Freudenberg Strategically and Operationally Successful



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, significant negative exchange rate effects and the effects of the new accounting standard IFRS 15, sales increased by 1.2 percent over the previous year. Freudenberg, therefore, increased 2018 sales to €9,455.4 million or Rs. 76,235 crores (previous year: €9,345.6 million or Rs. 75,350 crores) on the basis of IFRS.
 
Freudenberg’s business also performed strongly in India, with sales growing by 18.6 percent to €304 million or Rs. 2,401 crores. This rise is the result of continuous investments in existing and new projects. One example is the production facility in Chennai which is close to completion.
 
In India, Freudenberg’s seven Business Groups have a total workforce of some 2,750 employees at around 50 locations – running six R&D centers and 14 production sites with state-of-the-art shop floors. “We remain committed to our long term orientation and continue to grow sustainably. The upcoming facility in Chennai is on track and close to completion underlining our long-term commitment to the local market and to support the ‘Make in India’ initiative,” said Georg Graf, Freudenberg's Regional Representative in India. The total investment so far is around €30 million or Rs. 240 crore.
 
“The Indian market plays a key role in our existing and future operations, and our diversified and innovative portfolio caters to the demands of India’s industry. Both, operationally and strategically, 2018 was a successful year for Freudenberg worldwide. These important decisions have contributed to the sustainable growth of the entire Group. We are well on our way to being one of the most innovative and efficient technology companies. One third of sales (33.6 percent) have been generated with products introduced less than four years ago, providing an example of Freudenberg’s innovative strength,” Graf added.
 
Innovation
The growing investments and activities in electromobility are especially noteworthy. Freudenberg also acts as a reliable partner to its customers and is working hard on future-oriented innovations for all types of drive systems, including hybrids, fuel cells and internal combustion engines. Examples include battery separators and gas diffusion layers, as well as special filters for direct installation on gas diffusion layers.
 
The total amount invested in innovation was €444.3 million or Rs. 3582 crores (previous year: €427.8 million or Rs. 3449 crores). This represents 4.7 percent of sales (previous year: 4.6 percent). Freudenberg measures the effectiveness of its research and development activities using the share of new products (products introduced less than four years ago) relative to sales. This share reached 33.6 percent (previous year: 33.0 percent).
 
In the year under review, the number of research and development employees grew to 3,590 (previous year: 3,445).
 
Portfolio
Freudenberg’s strategy is to develop its portfolio selectively and in a focused way through acquisitions in all Business Groups. The objective is a balanced portfolio of cyclical and anti-cyclical business with equal sales contributions from the Americas, Europe and Asia.
 
Human Resources
As at December 31, 2018, Freudenberg employed 49,137 people. Employee numbers rose to 12,176 (previous year: 11,472) in Germany, to 26,243 (previous year: 25,369) in Europe (including Germany), to 10,783 (previous year: 10,285) in North America and to 10,062 (previous year 9,876) in Asia of which to 2,750 in India (previous year 2,669). In contrast, employee numbers in South America fell to 1,461.
 
Health & Safety
Employee safety has top priority at Freudenberg. In the 2018 financial year, the LDIFR (Lost Day Incident Frequency Rate – this rate measures all incidents at work involving at least one day’s absence per million working hours) – was 1.5 (previous year: 1.4). This is a good value for a manufacturing company.
 
Corporate Citizenship
Freudenberg’s commitment to Corporate Citizenship extends beyond the value chain. In 2018, many Group companies, sites and employees volunteered in small initiatives and complex projects. The e² (education and environment) program has been strengthening our corporate citizenship since 2015. The goal is to provide people with access to education and employment, and support environmental protection. Freudenberg has already donated a total of Rs. 112.8 crores to the program. By the end of the year, e² was supporting some 70 projects.
 
As part of its e² program, the Freudenberg Group and its local employees are fostering the education of poor children in Bengaluru. The Group is contributing financially to the Parikrma Humanity Foundation, a non-profit organization that local Freudenberg employees in India have been visiting over the years. Parikrma runs four centers for learning, including a kindergarten and school as well as a junior college, and has a clear mission: providing under-privileged children from the slums of Bengaluru with a high quality education, excellent English language skills and the confidence to dream big – even about international careers.
 
The Freudenberg Training Centre (FTC) in Nagapattinam, India, was originally established back in 2009, following the devastating tsunami which hit South East Asia in 2004. The FTC completes its 10 th anniversary in 2019. Through the provision of training for young people, Freudenberg is opening up opportunities for them to help themselves, at the same time as boosting the region's economy. “On the occasion of the FTC´s anniversary and the Freudenberg Group’s 170 th anniversary, we have planted 170 trees at Nagapattinam as a small contribution towards a greener environment. We recognize that skills development is essential as part of the drive to build on India's socio-economic infrastructure. Bridging the critical gap between manpower availability and employability is important to provide sustainable livelihood opportunities,” said Graf.
 
Sustainability
The sustainability strategy for the Group developed in 2016 was integrated in all Business Groups and is a systematic component of the strategy process. The strategy has two dimensions: One dimension is process design and equipment usage to make production as resource efficient as possible (Footprint). The second dimension is the numerous Freudenberg products and solutions that make our customer’s production more efficient and sustainable or allow products to be manufactured with greater resource efficiency (Handprint). Key performance indicators measure three core areas - material efficiency, energy efficiency and emissions.
 
Outlook
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 stronger decline in global growth has increased. Geopolitical and economic uncertainties are unlikely to abate.

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