ANNUAL REPORT 2017

SYSTEM PARTS SEGMENT

Existing plants are working at full capacity; new locations are being developed. The business in fineblanking and forming parts remains an expanding sector. This is due in part to the worldwide increase in automobile production.

The System Parts segment is driving the growth of the entire Group, and accounted for 89.4 percent of the Feintool Group's total sales in 2017, compared to 87 percent in the previous year. This development can be attributed to the segment's long-term growth path. With sales of CHF 548 million, the fineblanking and forming parts business has grown significantly compared to the previous year. The increase was 14.3 percent. This is mainly due to the good economic situation in the automotive industry, which is the largest customer group in the segment. Feintool reported numerous production start-ups; deliveries of ready-to-install parts for all-wheel drive components increased in particular in 2017. The increase in the number of alternative drives also had a positive effect on earnings. For example, the quantity of components sold for hybrid drives increased – although it remains at a relatively low level.

Good results worldwide

In light of this good situation, the existing European Feintool plants – especially the German locations – were more than fully utilized in 2017. This reflects the strong position of the European automotive industry. German OEMs and their component suppliers in particular reported an all-time high in terms of sales in 2017. The only major challenges facing the segment in Europe came from an increase in steel prices in the first half of 2017. Feintool succeeded in passing on part of the cost increase to customers.

At the same time, China is becoming more and more important as a sales market, since it increasingly produces passenger cars in the premium segment. A large number of fineblanked components are installed in their transmissions. This gives rise to particularly high potential for Feintool in China.

In Japan, the System Parts segment's sales and earnings remained stable at a high level. This is particularly satisfying in view of the demographic change in the country, which is leading to fewer and fewer car buyers. In this situation, Feintool maintained its market position and reported highly profitable business.

Sales and earnings also remained stable in the US. In light of the saturation of the US automotive market, this shows that Feintool is optimally meeting the needs of its customers in the US.

Systematic investment

In order to meet the high global demand for Feintool products and enable further growth, the company continued its expansion strategy in 2017. It focuses on the core markets of Europe, North America and Asia. With the forming plant acquired in Tianjin, Feintool is responding to the increasing demand on the Chinese market and closing two strategically important gaps. On the one hand, Feintool now also offers forming technology in China and, on the other, the company has now opened up the north of the country. Two forming presses went into production in 2017; a third press will follow in 2019, and a fourth is planned. The plant will be further expanded for this purpose.

Feintool has also invested in Europe in order to better serve the growing automotive market there. In 2017, we began the construction of a new plant in Most in the Czech Republic, located between Dresden and Prague. The new location will contain the entire fineblanking process, with a focus on high-volume parts production and spare parts. When production starts at the end of 2018, around 60 employees will be working there.

In the US, Feintool opened a new sales and development office near Detroit in 2017. Feintool is thus moving as close as possible to its US customers. The goal is to work even more intensively with OEMs and tier 1 partners in research, development and sales.

Expanded value added

Feintool is continually expanding its range of services for its customers and thus opening up new business areas: This includes, for example, supplementary manufacturing processes such as hardening, welding and grinding. The company is thus responding to customers who are increasingly demanding development know-how and manufacturing compe-tence from a single source. In this way, Feintool succeeds in winning new customers and strengthening customer loyalty. As an additional process, for example, Feintool offers double-disk grinding worldwide with the same high quality and efficiency. This was initially introduced in Lyss as a post-processing method for valve plates and rolled out in Taicang and in Cincinnati for the production of camshaft adjuster covers. Double-disk grinding is also planned at the new location in Most. The method of setting up a production process at one location and then rolling it out at other plants promises the highest possible efficiency.

Thanks to all these activities, the System Parts segment will continue to grow in 2018.