Press release: Business development of the MAHLE Group in the year 2006

Press release (short version) [PDF; 41 KB]
Press release(short version) [RTF; 1013 KB]

Press release (long version) [PDF; 107 KB]
Press release (long version [RTF; 1128 KB]

Presentation Business Development 2006 [PDF; 2000 KB]

MAHLE at a Glance—Business Year 2006 [PDF; 13 KB]

 

Stuttgart/Germany, April 26, 2007—MAHLE records further growth

 
Global automotive industry on course for further expansion
In 2006, the automotive industry was again able to benefit from the dynamic development of the global economy. The worldwide production of passenger cars and light commercial vehicles rose by 4.1 percent to 66.3 million units, primarily as a result of the higher demand in the BRIC countries (Brazil, Russia, India, and China). Unit sales figures for passenger cars increased by 6.6 percent to 42.9 million units, while light commercial vehicles remained at the previous year's level with 23.5 million units. The production of medium-weight and heavy commercial vehicles also developed more positively than expected at the beginning of the year, increasing by 10.5 percent to around 2.7 million units worldwide.

Sales
The MAHLE Group’s sales amounted to EUR 4,314 million, a rise of 4.7 percent in comparison with the previous year (EUR 4,122 million). The sales increase is primarily due to organic growth. This bears witness to the strong technological positioning of MAHLE in the global market, further increases in deliveries of large system environments, and, in particular, MAHLE's healthy presence in the growth markets of the automotive industry, especially in Asia. Considerable price reductions on some of our products were compensated for by gains of further market share in new strategic areas.

Although sales in Germany, which reached EUR 1,233 million, declined slightly in comparison with the previous year, sales rose in the rest of Europe, particularly in the Eastern European locations. While the sales generated and invoiced in Asia remained on the level of the previous year due to the significant devaluation of the Japanese yen, American sales could be increased by 13.6 percent to EUR 1,213 million.

Profit
The profit before tax grew by 7.3 percent from EUR 274.7 to 294.6 million. This improvement in profit could only be achieved by means of significant increases in productivity in all organizational areas of the Group, as it was necessary to compensate for some considerable adverse effects on profit. Besides more or less significant price reductions in all of the Group’s product divisions, the drastic rises in material prices in particular had to be counteracted by means of cost reductions and productivity increases.

The increase of 7.3 percent in the profit before tax was successfully converted into a rise of over 20 percent in the net income for the year (profit after tax).


Investments
With expenditure totaling EUR 264 million for new machinery, equipment, and buildings, the MAHLE Group once again invested significantly above the depreciation level of EUR 223 million in 2006. With this investment ratio of 6.6 percent of sales, MAHLE has once again significantly exceeded the average investment level of the automotive industry and automotive supply industry. This long-term, strategically oriented investment approach taken by the MAHLE Group demonstrates the Group’s long-term growth strategy, which is based on the latest production technologies and a sustained high level of investment in the Group’s seven globally oriented research and development centers.

Of the total investments in 2006, approximately EUR 100 million went toward Europe, thereof EUR 60 million toward the German locations, EUR 50 million toward the USA and Mexico, EUR 36 million toward the South American locations, and EUR 70 million toward the Asia/Pacific region.

Headcount development
As a result of the business expansion and the rise in sales, MAHLE had 1,184 more employees at the end of 2006 than at the end of 2005. As of December 31, 2006, MAHLE had a total of 38,603 employees.


Strategic acquisitions
In terms of product portfolio, we focus on the engine as well as the powertrain. In connection with this strategic objective, we have expanded our product portfolio significantly in recent years. Another important building block of our Group strategy is to be one of the three largest suppliers worldwide in every product group in our range, because the only way to fulfill the requirements of our customers is to achieve a certain size and a global presence. The acquisitions we have made in the first quarter of 2007 or for which we are currently still in negotiations, e.g., the engine parts division of Dana, the acquisition of the Argentinean valve manufacturer Edival, or the air intake modules business segment of Siemens VDO, all contribute to this aim: to achieve a global competitive position among the top three suppliers in the relevant product group and to improve the balance of our regional presence and customer portfolio.

Outlook for 2007
In 2007, we once again anticipate an increase of approximately 3 percent in worldwide production figures for passenger cars, while we expect worldwide truck production figures to remain stable.


MAHLE’s business development this year will be characterized by the following factors and necessities:

1. A further increase in the cost of raw materials relevant to MAHLE, which cannot be completely passed on to our customers.

2. Relocation of production to low cost countries, as a result of the further intensification of price pressure.

3. Fast, successful integration of the acquisition projects from the first half of 2007.

4. Moderate wage and salary adjustments, particularly at locations where labor costs are high.

5. Sales, profit, and balance sheet affected by exchange rate fluctuations of the US dollar, Japanese yen, and Brazilian real in relation to the euro.

Thanks to the strategic orientation of our acquisition strategy, we are now among the three largest suppliers on the global market in all major product groups. In the medium term, we are aiming for a sales volume that significantly exceeds EUR 5 billion or USD 6.7 billion. Our product portfolio remains focused on the combustion engine. In this area, we offer by far the broadest spectrum of products and services: many individual components, systems, complete engine assemblies, and engineering services. We will further increase our expenditure on R&D in the coming year, in order to further underpin our claim to technological leadership with innovative products.

Furthermore, we will maintain the policy of a high added value ratio and the associated high level of investment and capital expenditure, to give ourselves scope – through our own productivity increases – to be able to offer the prices required by the market.


We expect to achieve the following key figures in 2007:

Sales: approx. EUR 5 billion -> USD 6.7 billion

Investments: approx. EUR 350 million -> USD 475 million

Headcount (07/12/31): approx. 49,000

We anticipate a slight decline in operating profit for 2007 because, besides external market factors such as further increases in material prices, price reductions, and remuneration increases, restructuring and integration costs are planned in connection with the large acquisitions made in the first half of the year in order to safeguard the medium- and long-term synergy and profit potential.