Matth. Hohner AG

Group Management Report for Fiscal Year 2010/2011
• 1 Frameworks and Business
Sales Trend
In the fiscal year 2010/2011 the worldwide economic recovery had great influence on the business
performance of the HOHNER-Group. After the serious economic crisis in 2009 the global economy recovered
stronger and faster than expected. However, the growth in the music industry could not keep pace in all
regions with the overall economic trend. Based on the strong international popularity and presence of the
HOHNER-Group with its brands HOHNER, SONOR and Lanikai, the Group sustained its position better than
forecasted.
In the first half-year the Group expected a sales growth of about 5 % adjusted for exchange rate effects.
In the full fiscal year the Group could exceed this forecast and total sales could be increased from EUR 58.0
million in the previous year to EUR 63.9 million in the reporting year. This corresponds to a percentage
increase of
10.2 %, 6.9 % adjusted for exchange rate effects. The overall economic recovery was supported by high
growth rates in the regions South- and Central America as well as Asia. This was a special benefit for the
HOHNER Group since it expanded its presence on these markets in the last years. In South and Central
America a sales growth of 36.1 % could be reached, in Asia the HOHNER Group generated a growth of 22.5
% compared to previous year.
In the North American market, which is a very important market for HOHNER, the Group was able to develop
stronger than the total market. Due to the intensification of the marketing and sales activities and the
introduction of new products a growth of 28.7 % compared to previous year was achieved.
In contrast, sales in Europe, still the largest sales market, slightly decreased by 0.7 %. On the domestic market,
where the crisis hardly could be felt in the last 2 years, a sales decline of 5.3 % had to be recorded. Due to
imports from Asian production countries, the pricing pressure on the products of the music industry remains
unchanged, especially in the European markets. Due to a sustainable pricing policy the HOHNER-Group was
able to defend its strong market position in the Western European markets; in the Eastern European growth
regions HOHNER could even reach a further sales growth.
Sales Development – Wind Instruments (reed instruments plus recorders)
Compared to the prior year, segment sales increased by TEUR 2,309 (+8.5 %) to TEUR 29,623. The share of
this segment in total sales amounts to 46 % (prior year: 47 %). When taking into account the effects of the
USD and CHF exchange rates, segment sales increased by TEUR 1,625 (+5.8 %).
On the important US market the Group reached a sales growth of 10.2 % adjusted for exchange rate effects
in the segment wind instruments. Taking into consideration the exchange rates, and with focus on marketing
activities, sales with accordions could be increased by 20 % compared to previous year. Mainly in the area of
favorable beginner models a significant growth could be reached. The cooperation with leading musicians
in this music genre (like Flaco Jimenez, Esteban “Steve” Jordan or Jorge Hernandes (Los Tigres Del Norte))
will consistently be continued and intensified. In the area of harmonicas the positive market trend for these
products has further increased, which was already visible in the second half-year of the previous year, so that
a growth of 8 % could be reached adjusted for exchange rate effects. The share of the US market in this
segment increased from 31 % to 34 %.
Mainly due to the buying reticence of the customers in Germany for high-quality accordions (-30 % compared
to previous year) sales on the German market decreased by 7 %. The share of the German market in this
segment decreased from 12 % to 10 %.
On the remaining European market (35 % share of segment sales in 2010/2011) sales slightly decreased by
3 %. A significant sales increase in the non-EU countries (+19 %) could be reached, while sales in the EU
countries declined by -7.4 %. A part of this decline accounted for the bankruptcy of the distribution partner
for the Benelux countries. The increase in the European countries outside the EU was mainly due to Russia
(+87 %) and Ukraine (+191 %). With this, the markets reached the level before the economic crisis.
On the Asian market (11 % share of segment sales in 2010/2011) sales could be increased by 18 % to
EUR 3.3 million in the reporting year. Particularly supplies to the production partners (+23 %) significantly
increased due to sales increases. Sales with Japan (+11 %), Korea (+17 %), Singapore (+70 %) and Australia
(+8 %) could also significantly be increased. However, sales in Thailand decreased by 57 % due to the political
crisis.
Fortunately, based on intensified market activities and product innovations, on the South- and Central
American market (10 % share of segment sales in 2010/2011) a further growth of 36 % to now EUR 3.0
million could be achieved in the reporting year, after an already significant increase by 37 % in the prior
year. Mainly sales in Mexico (+166 %), Panama (+222 %), Chile (+49 %) and Argentina (+104 %) could
significantly be increased.
After the economic recovery and after overcoming the worldwide economic crisis, a growth of 8.5 % could
be reached in the segment wind instruments. Due to the fact that the important customers place their orders
about three months in advance, the Group companies have enough time to react adequately to potential
changes. The order situation for the first quarter of the new fiscal year is also in line with the expectations.
Due to the challenges on the procurement market, caused by labor shortage in some regions in China as well
as by market price increases and the related delivery bottlenecks, the Group only expects a sales growth of
about 2 % to 3 % for the fiscal year 2011/2012.
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Group ManaGeMent report Group ManaGeMent report
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