Family-owned STIHL grows again in 2008, but notices the worldwide economic downturn in 2009

Despite the difficult conditions worldwide, the STIHL Group was able to increase both unit sales and turnover to a certain extent in 2008 and gain market shares in almost all product categories. With 2.6 percent growth over the previous year the company reported a worldwide turnover of EUR 2.143 billion. Had exchange rates remained unchanged, turnover growth would have been 5.4 percent.
The company expects its 2009 turnover to be well short of the previous year’s. “Being a financially sound and independent family-owned company, we will continue to pursue our medium and long-term goals – we will keep on course. At the same time, we can react very flexibly and quickly to market fluctuations and adjust our production accordingly,” explained STIHL Executive Board Chairman Dr. Bertram Kandziora at the balance sheet press conference on April 28, 2009.

Gains in market shares
STIHL was able to further strengthen its global market position with increased market shares against a background of a falling world market volume. The share of turnover generated abroad increased marginally over the previous year, i.e. it grew by 0.4 percentage points to 88.7 percent. The company upped unit sales of chain saws in particular in eastern Europe, North and South America. Unit sales of outdoor power tools increased at an above-average rate in several western European countries. On the other hand, there was a drop in unit sales of cut-off machines in the American, Spanish and British construction industries. Subsidiary VIKING grew 27% to a sales volume of EUR 119 million, business with the newly launched T5 and T6 series lawn tractors in particular having developed favorably.

Sound equity ratio, record investments
STIHL is not directly affected by the financial market crisis; as before, investments have been and will be financed from the company’s own capital resources. As in previous years, STIHL has a sound financial structure with an equity ratio of 60.3 percent, including participating capital and a loan from the EVA MAYR-STIHL STIFTUNG (foundation). Investments were at a record level of EUR 189 million, which was about 10 percent higher than the previous year. The manufacturing subsidiaries accounted for about 83 percent of investments.

New business segment with carburetor manufacturer
STIHL acquired carburetor manufacturer Zama, including Zama Japan KK and Zama Corporation, Ltd., Hong Kong, on December 31, 2008. With a sales volume of about EUR 50 million (2008), Zama is one of the world’s largest manufacturers of carburetors for handheld power tools and a long-standing supplier to STIHL. In making this acquisition STIHL has entered a new business segment with growth potential.

Worldwide workforce increases
Compared to the previous year, the worldwide workforce grew 3.2 percent to 10,095, of which some 4,000 are employed in Germany. The 1,389 employees of the newly acquired Zama Group must be added to this number, i.e. the total workforce numbered 11,484 as of December 31, 2008.

Lower fuel consumption and emissions with new engines
The STIHL product line was expanded with the addition of new models with considerably better functionality and environmental compatibility. The engines of the new FS 40/50/56 entry-level trimmers, for example, save 20 percent fuel and an equivalent amount of CO2. U.S. and EU emission standards for handheld power tools have been tightened still further. STIHL has developed engine concepts that already comply with the legal requirements prior to their introduction.

Expectations for new cordless power tool segment
“With our record investments last year, we have equipped ourselves for future competition. In 2009 we will present products that substantiate this claim. Our innovative cordless technology is now being introduced on the market and is a milestone in STIHL’s product history. STIHL’s powerful HSA 65 and HSA 85 cordless hedge trimmers open up a new product seqment,” emphasized the Executive Board Chairman Dr. Kandziora. VIKING will also be launching several new products on the market in 2009.

STIHL uses own manufacturing and distribution network
STIHL uses its own international manufacturing and distribution network to cushion the effects of the worldwide economic crisis. As it became clear from unit sales at the be-ginning of the year that STIHL was also affected by the economic crisis, production out-put in the international manufacturing network was adjusted accordingly. Time accounts are being reduced at the German founding company – by collectively working fewer shifts, for example. The regular staff at the founding company in Waiblingen are the main focus of these efforts to safeguard jobs. For example, it was decided as early as December last year to transfer the production of 100,000 powerheads from Brazil and the United States to Germany in order to secure jobs at the founding company. To boost unit sales, STIHL is covering the markets on a targeted basis with its own sales organi-zation. The company achieves 81 percent of its worldwide sales volume with its 32 sales subsidiaries. This distribution and sales network and the dealer-only sales philosophy are a particular advantage in the battle for market shares.

Founding company in particular feels impact of worldwide financial crisis
While there was a modest rise in turnover in the STIHL Group as a whole in 2008, the effects of the worldwide economic crisis were already being felt at the German founding company, ANDREAS STIHL AG & Co. KG. The weak state of the construction industry resulted in a drop in demand for cut-off machines and professional chain saws. Produc-tion at the founding company specializes in these products within the international manufacturing network and is therefore hit particularly hard by changes in this segment of the market. Turnover dipped accordingly by 10 percent to EUR 818 million. The total workforce at the founding company was down 2.2 percent to 3,750 as of December 31, 2008, due to a drop in the number of blue-collar workers on limited-term contracts of employment and temporary staff. Of that total 2,804 were employed in Waiblingen, 292 in Ludwigsburg, 595 in Prüm-Weinsheim and 59 in Wiechs am Randen.

Jobs of regular staff secure
Although there was a reduction in the total workforce at the founding company, the number of regular staff was actually increased in 2008 to 3,548. All suitable and inter-ested apprentices were offered unlimited contracts of employment. 62 young men and women started their training at the founding company; a total of 211 apprentices and trainees were working at the company as of December 31, 2008. The company again plans to provide training in 2009 at a high level and over and beyond its own requirements. The regular staff are to receive a voluntary merit bonus amounting to 60 percent of one month’s salary (previous year: 82%). Despite the dip in earnings at the founding company, the interest on employees’ participating rights remains at 10 percent, as in previous years.
The subsidy paid by the company for the acquisition of new participating rights remains unchanged at its previous high level, i.e. 200 percent. “The interest on our participation scheme is far above the average for comparable schemes in German industry. In this way we honor the outstanding accomplishments of our workforce,” stressed Dr. Kandziora.

(Voucher copy requested.)