Financial Overview

(in million EUR)

	FY ended Dec. 31, 2012	FY ended Dec. 31, 2011	Rate of Change (%)	Factors
Net Sales	2,369	2,313	2.4	1)
Net Income	103	105	(1.9)	-

Factors
1) Net sales
-Despite the sharp decline in automotive production in Western Europe, the Company achieved sales of EUR 2,369 million in 2012, which represented growth of EUR 56 million or 2.4% compared with the previous year. Growth in the Automotive sector was lower than the 6% increase recorded in the global production of light vehicles, which was due to weak demand from Western European automotive manufacturers.

-The Company's Mechatronics division registered a 6% increase in sales to EUR 1,091 million in 2012. This improvement was achieved mainly through a large number of product launches and increases in production in high-growth product groups, specifically those serving the major trends towards reductions in CO2 and emissions.

-Sales of the Company's Hardparts division decreased slightly from EUR 1,092 million in 2011 to EUR 1,087 million in 2012. Though sales improved for large-bore pistons, sales of small-bore pistons and plain bearings dropped because of falling demand from the economy.

Acquisitions

-The Company announced that it has taken over complete control of the British company Mechadyne International Limited of Kirtlington in Oxfordshire, the UK. The Company intends to integrate Mechadyne into the Valvetrain Systems unit of its subsidiary Pierburg GmbH, while maintaining Mechadyne's brand name. Mechadyne's activities focuses on the company's expertise in variable valve control. (From a press release on September 18, 2012)

Joint Venture

-Pierburg Pump Technology GmbH, a subsidiary of the Company, has set up another joint venture in Shanghai, China with Mikuni Corp. The new company, Pierburg Mikuni Pump Technology (Shanghai) Corp., will be a wholly-owned subsidiary of the joint venture Pierburg Mikuni Pump Technology Corporation, which was established in 2010. Pierburg Pump Technology GmbH holds an indirect 51-percent stake in the new venture, which will be capitalized at CNY 14 million, or approximately JPY 168 million. Through a jointly held company, the partners intend to develop, produce and market electric water pumps and variable oil pumps for the Chinese market. The market launch of the joint venture is scheduled for April 2012. (From a press release on April 2, 2012)

Restructuring

-The Company transferred the operations of Kirloskar Oil Engines Ltd. in India from Khadki, Pune to the Company's plant in Takwe. Kirloskar Oil Engines Ltd. was acquired by the Company at the end of the third quarter of 2011.

-In 2012, the North and South American production sites of the Company's KS Gleitlager division were merged in a newly constructed hall in Mexico.

R&D Expenditure

(in million EUR)

	FY ended Dec. 31, 2012	FY ended Dec. 31, 2011	FY ended Dec. 31, 2010
Total	147	130	120

 

Product Development

Steel piston for supercharged diesel engines
-The Company's Hardparts division is developing a steel piston for supercharged passenger car diesel engines with outputs of over 100 kilowatts per liter and ignition pressures larger than 200 bar. The steel piston provides enhanced engine performance, improved thermodynamic efficiency and reduced friction losses. Depending on the application, fuel consumption and carbon dioxide emissions can be reduced by up to 5%. Production on the piston is scheduled to begin in 2014.

Steel-aluminum antifriction layer alloy
-The Company is scheduled to start series production of its new steel-aluminum antifriction layer alloy KS R53 in mid-2013. Compared to current steel-aluminum antifriction layer alloys, KS R53 has much greater strength and wear-resistance. This makes KS R53 more suitable for highly loaded connecting rod bearing applications in gas engines as well as crankshaft bearing applications in gas and diesel engines.

Exhaust flow sensor
-An exhaust flow sensor has been developed by the Company's Pierburg subsidiary is scheduled for series start-up in 2013. This sensor records hot gas flows directly in the exhaust gas, integrating the system to precisely regulate exhaust recirculation.

Capital Expenditure

(in million EUR)

	FY ended Dec. 31, 2012	FY ended Dec. 31, 2011	FY ended Dec. 31, 2010
Total	148	104	96

<Mechatronics division>
-Capital expenditure in the Company's Mechatronics division totaled EUR 66 million in 2012, up from EUR 62 million in 2011. Funding was spread out throughout the various product lines of the division.

<Hardparts division>
-The Company's Hardparts division invested EUR 77 million in capital expenditures in 2012, more than double the previous year's figure of EUR 38 million. The focus of the increased spending was in KS Kolbenschmidt's small-bore pistons.

Investments in Germany

-The Company announced that its subsidiary Pierburg GmbH plans to concentrate its two German production facilities in Neuss and Nettetal at a new location in North Rhine-Westphalia, the "Hafenmole" in Neuss. The Company has now signed a contract to acquire approximately 70,000 square meters of space in the Port of Neuss. Pierburg intends to produce magnetic valves, exhaust gas recirculation systems and other components for cars and commercial vehicles at the new Hafenmole plant starting in 2014. The Nettetal plant currently has around 400 employees, while roughly 300 now work in production jobs in Neuss. The consolidated plant is projected to require some 600 staff. The Company is investing an eight-figure amount in the new construction project. (From a press release on July 23, 2012)

Investments Outside Germany

<China>
-The Company announced that it has opened its Chinese head office, the KSPG House, in Zhangjiang (Pudong District, Shanghai). The new office was established for all the wholly-owned Chinese subsidiaries of the Company and will serve as the strategic launch pad for further growth. In recent years the Company has established in China several wholly-owned subsidiaries. Since the autumn of 2012, Pierburg China has been manufacturing exhaust gas recirculation systems at a newly built location in Kunshan, Jiangsu Province, and in the spring of 2013 will also start on the production of throttle bodies destined for the Chinese market. (From a press release on December 5, 2012)