Group - L. Possehl & Co. mbH

Segment and Company-specific risks
As a conglomerate, the Possehl Group is active in various sectors
with disparate risk profiles and degrees of risk. The main potential risks
encountered by the individual divisions are as follows:
Production: For all segments, intense competition creates permanent
pressure to reduce production costs. This applies particularly to
the Electronics division and our engineering businesses. In addition, a
further fall in the US dollar could impair the earnings of the Electronics
division. In some divisions, there is also a certain dependency on
individual large customers. Our aim is to reduce existing dependencies
further by acquiring new customers and so broadening the customer
base.
Trading: The trading companies are exposed to price risks on
one hand, but also to procurement risks on the other. Especially trade
barriers in the form of tariffs and quotas can harm the trading business.
We manage this risk via our global presence, long-term supplier
relationships, a broad customer base, and a high degree of diversification.
The dependence on the steel industry is mitigated by developing
new businesses in the plastics, dyes, and paint industries. The resulting
diversification of risks also applies to the default risk of receivables,
which are further limited by hedging instruments, particularly commercial
credit insurance. Price fluctuations are reduced by extensive use of
back-to-back transactions.
28
Employee risks
The success of the Possehl Group is critically dependent on the
expertise and commitment of all employees. Retaining new employees
and know-how are fundamental components of our personnel policy.
Targeted employee development and continuing education are an
additional emphasis. Our managers and management trainees also
benefit from the Possehl Academy.
Macroeconomic risks
We expect moderate global economic growth for 2008, although
probably below the level of the previous year. As a result of the cooling
of the US economy, the risks of less favorable growth for the global
economy have noticeably increased. In addition, the danger exists of
continued increases in energy prices, which would put pressure on purchasing
power. The unfavorable development of the global economy
can have a negative impact on the financial and earnings position of
the Possehl Group.
overall assessment: No Existential risks
for the Possehl Group
The risk position of the Possehl Group has not substantially
changed during the reporting period. The Group’s continued broad
diversification leads to a balance of risks between individual divisions
within the company. From today’s perspective, no risks can be identified
which could endanger the Possehl Group’s continued existence.