Heraeus achieves positive results in 2009 and starts strong in 2010

Business developments in 2009 were significantly influenced by general economic trends in the most important economic regions. The global decline in almost every industry and region, steep losses in financial and commodities markets, and risks in the banking sector presented a multitude of challenges, especially in the first half of the year. Key sectors for Heraeus that felt the greatest impact included the electronics, semiconductor, steel, chemical, and automotive industries. However, the pharmaceutical and medical industries weathered the storm more hardily, and the medical technologies and fiber optics areas as well as products for the photovoltaics industry continued to show positive development.

Solid financial structure enables growth

The Group's income after taxes (net income) declined to €118 million, 29.8% lower than the previous year. Cash flow from current business activities also sank by 71.4% to €131 million. By contrast, shareholders’ equity for the Heraeus Group increased by around 6.2% to €1.7 billion and was secured at a very healthy level of 58%. “Thanks to our solid financial structure, our broad regional representation, as well as our diversified business portfolio, we faced the global financial and economic crisis from a position of strength. For that reason, we were also able to continue investing in property, plants, and equipment to further expand into promising new technologies and growth markets as well as make targeted acquisitions to strengthen our competitive position,” explained CFO and Member of the Board of Management Jan Rinnert.

Targeted acquisitions strengthen the Group's competitive position
A total of €12.0 million was spent on acquisitions in the reporting year. The purchase of the electronic packaging materials business of Umicore S.A. in Belgium further expanded our portfolio in the manufacture of soft solders and fluxing agents for the semiconductor industry. The Thick Film unit was significantly strengthened by two targeted acquisitions in the USA, namely the thick film pastes business of LORD Corporation, headquartered in Cary, North Carolina, and the thick film business of BASF Catalysts LLC, of Iselin, New Jersey. The establishment of a joint venture with Jiangsu Golden Changjiang Environmental Protective Motor Muffler Co., Ltd. will enable Heraeus to serve the developing Asian market for motorcycle catalysts.

Moderate personnel capacity adjustments
Acquisitions added 50 employees worldwide, but overall the number of Heraeus employees around the world declined by 4% to 12,340. The global economic crisis led to staffing cutbacks abroad, particularly in the United States. Locations in the USA cut 219 jobs, while 73 employees had to be let go in Germany as of the balance sheet date. Early measures to improve flexibility including time accounts and part-time work, as well as legal regulations that allowed cuts in work hours and short-time work enabled us to continue employing permanent staff. The quartz glass business segment had to put a social compensation plan in place for 130 employees due to structural changes.

Business segments developing at varying rates
In the precious metals business segment, declining industrial demand in key markets, namely the chemical, electronics, semiconductor, and automotive indus-tries, and low prices for industrial metals at the start of the year tugged product revenues down by 11.4% from the previous year. Precious metals trading revenue was largely influenced by high price volatility, ending at 4.9% above the previous year’s level.

In recent years, the sensors business segment profited handsomely from strong growth in the global steel market. When the global economy collapsed, demand for steel plummeted worldwide. Because sales in China compensated only in part for the downturns in Europe and North America, the sensors business segment was hit with a 21.9% slump in overall revenues.

The market for orthopedic biomaterials used for treating bone defects as well as regenerating bone and soft tissues continued to grow worldwide, due in large part to demographic change. The biomaterials and medical products business segment participated strongly in this growth with innovative products, boosting its revenues by 6.6%.

The various markets for the dental products business segment behaved differently during 2009. While sales of prosthetics matched the previous year’s level, products for dentists were more significantly affected by the economic crisis. Despite the slight decline in the dental market, the business segment held its product revenues nearly steady, dipping just 0.5% below the previous year’s level.

The quartz glass business segment definitely felt the impact of the economic crisis. After the very strong investment activities of recent years, the semiconductor industry was particularly hard hit by the crisis and the coinciding cyclical downturn. Revenues for Heraeus Quarzglas fell by 6.6%. Only in the telecommunications industry did the growth seen in recent years continue in 2009, buoyed by the booming market in China.
Starting in the fourth quarter of 2008, the global economic crisis also affected customers in the specialty lighting sources business segment, leading to a 22.6% drop in revenues. Performance was significantly influenced by the breadth of the economic downturn and the reduced demand for capital goods.