Leoni AG Business Report FY2008

Business Highlights

Financial overview
(in million euros) FY2008 FY2007 Rate of change Factors
Sales 2,912.0 2,366.8 23.5 -
EBIT 55.7 138.1 (59.7)
Wire & Cable Solutions Division
Sales 1,401.5 1,380.8 1.5 -
EBIT 29.6 80.8 (63.4)
Wiring Systems Division
Sales 1,510.5 986.0 53.2 -The LWSF Group provided 573.6 million Euros to the total sales. Business went according to plan in the first nine months. Due to the crisis in the automotive industry the Company was compelled in the fourth quarter. High rates of growth were also generated in the commercial vehicle industry. Furthermore, the Company registered positive impetus in China where, alongside he foreign carmakers, the Company also supplied the Chinese manufacture SAIC with notable quantities for the first time. Irrespective of the economic crisis, various new and follow-on projects for some of its customers in the motor vehicles industry again started up in 2008.
EBIT 23.4 57.8 (59.5) -EBIT contracted from 57.8 million Euros to 23.4 million Euros. This includes restructuring expenses amounting to 5.2 million Euros (previous year 5.8 million Euros), which involved facility closure in Poland, Hungary and Italy. Adjusted for the impact of revaluation associated with the purchase of the LWSF Group, fiscal 2008 EBIT came to 37.4 million Euros.

Start-up of various new and follow-on projects

-Peugeot 308 station wagon
-Updated Peugeot 407
-Citroen's C5
-Start of production of Mercedes C-Class Sports
-Coupe in Brazil and for the face-lifted Porsche 911.
-Start of production of cable harnesses for new engines of manufacturer Cummins.

-In January 2008, the Company took over the wiring systems division of the French automotive component supplier Valeo. This acquired group was named LEONI Wiring Systems France (LWSF). The LWSF is a strategic fit for the Company: it extended its customer base to include major car makers not previously supplied, like Peugeot, Citroen, Renault-Nissan, Seat and Fiat as well as other partners in the component supply and commercial vehicle industries. The LWSF facilities, most of which are located in North Africa, also complement the Company's production network. Through this acquisition the Company already won a further development contract from carmakers PSA in 2008.

-The Company announced to acquire 50 percent of the shares in Daekyeung, a leading Korean producer of wiring systems. Daekyeung's existing customer base will give the Company direct access to key motor vehicle manufacturers such as GMDAT (General Motors Daewoo Auto & Technology), SsangYong Motors as well as Volvo Construction Equipment. The Company and Daekyeung already signed a joint venture agreement in 2007 on shared development of cable harnesses for the compact and small car class of customer General Motors. With this investment, the partners will place their existing collaboration on a lasting footing and intend to bid for new contracts from, among others, the South Korean motor vehicle industry. Daekyeung employs about 1,900 people and has production facilities in China. The business generated sales of about EUR 70 million in the 2007 financial year. The Company has set itself the goal of significantly increasing its business in high growth markets like China and Korea, and in the medium term of generating about 15 to 20 percent of its sales in Asia. (From a press release on Mar. 4, 2008).

Expansion of business in Russia
Russia is now a firm fixture in the Company's growth strategy. In 2008 the Company achieved a breakthrough in two respects:
-First the Company succeeded in obtaining an order from KAMAZ. KAMAZ will in the future source about 40% of the cable harness it needs from the Company. This is the basis on which the Company is planning to move into its own plant near the KAMAZ facility in Nebereshnye Clelny.
-Secondly, the Company took over the international wiring systems business of the Russian automotive component supplier Itelma. The Company moved into a new production facility for this business in Gordets, about 450 km southeast of Moscow. At first, the plant will produce cable harnesses for the Dacia Logan. Another order involving the wiring system for the Fiat Ducato also substantiates its strategy.

Outlook for the Wiring Systems division's business
-Sales relating to current projects will in 2009 track the trend in the automotive market.
-Various start-ups, especially in the small and compact car segment as well as in the lower to upper mid range, will counteract this decline.
-Among others, the Company will commence supply for the Dacia Sandero, Opel's new Astra and Zafira models, PSA's C2 and C3, the Mercedes E-Class as well as BMW's updated 5, 6 and 7 Series models.
-However, the earnings contribution will still be small during the start-up phase.


R&D Expenditure
(in million EUR) FY2008 FY2007 FY2006
Total 88.3 55.9 47.2

-In addition to the head office of the Wiring Systems division in Kitzingen, the Company has its development offices around the world. A new Engineering Center was set up Seoul, Korea, in the first quarter of 2007. The Company has further development centers in the United States, the United Kingdom, Slovakia, Tunisia and China.
The Intedis joint venture supports the Wiring systems division in the design and simulation of complex wiring system architectures. In the future, the Company's recently acquired R&D center in France with a sub-office in Morocco will also play a key role in the international network of the Company's competence centers.

Expansion of the component business
-In order to extend its vertical range of manufacture, the Wiring Systems division is continuing to systematically expand its business involving electric and electronic components. The Company is therefore highly focused on developing its products as well as broadening its range. The Components business unit already has succeeded in obtaining several orders from the car and commercial vehicle industry. As part of a large project, the Company prepared in 2008 for production in Romania of fuses and relay boxes developed in-house, with production itself commencing in 2009.

SAE 2008 World congress
What do you want us to see ?

- Hybrid type cables and data communications cables
i.e. DVD and infotainment applications.
Models the products (s) shown are installed into?
- Not installed into models because they sell to tier ones and tier twos. Examples of current customers are Lear and Yazaki.
Where the products shown are made (facilities)?
-Roth, Germany
-Cuauhtemoc, Mexico (State is Chihuhua)

Investment Activities

Capital Expenditure
(in million EUR ) FY2008 FY2007
Wire & Cable Solutions Division 53.1 48.0
Wiring Systems Division 93.6 37.7
Company's Total Capital Expenditure 336.1 132.6

Overseas Investments

-Through the year of FY2008, the Company expanded production facilities in China, Morocco, Tunisia and the Ukraine. At its own factory in Arab, Romania, the Company invested in plant for production of electrical components. In Naberezhnye Chelny (Tatarstan), Russia the Company prepared for production of wiring systems to supply KAMAZ. The upcoming supply for the Dacia Logan also involved capital investment. The Company acquired production lines for Russian subsidiary Lik Avto in Gorodets.

-In December 2008, the Company opened a new production facility in the Mexican state of Durango. The Durango facility is the Group's 3rd production facility in Mexico. The new facility will initially produce mainly wiring systems for commercial vehicle manufacturers based in the United States. By the end of 2009, the plant is to manufacture cable harnesses for commercial vehicle and passenger car industries. (From a press release on Dec 2, 2008)