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5. GRAMMER AG Business Report FY ended Dec. 2014

GRAMMER AG Business Report FY ended Dec. 2014

Factors
1) Automotive Division
-The Company's sales in the Automotive Division rose by 12.1% over the previous year to EUR 911.6 million. Increased sales of premium OEM models, which the Company primarily supplies, contributed to the increase sales in the Company's Automotive Division. The division experienced growth in across all of its product lines, with center consoles achieving the highest growth.

2) Seating Systems Division
-The Company's Seating Systems Division had sales of EUR 478.7 million in the fiscal year ended December 31, 2014, a 1.2% increase over the previous year. Despite declines in the agricultural machinery segment and level sales in the off-road and truck segments, the gains from the railway and material handling segments led to the increase in sales.

Acquisition

-In December 2014, the Company signed a contract to fully take over the joint venture in China called Grammer Seating (Jiangsu) Co., Ltd. Under the contract, the Company will acquire the 40% share from Jiangsu Yuhua Automobile Parts Co. Ltd., its Chinese joint-venture partner. Grammer Seating (Jiangsu) Co., Ltd. has been producing suspended seating systems for trucks in China since 2013. The Company expects to broaden its position in this high-growth region by offering seat models addressing the specific requirements of this market.

Divestiture

-In April 14, 2014, the Company sold its holdings in the Ningbo nectec Jifeng Automotive Parts Co., Ltd. (Ningbo nectec) to the joint venture partner Ningbo Jifeng Auto Parts Co., Ltd. Ningbo nectec has been manufacturing headrests in China.

Contract

-Major contracts launched in 2014 are as follows:

• Complete headrest for Jaguar Land Rover
• Center console for BMW "2 Series Active Tourer"
• Center console for Mercedes-Benz "C-Class" global platform
• Suspended truck seat for local market in China

Outlook for FY endind Dec. 2015

-The Company expects its sales for FY ending Dec. 2015 to be increased to more than EUR 1,400 million. Despite the anticipation that Seating Systems division is not to be grown significantly due to the weak environment, the Company's overall sales is expected to increase over the previous year mainly thanks to strong order book and additional customer projects in the Automotive Division.

R&D Structure

-As of December 31, 2014, the Company has over 400 employees working in research and development. The Company has 10 R&D centers in Germany, France, Chezh Republic, China, Turkey, Brazil and the U.S.

Product Development

Integrated haptic warning system
-The Company will present an integrated haptic warning system for bus driver seats at IAA Commercial Vehicles 2014. The system acts as a lane departure warning system by providing haptic feedback. It consists of two vibration motors that are integrated in the seat cushion on the left and right which perceptibly vibrate if the vehicle passes over the left or right lane divider, which is detected by infrared sensors on the underbody. (From a press release on September 24, 2014)

Investments in Germany

-The Company is relocating and enlarging its center console production facility in Rastatt, Germany. The assembly plant, which assembles and sequences center consoles for the models of a German premium automotive OEM, will be relocated within Rastatt and will also gain an additional production line. The new site will have almost twice as much floor space compared to its previous location. (From a press release on November 5, 2014)

-In 2014, the Company expanded metal production at the facility in Schafhof.

Investments outside Germany

-Capital expenditures in the Automotive Division in 2014 went towards the following projects:

• Relocation of a plant in Shanghai, China to provide more space for further growth.
• Sourcing equipment to a plant in Beijing, China for the start-up of a new series of center consoles.
• Acquiring production equipment in Mexico for the start-up of new projects.
• Expansion of injection mold production equipment and the localization of spring assemblies production capabilities in Mexico.
• Establishment and expansion of facilities in the Czech Republic.
• Insourcing of the sewing operations in Bulgaria and Serbia due to high demand.

-The Company has increased its production capacity in Brazil and has established new manufacturing capacities for headrests for the local passenger car market. The total floor space of the Atibaia plant near Sao Paulo, which also assembles driver and passenger seats for trucks and agricultural machinery, has been extended by one third to 15,000 square meters. With these extensions, the Company will be able to execute new orders awarded in the automotive segment. Consequently, the Company will be producing interior components for passenger cars for the local automotive market in Brazil for the first time. Due to the expansion at the plant, the Company has hired 100 new employees to bring the total number of workers to almost 700 employees. (From a press release on July 1, 2014)

-The Company is establishing a new manufacturing facility in Tupelo, Mississippi, U.S. The new plant will assemble suspended seats for the North American commercial vehicle market and serve as the Company's new headquarters in the U.S. The plant is scheduled to open and begin production at the end of 2014. By 2016, the plant will gain center console production capabilities.

Data

Number of Employees

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