The global technology group Freudenberg continued its good business development in 2018 in a volatile and difficult environment and recorded strong organic growth of 4.3 percent. Including the effects of acquisitions and disinvestments (Euro +43.2 million), significant negative exchange rate effects (Euro -285.6 million) and the effects of the new accounting standard IFRS 15 (Euro -54.3 million), sales increased by Euro 109.8 million (or 1.2 percent) over the previous year. Freudenberg therefore increased 2018 sales to Euro 9,455.4 million (previous year: Euro 9,345.6 million) on the basis of IFRS.
Profit from operations amounted to Euro 910.3 million, slightly exceeding the high figure of Euro 905.0 million for the previous year.
The future viability of the Group was further strengthened. Its broad positioning in about 40 markets and 56 countries minimises the risk. One third of sales (33.6 percent) is generated with products introduced less than four years ago, providing an example of the company’s innovative strength. The equity ratio of 51.9 percent ensures its stability. As on December 31, 2018, the Group employed 49,137 people (previous year: 47,653).
“Our strong strategic and operative plannings are the keys to Freudenberg’s success, along with the team spirit of more than 49,000 employees as well as close and agile cooperation with our customers,” Mohsen Sohi, CEO of the Freudenberg Group, said at the annual press conference in Weinheim. In addition to sales, profit from operations and return on sales are Freudenberg’s key financial performance indicators.
“With renewed vigour, we have worked intensively on making our processes, services and products more efficient, better and safer in 2018,”Ralf Krieger, CFO of the Freudenberg Group, said. “We use standardisation and the application of lean and six sigma methods along with other factors.”
At 6.7 percent, the administrative expenses ratio remained at the same level as the previous year. The company generated a return on sales of 9.6 percent even though material and energy prices rose strongly over the course of the year under review and major investments were made in e-mobility.
Consolidated profit was Euro 602.4 million, although some Euro 100 million below 2017 (Euro 700.1 million). Lower income from participations and the lower pro-rata share in the profit of associated companies in 2018 led to this decline. Profit also increased in 2017, due to non-recurring tax revenues, partly due to the US tax reform.
Cash flow from operating activities amounted to Euro 828.4 million (previous year: Euro 929.0 million), equaling a drop of Euro 100.6 million compared with the previous year. This decline is chiefly attributable to the first-time application of IFRS 15 (roughly Euro 80 million).
“We are proud to have boosted our equity ratio from 47.4 percent in the previous year to 51.9 percent. In absolute terms, equity rose by Euro 477.1 million, chiefly due to the positive result,” Sohi said. The equity ratio means the company continues to hold a very good, comfortable equity base.
To secure the Group’s future, Freudenberg invested in total Euro 555 million in 2018 (previous year: Euro 670 million) including about Euro 175 million in acquisitions (previous year: Euro 170 million) and about Euro 380 million (previous year: Euro 500 million) in production plant, tangible assets, buildings and intangible assets (additions to the statement of financial position).
The group invested Euro 125 million in Germany (previous year: Euro 175 million). The major investments included: In Maisach, the new European logistics centre of Freudenberg Chemical Specialities, a project costing about Euro 40 million, was commissioned.
The Freudenberg Performance Materials Business Group started work on the construction of a new spunlaid plant in Taiwan. Vibracoustic expanded production at its plant in Sroda Slaska, Poland, and started construction of a third plant in Chongqing, China.
Freudenberg expects a difficult macro-economic environment in the 2019 financial year. Growth forecasts for the world economy in 2019 are slightly lower than those for the previous year. The risk of a decline in global growth has increased. Geopolitical and economic uncertainties are unlikely to abate. In the face of increasing market volatility, Freudenberg will closely monitor further developments and react flexibly.
In total, Freudenberg plans to invest in Euro 370 million worth of projects in 2019. Of this amount, about Euro 125 million are to be invested in tangible assets in Germany, including Euro 30 million in Weinheim.