ANNUAL REPORT 2018

SYSTEM PARTS SEGMENT

Business with fineblanked, formed and stamped electrical sheet metal parts ran at full speed in 2018 – mainly thanks to global automobile production, which grew again last year. The manufacturing plants are operating at full capacity overall.

2018 was a successful year for the System Parts segment. Despite a slight dip towards the end of the year, earnings increased slightly once again. Due to high demand for fineblanked, formed and stamped components, total turnover amounted to CHF 587 million. In particular, sustained high customer demand for sophisticated system components for all-wheel and automatic transmissions and damping elements played a decisive role in this positive development.

Business with the newly integrated punch packaging technology, which is used to manufacture rotors and stators for electric motors, developed encouragingly. This contributed to growth as expected. Due to the steadily rising demand for electric motors, the investment in the new punch packaging business segment has proven to be worthwhile, especially since demand for components for electric motors is likely to continue growing.

Brisk business activity worldwide

China is becoming an increasingly important sales market for the automotive industry and thus also for Feintool. The high demand for premium-segment vehicles in particular is leading to an increase in production, also directly in China. A large number of fineblanked and formed components are installed in high-quality vehicles. This has resulted in particularly high potential for Feintool in the Chinese market, despite the temporarily reduced growth forecasts for the Chinese economy. In the medium term, Feintool expects sustained and solid growth, and thus increasing demand for Feintool products.

In Japan, the System Parts segment was able to maintain the high level of sales and earnings recorded in 2017, and its market position and profitability remain stable.

In the US, sales and overall income also remained stable. The significant increase in steel prices in 2018 was largely passed on to customers. Demand for SUVs in the North American market continues unabated. With its products, Feintool continues to be excellently positioned and in demand in this vehicle segment.

Capacity utilization at the European plants remained high despite an increase in skepticism about diesel vehicles, for example due to the threat of driving bans in Germany, which had an impact on demand. On the other hand, increasing demand for hybrid vehicles was already recorded in 2018.

Strategic investment completed

Feintool again made targeted investments in new and sustainable areas in 2018. The acquisition of Feintool System Parts Jessen GmbH is of particular note. The strongly growing company employs around 200 people. The technological expertise in the blanking and laser cutting of electrical sheet metal obtained through the acquisition is to be developed first in Europe and then, in further stages, on a global level. The acquisition will significantly strengthen the System Parts segment and open up a further business area. Feintool already supplies the growing hybrid drive market with fineblanked and formed components. The product range is now being expanded to include punch-packaged rotor and stator components. This expansion fits perfectly into Feintool's existing product and process portfolio and is also an investment in the future. In the medium term, the company expects further sustainable growth for these products in the automotive industry, the energy sector and for industrial applications. In particular, electrification in all these industries will ensure high demand for electrical sheet metal components in future.

In order to meet the high global demand for fineblanked and formed components and enable further growth, the company continued its expansion strategy in 2018. This strategy focuses on the core markets of Europe, North America and Asia. The plant in Tianjin supplies the Chinese market with formed components to meet the growing demand for mid-range and luxury vehicles. Work started to expand the site in order to meet the high customer demand. This ensures that all orders can be fulfilled as planned in 2019. An additional capacity expansion in Tianjin is planned for the next few years.

In Europe, the new plant in Most, Czech Republic, was also completed on schedule. The first fineblanked components and tool elements will be manufactured there in 2019. The development of hardening technology at the Ohrdruf plant in Germany has also been completed.

Adding value

Feintool is continuously expanding its product range for its customers by enlarging its product portfolio to include supplementary manufacturing processes such as hardening, welding, machining, grinding and assembly. Feintool is thus meeting the need of its customers to obtain development know-how and manufacturing competence from a single source. This strategy enables Feintool to consistently gain new customers and at the same time strengthen existing customers' loyalty.

Established manufacturing processes are being rolled out internationally and across locations using the best practice model, for instance laser welding from Germany to China. The new Jessen site will play a major role in the coming years with its technologies that complement the product portfolio, such as plastic insulation. In future, Feintool will increasingly supply customers with products that are ready for assembly.

Thanks to all these activities, the System Parts segment will continue to grow in 2019.