A hundred-year balance Annual Report 2010 - Uzin Utz AG

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Risk Report Main risks Environment and sector risks The main overall economic risks for the Group are posed by general economic developments, and particularly those in the construction sector. Although the global economy and the German economy are on the upturn, risks must still be anticipated due to the continuing weak development of the construction industry. Public construction in Germany in particular cannot pull out of its downward trend because local authorities have no funds available. Europe, another main market, also presents risks. Continual reports by EU states with severe financial problems continue to give cause for concern in these regions. The same uncertainty also exists in other markets. By active dialogue with our customers and intensive internal analysis and research on the market environment, customer requirements and the competition, we can react in good time to new developments and the needs of the sector. Product risks The future development of the group depends to a great extent on developing innovative products and optimising existing formulations. Every effort is therefore being made to push ahead with development work and identify product requirements and trends in good time. High development costs and continual in-house developments are being devoted to this requirement. Any possible damages occurring are covered by comprehensive international insurance coverage, which also includes corresponding product liability insurance. Normal operating risks are covered by corresponding precautionary reserves. » In addition to the changing requirements of our customers, new laws are continually being passed, particularly relating to the chemicals sector. Due to the prohibition or the restricted use of certain chemicals or hazardous materials, it is essential for the Uzin Utz Group to develop new formulations in line with these requirements, while at the same time maintaining or even improving the product quality. Since 1st December 2010, under the regulations of REACH (Registration, Evaluation, Authorisation and Restriction of Chemicals), a notification requirement has been in force for importers of raw materials from non-EU countries if these import materials which are hazardous or subject to registration. » Due to the critical situation of various essential raw material markets, delivery bottlenecks have occurred, and continue to occur, with regard to their availability. It is therefore essential to identify corresponding substitute raw materials, in order to convert the product formulae, while still maintaining consistent quality. » In order to overcome these challenges with the optimum result and maximum product quality throughout the group at all times, a project was started in the year 2010 by the specialist departments of Quality Control and International Research & Development. The aim is to ensure that product groups which are produced at different locations within the group are produced worldwide to the same standards and the same quality. This is intended to reduce to the minimum the number of product faults throughout the group. Failure risks in the area of production and the main IT-supported processes In the production areas of the individual works, the likelihood of inefficient operation of production facilities is largely reduced by regular maintenance, fire safety and other precautionary measures. Corresponding insurance coverage has been taken out against damage caused by natural disasters and resulting stoppages. » The business and production processes, and the internal and external communication of the Uzin Utz Group are increasingly based on information technologies. A major fault, or even the failure of the global and regional business systems can lead to a loss of data and impairment of the business and production processes. The likelihood of failure of process-critical information systems is reduced to the minimum by corresponding technical, structural and organisational measures. Financial risks The level of financial risks is difficult to assess in the current situation. Due to the persisting uncertainties on the financial markets, sensible securitisation must be provided for sales which are subject to an exchange rate risk, while always weighing up the costs and benefits. The development of the currencies relevant for the Group is described in the “Revenue situation” section of this report. Possible future large exchange rate fluctuations continue to harbour a residual risk. » Even after the economic crisis is considered to have been overcome, the focus in the Group still lies on the permanent credit rating of customers. The great majority of receivables from customers are also covered by cre- 54
dit insurance. The optimisation of freely available funds is ensured by group-wide, strict claims management. » All major liabilities in favour of banks are basically financed in the long term with fixed interest rates or secured against interest rate change risks by an interest rate swap. » The main finance instruments used by the Uzin Utz Group include bank loans and current account overdrafts, financing-leasing agreements and liabilities from deliveries and services. The main purpose of these finance instruments is the financing of business activities. The Group has various financial assets, such as receivables from deliveries and services, funds and short-term deposits, which result directly from its business activities. The Uzin Utz Group also has a very low level of derivative finance instruments in the form of forward exchange transactions and an interest rate swap. The purpose of these finance instruments is to provide security against interest rate change risks resulting from the business activities of the Uzin Utz Group and its financing sources. Investment risks Risks resulting from major investments are assessed by standardised investment calculations, and must be approved by the Board of Uzin Utz AG. External consultants are also engaged for this purpose if necessary. Possible acquisitions are analysed with external support, assessed by the Board and approved by the Supervisory Board. Risks endangering the company’s existence None of the above risks currently endanger the company’s existence. There are at the moment no other identifiable risks that might endanger the company’s existence. Description of the risk management system The Group operates a system for the identification and control of present and future business and financial risks. This risk management system was implemented many years ago in the group. No major changes have been made to the system. This is nevertheless a living system, which in the course of continual improvement is subject to a permanent optimisation process. » The elements of the risk management system are −− the risk management, −− the risk controlling and −− the risk reporting. » These are all based on a number of individual evaluations, analyses, reports and project groups, which analyse individual processes and circumstances in detail according to the situation. The responsibility for this task lies with the responsible departmental or divisional manager of the relevant shareholding company. These report direct to the relevant director or board of the company, who in turn consult on all important matters with the Chief Financial Officer of Uzin Utz AG, with whom the overall responsibility lies. The “Central Controlling (CO)” Department of the parent company coordinates the risk management elements across the Group. Documents distributed to the Chief Financial Officer of Uzin Utz AG are submitted by him if necessary to the complete Board and the Supervisory Board of Uzin Utz AG and other circles. The complete risk management system is designed to identify and counteract risks endangering the existence of the company at an early stage, and to ensure the achievement of the business objectives. The principles, guidelines, processes and responsibilities of the internal control and risk management system are defined and established. The risk management system essentially covers the risk groups described above. In addition to individual risk management measures, we act in awareness of risks on the basis of safety-orientated, professional company management, with appropriate insurance cover and guidelines and instructions applicable across the company. » The highly controlling-orientated and proven cost management introduced in the past, as an integral component of controlling, whose importance is even greater under the existing conditions, will continue to support the philosophy of revenue-orientated development. » The statements in the sections “Financial situation” and “Financial risks” of this report apply for the area of financial instruments. The result and liquidity risks of the financial assets are also identified in the form of an early detection system. The main elements of this system consist of detailed monthly reporting on al major balance sheet and P&L positions, a quarterly risk management report, regular audit discussions on site with the shareholding companies, an Organisation Manual which is valid throughout the Group and mandatory, direct communications channels for the directors of the shareholding companies with the Board of Uzin Utz AG on all important matters. 55
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A hundred-year balance Annual Repor
Page 3: Investor Relations Overview The Sha
Page 6 and 7: Brief presentation of the Group Sin
Page 8 and 9: Values and substance Dear sharehold
Page 10 and 11: Striving for success and stability
Page 12 and 13: »» Were there also possible alter
Page 14 and 15: Dynamism and Sustainability “100
Page 16 and 17: Structure and Direction 1951 1952 1
Page 18 and 19: UZIN For more than 50 years the est
Page 20 and 21: Loyalty to the Location and Growth
Page 22: Wooded area near Heidenheim
Page 25 and 26: TRANs PA RENCY 1976 1977 1978 1979
Page 28 and 29: Adaptation and Synergy Learning fro
Page 30: Banks of the Danube near Elchingen
Page 33 and 34: Ex Pan 1996 Sion 1997 1998 1999 200
Page 36 and 37: Development and Earning Power Prepa
Page 38: Field between Erbach and Ulm
Page 42 and 43: Consolidated Financial Statement of
Page 44 and 45: Uzin Utz Aktiengesellschaft, Ulm (D
Page 46 and 47: Uzin Utz Aktiengesellschaft, Ulm Co
Page 48 and 49: Equity Holdings (figures according
Page 50 and 51: » Other essential requirements - p
Page 52 and 53: Situation of the Group* * (all figu
Page 56 and 57: Internal control and risk managemen
Page 58 and 59: the year 2010 was the real crisis y
Page 60 and 61: stone are convincing above all for
Page 62 and 63: for foot traffic and loading. Thank
Page 64 and 65: a complete laying materials system
Page 66 and 67: WOLFF brand The year 2010 also saw
Page 68 and 69: Existing branches The shareholding
Page 70: 2010 Dieselstrasse 3 D-89079 Ulm Ph
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