PDF, 1.2 MB - Pfleiderer AG

52 being focused: being better
risk report
The risks that the Pfleiderer Group is facing have changed considerably as a result of divesting
the Insulation Technology and Doors and Windows Business Centers. Income from the sale of
these operations has given the Group considerable financial room to reduce corporate debt, as
well as to make further investments. In view of these positive effects, the Company accepted
book losses resulting from the sale of these business centers. The thinking behind this is
based on securing the Company’s long-term success, which is why the Pfleiderer Group decided
it was more important to detach itself from the German construction sector. This is coupled
to extending cost advantages to the Wood-Based Panels Business Center while building on the
Company’s international activities and gaining new market potentials. Concentrating on our
core activities in Wood-Based Panels and Infrastructure Technology, which operate in different
markets, as well as our planed expansion of foreign operations, has spread risk more evenly
throughout the Group.
General Risk Situation and Individual Risk Scenarios
Overall Economic Risk and Sector Risk
Germany provided the main source of income for the Group during the reporting period. This
inevitably makes Pfleiderer more dependent on its domestic economy, with all its forecast
weakness. However, this was fully taken into account when planning activities, and so does not
represent a specific risk. There are also no apparent economic risks relating to markets abroad
that could have a major effect on operating results.
The new organization, and further slimming down of overhead structures, has enabled
Pfleiderer to create the prerequisite for reacting flexibly and efficiently to those labor risks
which cannot be entirely discounted.
The Rail Traffic Business Unit in the Infrastructure Technology Business Centeris participating
in the construction of new rail track by the Deutsche Bahn, as well as in its modernization
projects. Apart from that, Pfleiderer is involved in major international projects to extend
high-speed links. After expiry of the master agreement at the end of 2003, the industry
expects some pressure on prices and conditions to emerge over the medium term. Further
rationalization and the creation of production sites close to demand are one way of counteracting
poorer results. Seen internationally, this business segment is increasingly changing from
a supply operation to project work. While this presents an opportunity for higher earnings,
it does mean that contractors have to face additional demands regarding technical planning,
order processing and logistics. Pfleiderer is preparing itself for this through changes to its
organization and personnel structures. Large construction companies wanting to enter the rail
traffic business, as expected some years ago, would first have to create efficient structures
that could compete against current suppliers, with their years of experience, flexibility and lean
organizations.
In the masts business, Pfleiderer has adjusted to reduced ordering from mobile phone
operators compared to previous years. No further risks, especially with regard to capacity
utilization, are identified here. Nor are there any serious risks or capacity problems seen for
our plants in the USA which produce concrete and fiberglass masts. Should the market for