Market slump hits automotive supplier Preh – company’s stability nevertheless secure
The worldwide crisis in the automobile industry has also had a heavy impact on Preh. The slump has cut into the group’s sales and earnings. The company, which specializes in driver control systems, sensors and ECUs, continues to perform better than the market as a whole, but management is expecting a slight downturn in profits for the current 2009 fiscal year. To ensure that Preh remains successful in the future, it has launched an extensive program for cutting costs, improving liquidity and increasing its capital. This will require significant contributions from equity holders, banks and – last but not least – employees.
In 2008, Preh was not able to continue its past growth. Sales dropped to about €305 million, just under the previous year’s sales (adjusted to reflect the sale of Preh’s subsidiary PrehTronics in July 2008). Preh expects that conditions will remain unfavorable in the automotive market in the coming year as well. However, the company is confident that it will outperform the overall market in 2009 as a result of numerous new production starts and its position in comparatively robust market segments.
As a result of the economic slump, earnings before taxes (EBT) decreased substantially in 2008, only reaching €4.2 million after hitting €12.7 million in the previous year. Preh expects a slightly downside result in 2009.
“The crisis in the automobile industry has also put Preh in a difficult situation. After five years of vigorous growth, beginning in the fourth quarter of 2008 we had to face double-digit decreases in sales due to drastically reduced customer orders,” said Dr. Michael Roesnick, president of Preh GmbH during the presentation of the results of the previous fiscal year. He continued, “But there are also bright spots: We continue to develop better than the overall market, which, for example, has seen a 43% decrease in production in Western Europe alone in the first quarter of 2009. Furthermore, we have acquired outstanding new business with German automobile manufacturers in the past few months.”
Shareholders provide additional capital
In order to prepare Preh for the possibility of a long-term crisis and to equip it to take advantage of opportunities as they arise, a package was developed to increase credit lines and provide new capital. For this purpose, the majority shareholders – Deutsche Beteiligungs AG and its co-investors – have provided more than €7 million in additional capital for the company. “I view this as strong evidence of the confidence that our shareholders have in us,” emphasized Roesnick. “As a result, we are in a much more comfortable position than some of our competitors and are therefore well-equipped to aggressively pursue our successful growth course once the crisis is over.”
Employees make an important contribution to protecting the company’s future
Management and the works council have agreed to extensive measures to cut costs and improve liquidity, in addition to the short-time work schedule that has been in place since February 9, 2009. Additional measures include postponing a second wage increase and special payments such as vacation and Christmas bonuses.
Currently about 2,000 employees work in the Preh group.
New plant in Romania ensures competitiveness
The new Preh site in Braov, Romania recently went into operation. In view of the current automobile crisis in particular, the location will play an important role in ensuring Preh’s long-term competitiveness, according to Roesnick.
High forecasting uncertainty makes planning difficult
The current market holds many uncertainties and risks. This is reflected in the repeated decreases in growth rate predictions by the International Monetary Fund, the OECD, and economic research institutes. “Based on the currently available data, I expect that we will perform significantly better this year than the overall market – which would amount to a real success. All in all, we think it very likely that we will come out of this crisis stronger than ever,” stated Preh head Dr. Michael Roesnick.
