Matth. Hohner AG

Group Management Report for Fiscal Year 2010/2011
Risk inventories are structured to include the fields of
• Finance
• Personnel
• Purchase
• Production
• Sales
• Research & Development
• IT
• General Risks
Currently, there are no discernible risks threatening the existence of the stock corporation and the Group.
Despite the partly challenging environment at SONOR GmbH & Co. KG and Hohner S.A. a positive net profit
could be reached. At Hohner Musikinstumente GmbH & Co. KG and Hohner Inc. sales as well as net profit
could significantly be improved.
The U.S. Dollar/Euro exchange rate’s future development continues to pose a serious risk. In particular strong
exchange rate fluctuations like in the last 12 months (with a fluctuation range of more than 20 %) may
result in disadvantages due to the price increase of the products related to the exchange rates. So far, it was
managed to avoid both losses in sales and losses in margin on a big extent by supplying flexibly. For hedging
foreign exchange risks mainly forward exchange transactions are used. In line with the distribution of risks
across the group, a monthly reporting about the exchange risks is established by all consolidated companies.
However, the biggest risk is in procurement. On the one hand, the risk lies in the tendency of strongly
increasing prices for raw materials and merchandise from China; on the other hand, delays in delivery and
delivery bottlenecks already arose due to labor shortage in some regions of China. By an adequate stockkeeping
as well as an intensified identification and selection of alternative supply sources an effort is being
made to react flexibly to the price fluctuations and availabilities, and thus minimize the risks.
The risks inherent in the overall weakness of demand are being faced with a flexible arrangement of
production capacities (e.g. reduction of overtime, short-time work) and an intensified close cooperation with
the worldwide sales partners.
In manufacturing, any risks like the deficiency of machines and employees are reduced by using foresight in
our maintenance and capital investment policies and by training and educating the employees
In sales, default risks are managed by stopping deliveries to customers who have reached individually set
accounts receivable limits and by carefully monitoring potentially critical customers. Receivables and liabilities
in foreign currency are all short-term, making currency risks manageable. Occasionally, hedge instruments are
used at the subsidiaries. With regard to liquidity risk, it should be noted that, in addition to bank loans,
the major share of group financing is provided by majority shareholder H.S. Investment Group Inc.
The entire scope of debt service has been taken into account in HOHNER Group’s financial planning. Risks
from cash flow fluctuations with regard to the use of financial instruments are immaterial.
• 11 Outlook for the 2011/2012 Fiscal Year
In the forecasts of the most important distribution partners sales growth is expected, however a prognosis of
the future development can only be estimated with several uncertainties due to the risks on the procurement
market. Due to the good order situation in the segments at the beginning of the new fiscal year, the company
expects a sales growth of slightly more than 5 % for the fiscal year 2011/2012 compared to previous year.
Due to threatening and announced price increases on the procurement market regarding material as well
as personnel costs and due to uncertainties in the highly indebted countries of the European area, only a
cautious increase of the result is expected compared to previous period.
The successful focus on individual country strategies and innovative product developments in the last years is
further pursued in order to face the risks of the further economic development. Besides this, competitiveness
of the sites in Trossingen and Bad Berleburg/Aue shall be increased by further improvement of processes
as well as by intensified investments. In addition, one of the main targets for the new fiscal year is the
optimization of the sourcing and quality management process. The target of all these measures is to secure
and improve the further profitable growth of the Parent Company and the Group long-term.
Trossingen, September 29, 2011
Matth. Hohner Aktiengesellschaft
Management Board
Manfred Stöhr Stefan Althoff
Group ManaGeMent report Group ManaGeMent report
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