Annual Report 2007 - Muehlhan AG

More documents

Recommendations

Info

30 despite the rapidly initiated and implemented reorganization program, MMi contributed a loss of Eur 3.0 million to consolidated net profit. during the renovation of a portion of the Golden Gate bridge by our subsidiary company CCC, significant difficulties arose in 2007, which – in our view – can be attributed primarily to intentionally false contractual information: on the one hand, the terms and conditions of the invitation to bid were incomplete with respect to a decisive point related to the scope of services. on the other hand, based on today’s knowledge, we are convinced that the seller and subsequent managing director of the company knowingly withheld essential information from us. We are currently engaged in a legal proceeding in the case with two opponents: in July of 2007, we sued our direct client, a joint venture between a large exchange-listed Japanese company and a medium-sized american company, for compensation for damages in the amount of uS$ 3.8 million and accounts receivable due of uS$ 2.5 million (overall uS$ 6.3 million) due to incomplete bidding documentation. to date, the client has acknowledged the latter only to the extent of uS$ 1.3 million, but initially retained it while making its own claims for compensation for damages. furthermore, he is making a claim for an additional uS$ 2.0 million without further explanation of the legal grounds, for which we have created no reserves for the lack of concrete terms. to date, we have already been successful in two proceedings with regard to the determination of legal jurisdiction. We expect that the proceedings will be decided in our favour in the coming months. in addition, we are reserving the right to sue the former shareholder and managing director for compensation for damages as a result of false contractual representations to the extent to which we may be unsuccessful in the proceedings mentioned above against the first opponent, despite positive expectations. for this reason, we are currently retaining the second and final purchase price instalment of uS$ 1 million still outstanding on the purchase price resulting from the corporate ac quisition. Even though we assume that the legal dispute will be decided in our favour, we have allowed for a total of Eur 2.9 million as losses for the project. together with attorneys’ fees of Eur 0.2 million incurred to date, the project therefore reduces consolidated net profit by Eur 3.1 million. at our uS subsidiary company Meaux, which is active in the offshore sector, as expected there was strong competition for customers and employees, because a managing director who left at the end of 2006 had founded a competing company during his employment by Meaux. a legal proceeding is pending here due to actions in bad faith. the reduction in price resulting from the situation has caused Meaux to add a loss of Eur 0.7 million to consolidated net income. in the meantime, we were partly able to win back lost customers such that that we are confident that our competitive situation will improve significantly in the coming months. Restructuring program in the USA leads to cost savings of EUR 2.5 million in 2008 as a result of the lack of sales successes and the existing overcapacity, a comprehensive restructuring program was started in June. in the course of the restructuring program, the continental management level was abolished and administrative expenses were significantly reduced. the program has since been completed and will result in cost savings of more than Eur 2.5 million starting in 2008. MMi (formerly Sipco) now has a structure whose costs are covered by existing work. if the remaining work decreases even more in the future, a closure of the entire shipyard operation would be considered. the closure costs arising as a result, however, can be estimated as being insignificant. Delays in Oil & Gas Offshore business inhibited overall business development the formation of a contract for the maintenance on three offshore platforms by our subsidiary company MGb as described under sales trends led to the inability to recover full costs. in the year 2006 we were successful in winning an international oil company as a new customer in the northern North Sea territory, which held out the prospect of a contract volume of Eur 13.0 million distributed over 24 months. during the course of additional negotiations, the volume was rapidly reduced to approximately Eur 8.0 million pending further notice, such that the productivity and profitability of the contract was significantly impaired, in no small part due to performance rendered in advance such as training programs, and the failure to make of use µ-jet technologies.
ManaGeMent divisions share group ManageMent report Group Consolidated FinanCial stateMents Consequently, agreements were made for 2008 and the subsequent years, which provide for the fair acceptance of additional costs, and which includes an expansion of the business activity at the same time. as such, the conditions for favourable business performance in 2008 exist. Unprofitable business rejected in Norway the Ship Newbuilding contracts at a Norwegian shipyard, which have been the source of losses since the end of 2006, were terminated by the shipyard during the first quarter of 2007 such that our subsidiary company Muehlhan Norge aS (MNo) lost about half of its sales in comparison to 2006. in this context, legal claims were made by the shipyard within the framework of warranty claims. on the other hand, our subsidiary company has claims of nearly the same amount for services provided in the year 2006, as well as for demobilization costs to which it is contrac tually entitled. Middle East subsidiary company MDQ breaks even in the fourth quarter in the past year, our subsidiary company Muehlhan dehan Qatar W.l.l. (MdQ) was able to establish itself successfully at the world’s largest industrial construction site ras laffan, where currently several gas liquefaction facilities are being built. MdQ performs surface protection work there on tanks, pipelines and on production facilities. project delays on behalf of our customers led to idle periods, which the new founded subsidiary was not able to fill up with additional contracts. Since the commencement of other projects in November 2007, we have been able to avoid downtimes through appropriate production control. despite the initial losses, we consider our entry into the market in Qatar successful. MdQ was able to establish itself in the market successfully, now has a solid customer base, and in doing so offers considerable growth potential within the approximately 80-square-kilometre industrial region being developed. in the last quarter, MdQ provided a positive contribution to the Group’s earnings for the first time. all in all, there was a loss of Eur 0.3 million during the first year of operations. Currency exchange rate fluctuations foreign currency exchange losses due to the strong Euro reduced the Group’s earnings by a total of Eur 2.1 million. the major currencies in which the losses occurred at the Group level are uS$ (Eur 1.0 million), united arab Emirates dirham and Qatari rial (Eur 0.4 million), and british pounds (Eur 0.3 million). With a revised financing structure in the Group, we will be able to significantly reduce the effects of future currency exchange rate fluctuations on the income statement starting in 2008. Sustainable positive development outside of the USA the decreasing effects on sales are offset by a series of positive effects, which caused revenues of Eur 196.1 million to move slightly above last year’s range, without taking into consideration the effects of consolidation (initial consolidation effect for CCC of nine months and for MCN of six months). the main effects were • continued strong growth in the European Ship Newbuilding business • increasing Ship Repair business at nearly all of our subsidiary companies in Europe • robustly growing wind turbine business, which continues to add earnings potential through the expansion of production capacity European newbuilding shipyards with strong order backlog backlogs for the European newbuilding shipyards are at their historic highs. Some capacities are booked partially through 2012. New capacities are developing, especially in southeast Europe. However, shipyard capacities are being expanded even in northern Europe, particularly in specialty shipbuilding. as a result of the many years of positive collaboration and close integration into the production processes of the shipyards, we assume that we will continue to profit from this development in the coming years. 31
Page 1 and 2: Annual Report 2007
Page 3 and 4: The Group is represented locally in
Page 5 and 6: Content 2 ManageMent 2 Foreword 5 E
Page 7 and 8: ManageMent divisions share Group Ma
Page 9 and 10: Executive Bodies executive board Dr
Page 19 and 20: One is successful not primarily as
Page 21 and 22: Continued and consistently good bus
Page 23 and 24: ManaGeMent divisions share Group Ma
Page 25 and 26: The marine markets are interconnect
Page 29 and 30: In our industry segments, a technol
Page 31 and 32: ManaGeMent divisions share group Ma
Page 33: ManaGeMent divisions share group Ma
Page 37 and 38: We issued a letter of credit for uS
Page 53 and 54: Retained earnings Equity Minority i
Page 63 and 64: 3. FINANCIAL ASSETS ManaGeMent divi
Page 65 and 66: sand (previous year: Eur 13,053 tho
Page 71 and 72: other provisions developed as follo
Page 73 and 74: eakdown by divisions: ManaGeMent di
Page 79 and 80: Statement of the Auditors´ Report
Page 81 and 82: ussia Muehlhan Morflot OOO 198035 S
Page 83 and 84: Contacts and Financial Calendar mue

Annual Report 2007 - Muehlhan AG

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?