Financial Overview

(in million Euros)

	FY2011	FY2010	Rate of change (%)	Factors
Overall
Sales	6,002.2	5,260.6	14.1	-Sales increased in all regions. -Changes in exchange rates affecting the translation of sales realized in foreign currencies had an overall negative impact of 52.2 million euro.
Net profit	231.1	176.6	30.9	-
Sales by business unit
Engine Systems and Components	2,699.3	2,377.9	13.5	1)
Filtration and Engine Peripherals	1,700.4	1,522.0	11.7	2)

 

Factors
1) Engine Systems and Components
-Sales in FY2011 increased by 13.5% year-on-year, due to the positive development of the automotive market worldwide. Although exchange rate developments, particularly the weakening of the U.S. dollar against the euro over the year, had an adverse effect on sales, the sales in FY2011 exceeded even precrisis sales level of 2007.

<By region>
-The business units in Europe and North America benefited in particular from the strong recovery of the commercial vehicle sector in these regions. In contrast, the sales increase at the plant in South America was primarily achieved through production for passenger car engines.

-The plants in Asia also recorded overall growth, although the development of business was impaired by sales losses connected with the earthquake in Japan, the flood disaster in Thailand, and the weak commercial vehicle market in China.

<By product>
-All  product groups recorded increases, with products for commercial vehicle engines achieving the strongest growth. However, pistons for passenger car engines, as well as cylinder liners and connecting rods, also made a significant contribution to the sales increase.

2) Filtration and Engine Peripherals
-Sales in FY2011 increased its sales by 11.7% year-on-year. While some considerable sales increases were achieved in the Europe and North America regions, the natural disasters in Japan and Thailand dampened growth in the Asia/Pacific region.

<By region>
-The sales growth in the Europe region was most pronounced in the plants in Austria and Germany, which recorded further growth on top of an already high sales level.

-The growth in North America is primarily due to the increased sales with U.S. passenger car manufactures, which had a particularly positive impact on the locations in Mexico and Canada. However, the natural disaster in Japan adversely affected the development of sales, even in the North America region, as the production plants of Japanese customers in the USA ordered reduced quantities from the Company as a result of being unable to obtain component deliveries from Asia.

-The temporary sales losses in Japan and Thailand were, however, offset by continuing sales growth in China, South Korea, and India, which resulted in a slight overall increase for the Asia region once again.

Acquisition

Share acquisition from Behr
-The Company increased its share from 19.9 to 36.85 percent in January 2011 as part of the planned acquisition of the Behr Group. The company's share in the Behr Group will be increased to more than 50 percent on January 1, 2013. (From a press release on March 1, 2011)

Business Partnership

-Mahle Technologies Holding (China) Co., Ltd. announced that it has signed a strategic cooperation agreement with Great Wall Motors. In this cooperation, the Company would provide Great Wall Motors with the air management system, vehicle thermal system, engine piston, air charge valve and other components, and both parties would plan the synchronous development of a Technology Center. At present, the engines of Models LJ 2.0T, 2.5TCI and 2.8TC applied in "Haval" SUV and "Wingle" Pickup have adopted the valves, bearing bushes, filtration systems and other components and parts from the Company. Both parties had a planned cooperation on the key components and parts used in "Haval H6", "Voleex C50", "Voleex C70" and other engines. (From a press release on June 23, 2011)

Recent Developments Outside Germany

<India>
-Mahle Filter Systems India Ltd announced that its new air filter production plant in Chennai, India takes up series production. The building was completed in December, 2010. In the first step of construction, the factory building has a ground surface of 3,300 square meters. In the medium term, it is planned to produce air filter systems, intake modules and cylinder head covers with integrated oil mist separation in the new plant. The Company has already received orders for these product groups and will supply automobile manufacturers in Chennai area. The first intake modules and air filters will be dispatched from August, 2011. Currently, the Company employs 80 staff in Chennai, this number is planned to be increased to approximately 150 in the medium term. (From a press release on May 5, 2011)

Contracts

-Robert Bosch GmbH announced that Bosch Mahle Turbo Systems has already signed contracts with six carmakers to supply its turbochargers. The company expects to deliver more than one million turbochargers per year. The product portfolio of Bosch Mahle Turbo Systems comprises of turbochargers, with wastegates, for gasoline engines producing power ranging between 45kW to 220kW. For diesel engines the portfolio offers products with a performance range, between 30 and 530 kW, and can also include variable turbine geometry (VTG). These are used in a variety of vehicles ranging from passenger cars to heavy-duty commercial vehicles. The product portfolio also includes very compact charging systems in which the exhaust manifold is integrated into the turbine housing. The company has two manufacturing sites in Blaichach; Germany and St. Michael; Austria. Pre-series production has already begun at these sites and turbocharger manufacturing is prepared to quickly ramp into series production at the beginning of 2012. (From a press release on September 13, 2011)

Awards

Received Company	Location	Awarding Company	Awards
Mahle Engine Components (Yingkou) Co., Ltd.	Yingkou/China	Chery Automobile	Best Cooperation Supplier
Mahle Donghyun Filter Systems (Tianjin) Co., Ltd.	Tianjin/China	Shanghai General Motors	Excellent Supplier
Mahle Group	Germany	Toyota	Superior Quality Performance Award
Mahle Engine Components USA	Morristown/USA	Ford	World Excellence Award Gold
Mahle Engine Components Japan	Japan	Hino Motors	Excellent Quality Award
Mahle Group	Germany	PSA Peugeot Citroen	Supplier Award
Mahle Components Slovakia s.r.o.	Dolny Kubin/Slovakia	Cummins	Supplier Award
MAHLE Metal Leve S.A.	Brazil	Volkswagen do Brazil	Supply Award

R&D Expense

(in million Euros)

	FY2011	FY2010	FY2009
Overall	323	310	246

 

R&D Structure

-The Company holds eight R&D centers worldwide:

• Stuttgart, Germany
• Northampton, UK
• Farmington Hills/Detroit, USA
• Novi/Detroit, USA
• Jundiai/Sao Paulo, Brazil
• Shanghai, China
• Kawagoe/Saitama, Japan
• Okegawa/Saitama, Japan

-In 2011, capacities at its research and development centers in Detroit/USA and Shanghai/China are frequently stretched to their limits. Expansion and development measures are therefore set to be carried out at both locations. In Shanghai, for example, the Company is planning to expand the testing area considerably and install additional engine test benches.

Product Development

Air intake modules with integrated indirect charge air cooling
-The Company developed air intake modules with integrated indirect charge air cooling. In comparison with direct charge air cooling, they allow up to 80 percent less pressure loss along the complete charge air line. They also result in lower fuel consumption at all engine speeds at partial and full load, as well as lower emissions due to increased heat dissipation during load changes. The engine's responsiveness is improved by shorter charge air lines and smaller volumes, and contributes to improved vehicle dynamics. These innovative air intake modules save space, as both the front end and the charge air cooler can be scaled down considerably. The coolant hoses also require less space than charge air pipes.

Capital Expenditure

(in million Euros)

Business Units	FY2011	FY2010	FY2009
Overall	319	199	172
Engine Systems and Components	159	89	87
Filtration and Engine Peripherals	104	79	55

 
<Engine Systems and Components>
-The focal region for investment was Asia, where the business unit expanded capacities significantly with a view to further market growth. This primarily affected China, Japan, and India. In all regions, continued investments were made to rationalize the manufacturing processes and introduce new production technologies.

<Filtration and Engine Peripherals>
Europe
-In Europe, the business unit invested considerably more than in the previous years. A large proportion of the investments were directed toward the plant in St. Michael/Austria - partly for optimizing processes in production and logistics, but primarily for production facilities for new products in the start-up phase.

North America
-In the North America region, the focus was on capital expenditure in Mexico. The slight increase in investments in comparison with the previous years was largely due to preparations for extensive production start-ups in the next two years.

Asia
-Significant capital expenditure was made on expansion activities, particularly at the plant in Shanghai/China. In Japan, a significant proportion of the investments went toward improving earthquake protection. The business unit also expanded output capacities for customer projects in Japan.

-Mahle Filter Systems Japan Corporation announced that it will open its new Kyushu plant in Nogata City, the Fukuoka prefecture, Japan. The new plant will manufacture filtration products for automotive industry. With the total area of 27,400 square meters, the new facility will start production at the end of 2012. (From a press release on July 13, 2011)