Consolidated Financial Statements - L. Possehl & Co. mbH
Consolidated Financial Statements - L. Possehl & Co. mbH
Consolidated Financial Statements - L. Possehl & Co. mbH
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Annual Report 2005<br />
HEALTHY GROWTH –<br />
Profi table and Robust
At a glance<br />
L. <strong>Possehl</strong> & <strong>Co</strong>. <strong>mbH</strong> is a management holding company based in Lübeck, Germany. Under our leadership, there<br />
were approximately 4,300 people employed worldwide during the reporting period, working in about 50 various<br />
companies toward the joint success of the Group. Our subsidiaries are divided into three core business segments:<br />
Production, Trading and Services. They are each extremely independent in their market operations. In 2005, the<br />
Group achieved annual sales of € 809 million, with profi t from ordinary operations totaling € 36 million.<br />
Key Figures<br />
2001 2002 2003 2004 2005<br />
Earnings<br />
Sales € million 1,084 1,076 1,016 695 809<br />
International € million 655 619 436 474 565<br />
Germany € million 429 456 580 221 244<br />
Result from ordinary operations € million -6 28 9 22 36<br />
<strong><strong>Co</strong>nsolidated</strong> net profi t € million -34 21 7 17 26<br />
Dividend € million - 5 3 5 5<br />
EBIT ratio % -1.9 3.4 2.6 3.9 5.3<br />
Return on equity before taxes % -14.0 17.2 10.8 13.3 20.6<br />
Balance sheet<br />
Balance sheet total € million 541 499 493 442 533<br />
Fixed assets € million 190 172 157 147 150<br />
Capital expenditures € million 39 25 39 37 24<br />
Depreciation € million 57 27 31 18 19<br />
Cash and cash equivalents € million 13 12 10 45 57<br />
Other current assets € million 331 307 321 249 324<br />
Shareholders’ equity € million 187 184 174 182 202<br />
Equity ratio % 34.6 36.9 35.3 41.1 37.9<br />
<strong>Financial</strong> data<br />
Net debt € million 118 93 103 40 35<br />
Gearing (net debt/equity) % 63.1 50.5 59.2 22.2 17.3<br />
Employees<br />
Total number of employees Ø 4,578 4,281 4,373 3,659 4,267<br />
Germany Ø 1,882 1,890 1,815 789 1,190<br />
International Ø 2,696 2,391 2,558 2,870 3,077
One of our most critical strengths is our company composition:<br />
We are focused when it comes to the various industries<br />
and diversifi ed in our corporate portfolio.<br />
Production<br />
Our business division Production is comprised<br />
of experienced industrial companies<br />
whose efforts are focused on the production<br />
of promising products for the future.<br />
The special characteristics of these companies<br />
include a high level of specialization<br />
as well as particular niche know-how. Our<br />
customers stem from the areas of trade,<br />
craft and the processing industry.<br />
Precious Metals Processing<br />
Heimerle – Meule G<strong>mbH</strong>, Pforzheim<br />
Electronics<br />
<strong>Possehl</strong> Electronics N.V.,<br />
‘s-Hertogenbosch (Netherlands)<br />
Elastomer-Processing<br />
Harburg-Freudenberger Maschinenbau<br />
G<strong>mbH</strong>, Hamburg<br />
Special-Purpose <strong>Co</strong>nstruction<br />
<strong>Possehl</strong> Spezialbau G<strong>mbH</strong>, Wiesbaden<br />
Textile Finishing Systems*<br />
A. Monforts Textilmaschinen G<strong>mbH</strong> & <strong>Co</strong>.<br />
KG, Mönchengladbach<br />
Cleaning Machines*<br />
Hako Holding G<strong>mbH</strong> & <strong>Co</strong>. KG,<br />
Bad Oldesloe<br />
2005 2004<br />
Sales 459.8 326.6<br />
EBT<br />
Capital<br />
29.0 13.8<br />
expenditures 15.6 16.0<br />
Employees 3,914 3,284<br />
* since 2006<br />
Our Group<br />
Trading<br />
Taking center stage in the Trading business<br />
division is International Trading, which is<br />
comprised of goods for both industry and<br />
the trades across the entire globe. This<br />
business segment is based on many years<br />
of experience coupled with a network that<br />
has grown and developed from within.<br />
Trading is the origin of <strong>Possehl</strong>’s business<br />
activities.<br />
International Trading<br />
<strong>Possehl</strong> Erzkontor G<strong>mbH</strong>, Lübeck<br />
<strong>Possehl</strong> Inc., Park Ridge, New Jersey (USA)<br />
2005 2004<br />
Sales 338.9 359.2<br />
EBT<br />
Capital<br />
11.7 13.2<br />
expenditures 1.3 2.0<br />
Employees 238 256<br />
L. <strong>Possehl</strong> & <strong>Co</strong>. <strong>mbH</strong><br />
Services<br />
April 2005<br />
Acquisition of Harburg-Freudenberger<br />
Maschinenbau G<strong>mbH</strong>, Hamburg<br />
Within the Services business segment, we<br />
gear our focus on service areas that augment<br />
our portfolio in a meaningful way.<br />
Locally we offer services in the area of<br />
environmental protection and outside of<br />
Germany we offer services in the areas<br />
of insurance and freighting services for<br />
commercial undertakings, shipping companies,<br />
shipyards and freight forwarders,<br />
to name a few.<br />
Environmental Protection<br />
<strong>Possehl</strong> Umweltschutz G<strong>mbH</strong>, Lübeck<br />
Broker Activities<br />
Lubeca Versicherungskontor G<strong>mbH</strong>,<br />
Lübeck<br />
Teutonia Fracht- und Assekuranzkontor<br />
G<strong>mbH</strong>, Lübeck<br />
2005 2004<br />
Sales 10.1 9.3<br />
EBT<br />
Capital<br />
1.4 1.3<br />
expenditures 0.3 0.3<br />
Employees 70 70
Investments<br />
By means of our Investments business segment,<br />
we acquire and hold fi nancial investments.<br />
Prerequisites for being included<br />
in our range of participating interests are<br />
that a company be profi table over the long<br />
term and that its business activities fi t into<br />
our portfolio.<br />
Norddeutsche Affi nerie AG, Hamburg<br />
Equity interest: 10 %<br />
o.m.t. Oberfl ächen- und Materialtechnologie<br />
G<strong>mbH</strong> & <strong>Co</strong>. KG, Lübeck<br />
Equity interest: 25 %<br />
Holsteiner Humus und Erden G<strong>mbH</strong>,<br />
Lübeck<br />
Equity interest: 33.33 %<br />
Milestones in 2005/2006<br />
January 2006 January 2006 February 2006 April 2006<br />
Disposal of a 10%<br />
share in Süd-Chemie<br />
AG, Munich<br />
Acquisition of a majority share<br />
in Hako Holding G<strong>mbH</strong> & <strong>Co</strong>. KG,<br />
Bad Oldesloe<br />
Acquisition of the<br />
remaining shares in<br />
<strong>Possehl</strong> Electronics<br />
N.V., ‘s-Hertogenbosch,<br />
Netherlands<br />
Sales by business segment<br />
in € million<br />
338.9<br />
■ Services<br />
■ Trading<br />
■ Production<br />
Acquisition of A. Monforts<br />
Textilmaschinen G<strong>mbH</strong> & <strong>Co</strong>. KG,<br />
Mönchengladbach<br />
10.0<br />
459.8
Table of <strong>Co</strong>ntents<br />
Letter from the Executive Board 2<br />
<strong>Co</strong>mpany Boards 4<br />
Letter from the Advisory <strong>Co</strong>uncil 5<br />
HEALTHY GROWTH – Profi table and Robust 7<br />
Group Management Report 12<br />
Overview 12<br />
Group structure and business activities 12<br />
General economic conditions and course of business 16<br />
Net assets, earnings and fi nancial position 16<br />
Employees 23<br />
Research and development 24<br />
Risk management 25<br />
Supplementary report and outlook 26<br />
<strong><strong>Co</strong>nsolidated</strong> <strong>Financial</strong> <strong>Statements</strong> 28<br />
Auditors’ Report 49<br />
Overview of Participations 50<br />
<strong>Co</strong>ntacts and Imprint<br />
1
2<br />
Uwe Lüders<br />
Dr Egon Rudolph<br />
Letter from the Executive Board<br />
Letter from the Executive Board<br />
DEAR BUSINESS PARTNERS, DEAR READERS,<br />
We can once again look back on a successful fi scal year:<br />
earnings before taxes jumped by 65 % to € 36.3<br />
million, with sales growth of 16 %. These fi gures<br />
prove that we are on a profi table course of<br />
growth. This satisfactory trend is the result<br />
of the fi rst-time consolidation of the world<br />
market leader for tire production systems,<br />
Harburg-Freudenberger, which we acquired<br />
in April of 2005, as well as from the consid-<br />
erable increase in productivity and important<br />
structural improvements in the existing<br />
business segments.<br />
Because of this good business development,<br />
the holding company L. <strong>Possehl</strong> &<br />
<strong>Co</strong>. <strong>mbH</strong> can pay out a dividend of € 5<br />
million to the <strong>Possehl</strong> Stiftung (<strong>Possehl</strong><br />
Foundation) from its € 9.5 million net profi t<br />
for the year 2005.<br />
All business divisions of the <strong>Possehl</strong> Group achieved<br />
positive results in fi scal year 2005. The Electronics and<br />
International Trading business divisions continue to be the<br />
main contributors to these good results. Despite the fi nancing of<br />
the acquisition of Harburg-Freudenberger, we were able to reduce the net<br />
debt from € 40.4 million to the current € 35.5 million. This gives us an extremely solid<br />
balance sheet again in 2005.<br />
Overall, we were able to fully realize the objectives we had planned for the year under review.<br />
We are also on the targeted growth course with respect to the budgeted data for the current<br />
fi scal year.<br />
In addition to the acquisition of Harburg-Freudenberger, we also acquired the remaining 19.9 % interest in <strong>Possehl</strong><br />
Electronics N.V. for our Electronics business division from our Hong Kong-Chinese partner, effective at the beginning<br />
of the year 2006. Due to the exclusive, operational control of this business division, growth opportunities<br />
for other companies within our Group are also evolving, as is the possibility of using the advantages provided by<br />
an Asian location.<br />
Also effective at the beginning of the year 2006, we acquired operational control of the international cleaning<br />
and sweeping machine specialist Hako Holding G<strong>mbH</strong> & <strong>Co</strong>. KG in Bad Oldesloe through a majority interest. With<br />
this acquisition of shares we were able to establish a new business division, further strengthening the Group.
With sales of approximately € 350 million and 2,100 employees, Hako is one of the worldwide leading<br />
manufacturers of machines for indoor and outdoor cleaning, as well as for property maintenance.<br />
The company provides high-quality, economically effi cient solutions for the professional cleaning and<br />
preservation of indoor and outdoor surfaces. The strengths of this company, which was previously<br />
family-owned for over 50 years, lie in its custom-made, innovative quality products and its closemeshed<br />
sales and service network.<br />
With the disposal of our shares in Süd-Chemie AG carried out in early 2006, we took advantage of<br />
the opportunity to further improve our fi nancial strength. The fi nancial resources from the sale of<br />
our minority interest in Süd-Chemie expand our scope for the additional purchase of other business<br />
divisions.<br />
By means of the acquisition of A. Monforts Textilmaschinen G<strong>mbH</strong> & <strong>Co</strong>. KG in Mönchengladbach on<br />
April 1, 2006, we reaffi rm our growth objectives for the current fi scal year as well. The Monforts<br />
Textilmaschinen Group, with its 375 employees, last achieved sales of approximately € 110 million<br />
and is a world market and technology leader in textile fi nishing systems in the high-quality segment.<br />
The tradition-rich family undertaking, founded in 1884, manufactures textile machines and systems<br />
for the processing and coating of woven and knitted goods and is the most important manufacturer,<br />
offering virtually a complete vertical range of manufacture in the fi eld of textile fi nishing. This<br />
Mönchengladbach-based company is internationally represented through its production locations in<br />
Austria (Wolkersdorf – St. Stephan), Switzerland (Oberaach) and via a joint venture in China (Hong<br />
Kong, Shenzhen). Its percentage of exports is over 90 %. With respect to worldwide sales, the company<br />
is focusing on the growth markets of Asia.<br />
In 2006, the <strong>Possehl</strong> Group will grow in size, with sales of over € 1.2 billion and more than<br />
6,700 employees. It will thereby further increase its strength and robustness. We will use this strong<br />
foundation to increase our corporate value on a sustained basis.<br />
Our strategic orientation envisions <strong>Possehl</strong> as a suitable successor owner or new owner of<br />
medium-sized companies. When competing with private equity investors, we successfully set<br />
ourselves apart by offering family businesses a long-term, solidly laid-out and secure view toward<br />
the future following acquisition. To further strengthen the <strong>Possehl</strong> Group, we will continue with our<br />
policy of growth in 2006. In order to accomplish this, we will continue to seek out company owners<br />
who wish to transfer their enterprises over to safe and responsible hands.<br />
Yours sincerely,<br />
Uwe Lüders Dr Egon Rudolph<br />
3
4<br />
<strong>Co</strong>mpany Boards<br />
EXECUTIVE BOARD<br />
Uwe Lüders<br />
Lübeck, Chairman<br />
Dr Egon Rudolph<br />
Bad Schwartau<br />
since May 19, 2005<br />
Dr Fred Wilsdorf<br />
Hamburg<br />
until March 31, 2006<br />
SUPERVISORY BOARD<br />
Dr Helmuth Pfeifer<br />
Lübeck, Chairman<br />
Attorney and Notary Public<br />
Gerd Rischau<br />
Lübeck, Deputy Chairman<br />
Senator (ret.)<br />
Volker Fritz *<br />
Gutenberg<br />
Applications engineer<br />
* elected by employees<br />
<strong>Co</strong>mpany Boards | Letter from the Advisory <strong>Co</strong>uncil<br />
ADVISORY COUNCIL<br />
Dr Lutz Peters<br />
Hamburg, Chairman<br />
CEO of AOH Nahrungsmittel G<strong>mbH</strong> & <strong>Co</strong>. KG<br />
Dr Helmuth Pfeifer<br />
Lübeck, Deputy Chairman<br />
Attorney and Notary Public<br />
Dr Stephan Bartelt<br />
Lübeck<br />
Businessman<br />
Dr Manfred Biermann<br />
Lübeck<br />
Certifi ed Public Accountant<br />
Theo Dräger<br />
Lübeck<br />
Chairman of the Supervisory Board of Dräger Medical AG & <strong>Co</strong>. KG<br />
Gerd Rischau<br />
Lübeck, until April 25, 2005<br />
Senator (ret.)<br />
Dr Werner Marnette<br />
Hollenstedt, since April 25, 2005<br />
Chairman of the Executive Board of Norddeutsche Affi nerie AG<br />
Martin Salzmann<br />
Lübeck<br />
Entrepreneur
Dr Lutz Peters<br />
Letter from the Advisory <strong>Co</strong>uncil<br />
LADIES AND GENTLEMEN,<br />
The Executive Board of L. <strong>Possehl</strong> & <strong>Co</strong>. <strong>mbH</strong> has kept the Advisory <strong>Co</strong>uncil informed on a regular basis during<br />
fi scal year 2005 regarding the course of business, the earnings and fi nancial position of the company, investment<br />
activities and possible corporate acquisitions.<br />
The Advisory <strong>Co</strong>uncil has advised the Executive Board and performed the duties incumbent<br />
upon it in its role as the corporate supervisory board. The Advisory <strong>Co</strong>uncil has been<br />
comprehensively informed about important business transactions within the scope of the<br />
regular reporting procedures as well as outside of the advisory council meetings. A timely<br />
and detailed relaying of information regarding the progress of business as well as the<br />
economic position of the company and the individual Group companies was thereby<br />
assured. The chairman of the Advisory <strong>Co</strong>uncil also remained in close contact with the<br />
Chairman of the Executive Board of the company.<br />
The Advisory <strong>Co</strong>uncil convened for four ordinary and two extraordinary meetings in fi scal<br />
year 2005. During these meetings, the Advisory <strong>Co</strong>uncil discussed in detail the company<br />
situation, the completed and pending corporate purchases and disposals, the consolidated<br />
fi nancial statements of the company and the corporate strategy. The Advisory <strong>Co</strong>uncil reviewed all important individual<br />
business transactions and made decisions regarding any events brought forth that required its approval.<br />
Of particular signifi cance were the discussions and approvals regarding the acquisition of the company currently<br />
trading under the name of Harburg-Freudenberger Maschinenbau G<strong>mbH</strong>, the majority acquisition of Hako Holding<br />
G<strong>mbH</strong> & <strong>Co</strong>. KG and the acquisition of the remaining 19.9 % of shares in <strong>Possehl</strong> Electronics N.V. Detailed advice<br />
was also provided regarding the disposal of the 10 % share in Süd-Chemie AG and the management buy-out of<br />
Bewehrungstechnik Pätau-<strong>Possehl</strong> G<strong>mbH</strong>.<br />
The annual fi nancial statements and the consolidated fi nancial statements were prepared according to the<br />
principles of the German <strong>Co</strong>mmercial <strong>Co</strong>de (HGB). BDO Deutsche Warentreuhand Aktiengesellschaft,<br />
Wirtschafts prüfungsgesellschaft, Hamburg, audited the individual and consolidated fi nancial statements of<br />
L. <strong>Possehl</strong> & <strong>Co</strong>. <strong>mbH</strong>, the management report and group management report and provided them each with an<br />
unqualifi ed auditors’ certifi cate.<br />
In its meeting of May 4, 2006, in the presence of the auditors, the Advisory <strong>Co</strong>uncil provided detailed advice as<br />
to the auditors’ report as well as the main points and results of the audit. The Advisory <strong>Co</strong>uncil agreed with the<br />
results of the audit without any objections.<br />
5
6<br />
In agreement with the Supervisory Board of the company, the Advisory <strong>Co</strong>uncil approved the<br />
annual fi nancial statements and the consolidated fi nancial statements and recommends that the<br />
share holder approve the annual fi nancial statements. The Advisory <strong>Co</strong>uncil agrees with the Executive<br />
Board’s proposal on the appropriation of profi ts.<br />
Dr Egon Rudolph has been appointed as a member of the Executive Board, effective as of May 19,<br />
2005. On March 31, 2006 Dr Fred Wilsdorf stepped down from the Executive Board of L. <strong>Possehl</strong> &<br />
<strong>Co</strong>. <strong>mbH</strong>. The Advisory <strong>Co</strong>uncil thanks him for his contributions.<br />
Mr. Senator Gerd Rischau (ret.) stepped down from the Advisory <strong>Co</strong>uncil of the company as of<br />
April 25, 2005. The Advisory <strong>Co</strong>uncil would like to thank Mr. Rischau for the work he performed<br />
while on this board. The shareholder has appointed Dr Werner Marnette as the new member of the<br />
Advisory <strong>Co</strong>uncil, effective as of April 25, 2005.<br />
The Advisory <strong>Co</strong>uncil would like to thank the Executive Board, the managing directors of the Group<br />
companies and all employees of the <strong>Possehl</strong> Group for their dedicated and successful service during<br />
the past fi scal year.<br />
Lübeck, May 4, 2006<br />
The Advisory <strong>Co</strong>uncil<br />
Dr Lutz Peters<br />
Chairman<br />
Letter from the Advisory <strong>Co</strong>uncil | HEALTHY GROWTH
HEALTHY<br />
GROWTH –<br />
Profi table and Robust<br />
<strong>Possehl</strong> has already evolved very successfully for more than six generations under this motto.<br />
This guideline helps us through turbulent times such as these, in particular.<br />
Following the initial corporate acquisitions of the past year and in the fi rst few months of the<br />
current year, we are continuing to be on the lookout for new partners – partners that fi t with us,<br />
are capable and have a solid foundation, a good market position and a positive image. They stem<br />
from mature industries with robust structures and ideally render a service that is diffi cult to<br />
replace. We are open-minded and look forward to having new members join our Group.<br />
We promise all of our companies that they will have the capacity to grow, and with a healthy<br />
corporate perspective. We grow because our companies develop successfully. We preserve their<br />
corporate scope for development and support them on a strategic and fi nancial level. Our com-<br />
panies grow because they are able to concentrate on that which sets them apart: achieving good<br />
performance, on the basis of their particular know-how and their many years of experience.<br />
7
Our goal is to achieve optimum profi t, not maximum profi t.<br />
We manage our business according to healthy, operational income<br />
objectives. We want to generate a solid dividend each year<br />
along with appropriate economic means for fi nancing incomeoriented<br />
growth. Our companies come from production, trading<br />
and special services areas. What they have in common is the fact<br />
that they operate in robust market structures, their business is<br />
clearly defi nable and their success is not speculative.<br />
Growing –<br />
healthily!
<strong>Co</strong>ntinuing to develop –<br />
for the long term!<br />
Quality is the central basis for success. We are interested in longterm<br />
success. That is why we make sure that the business of our<br />
companies is based on a strong foundation – and that their business<br />
has prospects for the long run as well. We also ensure that<br />
our companies keep these prospects in mind.<br />
Truly solid success is reached through steadiness and planning,<br />
not by chance. When we incorporate a new company into our<br />
Group, we have not only thoroughly checked it out beforehand<br />
to ensure that it will fi t with us. We have also scoped out the<br />
path that it will embark upon with us. We want our companies to<br />
develop over the long term and be successful.
Being successful –<br />
together!<br />
If the parts win, the sum of the parts wins even more. A company that is globally<br />
positioned with its group of companies needs a solid link to hold the various parts<br />
together and provide orientation. As a holding company, we have a key role in this<br />
regard. We have developed a sustainable philosophy over the past several generations,<br />
which we carry on in our companies. We support our companies by providing<br />
them with security; and we promote them by challenging their entrepreneurial<br />
spirit. As a holding company, we thrive on strong and successful companies.<br />
And vice versa: our companies profi t from our strong holding capability.
Mastering challenges –<br />
with strength from within<br />
Our companies are strong. But they, too, must stand up to strong competition in<br />
their business on a daily basis. They draw on their long-standing experience and<br />
special know-how to accomplish this. As a result, their products and services are<br />
excellent across the board. The particular strength of our companies lies in the<br />
fact that their products and services are unique and not easy to come by from the<br />
competition.<br />
As a strategic management holding company, we carve out objectives and routes<br />
together with our companies. The companies themselves then set out on these<br />
different routes – operating largely under their own responsibility. We can depend<br />
on our companies! The reason for this is that they have outstanding executives in<br />
the top positions, who are very familiar with their market and its challenges. As the<br />
holding company, we maintain the required closeness by means of fi rm fi nancial<br />
management and a regular system of reporting. We can therefore head off a crisis<br />
at an early stage.
12<br />
Overview 12<br />
Group structure and business activities 12<br />
General economic conditions and course of business 16<br />
Net assets, earnings and fi nancial position 16<br />
Employees 23<br />
Research and development 24<br />
Risk management 25<br />
Supplementary report and outlook 26<br />
Overview | Group structure and business activities<br />
Group Management Report<br />
OVERVIEW<br />
<strong>Possehl</strong> grows and increases earnings<br />
Fiscal year 2005 was a successful one for the <strong>Possehl</strong> Group. Following<br />
a decline in the previous year, sales revenues in the<br />
reporting period were able to advance by double digits to<br />
€ 808.7 million. The Group net profi t for the year also<br />
increased signifi cantly by € 9.6 million to € 26.5<br />
million. This positive development pertains to<br />
virtually all Group divisions. The successful acquisition<br />
of the Harburg-Freudenberger Group<br />
on April 1, 2005 also contributed considerably<br />
to the positive sales and earnings trend.<br />
All operating business divisions<br />
developing positively<br />
Following the extensive portfolio changes<br />
made over the last several years, we were<br />
back in the black for all of the operating<br />
business divisions of our Group in fi scal<br />
year 2005.<br />
Growth trend continues as year<br />
commences<br />
The high level of liquid funds on hand and the<br />
good cash fl ow enable us, in addition to internal,<br />
organic growth, to also grow by means of further<br />
acquisitions. Important steps were taken in this direction<br />
at the beginning of the year 2006 through taking over a<br />
majority interest in the Hako Group and through the acquisition of the<br />
Monforts Textilmaschinen Group.<br />
GROUP STRUCTURE AND BUSINESS ACTIVITIES<br />
The Group structure is divided into four business segments<br />
L. <strong>Possehl</strong> & <strong>Co</strong>. <strong>mbH</strong> is the managing holding company of the operational<br />
companies that belong to the <strong>Possehl</strong> Group. The <strong>Possehl</strong> Group is involved in the<br />
business segments of Production, Trading, Services and in the management of<br />
investments. The following summary provides an overview of the individual business<br />
segments in the reporting year:
PRODUCTION BUSINESS SEGMENT<br />
The Production business segment includes the four business divisions<br />
Precious Metals Processing, Electronics, Elastomer-Processing and<br />
Special-Purpose <strong>Co</strong>nstruction.<br />
Precious Metals Processing: Heimerle + Meule is a full-service provider<br />
for the recycling of precious metals, in particular gold, silver and<br />
platinum. The reclaimed materials are further processed into semi-fi nished<br />
products, salts and alloys. Customers include the jewelry industry,<br />
automobile suppliers, the electric and electronics industries and<br />
dental companies.<br />
The semi-fi nished products are provided to the jewelry industry in the<br />
form of wires, bands, tubes and molded ring blanks. The range of services<br />
is augmented by small electroplating devices, electroplating baths<br />
and services in decorative commercial electroplating. The dental division<br />
supplies dentists and dental laboratories with precious metal dental<br />
alloys, modern veneered ceramics and innovative dental devices.<br />
<strong>Co</strong>ntact materials in various shapes are manufactured in Pforzheim for<br />
companies involved in electrical engineering. Bands and drum goods<br />
can be commercially electroplated in a high-performance electroplating<br />
process.<br />
L. <strong>Possehl</strong> & <strong>Co</strong>. <strong>mbH</strong><br />
Production Trading Services Investments<br />
Precious Metals Processing<br />
Electronics<br />
Elastomer-Processing<br />
Special-Purpose <strong>Co</strong>nstruction<br />
International Trading<br />
Environmental Protection<br />
Broker Activities<br />
Electronics: this business division and the companies within it specialize<br />
in the production of lead frames. The focus of activities is in Asia<br />
– China, Malaysia and Singapore.<br />
Lead frames are primarily copper-based, multi-channel conductor and<br />
carrier units to which silicon chips are attached. As an integrated lead<br />
frame manufacturer, <strong>Possehl</strong> Electronics is taking over the stamping<br />
and etching production of the copper elements, as well as the subsequent<br />
electroplate coating and special mounting. The scope of products<br />
ranges from the low-channel discrete components, which are used<br />
for individual transistors or light-emitting diodes, to power lead frames,<br />
which must meet particularly high thermal demands, to lead frames<br />
for integrated circuits, as used in mobile telephones, motor vehicles or<br />
computers, for example.<br />
<strong>Possehl</strong> Electronics has already achieved a large market share with<br />
respect to European customers. But even the Asian growth markets<br />
– primarily China – are continuing to take on more importance. With<br />
its operating companies in Europe, Asia and North America, <strong>Possehl</strong><br />
Electronics is now number fi ve among the globally active producers and<br />
providers of lead frames for the semiconductor industry. The two North<br />
American sites are also among the leading providers of copper-based<br />
plug connections.<br />
Elastomer-Processing: The Harburg-Freudenberger Group is the<br />
global market leader for tire production systems. With its 150-year tradition,<br />
this company is comprised of three divisions, specifi cally natural<br />
rubber, rubber compound and edible oil technology.<br />
13
14<br />
Harburg-Freudenberger provides the rubber and natural rubber processing<br />
industry with an extensive range of machinery and know-how for all<br />
of the essential production stages, from raw material preparation to<br />
natural rubber processing to vulcanization. Plants that produce tires<br />
are therefore particularly important.<br />
In the fi eld of edible oil technology, worm extruders for the preparation<br />
of oilseed as well as for meat and bonemeal production, machines<br />
for solvent extraction for the edible oil industry and refi ning systems<br />
for plant and animal oils and fats have been developed, produced and<br />
marketed for over 80 years.<br />
The group has two internal production sites in Harburg (natural rubber<br />
technology, edible oil technology) and in Freudenberg (rubber compound<br />
technology) as well as subsidiaries in the USA, Croatia and the<br />
new sales companies in France and Russia established in 2005.<br />
Special-Purpose <strong>Co</strong>nstruction: The <strong>Co</strong>nstruction business division<br />
is positioned as a specialist for surface processing in airport, industrial<br />
and road construction. The companies in this business division<br />
include sites in Germany, the Netherlands, Austria, Slovenia, Croatia,<br />
Spain, France and Belarus. The managing company is <strong>Possehl</strong><br />
Spezialbau G<strong>mbH</strong> in Wiesbaden.<br />
The companies of the Spezialbau Group carry out maintenance and<br />
repair work on traffi c areas made of asphalt and concrete. These special<br />
constructive measures serve both to preserve the substance and<br />
to improve the surface characteristics of traffi c areas in interior and<br />
exterior zones. Its competence as a full-service provider is the reason<br />
for the good market position enjoyed by the Group.<br />
Through its joint technology and the Katfi x and EP-Grip products,<br />
<strong>Possehl</strong> Spezialbau is involved in both the new construction of streets<br />
and the preservation, repair and safeguarding of existing traffi c routes.<br />
The group of companies manufactures high-quality building protection<br />
products on the basis of reaction resins, which are known on the market<br />
as cds-building protection products. Another important brand-name<br />
product of <strong>Possehl</strong> Spezialbau is its anti-skid facings in the form of<br />
coatings for runways, which help improve fl ight safety both at home and<br />
abroad. The coating system developed by <strong>Possehl</strong> Spezialbau reduces<br />
the off-times on runways during installation and is being used throughout<br />
Europe at numerous large civilian and military airports.<br />
Group structure and business activities<br />
Group Management Report<br />
TRADING BUSINESS SEGMENT<br />
The Trading business segment is represented at <strong>Possehl</strong> by the International<br />
Trading unit. The companies of the Erzkontor- and <strong>Possehl</strong> Inc.<br />
Group belong to this unit. The companies of the Erzkontor Group are<br />
represented primarily in Europe and Asia; the regional focal point of<br />
activities of the <strong>Possehl</strong> Inc. Group is in North and South America.<br />
<strong>Possehl</strong> Erzkontor: <strong>Possehl</strong> Erzkontor G<strong>mbH</strong> is one of the two management<br />
companies of the <strong>Possehl</strong> Group and concentrates mainly on<br />
international trading. The business is operated primarily from the central<br />
offi ce in the Hanseatic city of Lübeck, with the help of a subsidiary<br />
in Hong Kong and offi ces in Krefeld, Paris, Bratislava, Jekaterinburg,<br />
Beijing, Dalian and Chennai. Affi liated companies in Schiedam, Wesel,<br />
Krefeld and Duisburg round out the activities of the group.<br />
The main areas of concentration of the Erzkontor Group are in commercial<br />
trade with raw materials for the fi reproof and metallurgical<br />
industry, the chemical, welding electrode, cement, plastics and paper<br />
industries. Trade activities include representing well-known mines and<br />
producers as well as free commercial transactions. In addition to the<br />
drop shipment business, the storage and processing sector also plays<br />
an important role.<br />
With its commercial and technical competence as a long-term provider<br />
of industrial minerals, its international know-how and global orientation,<br />
the Erzkontor Group is assured of a strong position in the market. This<br />
position could also be expanded during the last several years due to the<br />
fact that additional activities were grouped around the actual core business<br />
– international trading in raw materials for the fi reproof and metallurgical<br />
industry. Today, with the help of modern grinding aggregates,<br />
crushing and sifting plants, the Erzkontor Group can manufacture all of<br />
the usual standard grains and grinding fi nenesses at various locations<br />
within Europe. All processing operations are certifi ed according to the<br />
applicable DIN EN ISO norms. Three German operating sites also have<br />
the special approvals required for the processing and mixing of waste<br />
materials from the steel and other industries.<br />
<strong>Possehl</strong> Inc.: During the reporting period, the USA-based <strong>Possehl</strong> Inc.<br />
Group consisted of the two primary trading companies <strong>Possehl</strong> Inc.<br />
and Alumina Trading <strong>Co</strong>., fi ve affi liated companies and a purchasing
company. It sells industrial raw materials to customers in North and<br />
South America. The group’s main business consists of trading in industrial<br />
raw materials for the fi reproof, metallurgy and chemical fi elds. The<br />
<strong>Possehl</strong> Inc. Group rounds out its range of offerings with shipping and<br />
logistics services. The People’s Republic of China therefore serves the<br />
American companies as a signifi cant source of procurement.<br />
SERVICES BUSINESS SEGMENT<br />
The Services business segment includes the companies<br />
<strong>Possehl</strong> Umweltschutz G<strong>mbH</strong> and the broker activities of Lubeca<br />
Versicherungskontor G<strong>mbH</strong> and Teutonia Fracht- und Assekuranzkontor<br />
G<strong>mbH</strong>.<br />
Environmental Protection: A recognized specialist, <strong>Possehl</strong> Umweltschutz<br />
handles the new construction, reconstruction and expansion<br />
and revision of tank farms. The company remedies pollution mishaps<br />
and oil spills on national highways and autobahns as well as bodies of<br />
water and gathers solid and liquid waste materials which are conveyed<br />
to thermal recycling.<br />
The Gesellschaft für das Recycling kontaminierter Industriebrachen<br />
<strong>mbH</strong> (GRKI) (recycling of contaminated brownfi elds company) operates<br />
four recycling yards in the urban area of Lübeck.<br />
Broker Activities: Lubeca Versicherungskontor G<strong>mbH</strong> offers insurance<br />
services of all types for the private, commercial and industrial<br />
sectors. By means of its many years of excellent connections to the entire<br />
insurance market, favorable coverage solutions can be worked out<br />
with customers. The activities of Lubeca Versicherungskontor G<strong>mbH</strong><br />
are rounded out by the historically evolved transport insurance division,<br />
in which the company is authorized to sign for and re-present a number<br />
of domestic and overseas insurers as an authorized agent of the insurer<br />
with stock exchange authorization.<br />
Teutonia Fracht- und Assekuranzkontor G<strong>mbH</strong> arranges the global<br />
transport of containers as well as bulk cargo and bulk goods. Included<br />
in its activities are the chartering of ships and cargo, the clearance of<br />
seagoing vessels and completing all transactions within the environment<br />
of ship’s agents and ship’s brokers. The company also acts as<br />
an insurance broker both in the placement and handling of insurance<br />
transactions in the product and transport sector.<br />
HOLDING COMPANY/INVESTMENTS<br />
In this business segment, we combine the parent company L. <strong>Possehl</strong><br />
& <strong>Co</strong>. <strong>mbH</strong> and the minority and/or fi nancial participations held by<br />
the parent company either directly or indirectly. The major participating<br />
interests on the balance sheet date are comprised of 30 % in Hako<br />
Holding G<strong>mbH</strong> & <strong>Co</strong>. KG, 10 % in Norddeutsche Affi nerie AG and 10.1 %<br />
in Süd-Chemie AG.<br />
Hako Group: By acquiring a 30 % interest in Hako Holding G<strong>mbH</strong> &<br />
<strong>Co</strong>. KG in the year 2004, <strong>Possehl</strong> took the fi rst step in setting up a new<br />
business division. In early 2006, this commitment was strengthened<br />
by means of a majority acquisition. Since that time, Hako has come to<br />
form its own business division within the <strong>Possehl</strong> Group.<br />
The Hako Group, headquartered in Bad Oldesloe, is one of the worldwide<br />
leading manufacturers of professional cleaning machines and has<br />
an extensive sales and service network in Europe as well as representative<br />
offi ces on three other continents. The Hako Group also manufactures<br />
cleaning machines via its US subsidiary Minuteman and distributes<br />
them in the USA. Specifi cally, the Hako range of products includes<br />
equipment for plant and building cleaning, exterior cleaning and property<br />
maintenance as well as special and municipal vehicles that can be<br />
used in many applications.<br />
Norddeutsche Affi nerie AG: As part of the disposal of Hüttenwerke<br />
Kayser AG in the year 1999, <strong>Possehl</strong> received 10 % of the shares in<br />
Norddeutsche Affi nerie AG (NA). The NA Group, located in Hamburg, is<br />
the largest integrated copper producer in Europe and the world’s largest<br />
copper recycler. The market value of our participation increased<br />
signifi cantly as a result of the positive business development of NA during<br />
the past year.<br />
15
16<br />
GENERAL ECONOMIC CONDITIONS<br />
AND COURSE OF BUSINESS<br />
Overall economy: Euro zone lags behind the<br />
global economic upswing<br />
The global economy continued to develop dynamically in the year under<br />
review; it grew by a good 4 %. The considerable increase in the price<br />
of crude oil – in particular in the fi rst half of the year – as well as the<br />
increase in price of the most important industrial raw materials had<br />
only a slightly negative effect on this positive trend. The fundamental<br />
growth engines were again China and the USA. Both national economies<br />
triggered important growth incentives in other industrial countries<br />
through their high demand for imports.<br />
The economy was clearly more restrained in the Euro zone, however,<br />
despite the fact that economic activity increased slightly over the last<br />
several months of the year. The high price of crude oil and low internal<br />
demand, in particular in Germany, had a noticeable braking effect<br />
on economic development. The gross national product in Germany increased<br />
by only 0.9 % in 2005.<br />
The US dollar had an exchange rate ratio of € 1.36 per US dollar at the<br />
beginning of last year, making it very weak. It recovered again during<br />
the course of the year and amounted to € 1.18 per US dollar at the<br />
end of the year. In an annual average the US dollar was quoted with an<br />
exchange rate of € 1.24, leaving it virtually unchanged compared to<br />
the previous year.<br />
Business trend for the Group: <strong>Possehl</strong> profi ts from an<br />
international spirit of optimism<br />
The overall economic development had a varied effect on the companies<br />
of the <strong>Possehl</strong> Group. While the Electronics business division in<br />
particular profi ted from the positive development in Asia, business in<br />
the precious metals sector was rather weak due to the low domestic<br />
demand. International Trading was able to maintain its favorable position<br />
in this inconsistent economic environment and achieve almost as<br />
satisfactory a result as in the previous year.<br />
Economic conditions | Net assets, earnings, fi nancial position<br />
FINANCIAL POSITION<br />
Group Management Report<br />
NET ASSETS, EARNINGS<br />
AND FINANCIAL POSITION<br />
INCOME POSITION OF THE GROUP<br />
Group achieves double-digit sales growth<br />
Sales revenues climbed by 16.3 % compared to the previous year from<br />
€ 695.1 million to € 808.7 million. A crucial factor for the signifi cant<br />
increase in sales is the fi rst time inclusion of the Harburg-Freudenberger<br />
Group in the consolidated fi nancial statements on April 1, 2005.<br />
Sales of € 127.0 million accrued to the Group for the 9-month period.<br />
Adjusted for the business division acquired in the reporting year and<br />
the halted business activities of Nordstahl G<strong>mbH</strong> during the previous<br />
year, sales revenue increased by 3.8 % compared to the previous year.<br />
With the exception of the Precious Metals Processing business division,<br />
all of the business divisions contributed to the increase in sales.<br />
The increase in sales stretches across almost all geographic regions.<br />
Domestic sales, however, show the smallest increase at a solid 10 %<br />
due to the strong export orientation of the Harburg-Freudenberger<br />
companies.<br />
Due to the acquisition of the Harburg-Freudenberger Group, the share<br />
of sales of the Production segment increased further. It amounts to<br />
57 % of total sales for the reporting year and therefore increased by<br />
5 percentage points. The share of sales accruing to International Trading<br />
is 42 %; the Services division continues to contribute 1 % to total<br />
sales.<br />
Sales by business segment<br />
in € million<br />
338.9<br />
■ Services<br />
■ Trading<br />
■ Production<br />
10.0<br />
459.8
Gross earnings improve by 36 %<br />
Gross earnings grew signifi cantly by € 73.2 million or 36.4 % to € 274.5<br />
million. The acquisition of the Harburg-Freudenberger Group is also<br />
refl ected in this positive development. Offsetting this was the decline in<br />
gross earnings in the International Trading and Precious Metals Processing<br />
divisions. The Electronics business division was again able to record<br />
an increase in gross earnings in 2005, as in the previous year.<br />
<strong>Co</strong>mparable operating expenditure clearly below that<br />
of the previous year<br />
Based on the comparable fi gures of the previous year, the other operating<br />
expenses declined signifi cantly. The personnel expenses in particular,<br />
adjusted for changes to the companies included in the consolidation,<br />
could be considerably reduced. The cost reduction and effi ciency<br />
improvement program introduced in the Electronics division already<br />
showed initial success during the reporting year.<br />
Earnings before taxes increase by 65.1 %<br />
The Group earnings before taxes (EBT) improved signifi cantly by € 14.3<br />
million to € 36.3 million. The previous business divisions together with<br />
the newly consolidated Harburg-Freudenberger Group contributed to<br />
this increase in earnings. The Electronics division, in particular, was<br />
able to increase earnings before taxes by over 50 % with a slight increase<br />
in sales. Earnings before taxes in International Trading at € 11.7<br />
million were slightly below the very good earnings of the previous year.<br />
All other operating business divisions also reported positive earnings.<br />
Segment earnings EBT<br />
in € million, excluding the holding company<br />
■ Services<br />
■ Trading<br />
■ Production<br />
1.3<br />
13.2<br />
13.8<br />
2004 2005<br />
1.4<br />
11.7<br />
29.0<br />
The holding company earnings also increased signifi cantly compared<br />
to the previous year. In addition to decreased personnel expenses, the<br />
dividend of Norddeutsche Affi nerie AG, which was absent the previous<br />
year, had a positive effect on the holding company earnings of € 2.2<br />
million.<br />
The return on equity before income tax increased from 13.3 % in the<br />
previous year to 20.6 % in the reporting period. The profi t to sales<br />
ratio (EBIT/sales) also increased considerably by 1.4 percentage points<br />
to 5.3 %.<br />
Group net income for the year increases to € 26.5 million<br />
The Group net income for the year before shares to third parties increased<br />
by € 9.6 million to € 26.5 million. Due to one-time tax burdens,<br />
the income tax rate increased from 15.9 % in the previous year to<br />
23.9 % in the reporting year, causing the increase in Group net income<br />
for the year to lag slightly behind the increase in earnings before taxes.<br />
The Group tax rate continues to be below the regular tax rate in the<br />
reporting year, however, due to the utilization of tax loss carryovers in<br />
some countries.<br />
EARNINGS POSITION IN THE PRODUCTION<br />
BUSINESS SEGMENT<br />
in €T<br />
2005 2004 Change %<br />
Sales 459,795 326,649 40.7<br />
EBT 28,990 13,828 109.7<br />
Capital expenditures 15,480 15,997 -3.2<br />
Precious Metals Processing: Strong demand for industrial<br />
semi-fi nished products partially compensates for declines<br />
in the dental area<br />
The activities in the Precious Metals Processing business division were<br />
affected by a weak economy during the past year. <strong>Co</strong>mpetition continued<br />
to increase, in particular in the jewelry and dental areas. Sales<br />
compared to the previous year therefore declined by 5 %.<br />
17
18<br />
Slumps in the dental segment were especially sharp. The effects of the<br />
health reform adopted by the federal government at the end of 2004<br />
played a role in this development. Since 2005, social statutory health<br />
insurance companies have been providing fi xed subsidies related to<br />
fi ndings instead of percentage of cost subsidies for dental services. Together<br />
with the start-up diffi culties of the health reform, this resulted in<br />
a signifi cant decline in sales in 2005. Added to this is the fact that the<br />
tendency to use base metal alloys and total ceramics for tooth replacement<br />
continues in practice.<br />
Although volume sales of jewelry alloys declined along with weak economic<br />
development, gross income in jewelry semi-fi nished products<br />
was maintained. Increased customer acquisition, an expansion of the<br />
value added level and an increase in precious metals prices contributed<br />
to this success.<br />
A strong demand for industrial semi-fi nished products – mainly for<br />
contact making materials in the wire and belt sector – as well as the<br />
increased sales of chemicals and baths for electroplating technology<br />
partially compensated for the slowing down of business activities in<br />
the dental sector.<br />
The adoption of the new product line “<strong>Co</strong>lorit” in the jewelry segment<br />
also compensated for the declines, as did the increases in tubing and<br />
bars. The ring blanks sector continues to be one of the support pillars<br />
of the business. Expansion of the silver alloy and platinum ring areas is<br />
anticipated for this sector.<br />
Heimerle + Meule confronted the overall declining market development<br />
by implementing restructuring measures and cost reduction programs.<br />
The company also undertook some organizational restructuring as<br />
part of this effort, which also entailed a reduction in the number of<br />
employees.<br />
By restructuring the company into business divisions with responsibility<br />
for results, Heimerle + Meule is anticipating positive incentives for<br />
further business development. Based on the considerable improvement<br />
in business at the beginning of the year 2006 and initial success in<br />
the cost saving measures that have been implemented, the company<br />
is already anticipating a noticeable sales and earnings recovery for the<br />
current year. Intensifying sales activities both at home and abroad is<br />
expected to further expand market share in all product divisions.<br />
Net assets, earnings, fi nancial position<br />
Group Management Report<br />
Electronics: Business in Asia developing well<br />
The Electronics business division is reporting a very successful fi scal<br />
year. The effi ciency improvement measures introduced in the previous<br />
year, the objectives of which were to achieve greater utilization of machinery,<br />
improved product quality and lower production costs, brought<br />
about a signifi cant improvement in performance in 2005. At the same<br />
time, new products were introduced to the market, while customer<br />
relations were intensifi ed and new markets in previously unsupported<br />
regions were serviced.<br />
The market environment continues to be strained, however. Price competition<br />
on the sales markets remains strong and the purchase prices<br />
for copper again increased by about 50 % during the course of the year.<br />
This resulted in a slight decline in the gross profi t margin compared to<br />
the previous year.<br />
<strong>Possehl</strong> Electronics was able to follow the growth of the market in the<br />
case of semiconductor products. Sales increased from € 168.4 million<br />
to € 177.2 million. All of the Asian sites therefore developed positively.<br />
The Malaysian site was able to develop a series of “best practice approaches”,<br />
which are now being transferred to other production sites.<br />
Successful product transfers also took place. <strong>Co</strong>nnector components,<br />
which we previously produced only in the US, are meanwhile being<br />
manufactured in Malaysia as well. Together with the very successful<br />
site for etching technology in Singapore, we service mainly customers<br />
in Southeast Asia from this site. Taiwan was revamped as an important<br />
market region for the semiconductor sector.<br />
In northern Asia we are continuing with the transfer strategy from Hong<br />
Kong to other regions in China which was started the previous year.<br />
For the current fi scal year, we are also planning to expand production<br />
capacities by creating a new Chinese site. Based on the reorientation,<br />
we were able to achieve a positive statement of income at the Hong<br />
Kong site for 2005. This should also be assured for the coming year<br />
due to increases from, among other things, the successful smart card<br />
business.<br />
The most diffi cult position on the market can be seen in the Electronics<br />
business division in Europe. At the two operating sites in the Netherlands<br />
and in France we will have to exert a great deal of effort in the<br />
future as well to safeguard our competitive position.
Elastomer-Processing: Pleasing business development<br />
The Elastomer-Processing business division (Harburg-Freudenberger<br />
Group) demonstrated very positive business development during<br />
the reporting period. <strong>Co</strong>ntinued investment activity within the tire<br />
industry resulted in an increase in both incoming orders and sales.<br />
The market recovery stretched across regional producers as well<br />
as to globally operating tire manufacturers. By working the market<br />
successfully, this business division was able to further cement existing<br />
customer relationships and successfully expand the base of customers<br />
during the past year.<br />
Signifi cant sales growth was achieved in the natural rubber technology<br />
division due to increased demand, particularly for heating presses. But<br />
demand in the rubber compound technology area was also satisfactory.<br />
The Harburg-Freudenberger Group achieved sales that were not quite<br />
as strong in the tire lay-up machines and in the extrusion division.<br />
The edible oil division also achieved very positive development in order<br />
backlog. Production expansion in the fi eld of bio-diesel, among other<br />
things, reaped profi ts for this division.<br />
Sales from services also increased signifi cantly, parallel to the increased<br />
sales from mechanical systems.<br />
In addition to Harburg-Freudenberger Maschinenbau G<strong>mbH</strong> and its two<br />
domestic production sites, the subsidiary in Croatia also achieved a noticeable<br />
increase in sales. Due to the strong business expansion in the<br />
fi eld of heating presses, the number of people employed was able to be<br />
increased. The production and sales company in the USA also achieved<br />
positive results during the period under review. A higher degree of independent<br />
operation together with an increase in trading activities for the<br />
German parent company was a decisive factor in this case.<br />
Two new sales companies were established in France and Russia during<br />
the period under review. Business is expected to expand over the next<br />
several years.<br />
The positive development of this business division will presumably continue<br />
in 2006. The backorders, which continue to be at a high level, indicate<br />
that sales will be at the previous years‘ level. However the market<br />
opportunities arising from new and existing business relations are seen<br />
alongside intense quality and pricing competition in all relevant product<br />
areas. The research and development measures taken hold of in the<br />
past as well as the excellent market positioning of products and service<br />
of the Harburg-Freudenberger Group lead us to expect a positive, but<br />
overall slowly evolving corporate development in the future.<br />
Special-Purpose <strong>Co</strong>nstruction: Revenue from truck<br />
tolls will lend further impetus to the successful<br />
business development<br />
The long-standing building crisis that started in the mid-1990s continued<br />
again into 2005. It has likely to have bottomed out during this year,<br />
however. The truck toll introduced in 2005 will have a positive effect on<br />
the business of the current year. The fi rst public funds for expanding<br />
traffi c routes have already begun to fl ow in. During the next several<br />
years, a total of 51 % of the toll income is expected to fl ow into this division,<br />
thus for example into a plan for countering traffi c jams as well as<br />
into an expansion program for various sections of the autobahn.<br />
Our Spezialbau Group focuses its activities on the fi elds of jointing technology<br />
and coating work both for the new construction of streets and<br />
for the preservation, repair and safeguarding of traffi c routes. Based on<br />
the positive framework conditions, there is a promising market volume<br />
for these business activities in the future.<br />
<strong>Possehl</strong> Spezialbau was able to become successfully established on<br />
the market in 2005. Sales increased by almost 6 % compared to the<br />
previous year. The major reasons for this success were a broad range of<br />
offerings, internal product development, good machinery and a broad<br />
presence throughout Germany and Europe.<br />
In addition to the management company in Wiesbaden, the success<br />
within the subsidiaries also contributed to the good performance – even<br />
though the diffi cult situation with the Spanish company burdened the<br />
fi nancial statements of 2005 once again. All of the other subsidiaries<br />
clearly exceeded their planned objectives. A number of different large<br />
projects for the coating of runways, which help increase fl ight safety in<br />
airports at home and abroad, were able to be successfully completed.<br />
Another important factor for the business success of the business<br />
division is the fact that the parent companies and subsidiaries utilize<br />
combined synergies in their collaboration.<br />
19
20<br />
Investments in the equipment and vehicle fl eet further improved the<br />
technical equipping of the construction site division. This ensures<br />
a high level of productivity for the current and future rendering of<br />
services and guarantees that the company can continue to achieve<br />
good profi ts.<br />
The strategic goals for the business division remain unchanged: growth<br />
at home and abroad, expansion of market share and improvement of<br />
the year-round utilization. In the cds coating division work is currently<br />
underway on developing innovative products; they are expected to<br />
strengthen the market position and ensure steady growth. Heightened<br />
marketing activities on the international level are also expected to expand<br />
business volume in this sector.<br />
<strong>Co</strong>ntact with the airports in western, eastern and southern Europe will<br />
also be stepped up with the aim of improving year-round utilization. In<br />
addition to the public contractors, <strong>Possehl</strong> Spezialbau will continue to<br />
place even more emphasis on industrial and commercial construction.<br />
The backlog of orders from 2005 ensures a good start to the season,<br />
which will be lagging somewhat due to the long-lasting wintry conditions<br />
at the beginning of the fi scal year 2006.<br />
EARNINGS POSITION IN THE TRADING<br />
BUSINESS SEGMENT<br />
in €T<br />
2005 2004 Change %<br />
Sales 338,878 359,157 -5.7<br />
EBT<br />
Earnings from affi liated<br />
11,699 13,207 -11.4<br />
companies 313 536 -41.6<br />
Capital expenditures 1,329 2,003 -33.7<br />
The Trading business segment reports an overall decline in sales by<br />
€20.3 million to € 338.9 million. The main reason for this is the fact<br />
that at the end of the year 2004, a large portion of the trading activities<br />
of Nordstahl G<strong>mbH</strong> had been halted. Adjusted for this effect, the sales<br />
revenues increased by 5.6 % compared to the previous year.<br />
Net assets, earnings, fi nancial position<br />
Group Management Report<br />
Erzkontor Group: Good results form the basis for<br />
expanding business activities<br />
The European steel industry, important for the Erzkontor Group,<br />
reported utilization in 2005 at a continued high level, even though there<br />
was a decline in production of 2.5 % compared to the previous year.<br />
This decline amounted to 4 % in Germany. The price for fi reproof raw<br />
materials was at a very high level due to the steel boom in the year<br />
2004 and in the 1st quarter of 2005, so that <strong>Possehl</strong> Erzkontor G<strong>mbH</strong><br />
was able to again reach the transaction value of the previous year despite<br />
the reduced sales.<br />
In the other product divisions such as metallurgy and plastics, price<br />
and margin increases could be achieved to some extent. This was possible<br />
in particular because of a partial business expansion. Another<br />
infl uential factor was the oil price development and/or scarcity of raw<br />
materials.<br />
In order to utilize the advantages of a broad value added chain, the<br />
range of services of the Erzkontor Group also includes services such as<br />
processing, storage, quality control and logistics.<br />
The subsidiary <strong>Possehl</strong> Erzkontor Hong Kong reported a signifi cant<br />
increase in sales. It expanded the fi reproof business with India in<br />
particular. The other companies of the Erzkontor Group were able to<br />
maintain the sales level of the previous year, and in some cases even<br />
considerably increase it. Despite a greater cost burden from interest<br />
rate increases in the dollar zones, the Erzkontor Group again achieved<br />
an overall excellent result in the reporting year.<br />
The German economy is expected to grow by between 1.0 and 1.5 % in<br />
2006. Even greater growth rates are predicted for the steel and foundry<br />
industry, which leads the Erzkontor Group to expect a high demand for<br />
fi reproof and metallurgical raw materials.<br />
The group is making an increased effort to set up new business activities<br />
in the plastics, dyeing and paper industry. Moreover, the geographic<br />
expansion of the key business segment toward Eastern Europe,<br />
Turkey and the Middle East will be further intensifi ed.
<strong>Possehl</strong> Inc. Group: American trading activities turn<br />
out to be very successful<br />
In fi scal year 2005, the <strong>Possehl</strong> Inc. Group was again able to achieve the<br />
high sales level of the previous year. The earnings that were achieved<br />
from these sales were equally positive. Expanding the range of products<br />
by adding chemicals together with the good market position in<br />
Central and South America guaranteed the success of our American<br />
trading activities.<br />
At the beginning of the year 2006 we handed over our products from<br />
the non-fi reproof division to our previous American partner. The trade<br />
in industrial raw materials for the steel and foundry industry for North<br />
America that remained with <strong>Possehl</strong> Inc. enabled a closer tie to the<br />
Erzkontor Group, which was operating primarily in Europe.<br />
EARNINGS POSITION IN THE SERVICES<br />
BUSINESS SEGMENT<br />
in €T<br />
2005 2004 Change %<br />
Sales 10,067 9,316 8.1<br />
EBT 1,394 1,319 5.7<br />
Capital expenditures 315 252 25.0<br />
Sales with services continue to advance<br />
The Services division was again able to increase its sales level as<br />
in the previous year. With revenues of € 10.0 million, the group of<br />
companies in the insurance, transport, tank protection, reconstruction<br />
and gravel industry reported growth of about 8 % compared to<br />
the reference period.<br />
The largest share of this positive development was claimed by<br />
<strong>Possehl</strong> Umweltschutz G<strong>mbH</strong>, which was able to generate its jump in<br />
sales mainly by supplying a rather large construction project from its<br />
own gravel sources. The company also succeeded in holding its ground<br />
in the diffi cult tank protection segment, which is burdened by the high<br />
price of oil and the resulting consumer behavior, through its good<br />
service and by expanding the market territory to Mecklenburg-West<br />
Pomerania.<br />
GRKI achieved sales and earnings at the level of the previous year<br />
through the operation of the recycling yards.<br />
Broker activities also<br />
record good earnings<br />
The struggle for market share based on price intensifi ed in the insurance<br />
market during the reporting period. This also characterized the<br />
business development of Lubeca Versicherungskontor G<strong>mbH</strong>. Our<br />
company was nevertheless able to successfully hold its own on the<br />
market.<br />
Teutonia Fracht- und Assekuranzkontor G<strong>mbH</strong> played a role in the increased<br />
demand for freight space, the price of which again increased<br />
signifi cantly.<br />
The companies in the Services division are anticipating that business<br />
volume will remain at the same high level for the next several years.<br />
NET ASSETS AND FINANCIAL POSITION<br />
<strong>Financial</strong> management and fi nancial position: The Group<br />
continues to have a high level of liquidity<br />
The fi nancing of the <strong>Possehl</strong> Group is handled centrally for the most<br />
part, with the goal of ensuring the cost-effective and secure provision<br />
of liquidity for all Group companies. At the same time, an attempt is<br />
made to invest the cash in banks in the most profi table way.<br />
As of the balance sheet date, the net debt of the Group is € 35.5 million<br />
(previous year: € 40.4 million). It therefore decreased by € 4.9<br />
million or 12.1 %. The inventory of cash and cash equivalents increased<br />
together with a slight increase in liabilities due to banks by € 12.1 million<br />
to € 56.7 million. This was possible even though the purchase<br />
price for the acquisition of the Harburg-Freudenberger Group was paid<br />
completely from internal funds.<br />
The gearing as a ratio of net debt to equity once again improved during<br />
the reporting period. The value declined from 22.2 % to 17.3 %. Taking<br />
into account the shares in Norddeutsche Affi nerie AG held in the<br />
fi nancial assets as well as the shares in Süd-Chemie AG reported within<br />
the current assets, there is once again a positive net liquidity on the<br />
balance sheet date. The shares in Süd-Chemie AG were disposed of at<br />
the beginning of fi scal year 2006. An infl ow of liquidity of € 37.3 million<br />
resulted from this sale. This enabled us to continue fi nancing the<br />
growth of the Group largely from our own internal funds.<br />
21
22<br />
Net debt in € million<br />
Net assets, earnings, fi nancial position | Employees<br />
2005 2004<br />
Cash and cash equivalents 56.7 44.6<br />
Liabilities due to banks 92.2 85.0<br />
Net debt -35.5 -40.4<br />
Cash fl ow and capital expenditures: High level of<br />
operating cash fl ow and capital expenditures at the level<br />
of the previous year<br />
Group funds statement (summary) in € million<br />
2005 2004<br />
Cash fl ow from operating activities 24.0 16.6<br />
Cash fl ow from investing activities -27.2 -0.1<br />
Cash fl ow from fi nancing activities 14.3 18.7<br />
Change affecting payment 11.1 35.2<br />
<strong>Financial</strong> resources as of December 31 56.7 44.6<br />
The cash fl ow from current business activities increased in the reporting<br />
year by € 7.4 million to € 24.0 million. A crucial factor for this<br />
positive development is fi rst and foremost the higher Group earnings,<br />
with the repeated increase in working capital leading to further commitment<br />
of capital.<br />
Balance sheet structure<br />
in € million<br />
Fixed assets<br />
Current assets<br />
Group Management Report<br />
442.1<br />
295.4<br />
2004 2005 2005 2004<br />
The investment volume in tangible and intangible assets of € 17.0 million<br />
was at the level of the previous year (€ 17.7 million). The Electronics<br />
business division largely determined this volume, as it did in 2004.<br />
€ 9.3 million was invested in technical systems and machinery as well<br />
as in tools for the processing of customer orders. The Harburg-Freudenberger<br />
Group essentially made investments for the replacement of<br />
its machinery and erected an assembly hall at its site in Freudenberg.<br />
The <strong>Co</strong>nstruction business division focused on the procurement of<br />
replacements of the construction site equipment. Overall, the <strong>Possehl</strong><br />
Group made primarily replacement and rationalization investments in<br />
2005, with the regional area of focus being in the growth market of the<br />
Far East.<br />
Outgoing payments for fi nancial investments during the reporting<br />
period pertained mainly to the Harburg-Freudenberger Group, while in<br />
the previous year they accrued mainly to the acquisition of the 30 %<br />
interest in Hako Holding G<strong>mbH</strong> & <strong>Co</strong>. KG.<br />
The positive cash fl ow from fi nancing activities of € 14.3 million (previous<br />
year: € 18.7 million) are based principally on higher short-term<br />
bank debts for fi nancing the increased working capital as well as on an<br />
increase in the clearing account with the <strong>Possehl</strong> Stiftung.<br />
Assets Liabilities<br />
146.7<br />
533.5 533.5<br />
150.2<br />
383.3<br />
202.4<br />
105.2<br />
92.2<br />
133.7<br />
442.1<br />
181.6<br />
78.8<br />
85.0<br />
96.7<br />
Shareholders’ equity<br />
Provisions<br />
Liabilities due to banks<br />
Other liabilities
Net assets: Balance sheet total increases by 20.7 %<br />
The Group balance sheet total increased during the reporting period<br />
by € 91.4 million to € 533.5 million. The increase in assets accrues almost<br />
exclusively to the current assets, while the fi xed assets increased<br />
only slightly.<br />
The shares we hold in Norddeutsche Affi nerie AG continue to comprise<br />
the main item being reported within the participations, while the Süd-<br />
Chemie shares have been reorganized into the current assets due to<br />
the disposal during the new year.<br />
The stock exchange price of the NA share developed very well during<br />
2005, so that the silent reserves in our block of shares increased<br />
considerably.<br />
Within the current assets, the inventory holdings increased in particular<br />
by € 48.0 million to € 148.3 million. This increase accrues mainly to<br />
International Trading and the fi rst-time consolidation of the Harburg-<br />
Freudenberger Group. In International trading, the request by our customers<br />
to keep consignment stocks on the books is continuing to intensify.<br />
Trade receivables increased overall by € 27.1 million to €150.6<br />
million. This increase can be traced back almost exclusively to the revised<br />
scope of consolidation.<br />
The non-recourse selling of receivables as part of an asset-backed securities<br />
transaction reduced the receivables portfolio by € 16.4 million.<br />
At the same time, the working capital increased by about 14 % compared<br />
to the previous year, to € 192.4 million. This increase is therefore<br />
due mainly to the exchange rate.<br />
Group equity increases by € 20.8 million<br />
Alongside the increased assets, equity that is now higher by € 20.8<br />
million as well as the mainly short-term outside capital that increased<br />
by € 70.6 million can be noted on the liabilities side.<br />
The increase in equity from € 181.6 million to € 202.4 million is based<br />
mainly on the Group net income for the year of € 26.5 million. In addition,<br />
the weaker Euro compared to the previous year had a positive<br />
effect on the amount of Group equity. <strong>Co</strong>ntrary to this was the instant<br />
offsetting of goodwill from the acquisition of the Harburg-Freudenberger<br />
Group as well as the dividend to the <strong>Possehl</strong> Stiftung.<br />
Despite the absolute increase in Group equity, the equity ratio was reduced<br />
from 41.1 % to 37.9 % due to the considerably higher balance<br />
sheet total. The long-term tied-up assets continue to be covered in full<br />
by the equity.<br />
EMPLOYEES<br />
Group demonstrates a high level of internationality<br />
The <strong>Possehl</strong> Group employed an annual average of 4,267 employees<br />
worldwide during the reporting period. <strong>Co</strong>mpared to the previous year,<br />
this represents an increase of 608 persons. Due to the fi rst-time inclusion<br />
of the Harburg-Freudenberger Group, the number of employees<br />
within the Group increased by an average of 822 employees, while the<br />
number of employees in the Precious Metals and Electronics divisions<br />
declined slightly during the same period.<br />
Employees by segment<br />
Number<br />
238<br />
70<br />
■ Holding company<br />
■ Services<br />
■ Trading<br />
■ Production<br />
45<br />
3,914<br />
Total: 4,267<br />
In accordance with the international orientation of the <strong>Possehl</strong> Group,<br />
72 % of our employees are working outside of Germany. This percentage<br />
has declined somewhat compared to the previous year, since Harburg-<br />
Freudenberger Maschinenbau G<strong>mbH</strong> employed a total of 632 persons<br />
at their two production sites in Germany as of December 31, 2005.<br />
23
24<br />
The proportion of employees working in Germany will increase again<br />
during the current fi scal year due to the fi rst-time consolidation of<br />
the Hako Group. Irrespective of this, we are assuming that due to the<br />
strong economic growth in Asia, the proportion of jobs in this region<br />
will increase again for the long term.<br />
Successful employee advancement and training<br />
Qualifi ed and dedicated employees assure the success of <strong>Possehl</strong>. To<br />
ensure our competitive edge, we will continue unabated to invest in the<br />
qualifi cation and training of our employees.<br />
The measures used for advancing and developing the achievement potential<br />
of our employees make up one of the central features of our<br />
personnel policy. Of key importance is our decentralized management<br />
principle, which enables senior executives and young executives to<br />
have a high degree of development, responsibility and decision-making<br />
capacity. Through targeted encouragement of communication and<br />
the exchange of information – including among the individual business<br />
divisions and companies of the Group – we use the available know-how<br />
across the entire Group.<br />
In addition to the advancement of our executives, we place great value<br />
on the continuing education of young people. During the reporting period,<br />
the Group trained 49 young people, primarily at the domestic sites.<br />
This is almost double the number trained during the previous year. It is<br />
our goal to further increase the number of openings for apprentices and<br />
the training quota within the Group.<br />
Employees | Research and development | Risk management<br />
Group Management Report<br />
RESEARCH AND DEVELOPMENT<br />
<strong>Possehl</strong> companies achieve customer-oriented product<br />
improvements again in 2005<br />
Within the Precious Metals Processing business division, the development<br />
of a high gold-bearing, extra fi rm defl agration alloy for the dental<br />
segment was completed and introduced into the market in 2005.<br />
A new silver-palladium defl agration alloy was also adopted into the<br />
range of products following the successful completion of development.<br />
The characteristics of a palladium alloy were improved for the jewelry<br />
segment and adapted to market requirements.<br />
Following the concentration of research and development activities in<br />
Asia, the Electronics business division continued to move forward in<br />
2005 with the development of the QFN (quad fl at no-lead) technology in<br />
its successor products. The development efforts were even intensifi ed<br />
in the area of smart cards. The ongoing technological development for<br />
minimizing surfaces, expanding functions during stamping and broadening<br />
the etching process also played an even more important role.<br />
In close coordination with customers, the Harburg-Freudenberger Group<br />
developed new control platforms for tire lay-up machines. The edible oil<br />
technology launched a screw extrusion press with an advanced scope<br />
of function and a completely new type of direct drive concept. In the<br />
rubber compound product division, a new compound supplier control<br />
developed on the basis of the Java program language was successfully<br />
put into operation at the customer’s premises.<br />
The <strong>Co</strong>nstruction business division also expanded its existing range of<br />
products and developed new products and procedures, in particular in<br />
the area of the cds products (coverings, seals and mortar for the repair<br />
and coating of industrial and traffi c areas). The increased international<br />
orientation of this business division also requires that the product<br />
range be expanded to new application areas. The construction fi rms<br />
also have at their disposal the cds laboratory, the cds application technology<br />
and their own structural engineering laboratory in a supporting<br />
and advisory role.
RISK MANAGEMENT<br />
Based on a system of regular monitoring, no overall risks that could<br />
endanger its continued existence can be identifi ed for the <strong>Possehl</strong><br />
Group.<br />
Potential corporate risks always in focus<br />
The <strong>Possehl</strong> Group management is continuously working on the further<br />
development if its risk management system. In addition to an assessment<br />
of the general risk potential, the <strong>Possehl</strong> Group also analyzes the<br />
company-specifi c risks. In this way, management and control boards<br />
can detect potential factors that may endanger the continued existence<br />
of the company early on and develop defense strategies. This minimizes<br />
the risks for the individual companies and the Group as a whole.<br />
In addition to risks, the Group management always has its eye on corporate<br />
opportunities: potential opportunities are identifi ed, their risk<br />
potential is analyzed and they are further pursued depending on the<br />
respective valuation.<br />
In order to limit the risks for the entire <strong>Possehl</strong> Group, we have in the<br />
past conscientiously invested in fi elds with different types of opportunity<br />
and risk profi les when selecting the business divisions. We conscientiously<br />
strive for a situation of no synergies between the individual<br />
business divisions of our Group.<br />
The Group works with an effective system<br />
for risk monitoring<br />
Included among the components of the <strong>Possehl</strong> risk monitoring system<br />
are the domestic fi nancial clearing system, the accounts receivable reporting<br />
system, the operating and strategic planning with the monthly<br />
reporting system, the regular quarterly meetings between the Executive<br />
Board of the holding company and the managing directors of the<br />
operating companies and the investment controlling. This systematic<br />
and close collaboration with the managing directors of our subsidiaries<br />
enables us to detect unfavorable situations in good time and undertake<br />
suitable corrective measures.<br />
Individual risks within the business segments<br />
are dealt with appropriately<br />
The special operating risks have different characteristics in the individual<br />
business segments:<br />
In the Production division, the optimization of processing times and<br />
thorough quality assurance and monitoring of procurement and manufacturing<br />
are of utmost importance. It is therefore important for the<br />
production business divisions – Precious Metals Processing, Electronics,<br />
Elastomer-Processing and <strong>Co</strong>nstruction – to recognize, analyze and<br />
appropriately minimize the special manufacturing and processing risks<br />
at an early stage by means of suitable key data. A special risk in the<br />
Electronics segment is that of only being able to partially pass on the<br />
burden of the rising price of copper to our customers.<br />
Specifi c procurement risks are defi nitive for the companies in the Trading<br />
division. On one hand, price fl uctuations for commercial and preliminary<br />
products represent a permanent risk, and on the other hand<br />
the availability of the trade goods and raw materials must be assured<br />
at all times. Especially in times of strong market demand and limited<br />
offerings, the good supplier relations of the <strong>Possehl</strong> companies pay off,<br />
which as a rule are secured by long-term contractual ties. In addition,<br />
all of the companies watch the market continuously with the help of<br />
their international networks. Taking into account the effects of commitment<br />
of capital, they follow the practice of far sighted stockpiling and<br />
use the broadest possible geographic distribution of sources. Back-toback<br />
transactions are therefore standard in trading.<br />
In addition, the loss of receivables outstanding represents a permanent<br />
business risk across all business divisions. The Group therefore places<br />
special emphasis on the monitoring and safeguarding of outstanding<br />
accounts.<br />
If required, all business divisions safeguard against risks of currency<br />
and interest rate changes resulting from international corporate<br />
activities by using suitable hedging tools. <strong>Co</strong>ntingent or non-contingent<br />
derivatives are only concluded within the Group to hedge against physical<br />
inventories or transactions.<br />
25
26<br />
A malfunction of the electronic data processing can have a negative impact<br />
only in subareas due to our widely distributed business segments<br />
and corporate structures. To counteract these IT risks as well, the<br />
<strong>Possehl</strong> Group has at its disposal data backup systems, authorization<br />
plans and virus and access protections systems, as well as emergency<br />
plans, to name a few.<br />
Classic risk management is supplemented by<br />
credit investigations and accounts receivable<br />
management<br />
As part of its risk management, the <strong>Possehl</strong> Executive Board monitors<br />
the economic risks of its operating businesses using established<br />
controlling instruments. As a supplement to the monthly reporting,<br />
<strong>Possehl</strong> uses credit investigations and an active accounts receivable<br />
management system. In accordance with the internal Group guidelines,<br />
purchasing and selling transactions above certain individual business<br />
segment limits must be coordinated with the executive board of the<br />
holding company the same as acquisitions or investments.<br />
We check all yield assumptions centrally in the preparation phase<br />
and during the approval process and monitor their compliance<br />
during realization. For companies with longer production times, central<br />
risk management also focuses on reports concerning incoming orders<br />
and backlog of orders as well as pre-calculation tests above certain<br />
value limits.<br />
The D&O (Directors’ and Offi cers’) insurance assures against any misconduct<br />
by legal representatives or executive staff of the companies of<br />
the <strong>Possehl</strong> Group that may result in damages to third parties or within<br />
the <strong>Possehl</strong> Group.<br />
In addition, through its own in-house insurance brokerage company,<br />
Lubeca, <strong>Possehl</strong> has an instrument for central monitoring and safeguarding<br />
of all insurance contracts. Work has begun on establishing a<br />
worldwide loan insurance program, which already includes a signifi cant<br />
portion of our companies even today.<br />
Risk management | Supplementary report and outlook<br />
Group Management Report<br />
SUPPLEMENTARY REPORT AND OUTLOOK<br />
Growth policy already successfully implemented<br />
in the fi rst quarter<br />
The <strong>Possehl</strong> Group has continued to further pursue its growth policy at<br />
the beginning of the year 2006 as well:<br />
On January 1, 2006 L. <strong>Possehl</strong> increased its stake in Hako Holding<br />
G<strong>mbH</strong> & <strong>Co</strong>. KG from 30 % to about 56 % of the shares, thereby taking<br />
over corporate leadership. As an independent business division within<br />
the <strong>Possehl</strong> Group, Hako will further develop its good position on the<br />
market for cleaning and property maintenance machines.<br />
In the Electronics business division, we acquired the remaining shares<br />
in <strong>Possehl</strong> Electronics N.V. on February 17, 2006, making us the sole<br />
shareholder. This acquisition of shares gives us the opportunity to use<br />
the benefi ts of Asian locations within the Electronics division, but also<br />
in the entire <strong>Possehl</strong> Group, to further advantage.<br />
Mönchengladbach-based textile machine manufacturer<br />
Monforts acquired<br />
We took another important step in our growth on March 31, 2006 by<br />
acquiring all business shares in A. Monforts Textilmaschinen G<strong>mbH</strong> &<br />
<strong>Co</strong>. KG. The Monforts Group is the world market and technology leader<br />
for textile fi nishing systems in the high-quality sector. In addition to<br />
the main company in Mönchengladbach, it encompasses the two subsidiaries<br />
in Austria and Switzerland as well as a joint venture in China.<br />
Excluding the joint venture, the Monforts Group achieved annual sales<br />
of approximately € 110 million during the past fi scal year with a staff<br />
of 375.<br />
By acquiring the Monforts Group, we not only succeeded in continuing<br />
on our course of growth, but also realized a further balancing of risks in<br />
our portfolio at the same time. As with the Hako Group, the Monforts<br />
Group is being managed as an independent business division within the<br />
Production segment.
Shares in Süd-Chemie sold off<br />
At the beginning of the current fi scal year 2006, we sold off our<br />
block of shares of about 10 % held in Süd-Chemie AG. The cash fl ow<br />
resulting from the sale is now available to us for the further expansion<br />
of our Group.<br />
World economy will continue to grow<br />
We are assuming that the worldwide upswing will continue undiminished<br />
for the next two years. The positive trend will continue to be carried<br />
primarily by the USA as well as by the newly industrializing countries<br />
China and India. Increasing growth rates are also anticipated for<br />
the Euro zone, even though these rates will lag behind those of the<br />
American and Asian rates. According to current predictions, economic<br />
development in Germany will decline again as early as the year 2007<br />
due to the impending tax increases.<br />
<strong>Possehl</strong> remains on a profi table course of growth<br />
Due to its broad composition, <strong>Possehl</strong> will profi t from the pleasing economic<br />
development occurring worldwide. We are going on the assumption<br />
of Group sales of about € 1.2 billion for the coming fi scal year. This<br />
signifi cant increase will be achieved primarily because of the acquisitions<br />
carried out at the beginning of the year 2006. But the existing<br />
business division will also continue their profi table course of growth.<br />
Only in International Trading do we foresee a decline in sales, due to the<br />
reorganization of our American business.<br />
Risks for the future development of the <strong>Possehl</strong> Group may result primarily<br />
from a worldwide slowing down of the economy. The Electronics<br />
business division is also dependent on the cyclical development of<br />
the semiconductor industry. Because of the diversifi ed composition of<br />
the <strong>Possehl</strong> Group and the associated balancing of risk, we are able to<br />
compensate for rather weak developments in individual business divisions.<br />
We see signifi cant market opportunities, in particular by making increased<br />
use of the advantages from the Asian sites. The acquisition<br />
of the remaining shares in our <strong>Possehl</strong> Electronics will provide us with<br />
the additional potential for increasing growth and effi ciency here for<br />
the entire Group.<br />
Signifi cantly increased consolidated earnings expected<br />
For fi scal year 2006 we anticipate signifi cantly higher consolidated<br />
earnings. In addition to the one-time profi t from the disposal of our<br />
Süd-Chemie participation, the new cleaning and textile fi nishing systems<br />
business divisions will be the primary contributors.<br />
Following the completion of restructuring, we also anticipate an<br />
increase in earnings for the Precious Metals Processing business<br />
division. Only in the area of International Trading do we assume<br />
any decline in earnings, and that is due to the reorganization of the<br />
American business.<br />
We will continue to pursue the adopted course of growth even beyond<br />
fi scal year 2006. In this regard, we expect a further increase in sales<br />
for fi scal year 2007.<br />
27
28<br />
<strong><strong>Co</strong>nsolidated</strong> income statement 29<br />
<strong><strong>Co</strong>nsolidated</strong> statement of cash fl ows 30<br />
<strong><strong>Co</strong>nsolidated</strong> balance sheet 31<br />
<strong><strong>Co</strong>nsolidated</strong> fi xed-assets analysis 32<br />
<strong><strong>Co</strong>nsolidated</strong> equity analysis 34<br />
Segmental reporting 34<br />
Notes to the consolidated statements 36<br />
Auditor’s report 49<br />
Income statement<br />
<strong><strong>Co</strong>nsolidated</strong> <strong>Financial</strong> <strong>Statements</strong>
<strong><strong>Co</strong>nsolidated</strong> income statement in €T<br />
from January 1 to December 31, 2005<br />
Notes 2005 2004<br />
Net sales<br />
Changes in fi nished goods, work in progress<br />
1 808,740 695,122<br />
and own work capitalized 2 26,044 8,780<br />
Other operating income 3 19,076 16,781<br />
<strong>Co</strong>st of materials 4 579,331 519,385<br />
Gross profi t 274,529 201,298<br />
Personnel expenses 5 129,015 101,802<br />
Depreciation 6 19,194 18,270<br />
Other operating expenses 7 86,472 56,216<br />
Investment result 8 471 1,480<br />
Interest result 9 -6,975 -5,103<br />
Other fi nancial result 10 2,922 574<br />
Result from ordinary operations/net profi t before taxes 36,266 21,961<br />
Income taxes 11 8,668 3,488<br />
Other taxes 12 1,102 1,595<br />
<strong><strong>Co</strong>nsolidated</strong> net profi t 26,496 16,878<br />
Minority interests 4,305 4,189<br />
29
30<br />
Statement of cash fl ows | Balance sheet<br />
<strong><strong>Co</strong>nsolidated</strong> <strong>Financial</strong> <strong>Statements</strong><br />
<strong><strong>Co</strong>nsolidated</strong> statement of cash fl ows in €T<br />
from January 1 to December 31, 2005<br />
2005 2004<br />
<strong><strong>Co</strong>nsolidated</strong> net profi t 26,496 16,878<br />
Write-ups/write-downs on fi xed assets 19,194 18,680<br />
Changes in accruals and provisions -668 7,214<br />
Other non-cash expenses and income -1,220 -578<br />
Gains and losses from the disposal of fi xed assets -1,152 -1,572<br />
Changes in working capital -18,612 -24,022<br />
(1) Cash fl ow from operating activities 24,038 16,600<br />
Proceeds from the disposal of intangible and tangible fi xed assets<br />
Proceeds from the disposal of fi nancial investments and from the disposal<br />
2,408 2,967<br />
of consolidated companies and business units 10,102 28,697<br />
Payments for investments in intangible and tangible fi xed assets<br />
Payments for fi nancial investments and the acquisition<br />
-17,036 -17,169<br />
of consolidated companies and business units -22,710 -14,640<br />
2) Cash fl ow from investing activities -27,236 -145<br />
Payments to shareholders (including minority interests) -5,000 -3,868<br />
Changes in bank debt 6,908 -12,667<br />
Changes in other fi nancial claims/debt 12,365 35,250<br />
3) Cash fl ow from fi nancing activities 14,273 18,715<br />
Cash-relevant changes from (1) to (3) 11,075 35,170<br />
Exchange rate, scope of consolidation and valuation related changes in fi nancial resources 1,043 -469<br />
Cash and cash equivalents at the beginning of the year 44,558 9,857<br />
Cash and cash equivalents at the end of the year 56,676 44,558
<strong><strong>Co</strong>nsolidated</strong> balance sheet in €T<br />
as of December 31, 2005<br />
ASSETS Notes 12/31/2005 12/31/2004<br />
A. Fixed assets<br />
I. Intangible assets 13 1,761 1,132<br />
II. Property, plant and equipment 14 90,213 77,901<br />
III. <strong>Financial</strong> assets 15 58,199 67,649<br />
150,173 146,682<br />
B. Current assets<br />
I. Inventories 16 148,307 100,281<br />
II. Receivables and other assets 17<br />
1. Trade receivables 150,559 123,484<br />
2. Other receivables and other assets 20,788 25,248<br />
171,347 148,732<br />
III. Marketable securities<br />
IV. Cash and cash equivalents, Bundesbank balances,<br />
18 4,561 169<br />
balances at banks and checks 56,676 44,558<br />
380,891 293,740<br />
C. Prepaid expenses and deferred taxes 2,395 1,666<br />
Total assets 533,459 442,088<br />
SHAREHOLDERS’ EQUITY AND LIABILITIES Notes 12/31/2005 12/31/2004<br />
A. Shareholders’ equity<br />
I. Subscribed capital 19 30,678 30,678<br />
II. Retained earnings 108,486 107,009<br />
III. <strong><strong>Co</strong>nsolidated</strong> net profi t 41,801 29,435<br />
IV. Minority interests 21,402 14,485<br />
202,367 181,607<br />
B. Provisions<br />
1. Provisions for pensions 20 47,637 36,300<br />
2. Other provisions 21 57,512 42,506<br />
105,149 78,806<br />
C. Liabilities<br />
1. Liabilities due to banks 22 92,205 85,011<br />
2. Trade payables 52,613 29,903<br />
3. Other liabilities 80,807 66,539<br />
225,625 181,453<br />
D. Deferred income 318 222<br />
Total shareholders’ equity and liabilities 533,459 442,088<br />
31
32<br />
<strong><strong>Co</strong>nsolidated</strong> <strong>Financial</strong> <strong>Statements</strong><br />
<strong><strong>Co</strong>nsolidated</strong> fi xed-assets analysis in €T<br />
from January 1 to December 31, 2005<br />
Balance at<br />
01/01/05<br />
Changes in<br />
scope of<br />
consolidation<br />
Fixed assets<br />
I. Intangible assets<br />
1. <strong>Co</strong>ncessions, commercial property rights and similar rights<br />
and assets as well as licenses thereto 4,053 1,155<br />
2. Goodwill 424 1,841<br />
4,477 2,996<br />
II. Property, plant and equipment<br />
1. Land, equivalent titles and buildings<br />
(including on leased land) 64,460 246<br />
2. Production plant and machinery 160,878 12,743<br />
3. Other plant, factory and offi ce equipment 43,473 9,508<br />
4. Prepayments and construction in progress 1,347 398<br />
270,158 22,895<br />
III. Investments<br />
1. Shares of affi liated companies 13,705 0<br />
2. Loans to affi liated companies 0 0<br />
3. Investments in associated companies 13,578 0<br />
4. Other investments 5,314 7,705<br />
5. Loans under investor/investee relations 4,431 0<br />
6. Other long-term securities 36,295 0<br />
7. Other long-term loans 2,828 21<br />
76,151 7,726<br />
Total fi xed assets 350,786 33,617<br />
Fixed-assets analysis
Acquisition or manufacturing costs<br />
Additions Disposals Reclassifi cations<br />
Balance at<br />
12/31/05<br />
Cumulative<br />
depreciation as of<br />
12/31/2005<br />
Book values<br />
12/31/05<br />
Depreciation<br />
in 2005<br />
949 983 158 5,332 3,774 1,558 776<br />
7 0 0 2,272 2,069 203 72<br />
956 983 158 7,604 5,843 1,761 848<br />
4,992 855 2 68,845 28,281 40,564 2,479<br />
8,335 30,488 1,908 153,376 115,379 37,997 12,619<br />
3,763 7,279 291 49,756 40,089 9,667 3,248<br />
3,315 694 -2,381 1,985 0 1,985 0<br />
20,405 39,316 -180 273,962 183,749 90,213 18,346<br />
13 0 0 13,718 4,973 8,745 0<br />
70 0 0 70 0 70 0<br />
1,604 643 0 14,539 534 14,005 0<br />
112 9,582 0 3,549 2,928 621 112<br />
0 4,431 0 0 0 0 0<br />
789 0 -4,561 32,523 4 32,519 0<br />
159 594 0 2,414 175 2,239 0<br />
2,747 15,250 -4,561 66,813 8,614 58,199 112<br />
24,108 55,549 -4,583 348,379 198,206 150,173 19,306<br />
33
34<br />
Equity analysis | Segmental reporting<br />
<strong><strong>Co</strong>nsolidated</strong> <strong>Financial</strong> <strong>Statements</strong><br />
<strong><strong>Co</strong>nsolidated</strong> equity analysis in €T<br />
from January 1 to December 31, 2005<br />
<strong><strong>Co</strong>nsolidated</strong><br />
Currency<br />
01/01/2004<br />
net profi t Dividends translation<br />
Subscribed capital L. <strong>Possehl</strong> & <strong>Co</strong>. <strong>mbH</strong> 30,678<br />
Retained earnings 151,879 12,689 -3,000<br />
Cumulative other result -20,847 -2,596<br />
Group equity excluding minority interests 161,710 12,689 -3,000 -2,596<br />
Minority interests 14,662 4,189<br />
Cumulative other earnings of minority interests -2,481 -646<br />
Minority interests 12,181 4,189 -646<br />
Shareholders’ equity 173,891 16,878 -3,000 -3,242<br />
Segmental reporting in €T<br />
Production Trading<br />
by business segment 2005 2004 2005 2004<br />
External sales 459,795 326,649 338,878 359,157<br />
Segmental EBT 28,990 13,828 11,699 13,207<br />
Depreciation of PP&E -16,878 -16,555 -1,349 -1,320<br />
Depreciation of current assets -584 -2,008 -224 -347<br />
Other non-cash items 22,947 3,147 4,102 2<br />
Result from associated companies 0 0 313 536<br />
Result from other companies 0 0 -112 4<br />
Interest income 1,297 238 732 325<br />
Interest expenses -3,511 -3,150 -4,181 -2,060<br />
Segmental assets 248,763 162,335 179,289 161,939<br />
Capital expenditures 15,550 15,997 1,329 2,003<br />
Segmental liabilities 143,116 100,887 125,287 111,735<br />
Employees (number of) 3,914 3,284 238 256<br />
by region Germany Other Europe<br />
External sales 244,245 220,849 188,352 154,007<br />
Segmental assets 256,115 233,259 44,834 37,868<br />
Capital expenditures 13,109 24,293 3,466 1,543
Other<br />
changes<br />
in equity<br />
12/31/2004/<br />
01/01/2005<br />
<strong><strong>Co</strong>nsolidated</strong><br />
net profi t Dividends<br />
Currency<br />
translation<br />
Other<br />
changes<br />
in equity 12/31/2005<br />
30,678 30,678<br />
267 161,835 22,191 -5,000 -2,122 176,904<br />
-1,948 -25,391 10,004 -11,230 -26,617<br />
-1,681 167,122 22,191 -5,000 10,004 -13,352 180,965<br />
-1,239 17,612 4,305 497 22,414<br />
-3,127 2,115 -1,012<br />
-1,239 14,485 4,305 2,115 497 21,402<br />
-2,920 181,607 26,496 -5,000 12,119 -12,855 202,367<br />
Services Holding Transition Group<br />
2005 2004 2005 2004 2005 2004 2005 2004<br />
10,067 9,316 0 0 0 0 808,740 695,122<br />
1,394 1,319 -3,984 -7,633 -1,833 1,240 36,266 21,961<br />
-537 -576 -542 -624 0 395 -19,306 -18,680<br />
-59 -31 -32 -284 0 -1 -899 -2,671<br />
215 399 839 -2,087 -401 558 27,702 2,019<br />
0 0 1,078 389 0 0 1,391 925<br />
0 0 -808 551 0 0 -920 555<br />
64 66 3,176 3,606 -1,511 -1,671 3,758 2,564<br />
-127 -133 -4,424 -3,993 1,510 1,669 -10,733 -7,667<br />
7,994 8,867 278,163 254,904 -189,920 -157,446 524,289 430,599<br />
315 252 31,323 18,782 -24,409 195 24,108 37,229<br />
5,342 6,565 114,912 97,761 -75,348 -64,396 313,309 252,552<br />
70 70 45 49 4,267 3,659<br />
Asia America Other regions Group<br />
185,638 152,808 174,648 147,977 15,857 19,481 808,740 695,122<br />
114,237 84,255 105,967 69,254 3,136 5,963 524,289 430,599<br />
6,452 10,201 1,065 904 16 288 24,108 37,229<br />
35
36<br />
I. GENERAL INFORMATION<br />
<strong><strong>Co</strong>nsolidated</strong> <strong>Financial</strong> <strong>Statements</strong><br />
The consolidated fi nancial statements of L. <strong>Possehl</strong> & <strong>Co</strong>. <strong>mbH</strong> (hereinafter<br />
referred to as L. <strong>Possehl</strong>) for fi scal year 2005 were prepared according<br />
to the provisions of the German <strong>Co</strong>mmercial <strong>Co</strong>de (HGB). The<br />
fi nancial statements of the subsidiaries included in the consolidated<br />
fi nancial statements are based on the balance sheet date of the fi nancial<br />
statements of L. <strong>Possehl</strong>.<br />
In order to improve clarity and meaning of the consolidated fi nancial<br />
statements, individual items of the balance sheet and income statement<br />
are combined and individually reported and explained in the<br />
notes with the respective previous years’ amounts. Due to its essential<br />
content of information, the individual accounts receivable, provisions<br />
and liabilities of the balance sheet are reported separately. The income<br />
statement is structured according to the cost of production method.<br />
The consolidated fi nancial statements are drawn up in thousands (’000)<br />
of Euro.<br />
II. GROUP OF CONSOLIDATED COMPANIES AND<br />
ASSOCIATED AFFILIATES<br />
Besides L. <strong>Possehl</strong>, the consolidated fi nancial statements include 12<br />
German and 33 international production, trading and services companies,<br />
in which L. <strong>Possehl</strong> holds, whether directly or indirectly, the majority<br />
of voting rights. Overall, nine subsidiaries are not fully consolidated<br />
because of the minor importance on the net assets, fi nancial position<br />
and earnings of the Group. Please refer to the attached overview of<br />
participations for more information (see p. 56).<br />
The following signifi cant changes in the group of consolidated companies<br />
compared to the previous year should be mentioned:<br />
In a purchase agreement dated March 24, 2005, L. <strong>Possehl</strong> acquired<br />
all of the business shares in Harburg-Freudenberger Maschinenbau<br />
G<strong>mbH</strong>, based in Hamburg, as well as its subsidiaries Harburg-Freudenberger<br />
Belišce d.o.o. and HF Rubber Machinery, Inc. During the reporting<br />
period, Harburg-Freudenberger Maschinenbau G<strong>mbH</strong> established<br />
two additional subsidiaries in France and Russia, with the latter not yet<br />
being included in the consolidated fi nancial statements due to their<br />
minor importance.<br />
Notes<br />
The two companies <strong>Possehl</strong> do Brasil Ltda. and Nástrojárna <strong>Possehl</strong><br />
Electronic s.r.o. were disposed of during the reporting year and deconsolidated<br />
at the beginning of the fi scal year.<br />
Moreover, Nordstahl G<strong>mbH</strong> was merged with L. <strong>Possehl</strong> at the beginning<br />
of the fi scal year.<br />
Due to the acquisition of the Harburg-Freudenberger Group, Group<br />
sales increased by about € 127 million. The consolidated balance sheet<br />
total increased by a solid € 55 million as a result of this acquisition, and<br />
the number of employees increased on average 822. The other changes<br />
to the group of consolidated companies have not had a signifi cant impact<br />
on the net assets, fi nancial position and earnings of the Group.<br />
Major participations are measured according to the equity method if<br />
they have a signifi cant infl uence. The number of associated companies<br />
remains unchanged at 7.<br />
III. GROUP ACCOUNTING PRINCIPLES<br />
The annual fi nancial statements of the companies included in the<br />
consolidated fi nancial statements are prepared in accordance with<br />
standard accounting and valuation principles. If the fi nancial statements<br />
of associated companies deviate from the Group’s standard<br />
accounting principles, they are adjusted accordingly in the event<br />
of signifi cant variations.<br />
The consolidation of capital takes place according to the book value<br />
method by offsetting the participation book value against the prorated<br />
equity at the time of acquisition or addition. A positive amount resulting<br />
from the difference of the participation book value and prorated equity<br />
is offset against retained earnings.<br />
The participations measured according to the provisions for associated<br />
affi liates are reported by applying the book value method, i.e.<br />
associated affi liates are carried at the prorated equity as of the date<br />
of their acquisition or fi rst-time inclusion in the consolidated fi nancial<br />
statements. Any resultant net equity under cost is offset against the<br />
reserves retained from earnings. In case of net equity above cost, the<br />
item is limited to the historical costs at the time of the initial consolidation.<br />
In subsequent years, the value is adjusted for the prorated earnings<br />
of these companies impacting earnings, with profi t distributions<br />
for the previous years subtracted not impacting earnings.
In accordance with Article 312 Para. 6 HGB and based on the consolidated<br />
fi nancial statements prepared by Hako Holding G<strong>mbH</strong> & <strong>Co</strong>. KG,<br />
which include a total of 31 companies, Hako is to be included in the<br />
consolidated fi nancial statements of L. <strong>Possehl</strong> according to the equity<br />
method.<br />
Receivables and payables, as well as sales, expenses and gains in<br />
income among consolidated companies are set off against one another.<br />
Unless immaterial, intercompany profi t eliminations were performed<br />
for intra-subgroup transactions. Internal sales from supply of own products<br />
are reclassifi ed as own work capitalized or changes in inventory<br />
unless they are not negligible.<br />
Due to their immaterial effect on the net assets, fi nancial position and<br />
earnings of the Group, there are no intercompany profi ts to be eliminated<br />
from supply and service relationships with associated companies.<br />
The bad loan losses on Group-internal receivables performed in the<br />
individual fi nancial statements as well as the write-off on shares of consolidated<br />
companies are eliminated.<br />
Required deferred tax payments are recognized for earnings-relevant<br />
consolidation processes.<br />
IV. CURRENCY TRANSLATION<br />
The carrying values of the foreign subsidiaries are translated throughout<br />
at the mean current rate as of the balance sheet date. The differences<br />
resulting from exchange rate changes compared to the end of<br />
the previous fi scal year are offset against the reserves retained from<br />
and not recognized in net income. The currency used by the parent<br />
company is the Euro.<br />
Expenses and income including the consolidated net profi t are translated<br />
at the monthly average exchange rates. Currency differences from<br />
the application of different rates for translating the balance sheet and<br />
the income statement are treated as neutral in their effect on earnings<br />
in accordance with DRS 14.<br />
The following exchange rates are used for translating the most important<br />
foreign currencies within the Group:<br />
Reporting date rate in € Average rate in €<br />
<strong>Co</strong>untry Currency 2005 2004 2005 2004<br />
USA USD 0.84767 0.73416 0.80470 0.80520<br />
China RMB 0.10500 0.08990 0.09950 0.09850<br />
Hong Kong HKD 0.10932 0.09445 0.10343 0.10338<br />
Malaysia MYR 0.22430 0.19296 0.21342 0.21211<br />
Singapore SGD 0.50948 0.44920 0.47819 0.47619<br />
In the analysis of fi xed assets and provisions and in the development of<br />
bad loan provisions, the differences resulting from the currency translation<br />
of the beginning levels as of the balance sheet date of December<br />
31, 2005 compared with the previous year’s exchange rate are offset<br />
with retained earnings not impacting earnings.<br />
37
38<br />
<strong><strong>Co</strong>nsolidated</strong> <strong>Financial</strong> <strong>Statements</strong><br />
V. NOTES TO THE CONSOLIDATED<br />
INCOME STATEMENT<br />
1. Net sales<br />
For the split of consolidated external sales in the amount of<br />
€ 808,740,000 (previous year: € 695,122,000) by business segment<br />
and region, please refer to the segmental reporting section.<br />
2. Changes in fi nished goods, work in progress<br />
and own work capitalized<br />
in €T<br />
Increase in fi nished goods<br />
2005 2004<br />
and work in progress 22,811 5,012<br />
Other own work capitalized 3,233 3,768<br />
26,044 8,780<br />
3. Other operating income<br />
in €T<br />
Income from the<br />
2005 2004<br />
reversal of provisions<br />
Income from the disposal of<br />
6,793 4,691<br />
fully consolidated subsidiaries 1,719 1,442<br />
Income from rents and leases 1,533 1,273<br />
Income from handling charges 1,460 1,296<br />
Currency gains 1,875 1,160<br />
Insurance reimbursements<br />
Income from the disposal of<br />
442 560<br />
tangible assets and write-ups<br />
Income from the reversal of bad loan<br />
provisions and receipt of written-off<br />
628 438<br />
receivables 1,151 258<br />
Other 3,475 5,663<br />
19,076 16,781<br />
Notes<br />
The income from the disposal of fully consolidated subsidiaries combines<br />
the result from the disposal of individual assets and liabilities of<br />
subsidiaries no longer included in the scope of consolidation. The deconsolidation<br />
is completely earnings-relevant, including the previously<br />
existing differences included in the consolidated fi nancial statements.<br />
The income from the disposal of investments is reported under the<br />
investment result if it concerns not fully consolidated affi liated,<br />
associated and other participations; otherwise it is reported under the<br />
fi nancial result.<br />
4. <strong>Co</strong>st of materials<br />
in €T<br />
Expenses for raw materials and<br />
2005 2004<br />
supplies and goods received 562,147 503,943<br />
Expenses for services received 17,184 15,442<br />
579,331 519,385<br />
5. Personnel expenses<br />
in €T 2005 2004<br />
Wages and salaries 105,993 83,185<br />
Social security contributions 15,703 11,379<br />
Retirement expenses 7,319 7,238<br />
129,015 101,802<br />
The average number of employees by group amounted to:<br />
2005 2004<br />
Wage earners 2,979 2,670<br />
Salaried employees 1,239 962<br />
Apprentices/trainees 49 27<br />
4,267 3,659
6. Depreciation<br />
Depreciation of property, plant and equipment amounts to € 18,346,000<br />
(previous year: € 17,764,000) and depreciation of intangible assets<br />
amounts to € 848,000 (previous year: € 506,000). An extraordinary<br />
amount of € 488,000 (previous year € 1,968,000) on tangible assets<br />
is included.<br />
7. Other operating expenses<br />
in €T 2005 2004<br />
Other administrative expenses 9,208 5,812<br />
Other operating expenses 13,762 8,168<br />
Freight expenses 9,127 6,622<br />
Other sales and marketing expenses 17,166 8,016<br />
Insurance expenses 3,756 3,169<br />
Other personnel expenses 7,693 2,879<br />
Expenses for rents and leases 3,300 2,842<br />
Currency expenses<br />
Legal, IT and other<br />
2,065 2,812<br />
consulting services 6,957 4,501<br />
Maintenance expenses<br />
Expenses from the addition of<br />
8,609 2,376<br />
individual and lump-sum allowances<br />
Other losses in value<br />
1,543 1,109<br />
of current assets<br />
Losses from the disposal of fully<br />
362 513<br />
consolidated subsidiaries 345 0<br />
Losses from the disposal of tangible assets 427 308<br />
Other 2,152 7,089<br />
86,472 56,216<br />
The losses from the disposal of investments are reported under the<br />
investment result if they concern not fully consolidated affi liated, associated<br />
and other participations, otherwise they are reported under<br />
the fi nancial result.<br />
8. Investment result<br />
in €T<br />
Income from participations<br />
2005 2004<br />
in associated companies 1,604 1,147<br />
Income from other participations 0 4<br />
Income from profi t transfers<br />
Losses from the disposal<br />
0 564<br />
of other participations -310 0<br />
Expenses from loss assumption<br />
Expenses for participations<br />
-498 0<br />
in associated companies<br />
Write-downs on participations<br />
-213 0<br />
in associated companies<br />
Write-downs on<br />
0 -222<br />
other participations -112 -13<br />
471 1,480<br />
9. Interest result<br />
in €T<br />
Income from loans of<br />
2005 2004<br />
fi nancial fi xed assets 158 130<br />
Other interest and similar income 3,600 2,434<br />
Interest paid and similar expenses -10,733 -7,667<br />
-6,975 -5,103<br />
Interest expense for expenses related to affi liated companies amounts<br />
to € 240,000. In the previous year, an interest result of € 560,000<br />
related to affi liated companies.<br />
10. Other fi nancial result<br />
in €T<br />
Income from marketable securities<br />
2005 2004<br />
(dividends received) 2,922 749<br />
Write-offs on loans 0 -175<br />
2,922 574<br />
39
40<br />
11. Income taxes<br />
<strong><strong>Co</strong>nsolidated</strong> <strong>Financial</strong> <strong>Statements</strong><br />
Deferred taxes of the individual fi nancial statements are included if they<br />
are in accordance with the uniform accounting and valuation principles<br />
of the Group. Otherwise, adjustments are made, e.g. for the deferred<br />
tax assets for tax carry forwards.<br />
As far as consolidation measures result in deferred taxes, the business<br />
and country-specifi c average tax rates between 7.5 % and 40 % are<br />
applied. The income taxes in the reporting year include a deferred tax<br />
in the amount of € 1,247,000.<br />
Of the tax expense, € 3,563,000 pertains to previous years.<br />
12. Other taxes<br />
The other taxes are mainly non-deductible sales tax outside of Germany<br />
in addition to property, property transfer and motor vehicle taxes.<br />
VI. NOTES TO THE CONSOLIDATED STATEMENTS<br />
OF CASH FLOWS<br />
The statement of cash fl ows was drawn up following the scheme of<br />
DRS 2. The liquid funds include only the inventory of cash and cash<br />
equivalents (cash, Bundesbank balances and balances at other banks<br />
as well as checks). The changes in liquid funds resulting from exchange<br />
rate changes are reported separately.<br />
The other non-cash expenses essentially include allocations to specifi c<br />
provisions as well as expenses related to depreciation or disposal of<br />
current or fi xed assets. Income is mainly the result of equity assessments,<br />
release of specifi c provisions and value recoveries in inventory<br />
assets.<br />
Notes<br />
VII. NOTES TO THE CONSOLIDATED BALANCE SHEET<br />
Fixed assets<br />
On the basis of the Group’s uniform expected economic life, the depreciable<br />
fi xed assets are principally carried during the probably economic<br />
life applying a linear distribution of purchasing/manufacturing costs.<br />
Required extraordinary write-offs on intangible, tangible and fi nancial<br />
assets are accounted for.<br />
Detailed information can be found in the analysis of the Group’s<br />
fi xed assets. The historical acquisition/manufacturing costs as of<br />
01/01/2005 include adjustments from the currency translation which<br />
are neutral in effect on profi ts amounting to € 272,000 offsetting<br />
intangible assets and € 23,457,000 offsetting tangible fi xed assets.<br />
13. Intangible assets<br />
in €T 12/31/2005 12/31/2004<br />
1. <strong>Co</strong>ncessions, commercial<br />
property rights and similar<br />
rights and assets as well as<br />
licenses hereto 1,558 963<br />
2. Goodwill 203 169<br />
1,761 1,132<br />
The main item is software amounting to € 1,503,000 (previous year:<br />
€ 935,000), for which a three-year period of use is assured.<br />
Goodwill resulting from fi rst-time capital consolidation is directly<br />
offset against retained earnings, in the reporting year mainly from the<br />
fi rst consolidation of the Harburg-Freudenberger Group an amount of<br />
€ 11,319,000 in net terms.
14. Property, plant and equipment<br />
in €T 12/31/2005 12/31/2004<br />
1. Land, equivalent titles and<br />
buildings (including on leased land) 40,564 35,693<br />
2. Production plant and machinery 37,997 33,358<br />
3. Other plant, factory<br />
and offi ce equipment 9,667 7,611<br />
4. Prepayments and<br />
construction in progress 1,985 1,239<br />
90,213 77,901<br />
The production costs include appropriate shares of required material<br />
and production overhead as well as production plant related depreciation.<br />
Low value assets are completely written off in the year of purchase<br />
and recorded in the fi xed asset analysis as disposals.<br />
The linear depreciation of the purchase/production costs – reduced by<br />
grants, if necessary – is mainly based on the following assumed useful<br />
economic life:<br />
Buildings 20 – 50 years<br />
Production plant and machinery 5 – 10 years<br />
Tools 1 – 3 years<br />
Offi ce furniture 10 years<br />
Offi ce equipment 3 – 5 years<br />
Transportation vehicles 3 – 5 years<br />
In order to take into account the highly fl uctuating utilization rates<br />
of the tools used in the Electronics division, a method combining<br />
depreciation by usage with a maximum term of depreciation of four<br />
years is applied.<br />
15. <strong>Financial</strong> assets<br />
in €T 12/31/2005 12/31/2004<br />
1. Shares of affi liated companies 8,745 8,732<br />
2. Loans to affi liated companies 70 0<br />
3. Investments in associated companies 14,005 13,044<br />
4. Other investments<br />
5. Loans to companies with<br />
which the company is linked<br />
621 2,498<br />
by participation 0 4,431<br />
6. Long-term investments 32,519 36,291<br />
7. Other long-term loans 2,239 2,653<br />
58,199 67,649<br />
The list of shareholdings has been fi led and deposited with the Local<br />
<strong>Co</strong>urt of Lübeck under No. HRB 9.<br />
The following Germany-based subsidiaries made use of the exemption<br />
provision of Article 264 Para. 3 HGB during the reporting year 2005:<br />
Heimerle + Meule G<strong>mbH</strong>, Pforzheim<br />
Harburg-Freudenberger Maschinenbau G<strong>mbH</strong>, Hamburg<br />
<strong>Possehl</strong> Erzkontor G<strong>mbH</strong>, Lübeck<br />
<strong>Possehl</strong> Beteiligungsverwaltung G<strong>mbH</strong>, Lübeck<br />
The associated participations valued at-equity are carried with their<br />
prorated earnings, taking into account profi t distributions. The changes<br />
are reported in the analysis of fi xed assets as additions and disposals,<br />
respectively.<br />
The not fully consolidated shares in subsidiaries and the other participations<br />
are carried at historical cost – if applicable, less non-scheduled<br />
depreciation. Interest-free or low-interest bearing loans are reported at<br />
cash value. Personnel loans are reported at their nominal value.<br />
The non-current marketable securities are carried at cost.<br />
41
42<br />
Current assets<br />
16. Inventories<br />
<strong><strong>Co</strong>nsolidated</strong> <strong>Financial</strong> <strong>Statements</strong><br />
in €T 12/31/2005 12/31/2004<br />
1. Raw materials and supplies 31,018 18,619<br />
2. Work in progress,<br />
unfi nished services 12,275 13,740<br />
3. Finished products and goods 99,802 60,096<br />
4. Prepayments 5,212 7,826<br />
148,307 100,281<br />
Inventories are carried at the lower of cost or market. Write-downs for<br />
inventory risks stemming from the time of storage and reduced realizable<br />
values are accounted for to a reasonable extent. The rule of lossfree<br />
valuation is accounted for. In addition to the cost of materials and<br />
individual labor costs, the costs of production include reasonable production<br />
overhead.<br />
The precious metals inventories are valued pursuant to the principle of<br />
lower of cost or market applying the LIFO method.<br />
The prepayments of € 92,530,000 received on orders (previous year:<br />
€ 4,112,000) were directly offset against fi nished products and goods.<br />
Notes<br />
17. Receivables and other assets<br />
in €T 12/31/2005 12/31/2004<br />
1. Accounts receivable 150,559 123,484<br />
2. Other receivables<br />
and other assets<br />
Receivables due from<br />
associated companies<br />
Receivables due from companies<br />
with which the company is linked<br />
1 1,663<br />
by participating interests 1,274 1,099<br />
Other assets<br />
thereof with a term of<br />
19,513 22,486<br />
more than 1 year (1,164) (1,127)<br />
20,788 25,248<br />
Accounts receivable and other assets are carried at nominal values less<br />
adjustments for identifi able individual risks. In addition to individual<br />
adjustments on accounts receivable of € 4,274,000 (previous year:<br />
€ 2,296,000), the general credit risk is covered by a general provision<br />
for doubtful accounts of € 2,739,000 (previous year: € 2,638,000).<br />
The other assets mainly include tax reimbursement claims from corporate,<br />
withholding and sales taxes in the overall amount of € 9,172,000<br />
(previous year: € 11,490,000).<br />
18. Marketable securities<br />
The statement of securities pertains to the shares in Süd-Chemie AG<br />
reclassifi ed from the fi xed assets and disposed of at the beginning of<br />
the coming fi scal year and is drawn up at the Group acquisition costs.
19. Shareholders’ equity<br />
The design of the equity analysis is patterned after DRS 7.<br />
The equity held by the sole shareholder <strong>Possehl</strong> Stiftung of the parent<br />
company L. <strong>Possehl</strong> & <strong>Co</strong>. <strong>mbH</strong> is reported as the subscribed capital.<br />
Apart from the retained earnings of the parent company, the retained<br />
earnings include the adjustment item from the currency translation of<br />
foreign fi nancial statements as well as the setting-off of goodwill and<br />
existing net equity losses.<br />
They developed as follows during the year under review:<br />
in €T<br />
Retained earnings as of January 1, 2005 107,009<br />
Currency translation differences 10,004<br />
Discontinuations 2,722<br />
Change in consolidation of adjustment items -11,319<br />
Other consolidation procedures 70<br />
Retained earnings as of December 31, 2005 108,486<br />
The transition from the Group’s net profi t to the consolidated net profi t<br />
is as follows:<br />
in €T<br />
<strong><strong>Co</strong>nsolidated</strong> net profi t 26,496<br />
Minority interests -4,305<br />
Previous year’s consolidated net profi t 18,773<br />
Currency differences 837<br />
<strong><strong>Co</strong>nsolidated</strong> profi t 41,801<br />
20. Provisions for pensions<br />
The pension obligations in the amount of € 47,637,000 exist mainly for<br />
the parent company and the German subsidiaries. The provisions for<br />
pensions include 1,310 future pensions (previous year: 551) and 896<br />
(previous year: 698) current pensions for entitled active and former<br />
employees as well as surviving dependents. The amount of the pension<br />
obligations depends on the term of employment and the total salaries<br />
or contributions of the benefi ciaries.<br />
The valuation follows the tables of Dr Klaus Heubeck from the year<br />
2005 and uses an interest rate of 6 % to the partial value pursuant to<br />
Article 6a EStG (income tax law). The difference between the tables<br />
of 2005 and 1998 was added in completely if the new tables result in<br />
a higher amount, and in the case of a smaller provision, the reversal<br />
amount is released over a period of time of three years according to<br />
the provision of Article 6a Para. 4 EStG. In addition, obligations for<br />
adjusting the current pensions in accordance with Article 16 BetrAVG<br />
by € 1,580,000 (previous year € 1,552,000) are taken into account.<br />
21. Other provisions<br />
in €T 12/31/2005 12/31/2004<br />
1. Provisions for deferred taxes 3,358 3,354<br />
2. Other tax provisions 6,663 3,263<br />
3. Other provisions 47,491 35,889<br />
57,512 42,506<br />
All identifi able risks and uncertain obligations are included to a reasonable<br />
extent as tax or other provisions applying sound business judgment.<br />
The deferred tax assets and the deferred tax liabilities result from the<br />
differences between commercial and tax accounts of German and<br />
international Group companies. Moreover, deferred taxes are offset<br />
against earnings-relevant consolidation entries. Deferred tax assets<br />
and deferred tax liabilities are balanced. The recognition of a deferred<br />
tax asset from tax carry forwards is not realized.<br />
43
44<br />
<strong><strong>Co</strong>nsolidated</strong> <strong>Financial</strong> <strong>Statements</strong><br />
in €T 12/31/2005 12/31/2004<br />
Deferred tax liabilities 6,190 5,467<br />
Deferred tax assets -2,832 - 2,113<br />
Provisions for deferred taxes 3,358 3,354<br />
The other tax provisions and other provisions developed as follows in<br />
the year under review:<br />
Exchange<br />
Change in<br />
scope of Reclassifi -<br />
in €T 01/01/05 rate effect <strong>Co</strong>nsolidation cation Use Release Allocations 12/31/05<br />
Other tax provisions 3,263 195 1,424 0 -1,623 -253 3,657 6,663<br />
Personnel 16,740 799 6,595 58 -19,258 -844 18,858 22,948<br />
Impending losses<br />
Warranty and indemnity<br />
3,753 127 10 0 -336 -377 52 3,229<br />
contracts 4,190 294 3,956 448 -1,937 -2,661 2,141 6,431<br />
Accounting 954 37 381 16 -1,529 -11 1,552 1,400<br />
Accounts receivable 1,440 106 2,168 106 -2,931 -917 4,519 4,491<br />
Other 8,812 404 841 -581 -5,165 -1,049 5,730 8,992<br />
Other provisions 35,889 1,767 13,951 47 -31,156 -5,859 32,852 47,491<br />
The item personnel covers anniversary gifts, holiday claims, overtime,<br />
pre-retirement, and annual bonus payments as well as other personnel<br />
obligations.<br />
The item accounting includes the subsequent accounting work as well<br />
as the internal and external expenses for drawing up and auditing the<br />
fi nancial statements.<br />
The item other includes the future payment obligations from fees and<br />
notices, risks and uncertain obligations, from life annuities, legal disputes<br />
and claiming of payments.<br />
Notes
22. Liabilities<br />
in €T<br />
1. Liabilities due to banks<br />
(previous year)<br />
2. Accounts payable<br />
(previous year)<br />
3. Other liabilities<br />
Notes payable<br />
(previous year)<br />
Due to affi liated companies<br />
(previous year)<br />
Due to companies with which the company<br />
is linked by a participating interest<br />
(previous year)<br />
Other liabilities<br />
(previous year)<br />
Other liabilities<br />
(previous year)<br />
Liabilities are recognized with their redemption amounts.<br />
Rights of lien and retention of ownership supply security in the amount<br />
of € 1,031,000 (previous year: € 2,769,000).<br />
Other liabilities<br />
in €T 12/31/2005 12/31/2004<br />
Taxes 1,865 1,652<br />
Social security 1,377 1,149<br />
Shareholders<br />
49,267 45,891<br />
thereof due to the <strong>Possehl</strong> Stiftung<br />
(49,167) (45,891)<br />
Other 15,002 5,793<br />
Other liabilities 67,511 54,485<br />
Up to<br />
1 year<br />
75,040<br />
(67,098)<br />
52,598<br />
(29,903)<br />
-<br />
(302)<br />
13,107<br />
(11,644)<br />
189<br />
(108)<br />
67,044<br />
(54,040)<br />
80,340<br />
(66,094)<br />
1 – 5<br />
years > 5 years Total<br />
17,148<br />
(17,827)<br />
15<br />
(-)<br />
-<br />
(-)<br />
-<br />
(-)<br />
-<br />
(-)<br />
434<br />
(342)<br />
434<br />
(342)<br />
17<br />
(86)<br />
-<br />
(-)<br />
-<br />
(-)<br />
-<br />
(-)<br />
-<br />
(-)<br />
33<br />
(103)<br />
33<br />
(103)<br />
92,205<br />
(85,011)<br />
52,613<br />
(29,903)<br />
-<br />
(302)<br />
13,107<br />
(11,644)<br />
189<br />
(108)<br />
67,511<br />
(54,485)<br />
80,807<br />
(66,539)<br />
45
46<br />
VIII. CONTINGENT LIABILITIES<br />
<strong><strong>Co</strong>nsolidated</strong> <strong>Financial</strong> <strong>Statements</strong><br />
in €T 12/31/2005 12/31/2004<br />
Notes endorsed and discounted 442 236<br />
Suretyships and guarantees 1,797 1,587<br />
Guarantees/warranties 2,055 2,024<br />
<strong>Co</strong>llateralization of third-party debts 67 0<br />
IX. OTHER FINANCIAL OBLIGATIONS<br />
in €T<br />
Rental/leasing and other<br />
contractual obligations<br />
12/31/2005 12/31/2004<br />
(nominal values)<br />
with a term to maturity of<br />
49,077 29,343<br />
up to 1 year 14,014 3,460<br />
1 – 5 years 7,049 21,908<br />
> 5 years 28,014 3,975<br />
from fi xed-asset purchase commitments 880 1,709<br />
49,957 31,052<br />
X. FINANCIAL DERIVATIVES<br />
<strong>Financial</strong> derivatives are used for the purpose of currency and interest<br />
rate hedges within the Group. Only unconditional forwards on<br />
currencies and currency or interest rate swaps are used.<br />
Notes<br />
The currency forwards are forwards on a US dollar, CAD or Euro basis<br />
not traded at an exchange. In addition to the hedging of balance sheet<br />
items, in the near future upcoming payment obligations from procurement<br />
processes are also hedged against expected adverse currency<br />
trends.<br />
The terms of currency swaps are always short-term, while interest<br />
swaps extend to June 2009. Valuation is based on the mark-to-market<br />
method.<br />
The nominal and market values of derivatives can be seen in the<br />
following overview:<br />
in €T<br />
Nominal<br />
value<br />
12/31/2005<br />
Market<br />
value<br />
12/31/2005<br />
Currency forwards 20,537 -627<br />
Interest rate swaps 17,581 492<br />
Currency swaps 38,001 -2<br />
The market value of the fi nancial instruments is calculated from the<br />
valuation of all transactions as of the balance sheet date without<br />
taking the underlying transactions into account. Risks from the negative<br />
development of derivatives or from the contract partner, which makes<br />
it necessary to set up an impending loss provision, did not exist as of<br />
the balance sheet date.
XI. NOTES TO THE SEGMENTAL REPORTING<br />
General information<br />
The segmentation of the Group’s activities follows the internal reporting<br />
structure and the management of the Group according to the business<br />
segments. On a secondary level, there is a regional split by geographic<br />
regions. Activities and regions that cannot be specifi cally allocated are<br />
combined in a category called “Others”.<br />
Business segments<br />
The Production segment is comprised of the business divisions<br />
Electronics, Precious Metals Processing, Special-Purpose <strong>Co</strong>nstruction<br />
and the business division acquired during the year under review,<br />
Elastomer-Processing.<br />
The Trading segment includes those Group companies that are involved<br />
in the international raw materials trading of minerals, ores, metals,<br />
plastics and chemicals. The product range is rounded out by upstream<br />
and downstream preparation, grinding and processing activities.<br />
The combined activities of the Services segment include the Group’s<br />
companies in environmental protection and the brokerage of insurance<br />
and transport services.<br />
Central service functions that are rendered through holding and intermediate<br />
holding companies are combined in the Holding segment together<br />
with the held fi nancial investments.<br />
Geographic regions<br />
Secondary segmenting is based on the regions of Germany, other<br />
Europe, Asia and America.<br />
Segmental data<br />
The data in the segmental reporting is based on the accounting and<br />
reporting methods applied in the consolidated fi nancial statements<br />
and explained in the notes to the consolidated fi nancial statements.<br />
They are prepared in the sense of economically and legally independent<br />
companies, i.e. without eliminating inter-segmental processes. The<br />
transition of the balance sheet and income statement items to the<br />
items of the consolidated balance sheet and income statement accordingly<br />
represents the extent of the inter-segmental consolidation.<br />
The external sales revenue includes revenue from the sale of the products<br />
and/or the rendering of services to third parties. The inter-segmental<br />
sales result from supply and service relations among the individual<br />
segments. They are offset based on market prices. None of the<br />
sales across the segments are subject to elimination.<br />
As the segmental result, the earnings before taxes (EBT) are reported.<br />
For the differentiation of the segmental assets, the tax claims are subtracted<br />
from the gross assets. The segmental liabilities include provisions<br />
and long- and short-term debt/liabilities excluding tax liabilities.<br />
The balance from other non-cash items includes mainly write-ups,<br />
changes in bad loan losses, provisions (excluding tax provisions) and<br />
changes in inventories.<br />
The inter-segmental lock-in of capital between the operating subsidiaries<br />
of the individual business segments and the holding companies, in<br />
particular the parent company, becomes apparent in the transition of<br />
the segmental assets, liabilities and fi nancial result.<br />
For geographic segmenting, sales are segmented according to the location<br />
of the customer. The segmental assets and investments follow the<br />
location of the respective Group company.<br />
47
48 Notes | Auditors’ report<br />
<strong><strong>Co</strong>nsolidated</strong> <strong>Financial</strong> <strong>Statements</strong><br />
XII. TOTAL REMUNERATION OF THE EXECUTIVE<br />
AND SUPERVISORY BOARD<br />
The total remuneration paid to Executive Board members for their<br />
services on behalf of the parent company and subsidiaries totaled<br />
€ 1,843,000 (previous year: € 1,524,000), that paid to the Advisory<br />
<strong>Co</strong>uncil members totaled € 100,000 (previous year: € 0), and that for<br />
Supervisory Board members amounted to € 14,000 (previous year:<br />
€ 135,000).<br />
Former members of the Executive Board and their surviving dependents<br />
received € 711,000 (previous year: € 684,000). The obligations<br />
from current pension payments and vested pension rights are covered<br />
by provisions amounting to € 7,540,000 (previous year: € 7,646,000).<br />
XIII. PROPOSAL ON THE APPROPRIATION OF<br />
PROFITS OF THE PARENT COMPANY<br />
in €<br />
Net profi t 2005 9,394,023.62<br />
Profi t brought forward from the previous year 106,205.55<br />
Net income for the year 9,500,229.17<br />
A proposal was made to disburse from the net income for the year<br />
of € 9,500,229.17 a partial amount of € 5,000,000.00 to the sole<br />
partner, the <strong>Possehl</strong> Stiftung, and to allocate € 4,500,000.00 to<br />
the other retained earnings and to carry forward the remaining<br />
amount of € 229.17 to a new account.<br />
Lübeck, April 12, 2006<br />
L. <strong>Possehl</strong> & <strong>Co</strong>. <strong>mbH</strong><br />
The Executive Board<br />
Uwe Lüders Dr Egon Rudolph
Auditors’ report<br />
We have audited the consolidated fi nancial statements prepared by L. <strong>Possehl</strong> & <strong>Co</strong>. <strong>mbH</strong> – consisting<br />
of the balance sheet, income statement, notes, statement of cash fl ows, and consolidated equity<br />
analysis as well as the segmental reporting – and the group management report for the fi scal year from<br />
January 1, 2005 to December 31, 2005. The preparation of the consolidated fi nancial statements and the<br />
group management report in accordance with German <strong>Co</strong>mmercial <strong>Co</strong>de regulations is the responsibility<br />
of the company’s legal representatives. Our responsibility, based on our audit, is to express an opinion on<br />
the company’s consolidated fi nancial statements and its group management report.<br />
We have conducted our statutory group audit according to the provisions of Art. 317 HGB and with due<br />
regard to the standards on the audit of fi nancial statements generally accepted in Germany as established<br />
by IDW, the Institute of Sworn Public Auditors & Accountants in Germany. Those standards require<br />
that we plan and perform the audit to obtain reasonable assurance that any misstatement or fraud<br />
which has a material impact on the view of the net assets, fi nancial position and results of operations as<br />
presented by the consolidated fi nancial statements in accordance with generally accepted accounting<br />
principles and by the group management report is identifi ed. When planning the audit procedures, knowledge<br />
and understanding of the Group’s business, its economic and legal environment as well as sources<br />
of potential errors are given due consideration. An audit includes examining, largely on a test basis, the<br />
accounting-related internal control system’s effectiveness and the evidence supporting the amounts and<br />
disclosures in the consolidated fi nancial statements and the group management report. The audit also<br />
involves assessing the annual fi nancial statements of companies included in the consolidated fi nancial<br />
statements, the defi nition of the consolidation group, the accounting and consolidation principles used,<br />
and signifi cant estimates made, by the auditee’s legal representatives, as well as evaluating the overall<br />
presentation of the consolidated fi nancial statements and the group management report. We believe that<br />
our audit provides a reasonable basis for our opinion.<br />
Our audit did not result in any objections or exceptions.<br />
It is our opinion based on the knowledge and information obtained during the audit that the consolidated<br />
fi nancial statements, with due regard to the generally accepted accounting principles, present fairly,<br />
in all material respects, the Group’s net assets, fi nancial position and results of operations. The group<br />
management report agrees with the consolidated fi nancial statements and gives a true and fair view of<br />
the Group’s overall position and the risks and opportunities inherent in its future development.<br />
Hamburg, April 12, 2006<br />
BDO Deutsche Warentreuhand<br />
Aktiengesellschaft<br />
Wirtschaftsprüfungsgesellschaft<br />
Dyckerhoff Herbers<br />
Auditor Auditor<br />
49
50<br />
Shareholdings<br />
as of December 31, 2005<br />
Name Location<br />
<strong><strong>Co</strong>nsolidated</strong> subsidiaries<br />
Share of<br />
capital in %<br />
Precious Metals Processing<br />
Heimerle + Meule G<strong>mbH</strong> Pforzheim/Germany 100.00<br />
Electronics<br />
<strong>Possehl</strong> Electronics N.V. ‘s-Hertogenbosch/Netherlands 80.10<br />
<strong>Possehl</strong> Electronics Deutschland G<strong>mbH</strong> Wedel/Germany 100.00<br />
<strong>Possehl</strong> Electronics France S. A. Roche Ia Molière/France 100.00<br />
<strong>Possehl</strong> Electronics Nederland B. V. ‘s-Hertogenbosch/Netherlands 100.00<br />
<strong>Possehl</strong> Electronics Maroc S. A. R. L. Casablanca/Morocco 100.00<br />
<strong>Possehl</strong> Electronics Hong Kong Ltd. Hong Kong/China 100.00<br />
<strong>Possehl</strong> Laminates Ltd. Hong Kong/China 100.00<br />
Shenzhen <strong>Possehl</strong> SEG Electronics <strong>Co</strong>. Ltd. Shenzhen/China 79.67<br />
<strong>Possehl</strong> Electronics (Malaysia) Sdn. Bhd. Malakka/Malaysia 100.00<br />
<strong>Possehl</strong> Electronics Singapore Pte. Ltd. Jurong Town/Singapore 100.00<br />
<strong>Possehl</strong> <strong>Co</strong>nnector Services Illinois, LLC Elk Grove Village/Illinois/USA 100.00<br />
<strong>Possehl</strong> <strong>Co</strong>nnector Services SC, Inc. Rock Hill/South Carolina/USA 100.00<br />
<strong>Possehl</strong> (Malaysia) Sdn. Bhd. Malakka/Malaysia 100.00<br />
Special-Purpose <strong>Co</strong>nstruction<br />
<strong>Possehl</strong> Spezialbau G<strong>mbH</strong> Wiesbaden/Germany 100.00<br />
<strong>Possehl</strong> Aannemingsmaatschappij B. V. Oosterhout/Netherlands 100.00<br />
<strong>Possehl</strong> Spezialbau Ges.m.b.H. Griffen/Austria 100.00<br />
<strong>Possehl</strong> Iberica S.A. Madrid/Spain 100.00<br />
<strong>Possehl</strong> Posebne Gradnje d. o. o. Maribor/Slovenia 100.00<br />
<strong>Possehl</strong> Posebne Gradnje d. o. o. Jastrebarsko/Croatia 100.00<br />
<strong>Possehl</strong> Spezstroj AG<strong>mbH</strong> Minsk/Belarus 100.00<br />
Elastomer-Processing<br />
Harburg-Freudenberger Maschinenbau G<strong>mbH</strong> Hamburg/Germany 100.00<br />
Harburg-Freudenberger France S.A.R.L. Paris/France 100.00<br />
Harburg-Freudenberger Belisce d.o.o. Belisce/Croatia 95.00<br />
HF Rubber Machinery, Inc. Topeka/Kansas/USA 100.00<br />
Overview of Participations<br />
Overview of Participations
Shareholdings<br />
as of December 31, 2005<br />
Name Location<br />
Share of<br />
capital in %<br />
International Trading<br />
<strong>Possehl</strong> Erzkontor G<strong>mbH</strong> Lübeck/Germany 100.00<br />
IRS Stahlhandel G<strong>mbH</strong> Krefeld/Germany 100.00<br />
Mineralmahlwerk C. Welsch G<strong>mbH</strong> Wesel/Germany 100.00<br />
Van Mannekus & <strong>Co</strong>. B. V. Schiedam/Netherlands 100.00<br />
GeoCrete B.V. Schiedam/Netherlands 100.00<br />
<strong>Possehl</strong> Erzkontor Hong Kong Limited Hong Kong/China 100.00<br />
<strong>Possehl</strong>, Inc. Park Ridge/New Jersey/USA 100.00<br />
<strong>Possehl</strong> AE Athens/Greece 99.00<br />
Alumina Trading <strong>Co</strong>. Park Ridge/New Jersey/USA 50.00<br />
<strong>Possehl</strong> (H.K.) Limited Hong Kong/China 100.00<br />
Sino-American Shipping <strong>Co</strong>. Park Ridge/USA 100.00<br />
<strong>Possehl</strong> S. A. de C. V. Cuautitlan/Mexico 61.09<br />
Moliendas Industriales <strong>Possehl</strong> S. A. de C. V. Cuautitlan/Mexico 99.99<br />
<strong>Possehl</strong> Inc. Argentina Buenos Aires/Argentina 100.00<br />
Services<br />
<strong>Possehl</strong> Umweltschutz G<strong>mbH</strong> Lübeck/Germany 100.00<br />
Gesellschaft für das Recycling kontaminierter Industriebrachen <strong>mbH</strong> Lübeck/Germany 100.00<br />
Teutonia Fracht- und Assekuranzkontor G<strong>mbH</strong> Lübeck/Germany 100.00<br />
Lubeca Versicherungskontor G<strong>mbH</strong> Lübeck/Germany 100.00<br />
Participations<br />
<strong>Possehl</strong> Beteiligungsverwaltung G<strong>mbH</strong> Lübeck/Germany 100.00<br />
<strong>Possehl</strong> (H.K.) Holdings Ltd. Hong Kong/China 100.00<br />
51
52<br />
Shareholdings<br />
as of December 31, 2005<br />
Name Location<br />
Non-consolidated subsidiaries<br />
(of minor importance for the Group’s net assets, fi nancial position and earnings)<br />
Overview of Participations<br />
Share of<br />
capital in %<br />
Deutscher Eisenhandel AG Berlin/Germany 99.86<br />
Ravené <strong>Possehl</strong>-Stahl Verlegegesellschaft <strong>mbH</strong> Berlin/Germany 100.00<br />
<strong>Possehl</strong> Sicherheitstechnik G<strong>mbH</strong> Lübeck/Germany 100.00<br />
Lübeck Linie G<strong>mbH</strong> Lübeck/Germany 100.00<br />
Rudolf Scheele & <strong>Co</strong>. G<strong>mbH</strong> Lübeck/Germany 100.00<br />
Ravené Stal Polska Sp.zo.o. Szczecin/Poland 100.00<br />
Harburg-Freudenberger RUS Moscow/Russia 80.00<br />
<strong>Possehl</strong> <strong>Co</strong>nnector Services Inc. Rock Hill/South Carolina/USA 100.00<br />
<strong>Possehl</strong> S. Africa (Proprietary) Ltd. Johannesburg/South Africa 100.00<br />
Associated companies<br />
o.m.t. Oberfl ächen- und Materialtechnologie G<strong>mbH</strong> Lübeck/Germany 25.00<br />
Beck & <strong>Co</strong>. Industriebedarf G<strong>mbH</strong> & <strong>Co</strong>. KG Neuss/Germany 48.75<br />
Holsteiner Humus und Erden G<strong>mbH</strong> Lübeck/Germany 33.33<br />
<strong>Possehl</strong> Kehrmann G<strong>mbH</strong> Duisburg/Germany 50.00<br />
Hako Holding G<strong>mbH</strong> & <strong>Co</strong>. KG Bad Oldesloe/Germany 30.00<br />
Van Mannekus Universal V. O. F. Oudenbosch/Netherlands 50.00<br />
Tianjin Huade Mineral Product <strong>Co</strong>. Ltd. Tanggu/China 30.00<br />
Other non-associated companies<br />
Above 20%<br />
Aravio Grundstücksverwaltungsgesellschaft <strong>mbH</strong> & <strong>Co</strong>. Objekt Braunschweig KG Wiesbaden/Germany 90.00<br />
Aristo Grundstücksverwaltungsgesellschaft <strong>mbH</strong> & <strong>Co</strong>. Objekt Halle KG Wiesbaden/Germany 95.70<br />
Pafravo Grundstücksverwaltungsgesellschaft <strong>mbH</strong> & <strong>Co</strong>., Vermietungs-KG Pöcking/Germany 94.00<br />
Patrimo Grundstücksverwaltungsgesellschaft <strong>mbH</strong> & <strong>Co</strong>. KG Pöcking/Germany 94.00<br />
Bahners G<strong>mbH</strong> Neuss/Germany 50.00<br />
Flender Werft AG Lübeck/Germany 24.00<br />
Steinsvik Olivin AS Folkestad/Norway 21.81<br />
Major investments<br />
Norddeutsche Affi nerie AG Hamburg/Germany 10.00<br />
Süd-Chemie AG Munich/Germany 10.17<br />
Overview of Participations
CONTACTS AND IMPRINT<br />
L. <strong>Possehl</strong> & <strong>Co</strong>. <strong>mbH</strong><br />
Beckergrube 38-52<br />
23552 Lübeck, Germany<br />
Phone: 49 (0) 451 148 – 0<br />
Fax: 49 (0) 451 148 – 255<br />
E-mail: info@possehl.de<br />
Please contact:<br />
Mario Schreiber<br />
Head of <strong>Co</strong>rporate <strong>Co</strong>mmunications<br />
Phone: 49 (0) 451 148 – 304<br />
Fax: 49 (0) 451 148 – 1153<br />
E-mail: mschreiber@possehl.de<br />
Notes<br />
The annual report is available in both German and English.<br />
More information on the company is available on our website at<br />
www.possehl.de.<br />
Imprint<br />
Editor: The Executive Board of L. <strong>Possehl</strong> & <strong>Co</strong>. <strong>mbH</strong><br />
<strong>Co</strong>ordinator: Mario Schreiber<br />
<strong>Co</strong>ncept and design: Berichtsmanufaktur, Hamburg<br />
Photos: <strong>Possehl</strong> Group, Gettyimages, <strong>Co</strong>rbis<br />
Status: May 2006<br />
© L. <strong>Possehl</strong> & <strong>Co</strong>. <strong>mbH</strong>, Lübeck
www.possehl.de