of steel pistons was expanded.

<India>
-In India, the division installed two flexible assembly lines in order to ensure smooth new product startups.