Business News
Global recession pulls down sales and result Fehrenbach: We are resolutely adhering to our corporate strategy
Friday 24. April 2009 - As a result of the worldwide slump in business activity, theBosch Group had to record a fall in sales and earnings in fiscal 2008. At45.1 billion euros, sales were down 2.6 percent year on year. Afteradjusting for currency effects, they were down 0.5 percent. Profit beforetax stood at 940 million euros, compared with 3.8 billion […]
As a result of the worldwide slump in business activity, the
Bosch Group had to record a fall in sales and earnings in fiscal 2008. At
45.1 billion euros, sales were down 2.6 percent year on year. After
adjusting for currency effects, they were down 0.5 percent. Profit before
tax stood at 940 million euros, compared with 3.8 billion euros in the
previous year. At 2.1 percent, return on sales remained below the longterm
target level of between seven and eight percent. Despite the
unfavorable economic environment, Bosch made considerable investments
in the future in 2008. In the past year alone, a total of some ten billion
euros was spent on investments in the companys future. “Research,
development, and investment remain the basis for securing our future,
even in difficult times,” said Franz Fehrenbach, chairman of the board of
management of Robert Bosch GmbH, at the annual press conference. At
3.9 billion euros, a record sum was spent once more on research and
development. At the end of 2008, more than 32,500 associates around the
world were working on issues impacting the future. Bosch spent a record
amount of 3.2 billion euros on acquisitions, strengthening all three of its
business sectors. Capital expenditure accounted for a further 3.3 billion
euros.
The Bosch Group expects 2009 to be one of the most difficult years in the
history of the company, with significant risks to sales and earnings. “We
expect to see a deep recession until well into 2009. The first quarter has
clearly confirmed this assumption, with a significant drop in sales,”
Fehrenbach said. The situation called for a difficult balancing act between
rigorous savings on the one hand, and preserving the companys chances
for the future on the other, he said. “According to our estimates, however,
the first signs of stabilization should become apparent in the second half
of the year, albeit on a low level.” The decline in demand since the autumn
of 2008 has made corresponding adjustments in the workforce necessary.
Currently, some 32,000 staff in Germany are on shorter working weeks,
and a further 26,000 have had their working hours reduced in accordance
with collective agreements. Outside Germany, some 35,000 associates are
affected by reduced working hours. To quote Fehrenbach: “Wherever we
are faced with cyclical fluctuations in workload, our aim is to maintain our
core team as far as possible. At the same time, however, we have to tackle
structural adjustments that are pending anyway, as well as reduce any
foreseeable excess capacity.”
Weak automotive business overshadows successes
In the business sectors, the picture was a varied one in 2008. The
Automotive Technology business sector recorded substantial losses, with
sales falling by 6.9 percent to 26.5 billion euros. After adjusting for
currency effects, sales were down by 5.1 percent. One major reason for
this is to be found in the North American market, which declined by
roughly 16 percent in the course of the year. From the middle of the year,
this was compounded by the significant cooling of the automotive business
in Europe, together with resulting cutbacks in production. In Automotive
Technology, the return on sales from operations was 1.2 percent,
compared with 5.8 percent in the previous year. This marked decline in the
automotive business overshadows the successes achieved with innovative
products – successes which allowed Boschs market position to be
strengthened further. They include products which reduce consumption as
well as systems for increasing safety. Despite its clearly superior fuelconsumption
and CO2 values, the diesel engines share in the western
European passenger-car market is currently declining, as demand shifts
toward lower-cost vehicle segments. To secure its technologically
pioneering role, Bosch spent 3.2 billion euros solely on research and
development in automotive technology last year.
The Industrial Technology business sector achieved good sales growth in
2008. Sales increased to 6.7 billion euros – a rise of 13 percent, or as
much as 15 percent after adjusting for currency effects. If the effects of the
first-time pro rata consolidation of ersol Solar Energy AG are disregarded,
sales grew by ten percent. At 6.6 percent, the return on sales from
operations was down on the previous year. The main reason for this was
the increase in raw materials prices. Growth in this sector was chiefly
driven by automation technology and Bosch Rexroths business with
components and gearboxes for wind-power generation. A broader global
presence and the development of new products also resulted in a positive
business year for Packaging Technology.
In the Consumer Goods and Building Technology business sector, it was
possible to increase sales by 1.4 percent to 11.9 billion euros. In local
currencies, growth came to 4.2 percent. The main reason for the slowdown
in growth was the housing crisis in the U.S. and major European markets.
This applies in particular to the power tools, household appliances, and
security systems businesses. The heating technology business, by contrast,
felt the positive effect of improved incentive schemes for modern heating
systems in a number of European countries. Many new acquisitions will not
be fully reflected in this business sectors sales until 2009. In 2008,
consolidation effects totaled 60 million euros. The return on sales from
operations was six percent, compared with 7.5 percent in the previous
year.
Global footprint pays off
In the present economic situation, the Bosch Groups broad international
presence and its focused diversification have paid off. At least in part, it
was thus possible to offset shortfalls in individual regions and products. In
Europe, sales fell by 1.9 percent to 29.7 billion euros. This was caused
above all by reduced call orders by automakers, both in western and
eastern Europe. The most significant setbacks were in North America,
which saw a 15 percent drop in sales to 5.9 billion euros. After adjusting
for currency effects, the decrease was nine percent. Due to the difficulties
facing North American automakers, Automotive Technology was hardest
hit. By contrast, sales in South America again grew at a double-digit rate,
both in euros and in local currencies, rising by 12 percent to a good 1.7
billion euros. The economic downturn only set in here in the autumn of
2008, when the financial crisis came to a head. In Asia Pacific, sales grew
by seven percent after adjusting for currency effects. Because of the
weakness of certain currencies, however, sales expressed in euros grew by
just 3.2 percent to 7.9 billion euros. Here too, the main reason for the
slowdown in growth was the considerable drop in production, especially of
Japanese automakers.
Sound financial position
Despite the global recession, the Bosch Groups financial position remains
healthy. At the end of 2008, liquidity comprised some eight billion euros of
cash and cash equivalents, as well as securities. These funds are largely
sufficient to cover the companys financial and pension obligations. In
addition, Bosch is financially very flexible, and this situation was further
improved this month by a note loan of 500 million euros. With an equity
ratio of 49 percent, the Bosch Groups finances are extremely sound. This
creates sufficient latitude for pushing further ahead with projects that
fundamentally safeguard the companys future.
In March, for example, the foundation stone was laid at the Bosch
subsidiary ersol for a new manufacturing facility for crystalline solar cells
and modules. Between now and 2012, 530 million euros will be invested in
the new manufacturing facility in Arnstadt, Germany, and 1,100 new jobs
created. On April 29, a Bosch Rexroth plant for wind-turbine gearboxes will
be opened in Nuremberg, Germany. Some 180 million euros will be
invested in the plant up to 2013. Further projects in Germany include the
opening of a new semiconductor factory in Reutlingen, extension work to
the Abstatt site, and plans to pool corporate research and advance
engineering activities in the greater Stuttgart area. “In our investments, our
strategy is guided by our Invented for life slogan,” Fehrenbach said. “We
want to provide lasting technological answers to ecological questions. In
2007, 40 percent of our research and development budget was aimed at
conserving resources and protecting the environment. This year, the figure
is roughly 45 percent. And we now generate a strong third of our sales with
products that meet these criteria. Over the next few years, we want to
increase this figure significantly.”
Fehrenbach therefore believes that the Bosch Group is well positioned for
the post-recovery phase: “It is in times like these that Boschs innermost
strengths come into their own – great innovative ability, sound finances,
entrepreneurial independence, and a strong corporate culture. We are
affected by the current severe crisis, but even this crisis does not call our
fundamental strategy into question. We do not constantly redefine our
strategy, but stick to it even in constantly changing circumstances, and for
as long as the basic premises of our long-term scenarios hold true. There is
nothing in the present situation to convince us otherwise. Even in this
extremely difficult year, therefore, Bosch will remain quintessentially
Bosch.”