Consolidated Financial Statements - L. Possehl & Co. mbH

18
Slumps in the dental segment were especially sharp. The effects of the
health reform adopted by the federal government at the end of 2004
played a role in this development. Since 2005, social statutory health
insurance companies have been providing fi xed subsidies related to
fi ndings instead of percentage of cost subsidies for dental services. Together
with the start-up diffi culties of the health reform, this resulted in
a signifi cant decline in sales in 2005. Added to this is the fact that the
tendency to use base metal alloys and total ceramics for tooth replacement
continues in practice.
Although volume sales of jewelry alloys declined along with weak economic
development, gross income in jewelry semi-fi nished products
was maintained. Increased customer acquisition, an expansion of the
value added level and an increase in precious metals prices contributed
to this success.
A strong demand for industrial semi-fi nished products – mainly for
contact making materials in the wire and belt sector – as well as the
increased sales of chemicals and baths for electroplating technology
partially compensated for the slowing down of business activities in
the dental sector.
The adoption of the new product line “Colorit” in the jewelry segment
also compensated for the declines, as did the increases in tubing and
bars. The ring blanks sector continues to be one of the support pillars
of the business. Expansion of the silver alloy and platinum ring areas is
anticipated for this sector.
Heimerle + Meule confronted the overall declining market development
by implementing restructuring measures and cost reduction programs.
The company also undertook some organizational restructuring as
part of this effort, which also entailed a reduction in the number of
employees.
By restructuring the company into business divisions with responsibility
for results, Heimerle + Meule is anticipating positive incentives for
further business development. Based on the considerable improvement
in business at the beginning of the year 2006 and initial success in
the cost saving measures that have been implemented, the company
is already anticipating a noticeable sales and earnings recovery for the
current year. Intensifying sales activities both at home and abroad is
expected to further expand market share in all product divisions.
Net assets, earnings, fi nancial position
Group Management Report
Electronics: Business in Asia developing well
The Electronics business division is reporting a very successful fi scal
year. The effi ciency improvement measures introduced in the previous
year, the objectives of which were to achieve greater utilization of machinery,
improved product quality and lower production costs, brought
about a signifi cant improvement in performance in 2005. At the same
time, new products were introduced to the market, while customer
relations were intensifi ed and new markets in previously unsupported
regions were serviced.
The market environment continues to be strained, however. Price competition
on the sales markets remains strong and the purchase prices
for copper again increased by about 50 % during the course of the year.
This resulted in a slight decline in the gross profi t margin compared to
the previous year.
Possehl Electronics was able to follow the growth of the market in the
case of semiconductor products. Sales increased from € 168.4 million
to € 177.2 million. All of the Asian sites therefore developed positively.
The Malaysian site was able to develop a series of “best practice approaches”,
which are now being transferred to other production sites.
Successful product transfers also took place. Connector components,
which we previously produced only in the US, are meanwhile being
manufactured in Malaysia as well. Together with the very successful
site for etching technology in Singapore, we service mainly customers
in Southeast Asia from this site. Taiwan was revamped as an important
market region for the semiconductor sector.
In northern Asia we are continuing with the transfer strategy from Hong
Kong to other regions in China which was started the previous year.
For the current fi scal year, we are also planning to expand production
capacities by creating a new Chinese site. Based on the reorientation,
we were able to achieve a positive statement of income at the Hong
Kong site for 2005. This should also be assured for the coming year
due to increases from, among other things, the successful smart card
business.
The most diffi cult position on the market can be seen in the Electronics
business division in Europe. At the two operating sites in the Netherlands
and in France we will have to exert a great deal of effort in the
future as well to safeguard our competitive position.