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management report risk report pfleiderer ag 53
power transmission masts become saturated, other application areas are open. Pfleiderer is
not facing any political or currency risks either with its production in the USA. Product liability
risks, which must always be taken seriously in the USA, are seen as very slight, thanks to a
quality assurance program.
In its Wind Power Business Unit, Pfleiderer is involved with the development and production
of onshore and offshore wind converters. One risk that could hinder us in achieving sales
targets is the availability of sites for wind parks in the onshore segment. In earnings terms,
stand-alone units are no longer commercially attractive. No sales of offshore converters have
been planned for 2003 yet, with development work still to be completed by all competitors.
The German law which allows current to be fed into the power grid (“Stromeinspeisungsgesetz”)
is important for the industry, and will remain in force.
In the Wood-Based Panels Business Center, deviations from planned sales and income
levels in 2003 cannot be excluded. This is particularly due to unsatisfactory order books in the
furniture industry – with the danger that even big, well-known producers might end up leaving
the market. This, and production overcapacities in the particleboard industry, are having a
negative effect on prices. The objective of our new marketing and logistics concept, therefore,
is to improve earnings and to cut costs.
Currency exchange risks, which have a minimum effect on sales and earnings, only exist
for two particleboard plants in Poland.
Increasing interest rates, which could have a negative effect on ordering, are neither
expected in Germany nor abroad.
No amendments to laws, ordinances or tax regulations have been made or are pending
that could have a noticeable effect on the situation or development of the Company, its
segments or markets. No known fundamental technological changes exist with regard to the
use or manufacture of products by the Company. No risks from natural catastrophes or from
political changes have been discerned for the locations in Germany or abroad , nor is any
specific danger seen with regard to civil disorder or targeted sabotage.
Operating Risks
Sales Risks
The chance of a new, powerful competitor entering the market is considered slight and would
only bear on the Rail Traffic Business Unit. Pfleiderer sees no signs of any further concentration
among its customers nor, consequently, of any associated risks.
On the other hand, the danger of previously potent customers becoming bankrupt cannot
be excluded in any of our operating segments. In order to take this into account, and in accordance
with our corporate guidelines, risk from customers defaulting on payment has been
hedged by taking out credit insurance cover. However, it should be remembered that insurance
does contain excess coverage clauses which the Company would have to bear when claiming.
Risk relating to losses from a mobile phone network provider has now ceased as payments
have since been received.