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Foreword of the Management Board
The economic backdrop to Freudenberg Group business in 2003, a year in which the violent conflicts in the Middle East and the SARS epidemic in China had a severe impact, was broadly speaking even more difficult than the previous two years. Among the industrial sectors served by Freudenberg, the textile industry in the USA and Europe was severely hit by the effects of relocation, and the downturn in the construction industry continued. The automotive industry in Europe and North America reported a slight decrease, while automakers in the Far East registered a significant improvement. Overall, the mechanical engineering industry produced an average performance. The food retail trade showed no signs of growth momentum, either.
Against this unsatisfactory backdrop, the Freudenberg Group continued to focus on strengthening customer performance and expanding market positions through internal growth. Additionally, Freudenberg Nonwovens implemented a global restructuring process for production and sales in response to the far-reaching impact of textile industry relocation to the Far East.
With regard to portfolio restructuring, disinvestment was completed with the disposal of the remaining 49 percent interest in Technischer Handel Freudenberg (THF), and a series of strategic acquisitions was prepared (Burgmann and Chem-Trend group, completed in early 2004) or implemented (purchase of the second 50 percent of Freudenberg Politex Nonwovens, take-over of the US market leader O’Cedar under Chapter XI, purchase of the specialty lubricant retailer OKS of Munich).
The increase in sales from acquisitions which became effective in 2003 and internal growth could not offset the effects of deconsolidation and, more particularly, the serious impact of developments in the Euro/Dollar exchange rate; as a result, sales declined by just over 1 percent. Adjusted for these effects, sales rose by 3 percent. Consolidated profit totaled 93 million Euro, significantly lower than the previous year (137 million Euro), chiefly as a result of exchange rate effects, restructuring expenditure and upfront costs for the major acquisitions concluded in early 2004. Borrowing for these acquisitions secured in the fourth quarter of 2003 led to an increase in the balance sheet total; consequently, the share of partners’ equity declined by approximately 3 percent to 43 percent. As part of its annual review in summer 2003, Moody’s reaffirmed its A3 rating with a stable outlook assigned to Freudenberg.
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