Grammer AG Business report FY2007

Business Highlights

Financial overview

(in million EUR) FY2007 FY2006 Rate of Change(%) Factors
Revenue 998.1 881.0 13.3  
EBIT 32.1 38.9 (17.5)
Automotive segment
Revenue 657.7 574.8 14.4 See (1) below
EBIT 10.7 22.7 (52.9)

(1) Sales for this division came to EUR 657.7 million for FY2007, equal to 65.9% of the Group's revenues. EBIT went down significantly year-on-year. Product-related difficulties at ramp-ups, particularly in the USA, as well as implementing digitalized start-ups of projects taken on a short notice, led to considerable additional charges.

Business overview for the Automotive segment
-Automotive orders were solid during the year under review, partly the result of model changes. The new Mercedes-Benz C Class was among the new high-volume models to go into production in 2007, for which the Company provides crash-active headrests. Production also began for crash-active headrests for the BMW 5 and 6 Series and X3 and X5 models. The Company also landed a center console development contract from a German manufacturer.

-The Company窶冱 involvement in Asia is proceeding well. One year after the opening ceremony for its production location in Tianjin and Changchun, China, the Company was able to add BMW and Audi to its customer portfolio.

-The Company thus continues to pursue expansion at its new Asian locations. The focus is on the Shanghai plant, future site for center consoles for the General Motors Epsilon platform, and establishing a distribution location in Japan to enhance contracts in Asian carmakers.

-To strengthen earnings in the Automotive segment on a sustained basis, the Company took additional measures to improve profitability and cost efficiency. In addition to initiatives for improving processes and structures, these also concern optimization of the global production network. The Company has been investing in projects including building of a new production site in Serbia.

-Modest new demand in Germany somewhat dampened growth momentum seen elsewhere. Also, a number of Eastern European currencies appreciated in the third quarter. This in combination with rising wages and infrastructure costs made a number of its production locations substantially more expensive. Considerable commodity price increases and sustained weakness in the US dollar were additional negative factors.

-May 2007, the Company announced the sale of its Italian subsidiary Grammer s.r.l. This would result in the Amberg-based automotive supplier parting company with the main European base for its bus passenger seat business. The board of management sees this as providing an opportunity to focus the Group consistently on those target markets. The purchase agreement is planned to be signed before the end of June 2007. Together with the railroad business, the bus division forms part of the smallest business division, accounting for around 5 percent of total consolidated sales.

-Several components for global ramp-ups of prominent Germany manufacturers and following into production will be of key importance to its automotive business in 2008, in addition to the strength of the domestic market. The Company expects favorable results from the launch of new products, boosting revenues and earnings after ramp-up. Sales may decline slightly during models transition phases.


R&D Expenditure
(in million EUR) FY2007 FY2006
Overall 50.2 46.1

New Product Developments
-The Company created height-adjustable door armrests and sensor-controlled crash-active headrests. This system is already available in the market, being used with such models as the Mercedes-Benz C and E Classes. BMW also deploys crash-active headrests for its 5, 6 and 7 Series vehicles. This security feature protects vehicle occupants from whiplash neck injuries in the event of accident.

Investment Activities

Capital Expenditure

(in million euros)

FY2007 FY2006 FY2005
Overall 34.6 32.1 33.2
Automotive 14.9 16.6 17.9

Overseas Investment
-At the end of May 2006, the Company inaugurated two new plants in Tianjin and Changchun in China. At both of these locations, the Company manufactures armrests and headrests for AUdi and VW models, and starting in 2007, the Company will produce center consoles for the VW Passat.