60 years of würth
TRANSCRIPT
60 Years of WürthAnnual Report of the Würth Group 2005
1945
Sales: EUR 6.9 bil l ion
2005
60 Years of Growth
19
55
EU
R 8
6,00
0
19
65
EU
R 6
.9 M
ILLI
ON
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75
EU
R 1
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MIL
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R 5
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MIL
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ILLI
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After Reinhold Würth took over the company at the age of 19, the two-man business generatedannual sales of EUR 86,000 in 1955. Ten years later, having taken the plunge abroad by establis-hing Würth Netherlands, the Würth Group was already generating sales of EUR 6.9 million. Thecourse for success slowed down slightly in 1975, and the company recorded the only decreasein sales in its history. The year 1985 was all the more successful, with sales in excess of theDEM 1-billion threshold. Set back in 1987, the next sales target of 10 billion deutsch marks, for-mulated in Prof. Reinhold Würth’s vision for 2000, was eventually achieved. In its anniversaryyear, the Würth Group succeeded in reaching its targets and continuing the success story withsales of EUR 6.9 billion.
WÜRTH AT A GLANCE
2001 2002 2003 2004* 2005
Sales EUR million 5,277 5,360 5,453 6,203 6,914
Employees Number 37,407 39,809 41,952 46,973 50,767
Pre-tax operating result EUR million 270 281 330 395 455
Net income EUR million 141 167 219 260 331
Cash flow EUR million 389 386 431 484 571
Capital expenditure EUR million 249 227 217 237 310
Equity EUR million 1,198 1,354 1,502 1,715 2,049
Total assets EUR million 2,904 2,980 3,127 3,619 4,138
Würth Group
Since 1999, the consolidated financial statements of the Würth Group have been prepared in accordance with the InternationalFinancial Reporting Standards (IFRS).* First-time adoption of IAS 32 (Disclosure of financial instruments (limited partners’ capital)) and
first-time adoption of IAS 27 (IAS 27.33 disclosure of minority interests in equity)
Carmen Würth Family Foundation
Bettina Würth Family Foundation
Marion Würth Family Foundation
Markus Würth Family Foundation
Adolf Würth Foundation
Adolf Würth GmbH & Co. KG
Germany
RW Beteiligungen GmbH
Germany
Würth Beteiligungs-GmbH & Co. KG
Germany
German subsidiaries German subsidiaries Subsidiaries outside Germany
Würth International AG
Switzerland
Würth FinanceInternational B.V.
Netherlands
Reinhold Würth Holding GmbH
Germany
LEGAL STRUCTURE OF THE WÜRTH GROUP (simplified chart)
Pre-tax operating result and return on sales Würth Group
200
300
400
2001 2002
270281
330
2003
455
2005
395
2004
4.0
6.0
8.0
5.1 5.2
6.16.4
6.6
Operating result in EUR million
Return on sales as a percentage
Sales Würth Group
in EUR million
1996 1997 1998 1999 2000 2001 2002 2003
2,491
3,6204,110
5,136 5,277 5,360
2004
2,000
4,000
6,000
3,172
2005
6,914
6,203
5,453
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> GLOBAL SALES OF THE GROUP RISE TO
EUR 6.9 BILLION
> NET INCOME OF THE GROUP GROWS
TO EUR 331 MILLION
> EQUITY RISES ABOVE EUR 2.0 BILLION
> 50,000 TH EMPLOYEE HIRED
> TOTAL ASSETS AMOUNT TO EUR 4.1 BILLION
> EQUITY RATIO AT 49.5 PERCENT
> CAPITAL EXPENDITURE OF EUR 310 MILLION
CLEARLY IN EXCESS OF PRIOR YEAR
> CASH FLOW AMOUNTS TO EUR 571 MILLION
> GROUP RATING “A/OUTLOOK STABLE” CONFIRMED
60 years of growthand a record year 2005
Consolidated Financial Statements of the Würth Group
CONSOLIDATED BALANCE SHEET
Non-current assets
Intangible assets
Property, plant and equipment
At-equity investments
Other financial assets
Other assets
Deferred taxes
Current assets
Inventories
Receivables and other assets
Trade receivables
Receivables from the tax authorities
Other assets
Prepaid expenses
Securities
Cash and cash equivalents
Assetsin EUR million
* First-time adoption of IAS 32 (Disclosure of financial instruments (limited partners’ capital))
restated2004
139.6
1,250.2
0.0
23.6
1,413.4
34.6
87.4
122.0
1,535.4
775.7
835.0
9.1
132.5
19.1
995.7
62.3
250.0
2,083.7
3,619.1
2005
164.6
1,383.9
15.5
26.3
1,590.3
37.2
119.5
156.7
1,747.0
825.0
976.3
12.9
173.8
20.6
1,183.6
65.6
316.8
2,391.0
4,138.0
Share%
3.9
34.5
0.0
0.7
39.1
1.0
2.4
3.4
42.5
21.4
23.1
0.2
3.7
0.5
27.5
1.7
6.9
57.5
100.0
Share %
4.0
33.4
0.4
0.6
38.4
0.9
2.9
3.8
42.2
19.9
23.6
0.3
4.2
0.5
28.6
1.6
7.7
57.8
100.0
Change%
+ 17.9
+ 10.7
–
+ 11.4
+ 12.5
+ 7.5
+ 36.7
+ 28.4
+ 13.8
+ 6.4
+ 16.9
+ 41.8
+ 31.2
+ 7.9
+ 18.9
+ 5.3
+ 26.7
+ 14.7
+ 14.3
2
*
restated2004
148.3
850.7
704.9
11.2
1,715.1
103.2
32.1
722.2
13.0
870.5
49.4
118.1
146.9
308.4
405.6
5.1
1,033.5
3,619.1
2005
270.2
817.8
947.5
13.2
2,048.7
120.0
55.7
646.7
15.7
838.1
71.6
139.0
262.6
344.6
429.6
3.8
1,251.2
4,138.0
Share %
4.1
23.5
19.5
0.3
47.4
2.8
0.9
20.0
0.3
24.0
1.4
3.3
3.8
8.5
11.5
0.1
28.6
100.0
Share %
6.5
19.8
22.9
0.3
49.5
2.9
1.3
15.7
0.4
20.3
1.7
3.4
6.3
8.3
10.4
0.1
30.2
100.0
Equity
Share capital
Revenue reserves
Retained earnings
Minority interests
Non-current liabilities
Provisions for pensions and similar obligations
Provisions for deferred taxes
Financial liabilities
Other liabilities
Current liabilities
Tax provisions
Other provisions
Financial liabilities
Trade payables
Other liabilities
Deferred income
Equity and liabilitiesin EUR million
* First-time adoption of IAS 32 (Disclosure of financial instruments (limited partners’ capital)) and
first-time adoption of IAS 27 (IAS 27.33 disclosure of minority interests in equity)
Change%
+ 82.2
– 3.9
+ 34.4
+ 17.9
+ 19.5
+ 16.3
+ 73.5
– 10.5
+ 20.8
– 3.7
+ 44.9
+ 17.7
+ 78.8
+ 11.7
+ 5.9
– 25.5
+ 21.1
+ 14.3P
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*
Consolidated Financial Statements of the Würth Group
4
CONSOLIDATED INCOME STATEMENT
Sales
Changes in inventories
Own work capitalized
Other operating income
Cost of materials
Gross profit
Personnel expenses
Amortization and depreciation
Other operating expenses
Income from at-equity investments
Financial income
Financial expenses
Earnings before taxes
Income taxes
Earnings after taxes
Profit allocable to minority interests
Net income of the Group (after minority interests)
Income statementin EUR million
restated2004
6,203.2
15.2
9.6
96.5
6,324.5
2,802.9
3,521.6
1,803.4
191.4
1,120.6
0.0
18.9
52.9
372.2
109.2
263.0
3.5
259.5
2005
6,913.9
1.4
7.9
96.2
7,019.4
3,176.9
3,842.5
1,962.2
190.3
1,210.5
0.3
16.8
49.2
447.4
112.5
334.9
4.0
330.9
Share%
100.0
0.2
0.2
1.6
102.0
45.2
56.8
29.1
3.1
18.0
0.0
0.3
0.8
6.1
1.8
4.3
0.1
4.2
Share%
100.0
0.0
0.1
1.4
101.5
45.9
55.6
28.4
2.7
17.5
0.0
0.2
0.7
6.5
1.6
4.9
0.1
4.8
Change%
+ 11.5
– 90.8
– 17.7
– 0.3
+ 11.0
+ 13.3
+ 9.1
+ 8.8
– 0.6
+ 8.0
–
– 11.1
– 7.0
+ 20.2
+ 3.0
+ 27.3
+ 14.3
+ 27.5
* First-time adoption of IAS 32 (Disclosure of financial instruments (limited partners’ capital))
*
5
CONSOLIDATED CASH FLOW STATEMENT
479.3
15.1
191.9
3.2
– 7.5
30.7
– 107.7
15.8
– 50.1
570.7
– 18.4
– 123.9
19.5
7.2
455.1
– 17.2
– 264.4
– 28.5
– 63.9
– 0.5
– 3.4
24.8
– 353.1
– 132.1
101.9
– 6.9
120.7
– 125.4
– 41.8
6.6
66.8
406.2
17.8
191.8
2.3
– 4.7
17.4
– 107.1
18.3
– 57.8
484.2
– 134.6
– 97.8
51.5
35.2
338.5
– 20.6
– 215.5
– 1.1
– 26.0
– 4.1
– 9.2
11.5
– 265.0
– 25.6
0.1
– 14.2
165.6
– 185.3
– 59.4
– 1.0
13.1
Cash flow from operating activitiesin EUR million
Changes in cash and cash equivalents
in EUR million
2005
Change2005 2004 in EUR million
Short-term investments
Other cash equivalents
Cash on hand
Bank balances
Cash and cash equivalents
3.7
2.1
7.0
304.0
316.8
1.9
0.8
6.3
241.0
250.0
1.8
1.3
0.7
63.0
66.8
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* First-time adoption of IAS 32 (Disclosure of financial instruments (limited partners’ capital))
*
Earnings before interest and taxes
Changes in pension provisions
Amortization and depreciation
Losses on the disposal of non-current assets
Gains on the disposal of non-current assets
Other non-cash income and expenses
Payment of income taxes
Interest income
Interest payments
Gross cash flow
Changes in inventories
Changes in trade receivables
Changes in trade payables
Changes in other net working capital
Cash flow from operating activities
Investments in intangible assets
Investments in property, plant and equipment
Investments in financial assets
Investments in newly acquired subsidiaries
less cash
Acquisition of further shares in subsidiaries
Investments in securities classified as current assets
Cash received from the disposal of assets
Cash flow from investing activities
Distributions
Contributions to capital
Changes in shareholder loans
Increase in financial liabilities
Decrease in financial liabilities
Cash flow from financing activities
Changes due to consolidation
(mainly due to currency translation differences)
Changes in cash and cash equivalents
restated2004
Consolidated Financial Statements of the Würth Group
6
CONSOLIDATED VALUE ADDED STATEMENT
Sales
Changes in inventories and own work capitalized for capital expenditure
Other operating income
Financial income and income from at-equity investments
Less advance payments:
Cost of materials
Other operating expenses
Amortization and depreciation
Value added
6,203.2
24.8
96.5
18.9
6,343.4
2,802.9
1,120.6
191.4
4,114.9
2,228.5
6,913.9
9.3
96.2
17.1
7,036.5
3,176.9
1,210.5
190.3
4,577.7
2,458.8
+ 11.5
– 62.5
– 0.3
– 9.5
+ 10.9
+ 13.3
+ 8.0
– 0.6
+ 11.2
+ 10.3
Origin of value addedin EUR million
Change2005 %
* First-time adoption of IAS 32 (Disclosure of financial instruments (limited partners’ capital))
** Distributions less contributions to capital
Employees (personnel expenses)
Public sector (tax expenses)
Companies
Shareholders**
Lenders
Value added
1,803.4
109.2
237.5
25.5
52.9
2,228.5
1,962.2
112.5
304.7
30.2
49.2
2,458.8
+ 8.8
+ 3.0
+ 28.3
+ 18.4
– 7.0
+ 10.3
Utilizationin EUR million
Change2005 %
* restated2004
* restated2004
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AUDIT OPINIONOF THE GROUP AUDITOR
We have audited the consolidated financial state-ments prepared by the Würth Group, comprisingthe consolidated income statement, the consolidatedbalance sheet, the consolidated cash flow statement,statement of changes in shareholders’ equity and thenotes to the consolidated financial statements, toget-her with the group management report for the fiscalyear from January 1, 2005 to December 31, 2005. Thepreparation of the consolidated financial statementsand the group management report in accordancewith IFRSs as adopted by the EU, and the additionalrequirements of German commercial law pursuantto Sec. 315a (1) HGB [“Handelsgesetzbuch”: GermanCommercial Code] are the responsibility of the groupmanagement of the Würth Group. Our responsibi-lity is to express an opinion on the consolidatedfinancial statements and on the group managementreport based on our audit. In addition we have beeninstructed to express an opinion as to whether the con-solidated financial statements comply with full IFRS.
We conducted our audit of the consolidated financialstatements in accordance with Sec. 317 HGB andGerman generally accepted standards for the audit offinancial statements promulgated by the Institut derWirtschaftsprüfer [Institute of Public Auditors inGermany] (IDW). Those standards require that weplan and perform the audit such that misstatementsmaterially affecting the presentation of the netassets, financial position and results of operations inthe consolidated financial statements in accordancewith the applicable financial reporting frameworkand in the group management report are detectedwith reasonable assurance. Knowledge of the busi-
Stuttgart, March 31, 2006
Ernst & Young AGWirtschaftsprüfungsgesellschaft
signed by ElkartWirtschaftsprüfer[German Public Auditor]
signed by KaltmaierWirtschaftsprüfer[German Public Auditor]
ness activities and the economic and legal environ-ment of the Group and expectations as to possiblemisstatements are taken into account in the determi-nation of audit procedures. The effectiveness of theaccounting-related internal control system and theevidence supporting the disclosures in the consolida-ted financial statements and the group managementreport are examined primarily on a test basis withinthe framework of the audit. The audit includes asses-sing the annual financial statements of those entitiesincluded in consolidation, the determination of ent-ities to be included in consolidation, the accountingand consolidation principles used and significantestimates made by management, as well as evalua-ting the overall presentation of the consolidatedfinancial statements and the group managementreport. We believe that our audit provides a reaso-nable basis for our opinion.
Our audit has not led to any reservations.
In our opinion, based on the findings of our audit,the consolidated financial statements comply withIFRSs as adopted by the EU, the additional requi-rements of German commercial law pursuant toSec. 315a (1) HGB and full IFRS and give a true andfair view of the net assets, financial position andresults of operations of the Group in accordancewith these requirements. The group managementreport is consistent with the consolidated financialstatements and as a whole provides a suitable viewof the Group’s position and suitably presents theopportunities and risks of future development.”
The following audit opinion was issued by the groupauditor on the consolidated financial statements and thegroup management report:
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“
60 Years of Würth
60 Years of SuccessThe Würth Story
1 60 Years of Würth
16 Report of the Advisory Board
20 Corporate successionat SMEs
22 Foreword by the Chairman of the Board of Directors
24 The Boards of the Würth Group
27 Group management reportof the Würth Group27 Economic environment29 Business development30 Sales by region33 Results of operations, net assets
and financial position36 Employees38 Research and development,
environmental protection38 Risk management40 Corporate governance report42 Outlook for 2006
43 Art and culture
54 Group management reportof the Würth Group
54 The operational units within the Würth Group
56 Reports from the divisions of the Würth Line
56 Auto division57 Metal division58 Wood division59 Construction division60 Industry division
61 Reports from the Allied Companies
61 Electrical wholesale62 Tools63 reca group64 Trade65 Production66 Electronics67 Screws and standard parts
68 Milestones in the company’s history
70 Imprint/contact details
CONTENTS
THE WÜRTH COMPANY – MORE THAN JUST SCREWS
Reinhold Würth was 19 years old when he took over the screw wholesale business inKünzelsau in 1954 after the early death of his father, Adolf Würth. Over a period of 50 years,he turned the two-man operation into a global trading group. In the fiscal year 2005 theWürth Group had 351 companies in 81 countries.
Trade in fastening and assembly materials continues to be the core business of theGroup. But Würth has long been more than just a source of screws, screw accessories,dowels and plugs, tools and chemical products. In addition to this traditional range ofproducts, the Würth Group companies have for some years been selling protectiveclothing, products for DIY and hardware stores, electrical installation materials, electroniccomponents such as printed circuit boards, financial services and even solar modules.
1945– 2005
60 Years of Würth
60 YEARS OF SUCCESS
It is worth taking a look back. Satisfaction, pride, wonder, and confirmation are some of theemotions felt when looking back over the development of the Würth company. Satisfactionwith the steady growth, pride in the joint achievements, wonder at some comparisons of pastand present, and confirmation of the key success factors firmly anchored in the past andcontinually refined over 60 years. A focus on sales, localization and globalization, together withan awareness of our strong corporate culture are the cornerstones of our history and thedriving forces for a successful future. It is worth taking a look back – not to rest on our laurels,but because it spurs us on to set ourselves new targets and break records.
1940s <<< The castle mill and adjacentbuildings in Künzelsau – thecradle of the Würth Group
SUCCESS THROUGH DIVERSITY – ARCHITECTURE AT WÜRTH
AS A REFLECTION OF THE CORPORATE PHILOSOPHY
It all began in the former castle mill in Künzelsau in the 1940s. This building
does not just evoke memories of the business premises at the time. It is the
place where Reinhold Würth himself stacked the first goods received on the
wooden shelves.
To this day, there has always been more to the Würth company buildings
than a bare utilitarian architecture. They are individual examples in locations
around the world of industrial architecture in different countries. An extremely
public form of art, the architecture is a visible expression of the Würth Group’s
diversity.
The success factor localization ensures that – while universally valid attri-
butes such as comfort, well-being and tolerance are observed – a varied picture
emerges with a style adapted to the country in question. An architectural re-
flection of our business practice.
>>> Corporate headquarters in Künzelsau-Gaisbach
60 Years of Würth
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1950s <<< Adolf Würth (left)and his son Reinhold
SUCCESS THROUGH A VISIONARY – SETTING HIGH STANDARDS
WITH CREATIVITY AND A STRONG CORPORATE CULTURE
Like no other, Reinhold Würth has experienced and shaped the 60 years of the
company’s history. He has been the visionary of the company and is still the
driving force as it continues to develop. He works on the principle that “visions
are more than dreams because you can back them with arguments”. After all, a
global company has emerged from a two-man business.
Reinhold Würth shapes the corporate and management culture at Würth
without letting it become a rigid framework. Openness, honesty, constancy,
clarity and reliability are the decisive corporate principles which were not
superimposed as attributes but which have grown over 60 years.
There is awareness at Würth that management culture is not designed on the
drawing board, but developed in day-to-day collaboration. Taking the people in
the company seriously and being creative where they are concerned will also
remain our task for the future.
60 Years of Würth
>>> Reinhold Würth: Holding aspeech at the anniversaryfestivities on April 22, 2005
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1960s <<< The first Würth subsidiaryabroad: Würth Netherlands in ‘s-Hertogenbosch
SUCCESS THROUGH GLOBALIZATION – MULTIPLYING
BEST PRACTICES
As early as the 1960s, Würth establishes foreign subsidiaries in the Netherlands,
Switzerland, Austria, Italy, Denmark, and France. The company ‘crosses the
Pond’ to the USA in 1969. For a company of Würth’s size at that time (with
sales of EUR 13.6 million), this move comes at a surprisingly early stage – and
is proof of the visionary power at Würth.
The internationalization of the company does not follow a centrally
devised master plan of the Group’s parent. The move abroad is motivated not
by a rationally planned business idea, but by the customer contacts which have
grown over time. In 2005, Würth serves markets on all continents and in a total
of 81 countries.
The basic approach has not changed to the present day. Based on the
principle of cell division, the recipes for success are passed on to the
individual countries where they are adapted to the local market and culture.
60 Jahre Würth
>>> Würth worldwide: 351 companies servingmarkets in 81 countries
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1970s <<< Production of circuit boards at Würth Elektronik founded in 1976
SUCCESS THROUGH INNOVATION – WE INVEST IN THE FUTURE
The companies that do not trade under the name of Würth – our Allied Com-
panies (ACs) – are divided into eight strategic business units. They operate
independently of the Würth Line companies and are thus able to cover closely
related business segments. Eight ACs are already incorporated in the Group
in the 1970s. By 2005, the Würth Group has 231 ACs.
A further pioneering step is made in 2005. The largest single capital
expenditure in the history of the Würth Group (EUR 55 million) is made on
one of the Allied Companies: Würth Solar, which is part of the Würth Elektronik
Group. With the construction of the first large series production facilities
worldwide for CIS photovoltaic modules, Würth Solar marks a milestone not
only in the company’s history, but on the market for the generation of rene-
wable energies as well. With their uniform matt black design, CIS modules
meet the highest aesthetic standards. The flexibility they allow in module
design and, last but not least, the excellent energy output mean that there are
sunny times ahead for CIS modules.
60 Years of Würth
>>> High-tech: every CIS module issubject to a strict quality test
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<<< Tailored training: the “humansuccess factor” is recognizedat an early stage
SUCCESS THROUGH PEOPLE – LEARNING FROM EACH OTHER
“Success is a matter of adjusting one’s abilities to a service needed by others.”
This principle of Henry Ford’s is not foreign to employees at Würth. The
company offers them a range of opportunities to help them meet current
requirements. Würth develops tailored training programs at a very early stage.
The term “Würth Campus” is coined as early as the 1980s and describes the
special atmosphere of lifelong learning at the company.
A further important step is made in 1991 with the foundation of Würth
Academy, which today comprises all company training courses under one roof.
It offers all employees professional qualification courses as well as individual
courses for their personal development. The objective is not just to provide
knowledge that can be immediately put into practice – the range of courses is
complemented by a varied program including concerts, special events, litera-
ture readings and sport. The “human success factor” is not just a word at
Würth, it is a factor in which investments are made.
60 Years of Würth
1980s
>>> Lifelong learning: investments are made in thefurther development of employees
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1990s <<< The sales catalog before itwas split by division
>>> Multifaceted: each divisionoffers products for specialapplications
SUCCESS THROUGH CUSTOMER PROXIMITY –
PRECISE SPECIALIZATION THROUGH SEGMENTATION
The range of more than 100,000 products of the Würth Line is sold by the
divisions Auto, Metal, Wood, Construction, and Industry. By splitting the
products into these divisions, Würth meets the needs of precisely defined
customer target groups.
In the 1990s the company already promotes the associated specialization
and professionalization of its sales force. This involves a fundamental change for
the company: with the aim of serving customers as competent contact persons,
our sales representatives become specialists in a specific area of our sales
program. This segmentation is one of the key growth factors of the Würth Group.
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60 Years of Würth
13
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CONSTRUCTION DIVISION INDUSTRY DIVISION
AUTO DIVISION
METAL DIVISION W-VIZ anchor rod
Assy Plus screw
C-Product Service
Ultimate windscreen adhesive
Diamond blades
WOOD DIVISION
2005 <<< Anniversary festivities in theWürth Dome: looking backover 60 years of success
>>> Ready for new challenges: with drive towards new targets
SUCCESS THROUGH FARSIGHTEDNESS –
TEAMING UP FOR NEW RECORDS
Motivated, able to work in a team, and geared towards success – these are just
a few of the characteristic features which apply both to professional sport and
a market leader like Würth. Dynamism, curiosity and optimism give us as a
company the drive to set new records as well. Taking a look back motivates us
to continue the success story into the future. We are only at the start of a
growth curve and see enormous sales potential for future years.
Open for new ideas and markets, we are highly motivated and curious to
see what the future has in store for us. Our motto for the year 2006 VIBRANT
CURIOSITY describes what spurs us on to excellent performance and out-
standing results.
60 Years of Würth
14
Würth-Verkäufer Michael Lehmann beliefert eine Baustelle in Frankfurt/Main 15
Report of the Advisory Board
16
Ladies and Gentlemen,
It is a great pleasure for us both to have the opportunity to present thisReport of the Advisory Board for 2005 to you together. On behalf of thewhole Advisory Board of the Würth Group, we would like to report on thebusiness development and the work of this supervisory body.
The high energy prices did not throw the global economy off its coursefor growth in 2005. Owing to the dynamic momentum in Asia and NorthAmerica in particular, the global economy grew again by as much as threepercent. Europe, the core marketplace for the Würth Group, lagged conside-rably behind. Economic output climbed by a meager 1.3 percent in the eurozone and by just 0.9 percent in Germany. Whether or not Germany will beable to catch up with the top performers again in the next few years willdepend to a large extent on the work of the new government. The grand coa-lition has the historic chance of overcoming the political blockade of pastdecades and seriously tackling the reform of the excessive welfare state. Itis the only way if the country’s economic potential is to be released andGermany is to assume its role again as Europe’s growth engine.
The Würth Group maintained its growth course unchanged in 2005.Both sales and the operating result of Würth increased by double-digit rates.At 15.2 percent, the operating result grew at a faster pace than sales (+ 11.5 per-cent). Despite the weak economy in Germany, Würth raised its sales thereby a double-digit rate as well (+ 10.1 percent).
REPORT OF THE ADVISORY BOARD
Reinhold Würth Bettina Würth
17
Fiscal year 2005 – the year of the 60th anniversarySpeaking for us personally and the entire Advisory Board, we are particularlypleased with the result generated in 2005 – the year in which the companycelebrated its 60th anniversary. Management and the entire workforce haveevery reason to be proud of the success story of Würth. We have come along way from the two-man operation in 1945 to a group with more than50,000 employees in 81 countries. This collective achievement was madepossible only by the exceptional commitment of each and every employee.We would therefore like to say a special thank you to all our employees forthe excellent result in the anniversary year and for the success story of thepast decades.
It was important for us to invite as many employees, customers andbusiness associates as possible to our anniversary festivities to express ourthanks for their contribution to Würth’s success. A total of 16,867 guestscame to the celebrations and were able to gain an insight at the accompa-nying exhibition not only into the corporate history, but also into the currentrange of products offered by Würth. The high level of media attention sur-rounding the anniversary has reinforced the renown and reputation of Würtharound the world.
Work of the Advisory BoardThe Advisory Board of the Würth Group came together for three extensivemeetings and was regularly informed by the Board of Directors on a timelyand in-depth basis of the development of the company. Planning and riskcontrolling were further priorities of the work of the Advisory Board. Alltransactions subject to approval pursuant to the company statutes were sub-mitted to the Advisory Board for decision, discussed in detail, and thenapproved. The Chairman of the Advisory Board also attended numerousmeetings of the Board of Directors as a guest, providing advice on importantbusiness decisions concerning planning and strategy.
The Advisory Board’s investment committee met on November 24, 2005to discuss the applications for expenditures in fiscal 2006. The AdvisoryBoard then approved a substantial increase in capital expenditures to EUR412 million. The committee also determined that the real capital expendi-ture of the Group matched the planning presented in the fall of 2004 withonly minor deviations.
Transparency creates trustThe Würth Group has been known for a high degree of transparency in itscorporate management for many years – something that is still out of theordinary for family-run businesses not listed on a stock exchange. Both ourrelationship with the capital market and with employees, customers andbusiness associates is based on mutual trust. We feel that trust can only growif the cards are laid on the table. Publication of the corporate figures, detailedinformation of the business development in the annual reports and the assess-ment by recognized rating agencies are examples of this philosophy. In
Report of the Advisory Board
18
addition, we have followed the German Corporate Governance Code since2004 with only minor deviations. These deviations are due to the fact that theCode is designed for stock corporations and contains provisions which are notappropriate for family businesses like the Würth Group. We have included thedeclaration of compliance in the annual report for the first time this year.
Ernst & Young AG Wirtschaftsprüfungsgesellschaft, Stuttgart, auditedthe consolidated financial statements and the group management report andissued an unqualified opinion thereon. The consolidated financial statementsand the group management report as well as the audit report from Ernst &Young were discussed in depth by the Advisory Board’s audit committee andthe Chairman of the audit committee reported in detail to the AdvisoryBoard on the results of the committee’s work. The audit committee and theAdvisory Board did not raise any objections and approved the result of theaudit by Ernst & Young. The auditors attended the meeting of the AdvisoryBoard at which the balance sheet was discussed as well as the meeting of theaudit committee and readily answered all questions in full. The AdvisoryBoard of the Würth Group had Ernst & Young AG Wirtschaftsprüfungs-gesellschaft confirm its independence as defined by No 7.2.1 of the GermanCorporate Governance Code prior to the appointment.
Sincerely,
Bettina WürthChairwoman of the Advisory Board of the Würth Group
Reinhold WürthChairman Emeritus of theAdvisory Board of the WürthGroup
19
Ladies and Gentlemen,
The Würth company, aged 60, is well positioned. The continued existenceof the company and its organization has been secured for the long term bymeans of a foundations structure. The growth in sales and operating incomehas reached a new record. The Würth Group also has a resilient corporateculture that has grown over the years. In view of this situation, I decided thatthe 60th anniversary of the company and my 70th birthday were the rightmoment to announce my retirement from the Advisory Board. After 52 yearsat the top of the company, I felt that it was time to finally hand over the reinsto the next generation so that they can realize their own ideas for the com-pany. Robert Friedmann assumed the function of Chairman of the Boardof Directors already last year, and Bettina Würth was appointed Chairwomanof the Advisory Board of the Würth Group in March 2006. The generationchange in the management of the Group has thus been accomplished andthe course is set for the future of the Würth Group.
I am convinced that Bettina Würth and Robert Friedmann as the newstewardship team will continue the success story of the Group. Like fewothers, they both stand for the corporate culture of Würth, which is bestdescribed as Vibrant Curiosity, our motto for 2006. They can both look backat decades of experience in the Group, and have both earned the respectof employees and executives. And if need be, I will still be at hand shouldmy experience be required. I would like to close my last report of the AdvisoryBoard by thanking Bettina Würth and Robert Friedmann for their commit-ment to date. I have worked with both of them over many years and theirdrive and wealth of ideas have never ceased to impress me. I warmly wishthem both all the best and, of course, good fortune, as that can never go amiss.
May I thank all employees most sincerely for the excellent cooperationover the past years and decades. I would also like to express my thanks toall customers, suppliers, business associates, as well as the banks andauthorities for placing their trust in us.
I experienced immeasurable trust in the course of the 57 years of myworking life and was hardly ever disappointed. I am happy to say that I havenot lost my faith in the good in people.
Sincerely,
Reinhold Würth
GENERATION CHANGE PAVES THE WAY
FOR THE FUTURE
Corporate Succession at Family-Run Businesses
20
Ladies and Gentlemen,
After a working life of almost to 57 years, I retired on February 28, 2006. Thefiscal year 2005 brought record results for sales and earnings in the WürthGroup, the equity ratio is at 49.5 percent, and Standard & Poor’s rating “A/outlookstable” has been confirmed. The Group has a solid foundation, which meansthat I can hand over a company in good working order to the next generation.I am sure that my successors on the Board of Directors and the Advisory Boardwill steer and advance the company as I intended.
I would like to use the last annual report with my signature as an opportu-nity to provide information and voice some thoughts about how the generationchange was accomplished in the Würth Group, and what timeframe we allowedfor the process.
Having as a young businessman watched companies struggle and founderagain and again when it came to the question of who was to inherit the company,I already started deliberating the question of how the Würth company would con-tinue in the future after my time, without me, at the age of 40.
Life shows that small and medium-sized enterprises always have to survivetwo earthquakes in the inheritance process. First, the entrepreneur him- orherself is no longer there, and second, there often is discord and controversy ifnot in the first, then in the second generation, which in extreme cases can evenlead to fully fledged family feuds and more often than one might think to courtproceedings that run for several decades and are damaging for the stability ofthe company and jobs or even result in the loss of both.
If one branch of the family does not want to continue, it has to be paid offby the remaining stakeholders. The requisite funds and liquidity are usuallynot available, which means that venture capital has to be borrowed or third-partystakeholders need to be found, and these events usually culminate in a listedcorporation – or insolvency.
That is why I already started to gather information concerning the topic ofcorporate succession back in 1975 and got together a group of experts includingtwo commercial lawyers, a notary, a certified accountant and a tax consultant. Ialso had the support of Dr. Humpert, the Chairman of the Advisory Board ofthe Würth Group at that time. Through the many meetings and visits to otherfamily businesses such as Voith in Heidenheim, I was able to gain an insightinto the most varied forms of succession.
These talks and the preparation for contracts were spread over 13 years andculminated in the contribution of all shares in the Würth Group to the familyfoundations in 1987.
The law of foundations of the German state of Baden-Württemberg allowsfamily foundations to be established. The heirs are beneficiaries and receivegood and adequate return on capital employed, but no longer have access to theshares because they belong to the family foundation as a legal entity.
Around the same time as this early devolution of estate, I wrote a 200-pagecompendium of the legal structure of the Würth Group together with the expertgroup which contains fundamental statements concerning the strategy for thefuture, company law structures, provisions concerning the election rules forthe Foundation Supervisory Board, the Advisory Board and the Board of Direc-
CORPORATE SUCCESSION AT FAMILY-RUN BUSINESSES
21
tors, without however precluding opening clauses for any future constellationsthat are currently not foreseeable.
Meanwhile, we have had 18 years of experience with this compendium. Iknew when we introduced this set of rules that many an adjustment,amendment and addition would be needed based on future practicalexperience.
As it turns out, I have come to the conclusion that I have created anexemplary basis for succession with this compendium and the necessary im-provements added to it: I had the good fortune to have 18 years to watch theWürth Group evolve away from me and to accompany this process. I was thereto rectify any equivocal statements or hidden defects in the compendiumconcerning the legal structure of the Würth Group.
By writing this, I hope to convey my feeling that tackling the question ofdevolution of estate at an early stage produces sensible rules and solutions. Animportant factor was that I was able to develop my plans in full agreementwith my children. Openness and absolute non-discrimination of my childrenwere the basis for success. We will have to wait another 50 or 100 years to seewhether my vision will come true of creating a stable balance between provi-ding for the family on the one hand and safeguarding the company and jobson the other.
Whatever the outcome, I would like to take this opportunity to thank myadvisors and my family once again for the close cooperation to secure ourfamily-run business.
Generally speaking, it is certainly advisable for every businessman andentrepreneur not to wait until they are reminded that they are mortal. I thinkit is a grave mistake when the necessary inheritance provisions are not made,just to avoid hurting someone’s feelings in the family. Every successor solutionmade during the lifetime of the decedent has many an advantage even if itleads to family discord in the short term. If the decedent does not leave a will,not caring what happens when they are gone, the damage for the company canbe irreparable regardless of its size, as mentioned above.
I hope to have provided some food for thought with these words and I wouldbe happy if they could help to prevent even just one dispute among heirs.
I wish all my business associates all the best for the future!After 57 working years, it is with gratitude and a slight pang of regret that
I take leave of the business world and retire to the chair of the FoundationSupervisory Board.
Sincerely,
Reinhold Würth
Foreword by the Chairman of the Board of Directors
22
Ladies and Gentlemen,
The anniversary year 2005 was a good year for the WürthGroup: we were able to top our record growth from theprior year, achieving double-digit growth rates for both salesand the operating result. Sales rose by 11.5 percent fromEUR 6.2 billion to EUR 6.9 billion and the operating resultwas up 15.2 percent from EUR 395 million to EUR 455 mil-lion. Another milestone was reached when the 50,000th
employee was hired in September 2005. The whole Boardof Directors wishes to say a big thank you to our employeeswhose commitment has made this pace of growth possible.
Sales focus as a model for successThe performance of our employees is all the more remarkableconsidering that there is practically no comfortable orderbacklog at Würth. Our sales force provides intensive andindividual support for a total of 2.8 million customers, mostof which are small businesses with average annual sales ofEUR 2,000. With every sales talk, our employees contributea little to our sales, and millions and millions of customerrelationships produce billions in this way. This can onlysucceed with a strict sales focus and a high degree of consul-ting expertise.
The daily battle for customers keeps us alert and on theball. Like a 100-meter sprinter before the start, we perceiveour environment with a vibrant awareness. With concentra-tion sharpened to the maximum, we observe the marketand develop strategies. How can we improve our customerservice even more? Is there any need that we are not cateringfor? Where can we learn from others? It is questions like thesethat drive our employees, back office and sales staff alike.
This is what makes the corporate culture at Würthspecial: it is the drive to sell. We will put every effort intomaintaining and developing this corporate culture, as it isone of our critical success factors.
Three cheers for the tradeWith a keen eye, we also see the situation that our customersare facing. We have been especially concerned about thedevelopment of the trades in Germany. The weak economyand slump in sales in Germany has been a cause for concernfor small businesses in particular. In 2005 alone, the industryrecorded some 4,500 insolvencies. As a long-standingpartner of the trades, Würth seeks to improve the situationas much as possible. In this context, we issued the ‘manu-factum’ study last year as part of the ‘Ein Hoch dem Hand-werk’ (three cheers for the trade) campaign, analyzing the
Robert Friedmann
23
success factors for the trades in Germany. The study pro-vides concrete suggestions of how these small businessescan be successful in spite of the difficult economicconditions. In addition, we offer seminars for the trades onvarious aspects of company management.
Nevertheless, there is no denying it: the situation of thetrades will not improve sustainably if the framework con-ditions remain unchanged. This is why I call upon politi-cians to take the concerns of the trades – a major employer –seriously. Only if the economic and tax law framework areright, can the trades develop.
A flexible group thanks to its decentralized organizationOwing to the 60th anniversary of the company, awarenessof the corporate history was high last year. It was well worthtaking a look back, especially with the long history of succes-ses that Würth has. In addition to the special corporateculture with a focus on sales, two factors can be identifiedwhich have been and will continue to be critical for Würth’ssuccess: a decentralized organization and globalization.
The Würth Group has 351 subsidiaries, which are givena high degree of entrepreneurial freedom, and at the sametime have to take responsibility for the results. This meansthat despite our size, we are no cumbersome organization,but a flexible group with a family tradition, which is builton employee initiative and entrepreneurship. Most decisionsare made locally, as close as possible to the customer andnot at the faraway corporate headquarters.
Success factor globalization remains a priorityBesides a decentralized organization, international presenceis the second central pillar on which our corporate successstory rests. Würth ventured abroad at an early point in time.The first foreign subsidiary was established in 1962 in theNetherlands, and by 1987 the Group was already present onall five continents. This way, the Würth Group was alwaysa large step ahead of its competitors and already a globalcompany before the term was even coined. Würth has be-come an established brand and household name in the tradewith assembly materials in many countries of the world.
Today, we are present in 81 countries and reaping therewards of this early globalization strategy: some 60 per-cent of sales and approximately 75 percent of profit of theWürth Group are currently being generated outside ourhome market Germany. We have in-depth experience withhow to best introduce our business model in countries atdifferent development stages and with different marketsituations. Here again, it is important that the foreign sub-
sidiaries have the express freedom to interpret and adaptthe strategies of the Board of Directors as required by theirindividual market situation. Bearing this in mind, we willadvance the international expansion of the Group further –an objective which fills us with a driving ambition. We willfocus above all on Asia and North America in the next fewyears. Our market share is still relatively low there and thesemarkets offer above-average growth potential on accountof their dynamic economic development.
The visionary and driving force behind the successmodel that Würth is, is Professor Reinhold Würth. I wouldlike to thank him, also on behalf of the entire Board ofDirectors, for the good working relationship. His decisionto hand over the chair of the Advisory Board to BettinaWürth was a very worthy step. There are not many peoplewith a family-run business who know when to retire fromthe company – or manage to do so in such a well-organizedmanner. Even when taking this decision, Reinhold Würthstill had the interests of his company at heart, and he isleaving the Board of Directors and Advisory Board an orga-nization that is ideally positioned to meet the challengesof the future and we will make a concerted effort to expandit as he intended. My colleagues and I will be glad still to havehim and his wealth of experience to turn to as in the past. Iam very pleased that Bettina Würth – whom I know fromthe Board of Directors and who is held in high esteem by allemployees including myself – has taken over the chair of theAdvisory Board and will thus continue the family tradition.
But that is not the only reason why the Board of Direc-tors is optimistic about the current year. Würth is excellent-ly positioned and has a viable business model. Our highequity ratio of 49.5 percent and our “A/outlook stable” ratingare proof of our company’s sound financial position. Withthese bases to start from, I am confident that we will reachour ambitious aim of achieving further double-digit growth.With the necessary VIBRANT CURIOSITY, we are sureto succeed.
Sincerely,
Robert FriedmannChairman of the Board of Directors of the Würth Group
Robert Friedmann Rolf Bauer Dr. Harald Unkelbach
Dr. Roland Hartmann Dr. Reiner Specht
THE BOARDS OF THE WÜRTH GROUP
The Boards of the Würth Group
24
Robert FriedmannChairman of the Board of Directorsof the Würth Group(since June 1, 2005)
Dr. Roland HartmannMember of the Board of Directorsof the Würth Group(since June 1, 2005)
Dr. Walter JaegerChairman of the Board of Directorsof the Würth Group(until May 31, 2005)
Rolf BauerDeputy Chairman of theBoard of Directors of the WürthGroup
Dr. Reiner SpechtMember of the Board of Directorsof the Würth Group(since March 1, 2006)
Dr. Harald UnkelbachMember of the Board of Directorsof the Würth Group
Bettina WürthMember of the Board of Directorsof the Würth Group(until February 28, 2006)
BOARD OF DIRECTORS
The Board of Directors - comparable to the management board of a group holding – is the most senior decision-making board of the Würth Group and comprises fivemembers. Its most important duties include corporate strategy planning, the selectionof executives as well as the management of strategic business units and functions.
25
Honorary memberAlma WürthKünzelsau-Gaisbach
Honorary memberDr. Michael RogowskiChairman of the supervisoryboard of Voith AG, Heidenheim
Prof. Dr. h. c. Reinhold WürthChairman of the Advisory Board,Künzelsau-Gaisbach(until February 28, 2006)Chairman Emeritus of theAdvisory Board(since March 1, 2006)
Bettina WürthChairwoman of the Advisory Board,Künzelsau-Gaisbach(since March 1, 2006)
ADVISORY BOARD
The Advisory Board is the supreme supervisory and control body of the Würth Group.It advises on strategy and approves corporate planning as well as the use of funds andappoints the members of the Board of Directors, of the Board of Management as wellas the general managers of the high-revenue companies in the Group.
Dr. Bernd ThiemannDeputy Chairman of the Advisory BoardPartner Drueker & Co. GmbH & Co. KG, Frankfurt/Main
Peter EdelmannMember of the managementboard of Voith AG, Heidenheim
Hans G. GüldenbergbrandCreation, Frankfurt/MainMember of the advisory board ofH. C. Reynolds CorporateFinance, Frankfurt/Main
Dr. Frank HeinrichtMember of the managementboard of Heraeus HoldingGmbH, Hanau
Axel C. A. KraussChairman of the administrativeboard of Münzing Chemie GmbH, Heilbronn
Dr. Bernd-Albrecht von MaltzanDivisional board memberPrivate Wealth ManagementDeutsche Bank AG, Frankfurt/Main
Dr. Martin H. SorgCertified public accountant, partnerof the law firm Binz & Partner,Stuttgart
Dr. h. c. Uwe ZimpelmannSpokesman of the managementboard of LandwirtschaftlicheRentenbank, Frankfurt/Main
The Boards of the Würth GroupGroup Management Report of the Würth Group > Economic Environment
26
Michael CoffeyWürth Line UK,Ireland, Scandinavia (withoutFinland), Würth South Africa
Karl Ederreca Group Austria and EasternEurope (until December 31, 2005)
Jürgen GrafLogistics
Helmut GschnellWürth Line Italy,Würth Albania,Specialists in Italy
Michel KernWürth International AG Central purchasing
Jürgen Klohe/Jörg MurawskiWürth Elektronik Group
Max LoreficeDIN and Standard Parts and Stainless Steel, reca Group Italy, Würth Line South-East Europe, Würth Line Japan
Jürg MichelFinance
Juan RamírezWürth Line Spain,France, Central Americaand South America
Wolfgang RampmaierIndustry Division (Würth Line),Tools Trade
Pentti RantanenWürth Line Finland andBaltic Countries
Werner RauPurchasing, Export
Peter Schneiderreca Group Germanyand Western Europe
Hans SigristWürth Line Switzerland,Oceania and Subregion Asia
Dr. Reiner SpechtMetal Division (Würth Line),Würth Line Austria,Russia and SubregionEastern Europe, ConmetallGroup, IVT Group, van RoijGroup (until February 28, 2006)
Robert StolzWürth Line Wood USA
Zekeriya UlucaWürth Line Turkeyand Subregion Asia
Alois WimmerProduction of Screws,Dowels and Plugs
Markus WürthWood Division (Würth Line),Construction Division (WürthLine), Belgium, Netherlands,Portugal (Würth Line)
Peter ZürnCEO of Adolf Würth GmbH &Co. KG, Auto Division (WürthLine), Sales
BOARD OF MANAGEMENT
The 21 managers as of December 31, 2005 of the Board of Management constitute theoperational management of the Group and are each in charge of one strategic business unit.
27
The global recovery, however, is still marked by conside-rable regional differences, as has been the case in recentyears. The USA in particular, but also the east-Asianemerging countries with the growth center China expan-ded at an above-average rate in 2005. By contrast, theupturn in the euro zone remained moderate.
USA and China – the engines of economic growthThe cyclical dynamics of the USA can still be consideredone of the engines of global growth. At an annual rate of3.5 percent, the continued rise in real GDP in 2005 wasunbroken. The higher price of energy did reduce thepurchasing power of private households, but that waslargely offset by a further drop in the savings ratio – adevelopment to which the higher property prices alsocontributed. The increase in private consumption (+ 3.6 percent) thus only slowed marginally in 2005.
ECONOMIC ENVIRONMENT
Global economy still robust despite higher oil pricesGlobal economic growth remained robust in 2005, albeitslightly less dynamic than in the prior year. The high oilprices in particular had a negative impact on the economy.The price for a barrel of crude oil rose to around USD 60,doubling within the space of two years.
In spite of the hike in the price of oil, the globaleconomy expanded strongly again in 2005. The globalgross domestic product (GDP) increased by 4.4 percent,which is a 0.8 percentage points lower increase than in2004. Following a slowdown in the course of 2004, thegrowth in the global overall economic output picked upagain in 2005. Whereas the increase in real terms inglobal trade had been 10.3 percent in 2004, it still reached8.0 percent in 2005.
RECORD RESULTS IN THE ANNIVERSARYYEAR OF THE WÜRTH GROUP
● Group sales grow to EUR 6.9 billion
● Equity ratio up again at 49.5 percent
● 50,000th employee hired
● Double-digit growth also achieved in operating result
Sales of the Würth Group
in EUR million
1996 1997 1998 1999 2000 2001 2002 20052003
2,491
3,620
4,110
5,136 5,277 5,360 5,453
6,914
2004
6,203
2,000
4,000
6,000
3,172
Group Management Report of the Würth Group > Economic Environment/Business Development
28
The employment situation on the U.S. labor market, bycontrast, failed to improve significantly.
In Japan, the positive turnaround, which had begunin 2003, continued throughout 2005. Following a briefdip in the course of 2004, real GDP grew by 2.8 percentin the first six months of 2005. One reason for this de-velopment is the rapid and strong increase in foreigndemand. Compared to the prior year, exports only wentup slightly, but the growth recorded for 2005 neverthe-less came to 6.2 percent.
The share of emerging countries in the global tradehas been increasing steadily since 2000, with Chinaaccounting for three quarters of the growth. 2005 wasthe third consecutive year that China’s economy grewby almost ten percent. Year on year, the country’s tradesurplus more than tripled. However, the Chinese eco-nomy experienced considerable shifts in demand in thepast fiscal year. Real exports rose again substantially,while the imports of oil and capital goods fell sharply.
Moderate growth in the euro zoneMomentum of the European Monetary Union remainedvery modest again in 2005. Real GDP was up 1.3 percentin the euro zone, but developments differed substantiallyfrom one member state to another. The revaluation ofthe euro was still felt and the high oil prices put a damperon domestic demand above all in the first six months of2005. Whereas private consumption was still growingby 2.1 percent in 2004, it only reached a rate of 1.3 per-cent in 2005. Spain and France led the field in terms ofgrowth in GDP. Domestic demand in these countrieswas buoyed by a positive development of the buildingindustry. Italy, Portugal and the Netherlands brought upthe rear in terms of economic growth in the euro zone.
Germany world champion in exports again in 2005 – but economic recovery still slow German exports broke all records in the past year. Thevalue of exported goods rose by 7.5 percent to EUR 786billion – the highest level in the history of foreign tradestatistics and number one worldwide. Exports are a keygrowth driver for the economy. They accounted for 0.7percent of economic growth in 2005. Since domesticdemand remained weak, the anticipated stimulus for theGerman economy was barely perceptible. Real GDPincreased by 0.9 percent in 2005. This meant that theeconomic recovery experienced in 2004 slowed downagain slightly.
The German economy remains divided: positive impetus in 2005 came from the manufacturing industry –except for the building industry –, trade, the touristindustry and transportation, financing, leasing andbusiness service providers. At the same time, however,the number of insolvencies reached a new record highwith a 15.3 percent increase. This primarily reflected theincrease in consumer insolvencies. Private consumerspending moved sideways at prior-year level, and publicconsumption expenditure actually decreased.
There was no cyclical improvement on the Germanlabor market either. Despite various political measuresaimed at the labor market, the number of employeespaying into the state social security system remainedvery much in decline. The Federal Employment Agencyrecorded 4.6 million unemployed persons in December2005 and an annual average unemployment rate of 11.7percent.
MetalSince early 2005, production in the metal and electricalindustry has been set for growth. The dip at the end of2004 had already been overcome by the first quarter of2005. Annual sales in the metal and electrical industrywere 4.8 percent above the prior year. Leading economicresearch institutes in Germany (ifo, DIW) have predicted a recovery of 3.0 to 3.5 percent for 2006. The order inflow
Sales of the Würth Group
in EUR million 2004 2005 %
Würth Line Germany 816 862 + 5,6
Allied Companies Germany 1,708 1,917 + 12.2
Würth Group Germany 2,524 2,779 + 10.1
Würth Group International 3,679 4,135 + 12.4
Würth Group total 6,203 6,914 + 11.5
17.3 % Metal division
5.3 % Construction division
40.6 % Allied Companies
16.4 % Auto division
13.7 % Wood division
6.7 % Industry division
Share in total salesDivisions of the Würth Line and Allied Companies
29
also showed a positive development in 2005. In a year-on-year comparison, the metal and electrical industryrecorded a six percent increase in the number of ordersin 2005. Especially the export business noted a signifi-cant upwards trend in the second half of the year. Theannual average growth rate thus came to ten percent.Domestic orders, by contrast, only increased by 1.5 percent.
It remains to be seen whether the increase in eco-nomic activity can bring downsizing to a halt. On average,the metal and electrical industry recorded a one percentlower level of employment in 2005. Following a slightlymore positive development in the last six months of 2004,job cuts continued in the first half of 2005. By July, about35,000 jobs had been shed; subsequently, employmentfigures stabilized again.
Building industryThe German building industry including the buildingand civil engineering and finishing trades relevant forthe Würth Line’s trading business as well as the tradecustomers sector is still crisis-ridden. The overall down-turn which has been going on for more than a decadealso continued throughout 2005. Sales in the buildingindustry fell by 5.7 percent (EUR 4.5 billion) in 2005,reaching a new record low of approximately EUR 74 bil-lion. The level of employment in the building industryis in decline, in line with the sales development. Thenumber of employees dropped to about 715,000 in thebuilding and civil engineering trade in 2005, whichmeans that more than 50,000 jobs had been cut sincethe prior year.
The outlook for 2006 is cautiously optimistic. TheGerman construction employers’ association sees achance for a turnaround in the construction sector forthis year, which would at least put a stop to the contrac-tion that the German building industry has been expe-riencing for years. Layoffs are expected to continue, albeitat a much slower rate.
The tradesThe critical situation in the building industry again hada knock-on effect on the trades in 2005. Even in generalterms, the demand for products and services from thetrades was too low. Sales recorded by independent con-tractors in the licensed trades were 1.6 percent belowthe prior-year figure. As a result, there was no positivestimulus for the development of employment. At theend of 2005, the licensed trades employed 3.6 percentfewer persons than in the prior year.
BUSINESS DEVELOPMENT
Double-digit growth again in group salesThe Würth Group was not immune to the slower paceof global economic growth and the negative effects ofthe oil prices, especially in the first six months of 2005.The European countries in particular suffered in thefirst quarter of 2005 as a result of the cold winter inFebruary and March. Due to our strong presence in Euro-pe, every effort was needed in the following months atour entities in this region to make sure that the anni-versary year of the Würth Group would go down in thecompany’s history as another successful year and mile-stone. And we were successful indeed. In June 2005,we broke the record of EUR 600 million in sales permonth. In line with our motto SPEED, the Würth Groupmade a seamless transition from the prior year’s dyna-mic growth, closing 2005 with new record sales of EUR6.9 billion (prior year: EUR 6.2 billion). Total consoli-dated sales thus rose by 11.5 percent. Adjusted for acqui-sitions and effects of exchange rate fluctuation, i.e.using prior-year exchange rates, growth amounted to asmuch as 8.3 percent.
The Würth Group has grown steadily over 60 yearsto more than 50,000 employees and global sales of EUR6.9 billion today. This development would not havebeen possible without our 2.8 million customers. With270,000 daily customer contacts around the globe achie-ved by a sales force of over 27,000, customer satisfac-tion and customer management are a top priority for theWürth Group. It is with passion that we face this challengeand have set ourselves the aim in our sales departmentsof not just satisfying our customers, but filling themwith enthusiasm.
To do this, we must know our customers and whatthey can get excited about, what is important for themand what phase of development their company is cur-rently at. With 2.8 million customers today, we start bysplitting them up by industry, company size and growth.At the same time, we analyze our customers in terms ofpotential, so as to be able to benefit from it.
Domestic and foreign group entities maintain growth courseIn terms of growth both the German part of the WürthGroup and our foreign subsidiaries continued wherethey left off in the prior year. The development of theGerman group is particularly pleasing with sales growthof 10.1 percent to EUR 2.8 billion despite problems earlyon in the year. This growth was supported by the acqui-sition of the Würth Elektronik iBE group (distributionof inductive components) as an addition to the Electro-
Group Management Report of the Würth Group > Business Development/Sales by Region
30
Würth Line in a comparison of sales in absolute terms,the division recorded the highest growth at a rate of 18.4percent, which suggests that there still is potential inthe industrial business.
Sales in the Construction division totaled EUR 365million (prior year: EUR 341 million), which equals 7.0percent growth.
SALES BY REGION
The Würth Group, which has operations on all five con-tinents, strengthened the international outlook of itsbusiness activity further in 2005. The number of salescompanies working the markets doubled in the periodfrom 1998 to 2005 to 351 entities. In 81 countries aroundthe world, the Würth Group generated total sales ofEUR 6.9 billion, EUR 4.1 billion of which – a share of59.8 percent – was turned over outside Germany.
GermanyThe formation of a wholesale business for screws, nutsand bolts by Adolf Würth in 1945 laid the foundation forthe rapid growth and dynamic development of the WürthGroup. That is why Adolf Würth GmbH & Co. KG playeda special role in the anniversary year 2005. 60 years areno more than a brief moment in contemporary history,but it was a period of dramatic development for theWürth Group.
The motto for the year chosen by Adolf WürthGmbH & Co. KG ‘Ein Hoch dem Handwerk’ (three cheersfor the trade) documents once more that Würth seesitself as a partner for the trade and focuses on its custo-mers’ needs.
60 years along the line, Adolf Würth GmbH & Co.KG is still one of the flagships of the Group. While thedevelopment in the early part of the decade was in-fluenced by the difficult economic situation in Germany,in the anniversary year 2005 the company was able tocontinue the positive course set in 2003. The Germanparent company presented excellent separate financialstatements with sales of EUR 871 million and an opera-ting result of EUR 51 million. For the first time in manyyears, Adolf Würth GmbH & Co. KG managed to in-crease its share in total net income of the Würth Groupto over ten percent again.
Sales in Germany rose by 10.1 percent to EUR 2.8billion. Germany still is the strongest sales region in theWürth Group with a share of 40.2 percent.
nics business unit. Even adjusted for the acquisition,sales in Germany still rose by 6.1 percent. In spite of theslow recovery of the economy as a whole in Germany, itwas noticeable for the German part of the Würth Groupthat its economic situation in 2005 was better than thenationwide mood.
The 60th birthday of the Group’s parent companyAdolf Würth GmbH & Co. KG marked an opportunity tolook back this year to the very beginnings of the busi-ness. Despite our presence around the globe, the WürthGroup is still very committed to Germany. Our three lar-gest German companies (Adolf Würth GmbH & Co. KG;UNI ELEKTRO Fachgroßhandel GmbH & Co. KG; FEGAGroup Germany) contribute a major share of around 20percent to the total sales volume.
Accounting for 59,8 percent of group sales, ourforeign subsidiaries have gained in significance for theWürth Group in recent years. Increasing sales by 12.4percent to EUR 4.1 billion, the international companiesin the Group exceeded the four-billion-euro thresholdfor the first time. Adjusted for acquisitions and effectsof exchange rate fluctuation, the foreign companies stillgenerated almost double-digit growth with a rate of 9.8percent.
Our three largest foreign companies in the WürthLine – Würth Italy, Würth France and Würth Spain – viedfor first place in the 2005 sales ranking. With sales of EUR452 million, Würth Italy held its lead of the last few yearsagain over Würth Spain and Würth France, although itslead is dwindling. There was a shift within the ranking,however, as Würth Spain overtook Würth France.
Industry division grows by 18.4 percentAnalyzing our corporate growth in detail, the 231 sub-sidiaries not trading under the Würth name – our AlliedCompanies (AC) – recorded growth of 14.2 percent, whichbrought sales to a new record level of EUR 2.8 billion(prior year: EUR 2.5 billion).
Within the Würth Line consisting of 120 of the totalof 351 active sales companies in the Group, sales wereup 9.7 percent worldwide at EUR 4.1 billion (prior year:EUR 3.7 billion). With EUR 1,198 million (prior year:EUR 1,088 million) and 10.1 percent growth, the Metaldivision generated the highest sales of all Würth divi-sions. It was followed by the Auto division with sales ofEUR 1,134 million (prior year: EUR 1,049 million) and8.1 percent growth.
The Wood division improved its sales by 8.1 percentto EUR 946 million (prior year: EUR 875 million). TheIndustry division succeeded in raising its sales by EUR72 million on the prior year to EUR 463 million. Althoughthe Industry division does not take the lead within the
31
Western EuropeThis region includes the entities in Ireland, the UK, theBenelux states, France, Austria and Switzerland. Theincorporation of Würth Financial Services AG inLiechtenstein added another country to the region.
It was in the early 1960s that Reinhold Würthventured abroad for the first time. The establishment ofthe first foreign subsidiary in the Netherlands in 1962marked the start of globalization of the Würth Group.That same year, the incorporation of entities inSwitzerland and Austria followed. Multiplication of thebusiness idea on an international scale at an early stageis considered one of the key success factors of theWürth Group.
With EUR 1.3 billion, the region western Europegenerated just under 20 percent of total sales of theWürth Group, which makes it the second strongestsales region. The largest single company in the region –Würth France – accounts for a major share of the sales.The company founded in Erstein in 1966 comes thirdin a ranking of the Würth direct sales companies. Of the5,408 sales staff employed in the region, more than 40percent are employed at Würth France.
Southern EuropeThe profitable, high-growth companies in Spain, Italyand Portugal are predominant in the region of southernEurope. In the past year, market activity was intensifiedwith two further trading companies purchased in Italy.With sales of EUR 1.2 billion, the region ranks third insales behind Germany and western Europe although,with a sales force of 9,050, it leads the field in terms ofthe number of field staff. In the past, Würth Italy – theoldest single company and the top seller in the region –had the largest sales force in the Würth Group. But withItaly concentrating its business policy on consolidatingand increasing productivity in the past year, WürthSpain succeeded in overtaking it in 2005 in terms of thesize of the sales force. With a sales force of 3,261, WürthSpain employs almost twelve percent of the WürthGroup’s total sales staff.
Eastern EuropeThe companies in eastern Europe successfully raisedtheir share in total sales to 4.1 percent. This is the resultof the above-average sales growth in relation to theWürth Group of 24.0 percent to EUR 284 million.
Sales in EUR million 284
% share in total sales 4.1
Employees 4,920
Sales staff 2,954
Eastern Europe
Sales in EUR million 799
% share in total sales 11.6
Employees 5,221
Sales staff 2,729
America
Sales in EUR million 1,292
% share in total sales 18.7
Employees 9,892
Sales staff 5,408
Western Europe
Sales in EUR million 2,779
% share in total sales 40.2
Employees 14,263
Sales staff 4,614
Germany
Sales in EUR million 1,192
% share in total sales 17.2
Employees 11,548
Sales staff 9,050
Southern Europe
Sales in EUR million 395
% share in total sales 5.7
Employees 2,123
Sales staff 959
Scandinavia
Sales in EUR million 173
% share in total sales 2.5
Employees 2,800
Sales staff 1,774
Asia, Africa, Oceania
Group Management Report of the Würth Group > Sales by Region/Results of Operations, Net Assets and Financial Position
32
AmericaFollowing a business policy of growth by means ofacquisitions in the USA at the end of the 1990s, at thebeginning of this decade the emphasis was still on theconsolidation of the purchased divisions. The companieshave now been successfully integrated and are making a significant contribution to the Würth Group’s salesgrowth. The American companies managed to increasetheir sales by 17.5 percent in 2005 to EUR 799 million.Measured against total sales, they account for a share of 11.6 percent. Ten years ago, their share in sales wasjust 3.2 percent. The dynamic development of theAmerican market shows just how much sales potentialthere is in this region. We will continue to focus onexpanding our market share here.
The political, economic and financial situation inSouth America has developed extremely positively inrecent years. With 53.4 percent growth this subregionachieved the highest growth rate in sales in the WürthGroup. We plan to capitalize on this trend by formingWürth Columbia in 2006, and thus participate in thedevelopment of the markets in South America in theyears to come.
Asia, Africa and OceaniaWith sales of EUR 173 million, our smallest region wasable to slightly increase its share in total sales of theWürth Group to 2.5 percent. This region now has 47 com-panies actively serving the market. Further incorporationsare planned for this region in 2006, mainly by multi-plication of existing business models of our AlliedCompanies. We consider the subregion Asia to offer
For many years now, the region has experienced dyna-mic sales growth as a result of its increased marketpresence. In order to accelerate growth in eastern Europeand expand the still relatively small market shares,another four companies were founded in 2005. Theacquisition of the Würth Elektronik iBE group alsoadded subsidiaries in the Czech Republic and Bulgariato the region. The enlargement of the EU by eighteastern European member states in May 2004 shouldprovide impetus for growth in this region in the future.The multiplication of existing business models in easternEurope is also part of our strategic focus.
ScandinaviaIn Scandinavia, two companies had an anniversary tocelebrate in 2005. The company Würth Danmark A/Swas founded in 1965, and Würth Finland had its 30thanniversary. Würth Finland has been a model companyin the Würth Group for many years on account of itshigh profitability, stable high sales growth and a maturebranch system. The Scandinavian region is proof thateven after decades of market activity with a high marketshare there is still considerable sales potential to betapped. Professional marketing coupled with highmarket penetration are the means with which we wantto continue to use the opportunities which the marketoffers in future. Würth Norway, for instance – anothercompany that has been successful for many years –succeeded in increasing its sales again by 14.3 percent.Including the companies in Iceland and Sweden, theregion’s total sales went up by 13.2 percent to EUR 395million.
The Würth Group around the world
■ The 81 countries in which Würth is represented. EUR
33
huge future markets for the Würth Group, and since themajority of entities on the Asian market are still in theirstart-up phase, we expect above-average sales growth inthe next few years.
RESULTS OF OPERATIONS, NET ASSETS ANDFINANCIAL POSITION
Record operating resultThe Würth Group achieved a record result in fiscal 2005,exceeding its record prior-year performance (EUR 395million) by EUR 60 million. The pre-tax operating resultgrew by 15.2 percent in a year-on-year comparison – ahigher rate than sales – to EUR 455 million.
Our guiding principle ‘growth without profit isfatal’ was a driving force in the fiscal year 2005 as well:besides generating double-digit sales growth, we alsoraised earnings, the indicator for healthy growth. Thedevelopment of return on sales, which has been positivefor many years, is further proof of this. With a rate of6.6 percent, the Würth Group achieved the best resultin a five-year comparison.
We directed the focus of our business policy in 2005more towards acquisitions again. The acquisitions havehad a positive impact on growth in the Würth Group,contributing to a new record not only in sales, but alsoin the operating result.
At 33.3 percent, the increase in profits was excellent inGermany and with an operating result of EUR 116 mil-lion, we continued the positive trend from fiscal 2004.Around 75 percent of the operating result of the WürthGroup was generated outside Germany (EUR 339 mil-lion). The net income of the Group rose by EUR 71 millionon the prior year to EUR 331 million.
Our personnel expenses went up by a lower rate thansales. Taking account of our more expansion-driven salesgrowth in 2005 compared to prior years and the associa-ted increase in field staff, we again improved the resultsof operations disclosed in our income statement.
PurchasingGroup purchasing activities concentrated on optimizingthe supply chain management in 2005. The parametersused to measure the success of these activities includedthe rate of increase in inventory turnover and reductionof stocks. While there was still a risk in 2004 of poten-tial supply bottlenecks for certain raw materials, thesituation on the markets for raw materials relaxed againin 2005. In light of this change, we were strategicallywell advised not only to reduce stocks throughout theGroup, but to optimize them simultaneously by takingappropriate action. The strategy paid off. By the end ofthe year, stock turnover had improved to six times peryear. This is a record in the history of the Würth Group.The efforts to increase turnover were always guided by
Pre-tax operating result and return on sales of the Würth Group
in Mio. EUR
100 2.0
4.0
6.0
8.0
200
300
400
1996 1997 1998 1999 2000 2001 2002 2005
187
7.5
6.96.5 6.5
220237
268
305
270 281
455
2004
395
2003
330
Operating result in EUR million
Return on sales as a percentage
5.9
5.1 5.2
6.16.4
6.6
Group Management Report of the Würth Group > Results of Operations, Net Assets and Financial Position
34
the principle that on no account must the delivery servicebe jeopardized. And we succeeded here, too. This ratio,which is paramount for customer satisfaction, was keptlevel above 98 percent throughout 2005.
The increase in stock turnover while ensuring thatinventory availability remained at a high level was alsothe result of the continuation and strict implementationof the consignment warehouse strategy. By using state-of-the-art information technology to network suppliers,purchasing department and materials planning, we wereable to fine-tune the goods flow.
The Würth Group was not able to fully escape thesustained rise in the price of raw materials in 2005despite having optimized the supply chain. The pricehikes on the market for crude oil and many other rawmaterials led to exorbitant procurement prices. It wasnot possible to cushion these developments completely,which meant that the effects on gross profit could not be avoided entirely.
Capital expenditure covered by cash flowThe Würth Group generated a cash flow from operatingactivities of EUR 455 million in 2005 (prior year: EUR339 million), which was sufficient to cover the capitalexpenditures totaling EUR 310 million (prior year: EUR237 million). Of this amount, EUR 159 million was accoun-ted for by the international group, and EUR 151 millionby Germany. At EUR 55 million, the CISfab of WürthSolar represents by far the largest single investment inthe Würth Group, although the largest portion of thetotal investment (EUR 45 million) will not be realizeduntil 2006. Numerous larger individual investmentswere made in our Production unit in 2005. In addition,our Würth Line companies in Spain, Portugal, Romania,Russia and Turkey invested heavily in administrationand warehouse buildings. With capital expenditures ofEUR 412 million budgeted for 2006, the increasingvolume reflects our current business policy: we are get-ting ready for the future and further dynamic growth.
We are pleased to report that our double-digit salesgrowth in 2005 and the associated increase in receivablesdid not lead to any deterioration of collection days in2005. On the contrary: through our efficient receivablesmanagement we were able to improve our collectiondays in the last ten years by 2.6 days.
Equity ratio up againEquity climbed to EUR 2.0 billion in 2005 (prior year:EUR 1.7 billion). This led to an equity ratio of 49.5 per-cent (prior year: 47.4 percent) and, together with thereturn on equity of 24.2 percent, documents the finan-cial stability of the Würth Group.
200
250
300
2001 2002 2005
Capital expenditureof the Würth Group
in EUR million
249
227
310
2004
237
2003
217
1,000
1,500
2,000
2001 2002 2005
Equity of the Würth Group
in EUR million
1,198
1,354
2,049
2004
1,715
2003
1,502
300
400
500
2001 2002 2005
Gross cash flowof the Würth Group
in EUR million
389 386
571
20042003
431
484
35
Würth Finance International B.V. issued a new bond inJune 2005 with a volume of EUR 100 million. Thefunds raised were used on the one hand to repay a bondof CHF 100 million due in April and on the other theyare earmarked for future acquisitions. The new bondhas a term to maturity of seven years, the effective yieldis 3.66 percent.
Total assets went up due to the acquisitions madein 2005 by 14.3 percent to EUR 4.1 billion (prior year:EUR 3.6 billion). In their latest rating, the leading ratingagencies Standard & Poor’s and Fitch Rating confirmedtheir previous ‘A/outlook stable’ rating. The rating, whichreflects the positive development of the Würth Groupwill guarantee us favorable refinancing terms and booststhe confidence of customers and business partners.
Startups and acquisitionsWith the marked increase in the number of acquisitionsand startups in 2005, we made good progress towardsglobalization of the Würth Group in order to secure ourtarget growth. Twelve acquisitions were made and ninecompanies incorporated, which means that the possibi-lities for regional expansion of the Würth Line have nownearly all been exhausted. Most of the new companieswere established as subsidiaries of our Allied Companies.
The majority of the acquisitions in 2005 reinforcedthe Electronics unit and the financial services sector.The acquired iBE group with locations in Germany, theCzech Republic and Bulgaria is intended to complementWürth Elektronik eiSos GmbH & Co. KG. The aim is tostrategically reposition the Elektronik Group in theautomotive industry. In addition, the acquisition of WuerthElektronik India Pvt. Ltd. has given us access to themajor future market that India is.
We consider the 44.76 percent share acquired inInternationales Bankhaus Bodensee AG (IBB) in 2005an important building block to establish a largely inde-pendent financial services unit. At present the financialservices providers in the Würth Group already includeone insurer, several leasing companies and one insurancebroker. Specialized in asset management, IBB roundsthis portfolio off. In order to supplement our range ofservices on the Swiss market and establish a worldwideinsurance network, a Swiss insurance broker – Ober-hänsli & Partner AG – was acquired at the start of the year.
At year-end 2005, Marbet Marion & Bettina WürthGmbH & Co. KG and its subsidiaries in Spain and Italywere added to the Würth Group. This internationalcompany operating in the travel and event industry hasorganized innumerable corporate events, conferencesand business trips for the Würth Group as well as forrenowned external customers.
The following companies were integrated in the WürthGroup by way of acquisition:■ Würth Elektronik iBE GmbH, Germany with
subsidiaries in the Czech Republic and Bulgaria(distribution of inductive components)
■ Oberhänsli & Partner AG, Switzerland (insurance broker)
■ Eichmann Elektrofachgroßhandel GmbH, Austria(electrical wholesale)
■ Wuerth Elektronik India Pvt. Ltd., India(Electronics group)
■ Nuova Viterie Venete S.r.l., Italy (trade with fasteners)
■ Euroviti G.m.b.H., Italy (trade with fasteners)
■ Tooling International Ltd., UK with subsidiariesin the UK and the USA (production of recess tooling)
■ Teudeloff GmbH & Co. KG, Germany (trade with tools for the manufacture of screws)
■ KERONA GmbH, Germany (specialist for surface systems)
■ Duvimex Belgien BvbA, Belgium (trade with fasteners for flat roofing and cladding)
■ SWG Fasteners (Shanghai) Co. Ltd., China (screw production for the Chinese market)
■ Marbet Marion & Bettina Würth GmbH & Co.KG, Germany with subsidiaries in Italy and Spain(events agency/travel industry)
The following companies were established:
Würth Line■ Marion Würth India Pvt. Ltd., IndiaAllied Companies■ reca (Shanghai) Intern. Trading Co. Ltd., China■ reca Bucuresti S.r.l., Romania■ reca Bulgaria E.o.o.d., Bulgaria■ HAHN + KOLB Romania S.r.l., Romania■ Würth Leasing AG, Switzerland■ Wasi Bulgarien GmbH, Bulgaria■ Würth Financial Services AG, Liechtenstein■ Comgroup Information Technology (Shanghai)
Co. Ltd., China
Group Management Report of the Würth Group > Employees
36
the past fiscal year than that of our field staff. As of De-cember 31, 2005, we had 23,279 office employees (prioryear: 20,888). The sales force was strengthened aroundthe world by a further 1,403 salesmen and saleswomen(+5.4 percent), pushing the total number up to 27,488in 2005 (prior year: 26,085). The sharpest rise in thenumber of staff was recorded at the foreign subsidiaries,where headcount went up 10.5 percent to 36,504 per-sons (prior year: 33,032). The number of employeesworking in Germany in the reporting year was 14,263,which is an increase of 2.3 percent.
Success through tailored training“Success is a matter of adjusting one’s abilities to a ser-vice needed by others.” In line with this principle ofHenry Ford’s, the Würth Group supports its employeesin many ways. The company is fully aware that furthertraining is essential for robust growth in the comingyears.
Assuming responsibility and employeequalification go hand in hand here. According to ourguiding principle of a decentralized organization, ouremployees are encouraged to take a high degree of re-sponsibility and receive support tailored to their abili-ties. Performance-based payment and a bonus systemare designed to add weight to this fundamental principle.
EMPLOYEES
50,000th employee hiredDespite the expansion of e-business and virtually un-limited possibilities of internet use, Würth remains trueto itself – a direct sales company that attaches importanceto personal contact between the vendor and the customer.For us, selling is synonymous with having well-functio-ning customer communication supplemented by anexcellent service.
In keeping with our formula for success throughfield staff multiplication, ‘more vendors mean morecustomer contacts mean more sales’, we expanded oursales force again in 2005. We reached another mile-stone in the history of our Group last September whenthe 50,000th employee was hired – a salesman at ourdirect sales companies Würth Guangzhou in China.The employee curve of the Würth Group displays a clearupward trend at this milestone in 2005. The headcounthas more than doubled in the last eight years. The WürthGroup had 50,767 employees at the end of 2005 – whichis an increase of 3,794 on the prior year. The headcountrose by 1,273 due to the acquisitions and a considerablenumber of new jobs created.
Overall, partly as a result of the acquisitions, thenumber of back-office employees rose at a faster pace in
Employees Würth Group
EmployeesthereofSales staff
1996 1997 1998 1999 2000 2001 2005
20,37411,024
24,68813,224
28,80915,553
31,19116,616
36,16118,459
37,40719,240
50,76727,488
2004
46,97326,085
2003
41,95223,488
2002
39,80921,969
15,000
30,000
45,000
37
Training at WürthWürth has a long tradition of training its own employees.We value qualification of our employees as a critical fac-tor for success in the long term. Due to his own expe-rience, Professor Würth has always been an advocate forfirmly establishing various training programs in thecompany.
Internationality, mobility, flexibility and social skillsare key corporate principles, which govern all trainingcourses. Technical qualifications are the basic prerequi-site for dealing with content questions in current andfuture positions. Social skills such as communicationcompetence, responsibility and the ability to considerthe broader picture, however, are the criteria that needto be communicated to the present and futuregenerations.
For this purpose, Würth has a variety of modulesaimed at the development of employee potential alreadyduring the vocational training. Seminars, projects,visits to branch offices and other group companies in thecountry and abroad as well as participation in socialprojects are examples of the measures designed to furtherthe personal development of our trainees.
Development of management qualitiesGlobal economic and technological momentum forcescompanies to constantly adjust to increasingly toughercompetitive conditions. In this context, lifelong learningis required first and foremost of executives wishing tosteer a business successfully through these developments.Selecting the right executives is therefore a key factorfor future success of the company.
Würth has made the decision to recruit its manage-ment from its existing employees as far as possible.This guarantees not only that the executives are familiarwith the business operations, but also that they haveunderstood the corporate culture of Würth and will sup-port it. Owing to Würth’s continual growth, the demandfor executives is particularly high. A central task withregard to human resources is therefore to select emplo-yees with potential at an early stage, to encourage andtrain them in the areas where they need to learn most.
For this purpose, the ‘international high potentialprogram’ put in place a couple of years ago centralizedtraining for potential managers at all Würth companiesin MC Würth. The development program spans roughlythree years. The MC Würth Basic Seminar is followedby project work on ongoing operations, training on thejob and training courses.
Würth’s international high potential program ini-tiated in 2001 addresses future top managers alreadyworking in responsible positions. The candidates are
selected by the national general managers in coope-ration with the Board of Directors and participate inindividual qualification and coaching schemes. Afterthree to five years, the ‘high potentials’ are ready for the next step in their career.
Equal OpportunityIt is the policy of the Würth Group to provide equal em-ployment opportunities for all employees and candidatesfor employment without regard to age, sex, race, color,religion, national origin, disability, or sexual orientation,and to observe all requirements of the applicable laws. Inaddition, the Würth Group is committed to providing andmaintaining a work environment in which all employeesare treated with dignity and respect. Harassment basedon factors such as, but not limited to, age, sex, race, color,religion, national origin, disability, or sexual orientationwill not be tolerated. The Würth Group maintains a con-tinued commitment to equal employment opportunityand expects the full cooperation of all personnel.
A thank you from the Board of DirectorsFollowing the successful close of the fiscal year 2004, thecompany again set new records in sales and earnings in2005. We know that setting records year after year is nota matter of course and that each record is the result ofhard work. The resounding success in the past fiscal yearis above all attributable to the dedication of our emplo-yees. The Board of Directors would like to express itssincere thanks for their commitment and loyalty to thecompany.
Our special thanks go to the works council andcouncil of representatives who not only accompaniedour business policy but actively shaped and supported it in a spirit of constructive cooperation.
Employees
2004 2005 %
Würth Line Germany 5,067 5,000 – 1.3
Allied Companies Germany 8,874 9,263 + 4.4
Würth Group Germany 13,941 14,263 + 2.3
Würth Group International 33,032 36,504 + 10.5
Würth Group total 46,973 50,767 + 8.1
thereof:
Sales staff 26,085 27,488 + 5.4
Office staff 20,888 23,279 + 11.4
Group Management Report of the Würth Group > Research and Development, Environmental Protection/Risk Management
38
We have had an integrated management system in placefor quality assurance, industrial safety, health and en-vironmental protection since 1994. The system has beencertified under the international standards DIN EN ISO9001:2000 and ISO 14001:2004. In order to retain thecertification, we are audited each year by externalauditors.
RISK MANAGEMENT
The core business of the Würth Group is that of a typi-cal trading company. The business policy of the AlliedCompanies is also largely sales-oriented.
Over 27,400 salesmen and saleswomen offer ourservices to more than 2.8 million customers around theworld, selling some 100,000 different products.
The business model of the Würth Group is charac-terized by an extensive range of products, comparativelylow order values and a broad customer base. As a result,risks are spread effectively. Another favorable factor inthis respect is the decentralization of business units in351 legally independent entities in 81 countries. Inaddition, the characteristic Würth market is organizedextremely polypolistically, which means that there aremany suppliers and many customers. The business riskof the Würth Group in terms of risks jeopardizing itscontinued existence as a going concern is thereforecategorized as relatively low. In addition, the above fac-tors present opportunities to which we have aligned ourstrategic success factors.
In times of globalization and liberalization of mar-kets, as conditions become more complex and manage-ment decisions need to be made faster, the time availablefor weighing opportunities against risks is becomingshorter and shorter. To remain competitive, it is no longersufficient to respond to developments. The managementof opportunities and risks must consequently be firmlyintegrated in business processes and corporate decisions.That is why an adequate risk management system hasbeen also installed in the Würth Group, which enablesus to identify, record and assess opportunities and riskssystematically. Risk management is regarded as a systemfor the early detection of risks, since it is not based onpast experience, but analyzes future market developments.
Risk management is the responsibility of the mana-gement of each entity in the Group. These operatingunits each have an employee in charge of risk manage-ment, who supports management in implementing afunctioning and efficient risk management system.
The risk controlling system has added another safetynet in the Würth Group. The risk controlling is perfor-
RESEARCH AND DEVELOPMENT,ENVIRONMENTAL PROTECTION
Research and developmentThe 220 employees in our research and developmentand product management departments are consistentlyon the lookout for new product ideas to supplement andrefine the Würth range. 40 percent of Würth Line salesare generated with products that have only been includedin the product range over the last five years. As a tradinggroup, Würth has an internal development department,which tests new products under extreme conditionsusing complex processes and brings them to market ma-turity. Simultaneously, it cooperates closely with supp-liers and specialists from various product areas. Ourgoal is to develop the kind of products that cannot befound elsewhere or are at least distinctly above averagein quality and offer our customers special advantages.
A recent example of innovation in the Würth Groupis the largest single capital expenditure ever made inthe Group: the CISfab of Würth Solar – an entity of theWürth Elektronik Group, which is one of the AlliedCompanies. On the basis of research by the Universityof Stuttgart and the Centre for Solar Energy and Hydro-gen Research Baden-Württemberg (ZSW) and afterexcellent engineering work and a five-year pilot phase,Würth Solar was able to define and implement a pro-duction environment that is suitable in terms of produc-tivity and output for large series production.
As a globally operating company, Würth concentra-tes on the development of economical and time-savingsolutions for its customers. Besides quality, user-friend-liness is one of the main criteria for new products. Thisfuture-oriented product and system development workalso finds expression in our cooperation with indepen-dent research institutes, universities and the customeradvisory board. Not until our high standards regardingquality and functionality have been satisfied are pro-ducts released for sale.
Environmental protectionJust as specific and top-quality innovations figure amongour corporate goals, environmental protection is anintegral part of our corporate philosophy. Our corporateguidelines integrate all environmentally relevant mattersinto our operational management activities. This appliesequally to our manufacturing companies and to ourproducts. It goes without saying that the product rangeis environmentally friendly and safe to use. Examplesinclude the launch of the ecological ABSOBON brand ofthe Würth Line. The ecological impact analysis carriedout as part of product development is hence vital for us.
39
med by a risk controller, who reports directly to theChairwoman of the Advisory Board of the Würth Group.
The risk management system is a control circuit,i.e. a group-wide, cross-functional system that combinesall activities geared towards managing risks. The riskmanagement system should consequently be conceivedas a continuous process with the business as a learningorganization. Based on this approach, the risks of theWürth Group have been recorded and assessed systema-tically by means of a questionnaire since 1999. Thepurpose of the survey is to identify, analyze and assessany potential risks which could jeopardize the net assets,financial position and results of operations of an entityin the Würth Group in the medium or long term. Theaim is to secure the continued existence of the entitiesas a going concern, protect them against disruptive in-fluences and increase the business value.
Regarding business risks, a distinction is madebetween external and internal risks at the tradingcompanies in the Würth Group.
The key external risks relating to the market, com-petition and prices have been identified in the followingmain areas:
■ Cost increase in the sales promotion concepts■ Concentration of power on the customers’ side■ Deterioration of the credit rating of customers■ Rising pressure on prices due to change in
customers’ purchasing behavior (e-commerce)■ Potential industrial espionage
These risks can only be effectively countered by themanagement of the individual companies.
Apart from external risks, internal risks are alsoanalyzed. They tend to concern the personnel area andIT in particular.
Since more than 50 percent of Würth employees arefield staff, the largest risks naturally involve the fluctua-tion of field staff as well as lacking motivation of the salesstaff and misguided or missing incentive systems. Ex-tensive measures have been implemented throughoutthe Group in order to solve these personnel issues. Themost noteworthy are the ‘MC Würth’ and ‘High Poten-tial’ programs that focus on the employees’ career path.In addition, a range of further training measures in-cluding an MBA program and various distance learningcourses are offered, as well as training events at Akade-mie Würth.
In order to create a further engine for growth be-sides our existing sales concept and thus counteract therisks from the direct sales business, the branch structurein Germany was revised and a concept of pickup points
created. This consists of a nationwide, closely-knit branchnetwork that offers our customers easy-to-reach salespoints for immediate requirements. This concept hasalready proved quite successful in Germany.
The Würth Group has its own IT companies and ITspecialists who investigate the risks and issues concer-ning information technology at the individual entities aspart of regular IT checks, thus minimizing these risks.
The Würth Group also has an adequatemanagement information system as well as a number ofmonitoring and control instruments such as the con-trolling and internal audit departments. This way, it isensured that any potential risk factors are regularlyidentified at an early stage and appropriate action can betaken. The procedures, rules and other instructions inplace are designed to appropriately inform the AdvisoryBoard and the Board of Directors of the Würth Groupon a timely basis of the development and managementof the risks.
The manufacturing companies of the AC Line withinthe Würth Group ensure through careful selection ofsuppliers and materials as well as certified processes andcomprehensive quality audits that the products meet thehighest standards, including those of the automotiveindustry and its suppliers.
Risks that could result from contracts with custo-mers or suppliers are thus controlled by a transparentand strict monitoring process. The internal organiza-tional guidelines contain rules and instructions accor-ding to which the conclusion of contracts exceeding acertain term or volume is subject to the approval of thecompany boards.
We entered into a global third-party liability pro-gram, also under the aspect of product liability, to in-sure against risks associated with the production andsale of the Würth Group products to an economicallyreasonable extent and as customary in the industry.
Those risks that can be insured on an economicallyreasonable scale are covered by master programs inclu-ding the companies that have only just joined the Group.This applies both for the trading companies and themanufacturing companies in the Würth Group.
The business activities of the Würth Group are alsosubject to financial risks that are assessed, managedand monitored by a systematic risk management pro-cess. This process incorporates the management ofmarketing risks (mainly interest and exchange rate risks),credit risks and liquidity risks which is conducted cen-trally for the Würth Group by Würth Finance Inter-national B.V. The processes there are subject to a strictsegregation of functions between the party entering intothe risk and the party monitoring the risk. Financial
Group Management Report of the Würth Group > Risk Management/Corporate Governance Report/Outlook for 2006
40
of companies and is therefore closely related to corpo-rate ethics. The Würth Group welcomes the GermanCorporate Governance Code issued by the governmentcommission and last revised in June 2005.
With the aim of continuing the successful develop-ment of the Würth Group and safeguarding our morethan 50,000 jobs and even creating new positions, manyyears ago we already defined rules, codes of conduct andstandards for management and monitoring functionswithin the Würth Group. Our Board of Directors is com-parable to the management board and our AdvisoryBoard to the supervisory board of a stock corporation.Shareholders in the meaning of the Corporate Gover-nance Code are the five foundations:
■ Carmen Würth Family Foundation■ Bettina Würth Family Foundation■ Marion Würth Family Foundation■ Markus Würth Family Foundation■ Adolf Würth Foundation
Corporate governance in the Würth Group is ensuredby the following rules and systems:
■ Dual management system, i.e. segregation ofoperative management and supervisory bodies
■ Internal audit department■ Audit of the individual and consolidated financial
statements by independent auditors■ Risk management and risk controlling■ Target setting and planning process at company
and group level■ Refined controlling methods to create
transparency in operating units■ Rating by international rating agencies
We consider these interacting elements as a good basisfor corporate governance to be practiced in the WürthGroup.
On November 25, 2005 the Board of Directors andthe Advisory Board of the Würth Group issued thefollowing joint declaration of compliance for 2005 withthe German Corporate Governance Code as amendedon June 2, 2005.
Declaration of compliance pursuant to Sec. 161 AktG(German Stock Corporations Act):We declare that Würth complied with the recommen-dations of the government commission for the GermanCorporate Governance Code as published by the GermanFederal Ministry of Justice in the official part of theelectronic Bundesanzeiger (‘Federal Gazette’) with the
risks are managed via documented strategic guidelines,supplemented by regular reviews.
Würth Finance International B.V. uses derivativefinancial instruments to hedge against financial risksand optimize income from financial assets. Any loss ofvalue of an item is generally expected to be compensatedfor by a rise in value of the corresponding hedgingtransaction.
Various instruments are thus in place in all areasof the Würth Group to minimize the company risks.Risks have been insured to the extent possible. Risksthat cannot be insured are monitored and assessedsystematically by the operative management on the basisof highly detailed instructions and controlling systems.
CORPORATE GOVERNANCE REPORT
With more than 50,000 employees, the Würth Groupneeds certain rules to govern the behavior of people andtheir cooperation as well as to provide a framework forentrepreneurial decisions.
The corporate constitution of the Würth Group ismade up of the following components in addition to thefixed regulations provided by its legal structure:
■ Corporate philosophy■ Corporate culture■ Corporate ethics■ Corporate governance
The corporate philosophy, lived and defined by ReinholdWürth, determines the understanding and image theWürth Group has of itself. Together with corporate ethics,the corporate culture deals with questions of whichvalues and standards should underlie entrepreneurialdecisions and actions as well as the behavior and colla-boration of people. Würth’s corporate culture is descri-bed by terms such as dynamic, performance-oriented,open, honest, reliable and responsible. Corporate ethicsprovides the answer to questions about doing what isright within the regulatory framework.
Würth operates worldwide. This means that we needto set out binding standards and rules of conduct with-out infringing values prevailing in various countries andcultures. On the basis of our corporate philosophy andcorporate culture, our PAP rules (Policy and ProcedureManual) set out a code of conduct to guide executivesand employees with respect to the behavior and attitudeswe expect of them.
Corporate governance provides rules and standardsfor good and responsible management and monitoring
41
following exceptions in 2005 and will continue to complywith them in 2006.
Exceptions:We see the recommendations of the Corporate Gover-nance Code as guidelines for our entrepreneurial action.This notwithstanding, some of the rules stipulate re-quirements which do not seem appropriate for familybusinesses that are not listed on the stock exchange orwhich prove to be too rigid in terms of time or contentrequirements.
Specifically, these concern the following sections ofthe German Corporate Governance Code designed forentities listed on the stock exchange:
4.2.3 Disclosure of the basic principles of theremuneration system for the Board ofDirectors on the internet and in the annualreport
5.4.7 Incentive-based remuneration of the AdvisoryBoard
5.6.1 Inspection of the efficiency of the AdvisoryBoard
6.7 Publication of a financial calendar7.1.1 Publication of interim reports7.1.2 Publication of consolidated financial
statements within 90 days of the close of thefiscal year
7.1.4 Publication of a list of shareholdings
The Corporate Governance Code includes further recom-mendations which would constitute too severe a restric-tion of the individual rights of personality of certainboard members, and we have therefore given precedenceto the latter. Specifically, these concern the followingsections of the German Corporate Governance Code:
4.2.4 Detailed and individualized publication of theremuneration of the Board of Directors and ofremuneration components
5.4.7 Detailed and individualized publication of theremuneration of the Advisory Board and ofremuneration components
Subsequent eventsIn the first quarter of 2006 the Würth Group continuedalong the path to success taken in 2005. Raising sales by16.3 percent and recording double-digit growth (expres-sed in percent) in the operating result, we have met ourtargets for the first three months of 2006.
To further the establishment of a largely indepen-dent financial services unit, the Würth Group increased
its investment in Internationales Bankhaus BodenseeAG (IBB) to 88.55 percent effective January 20, 2006.
The Würth Group also acquired two tradingcompanies to support the international orientation. Oneis a Canadian entity purchased to close the geographicgap in the Würth Line in the Wood division in easternCanada.
The other is a company in the stainless steelindustry in Australia. This acquisition is an opportunityto expand our market presence further in Oceania.
OUTLOOK FOR 2006
The development of the global economic situation in2006 will continue at the pace experienced at the end of2005. Although monetary incentive will decline percep-tibly in the forecast period, this effect will be counter-acted by stabilizing oil prices. The impact of this changein monetary policy will be most noticeable in the USA;the U.S. economy is expected to slow down considerablyin the course of 2006. By contrast, the upturn in theeuro zone will continue.
In Germany, economic activity seems to be pickingup. The recovery is generally expected to become morepronounced in the current year. These expectations arebacked by the strong economic activity at an internatio-nal level, the favorable financing terms and conditionsas well as the anticipatory effects of the increase in VATannounced for January 1, 2007.
These factors have also contributed to the currentoptimism of German trade businesses that new im-petus will revive the domestic economy after years ofrecession. They are feeling encouraged by the improvedmood among SMEs.
While remaining realistic, we are neverthelessoptimistic about the future. Whereas focus was placedon securing the operating result between 2001 and2003, we are now planning to continue the course takenin 2004 and 2005 for more expansion-driven salesgrowth. Our declared aim is to achieve further double-digit growth. The organic growth – i.e. growth by in-creasing sales and output – is to be supplemented androunded out by specific acquisitions.
Even in our market campaign aimed at winningnew market shares, our business policy will continue tobe guided by the principle that ‘growth without profit isfatal’. An equally important target for us is to increasethe operating result by a higher rate than sales.
Striving towards our targets, the globalization ofthe Würth Group at an early stage pays off once again.Owing to our global presence and our broad range of
Group Management Report of the Würth Group > Outlook for 2006
42
products and services, we are in a position to largelydetach ourselves from economic developments and relyon our own corporate economy.
Nevertheless, we still want to express our attach-ment to our home market. After all, we generate some40 percent of group sales with our 71 entities in Germany.As an official partner of the initiative of the Germanfederal government and German industry and commerce‘Germany – Land of Ideas’, we are lending weight to ouraim of presenting Germany to its guests as an inno-vative, cosmopolitan and enthusiastic nation in the yearof the FIFA world cup. Germany is a highly resourcefulcountry with a creative passion and visionary ideas.These are some of the characteristic features which alsoapply for the Würth Group as reflected by our motto for2006: VIBRANT CURIOSITY.
We are open for new ideas and markets and notafraid of entering into calculable risks. We are ready toact and curious to see what 2006 has in store for us.VIBRANT CURIOSITY describes our perspective on thefuture and what spurs us on to excellent performanceand outstanding results.
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ART AND CULTURE
Henry Moore
Large Internal Form, 1981 – 82
LH 297b
Bronze, edition of 6+1, copy 5/6
498cm high
Würth Collection, Inv. 7350
Art and culture
44
Pablo Picasso
La conversation, 1901
Oil on cardboard
13.5 x 22.5 cm
Würth Collection, Inv. 7552
45
Carl Spitzweg
Die Nachhilfestunde
(the private lesson), around 1845
Oil on wood
26.2 x 34.4 cm
Würth Collection, Inv. 3829
Insight in the office building with
museum area on the open day,
May 1, 2005
In May 2001, the company’s museum space was supplemented by the opening of the “KunsthalleWürth” gallery in Schwäbisch Hall. Attractive exhibition forums were also added at Würth companiesin Norway, the Netherlands and Switzerland. Denmark and Austria, too, have taken on board theextraordinary concept of “art in the workplace”, making reference to central aspects of the Würthcompany such as modernism, international outlook and quality in their art displays. The basis forall activities is the Würth collection, which now includes some 9,000 works of art. It reflects thedevelopment of art from the late 19th century through to present day art. Significant groups of worksfrom earlier periods of the history of art were recently added to the collection. A varied range ofrelated educational and information events for all age groups are offered not only for our externalvisitors, but also for all employees and their families. Both the visitor interested in broadening theirmind and the concept of a museum as an experience, especially for children and young people, arecatered for. Together with various other cultural and social offerings, they complement ouremployees’ workday in the spirit of ‘lifelong learning’. They encourage tolerance and the ability todraw associations and provoke new ways of seeing things without which the technical, economicand social future would be impossible to imagine.
A commitment to culture and society, expressed in many different ways,
is just as much part of the corporate culture of Würth as the combination
of visionary ideas and concrete action. That is why, at the initiative of
Professor Dr. h. c. Reinhold Würth, a museum and hall for speeches, con-
ferences, concerts, readings and other events was integrated in the office
building at the headquarters in Künzelsau back in 1991. These venues have
become a real attraction for both company employees and the interested
public since their inauguration in 1991.
ART AND CULTURE 2005
Fernando Botero
Adam and Eve, 1998
Oil on canvas
219 x 183 cm
Würth Collection, Inv. 6580
Art and culture
46
47
The Würth museumThe Würth museum in Künzelsau registered a record number of visitors due to the corporateanniversary. Some 120,000 visitors came to take a look at the Würth collection. Like a group ofislands, the works of art selected for this occasion complemented each other showing aspects oflandscapes and nature as well as metamorphoses of the human figure and varying degrees ofabstraction. These approximately 80 impressive works on display at the anniversary exhibitionranged “From Spitzweg (via Arp, Braque, Ernst, Leger, Liebermann, Lichtenstein, Picasso,Richter, and many more) to Baselitz”, once again evidencing the “high-quality and contrastingwealth of the Würth collection” (Karin von Maur).
The Kunsthalle Würth galleryA highlight of the exhibition year 2005 was the “Henry Moore: Epoch and Echo – English Sculpturein the 20th century” exhibition. With his monumental, but cleverly stylized faceless depictions ofpeople, Moore already epitomized modern sculpture in the fifties and sixties of the last centuryin Europe and the USA. This explains his influence on the sculptural work the next generation,as impressively documented by the presentation of ten other renowned English sculptors. Attractingsome 85,000 visitors, this exhibition was the most successful one at Kunsthalle Würth to date.It was followed by a Fernando Botero retrospective. His characteristic aesthetic quality, alwaysmonumental, sometimes surreal and sometimes like a caricature, has made this Columbianfamous the whole world over. In the past year, Botero caused an international uproar when in a
series of paintings he expressed his concern and outrage at the physical and psychologicaltorture perpetrated by U.S. soldiers in Iraq’s Abu Ghraib prison. The exhibition of theextensive “Abu Ghraib” cycle at Kunsthalle Würth was the first time these works went ondisplay in Germany.
Würth collection on tourThe entire Christo collection – no less than 90 works of art – was on tour the whole yearround through major museums in North America, while Palermo chose a cross-section ofmasterpieces of expressionism and impressionism from the Würth collection for anexhibition hosted at the Norman Palace from February to July.
LiteratureThe reading of the Jewish writer Ruth Klüger in the context of the chair for poetry atTübingen University sponsored by Würth provided much food for thought and discussion.
Visitors in front of a work by Anish Kapoor at the
“Henry Moore: Epoche und Echo” exhibition
(Untitled, 2004, stainless steel, Würth collection, Inv. 8615)
Fernando Botero (left) with Prof. Dr. h. c.
Reinhold Würth at the inauguration of the
exhibition at the Kunsthalle Würth gallery
Claude Monet
La Gare Saint-Lazare ou
La Tranchée des Batignolles, 1877
Oil on canvas
38.5 x 46.5 cm
Würth Collection, Inv. 7320
Art and culture
48
49
Awarding the Würth Prize of Jeunesses Musicales on September 14, 2005
in the concert hall at Gendarmenmarkt in Berlin: Prof. Dr. h. c. Reinhold
Würth, Prof. Justus Frantz, Dr. Hans-Herwig Geyer, Chairman of
Jeunesses Musicales Germany (from left to right)
SPONSORING ART AND CULTURE
AS WELL AS RESEARCH AND THE SCIENCES
The non-profit Würth Foundation
Economic education in the German state of Baden-WürttembergThe Competence Center for Economic Education was set up by Professor Reinhold Würth inOctober 2005 under the auspices of the Würth Foundation. It has close ties with the Ministryfor Education, Youth and Sports of the German state of Baden-Württemberg and the EconomicEducation advisory council founded in 2000 in connection with Reinhold Würth’s chair forentrepreneurship at the University of Karlsruhe. This education initiative is aimed at enhancingstudents’ and teachers’ understanding of economic matters and promoting the spirit of entre-preneurship in Baden-Württemberg’s schools. To achieve this, it initiated specific projects forlessons, held training courses and launched practical teacher training initiatives. The WürthAward which will be granted by the Competence Center in Baden-Württemberg for innovativeschool projects concerning the topic of ‘economics and school’ is intended to provide a furtherincentive.
Würth Prize of Jeunesses Musicales GermanyThe Würth Prize of Jeunesses Musicales Germany has been awarded since 1991 to outstandingyoung ensembles or individuals in the music world who have contributed towards the aims ofJeunesses Musicales in a special way. The prizewinner in 2005 was the Philharmonia of the Nations,which brings together young musicians from different homelands united in their love for musicand acts as an ambassador for international understanding. Professor Justus Frantz is the musicdirector of the Philharmonia of the Nations which was founded in 1995 and inspired by LeonhardBernstein and Jehudy Menuhin.
Committed cultural work is an integral part of the corporate culture and philosophy of
Würth. It is the declared purpose of the Würth Foundation established by Reinhold
and Carmen Würth in 1987 to sponsor art and culture, research and science as well as
education projects.
The purpose of the foundation as defined by its charter was extended to include
education in 2005 and the foundation capital increased by another EUR 360,000 to
EUR 3.36 million.
Art and culture
50
LIFELONG LEARNING – NO LONGER SIMPLY A FEATURE
OF EDUCATION AND VOCATIONAL TRAINING
The Würth Academy
The trades center Customer enthusiasm is one of the top priorities in the Würth company. Customer seminarstherefore are an important factor in our relationship with customers. Our offering focuses onconveying product-specific expertise and operational knowledge. The seminars are offered on aregional basis, developed in close cooperation with our customers, our product department andour divisions and held at our customers or on our premises. Every seminar can be completedwith a certificate. In 2005 alone, we were able to welcome more than 6,500 customers as partici-pants to our customer seminars.
Employee developmentPurposeful work, productive processes, excellent skills in dealing with our customers and specialknow-how in individual areas are the key factors that are recognized as quality on the market.At over 200 seminars with more than 3,000 participants, our employees continued their develop-ment in 2005.
Business SchoolThe Würth Academy also offers working professionals training programs aimed at obtainingrecognized academic qualifications. This offer was initially only intended for Würth employees,but owing to the demand from interested individuals outside the Würth Group, these programswere opened up for all those interested who meet the necessary prerequisites.
Würth Academy buildings
in Künzelsau-Gaisbach
Customer seminars at one
of the trades centers
The main task of the Würth Academy is to offer a suitable program to
enhance our customers’ and employees’ skills. There are various
competence centers that provide a broad range of seminars and advanced
training opportunities for this purpose. The range even includes dealing
with cultural issues and improving physical fitness.
51
In collaboration with the University of Louisville in Kentucky (USA), an MBA course was designedfor working professionals. This course can be completed with an internationally recognizedAmerican university degree in International Management and Entrepreneurship, and has beenaccredited by the American Association to Advance Collegiate Schools of Business (AACSB).Over 13.5 months, the students are prepared for future international management responsibili-ties. Two periods of six weeks of the course are held at the University of Louisville. The rest ofthe course is held in Bad Mergentheim. 29 employees have successfully completed this MBA todate. The course has been expanded to offer two additional options, the Master of Engineering(MEng) and the Master of Science (MSc). Professor Reinhold Würth and the University ofLouisville signed the contract in November 2004.
In cooperation with the Fernhochschule Hamburg distance learning university, Würthsupports the dual advanced training concept. A degree in business as ‘Diplom-Kaufmann (FH)’or Bachelor of Arts can be achieved while continuing to work for the company. 23 students havemade use of this offer to date. It is open to everyone who has the necessary qualifications.
WÜRTHPHOENIX AcademyThe IT company with international operations in the Würth Group, Würth Phoenix sells theinnovative software developed by Würth for trading companies on the free market – WürthPhoenix. To enable optimum use of the software, the WÜRTHPHOENIX Academy organizestraining classes with practical exercises for interested groups. This way, it is guaranteed thatthe expected potential for improvement is actually achieved. Various methods from e-learningto on-site workshops are used to communicate the knowledge.
Made it: MBA students celebrate
graduation
Art and culture
52
Cultural eventsHighlights of the cultural events organized by the Würth Academy in 2005 included the concertof Gidon Kremer’s Kremerata Baltica, the lecture-concerts of Justus Frantz and his Philharmoniaof the Nations as well as the ballet matinee with scholars from the Birgit Keil Dance Foundationdirected by Professor Birgit Keil. Another highlight among the other 17 events featuring musicand stand-up comedy was Sissi Perlinger with her fast-moving and extremely varied stageperformance.
The Würth Open Air Festival 2005The three-day Würth Open Air Festival is one of the best-known major events in the region. Allthree concert evenings take place on company premises in the loading yard. In this unusualsetting, the festival was opened by Justus Frantz and his Philharmonia of the Nations. Saturdayevening was Woodstock evening, with bands like Canned Heat, Country Joe McDonald, Ten YearsAfter and Jefferson Starship. The last evening on Sunday the stage was set for German rock legendsKlaus Lage, Wolfgang Ambros and, as special guest, Udo Lindenberg and his Panik Orchestra.
Keeping fit with Würth‘Keeping fit with Würth’ refers to the range of health-oriented sports courses offered by the WürthAcademy in cooperation with the BKK Würth company health insurance fund. They are open to allemployees in the Würth Group and their families. The range of 60 keep-fit courses includesaerobics as well as various trend sports and back exercises. Wellness weekends, event days andactive breaks at work are also on the agenda.
The important part of the program is the preventative effect of fitness, social contacts and,last but not least, having fun, motivating and keeping our employees happy. We also support theparticipation in regional and supra-regional sports events. One example in 2005 was the parti-cipation of the ladies from the aerobics and step aerobics group in the International GermanGymnastics Festival in Berlin. In addition, we offer a broad range of eleven company sportsgroups, from football, hiking and diving right through to archery.
Ballet matinee of the Birgit Keil
Dance Foundation
Highlight of the Würth Open Air
Festival: Udo Lindenberg
Keeping fit with Würth: On stage
at the International German
Gymnastics Festival
53
Würth Haus Berlin and Würth Office Brussels
WÜRTH HOISTS THE FLAG IN BERLIN AND BRUSSELS
Against the backdrop of an enlargement and greater integration of the European Union in particular,cross-border trade and commerce is increasingly playing a guiding role. In times in which the scopeof governments to act is limited more and more by fiscal restrictions and political inflexibility,business as the remaining creative force is gaining in importance in all areas of society. Würth isprepared to face the responsibility arising; the initiatives originating from its group representativeoffices are proof of this.
A business enterprise is more than just purchasing and sales departments with an attachedbookkeeping department. This statement embodies the attitude ingrained in Würth: corporatecitizenship, public affairs and political communication are the topics which will be bundled, pur-sued and developed with priority at Würth House Berlin and Würth Office Brussels. Würth’srepresentative offices in Berlin and Brussels have become a place to meet representatives of natio-nal and European politics, industry associations, academia, and the diplomatic service.
These are the venues where debates can be held, away from day-to-day politics, unburdened,without party politics or conventional restrictions, and strategies can be developed as a result; thesole purpose being to make a sustainable contribution to the continued prosperity of our society.The Würth Haus Berlin and the Würth Office Brussels assume a facilitating and at the same timea guiding role, based on the ethics of the company and the commitment to the welfare of society.These are representative offices of businessmen and Württemberg liberals who speak out in favorof the independence of the civil society from the state.
Due to its dynamic corporate development and, in particular, its international nature, Würth feels ithas both a certain responsibility, as well as the legitimation to speak out on economic policy and –due to the relationship of cause and effect – on social trends and issues. In doing so, Würth is awarethat, as part of society, every business has an impact – whether positively or negatively – on society.Würth wants to take part in the debate about where we want to go in this society over the next twentyor thirty decisive years. The company magazine specifically designed for this purpose – ‘present’ –provides information on activities at our representative offices.
Würth Haus Berlin, representative office
of the Würth Group
Würth has a representative office in the German capital of Berlin and
since November 2005 has set up office at the heart of the European
Union with its new Würth Office Brussels.
Group Management Report of the Würth Group > The Operational Units
54
THE OPERATIONAL UNITS WITHIN THE WÜRTH GROUP
AUTO DIVISION METAL DIVISION WOOD DIVISION CONSTRUCTIONDIVISION
INDUSTRY DIVISION
Metal division – Maintenance subdivisionThis subdivision addresses a wide range of customers: in-houserepair shops, facility and installation maintenance of insurancecompanies, hotels, airports, sewage plants, clinics and hospitals,recycling companies as well as garden and landscape specialists.The focal point is a complete product range for minor repairs andproducts for servicing, maintenance and care.
Wood divisionThe Wood division serves customers in the entire woodworking andprocessing trade, typically joiners/carpenters and window makers(wood and vinyl). The product range covers furniture fittings, theentire range of fastening materials and sealing technology as well astools, machines, abrasives and chemical-technical products.
Construction divisionThe Construction division encompasses all sales units responsiblefor serving customers in the building and civil engineering industryand finishing trades. Marketing activity focuses on constructioncompanies, roofers, plasterers, stucco masons, dry constructionfirms and direct supplies to building sites. Customized logisticssolutions such as building site containers are also provided.
Industry divisionThe Industry division companies are specialized companies with acomplete range of assembly and connecting material for industrialproduction, as well as maintenance and repair. In addition to thecomprehensive standard range offered by these companies, theirstrength lies in customized, logistical supply and service concepts.
WÜRTH LINE
Auto division – Car subdivisionOur customers are car garages, vehicle fleets, automotive refurbi-shers and dealers. They include authorized dealerships of carmanufacturers and independent workshops as well as special shopsand service providers. The products sold in this customer segmentrange from expendables for repairs to chemical-technical productsfor maintenance, servicing and bodywork, and tools for pneumaticand electrical machines for professionals.
Auto division – Cargo subdivisionThe customer segments of the Cargo subdivision can be brokendown into authorized dealers and independent workshops as wellas specialized workshops and commercial vehicle service providers.We mainly sell fastening, assembly and cleaning products requiredespecially for the maintenance, repair and servicing of commercialvehicles in these segments.
Metal division – Metal subdivisionThis subdivision directly serves customers in the metalworking andmetal processing industries such as metal and steel fabricators,fitters, machine and vehicle manufacturers. The Metal subdivisionfocuses on the provision of products such as anchor and dowelsystems, tools and electrical machines and DIN/standard parts forworking and processing various metals.
Metal division – Household Technology subdivisionThe Household Technology subdivision concentrates on electri-cians, gas, heating and water installation firms, plumbers as well asair conditioning and ventilation system firms. The products offeredhere range from rapid assembly systems, insulating materials forplumbing and cable laying-out systems to installation materials inthe electrical area.
Car subdivision
Cargo subdivision
Metal subdivision
Household Technology subdivision (electrical/plumbing)
Maintenance subdivision
Würth Line operations focus on fastening and assembly materials, supplying customers in the trades, theconstruction sector, and industry. Internationally, the operational business units within the Würth Line comprisethe Auto division with the Car and Cargo subdivisions, the Metal division with the subdivisions Metal, HouseholdTechnology and Maintenance, the Wood division, the Construction division, and the Industry division.
The 351 companies that make up the Würth Group’sactive sales operations are divided into two units: Würth Line and Allied Companies.
55
ALLIED COMPANIES
ELECTRICAL WHOLESALE TOOLS RECA GROUP TRADE
PRODUCTION ELEKTRONICS SCREWS AND
STANDARD PARTS
DIVERSIFICATION/
OTHER
Electrical wholesaleThe companies in this group specialize in the wholesale trade inelectrical installation materials, installation systems, communica-tion technology, cables and lines, tools, data and network techno-logy, lighting and illumination, household appliances and a widerange of multimedia products.
ToolsThe majority of the Würth tools companies are located in CentralEurope and chiefly supply the metalworking and metal processingindustries. With more than 60,000 products covering metal cutting,tool and workpiece clamping, measuring and testing, hand tools,works equipment, industrial safety and machines, the companiesoffer a full range backed by high availability and same-day orderprocessing and delivery.
reca groupThe reca group companies supply fastening and assembly mate-rials direct to metal and car businesses as well as customers ofthe Cargo subdivision. Specialists for professional clothing,advertising materials and the industrial area complement andenrich the reca group.
TradeThe companies belonging to this unit sell fastening and assemblymaterials, gardening equipment, electrical tools and furniturefittings, mainly to specialist dealers and DIY and hardware stores.
The companies that do not trade under the name of Würth – our Allied Companies – operate independently of the Würth Line companies. They are divided into eight strategic business units. With the exception of a small number of manufacturing companies, the majority are sales companies operating in related areas. TheDiversification/Other group comprises service companies operating at regional level (such as hotels andrestaurants, Würth logistics operators, and a company set up as a training program).
ProductionThis group comprises the manufacturing companies of the WürthGroup. The product portfolio ranges from fasteners for the appli-cation area wood and for the automotive and electrical industry topunch and press fasteners, stamped and bent parts right throughto dowels, iron and furniture fittings, and tools.
ElectronicsThe Electronics unit includes those companies in the WürthGroup that are involved in the production and sale of electroniccomponents such as printed circuit boards and passive compo-nents as well as full componentry. With Würth Solar, the manu-facturer of innovative CIS photovoltaic modules, and WürthSolergy, a provider of complete solutions, the Würth ElektronikGroup also operates on the market for renewable energies.
Screws and standard partsThese companies are product specialists with concepts forsupplying industry.
Diversification/otherThis category covers companies operating primarily in differentlines of business from those served by Würth itself.
Group Management Report of the Würth Group > Würth Line
56
The fiscal year 2005 closed with record sales again ofEUR 1,134 million. Total sales were up 8.1 percent on 2004. Of the total sales force of 8,988 worldwide,1,762 worked in the Cargo subdivision, generatingsales of EUR 265 million, which is an increase of 10.9percent. With this double-digit growth rate, the Cargosubdivision was again a growth driver in the Auto divi-sion. Although the wave of consolidation still makesfor a difficult market situation, the Auto division ma-naged to expand its position on the market further.
Varied models for growthThe concept of growth by multiplication, which involvesthe geographical expansion of direct sales, is appliedin countries including, for example, Brazil, China andIndia, which offer significant potential for hiring newemployees. On the more mature European markets,the sales force is enlarged at a more cautious rate. Thepriority there is to enhance productivity, and greateremphasis is placed on the topic C-parts management.The positive developments in Germany and Spain –8.8 percent and 14.3 percent growth respectively –were highly satisfactory.
Würth stands for quality – our customers appreciate ourproduct competenceWürth customers in the automotive business appre-ciate our product competence. The official supplier ofthe BMW Sauber F1 team, we are intimately familiarwith quality and service standards. We focus on productinnovations which allow our customers to work moreefficiently and save time. With a whole range of newdevelopments from the Retex upholstery repair systemto the nano polish and WGLG 100 self-igniting gassoldering iron, we make sure to defend our position asmarket leader. Further examples are the new chemicalsfor car wash plants, the powerbond body compound,our SmileREPAIR concept and the new Replast adhesivesystem for repairing virtually any kind of plastic. Specialmention should also be made of the latest developmentin diagnosis systems: WoW! Snooper, a handy dia-gnostic tool with an impressive range of functions forwireless work in the workshop.
Outlook for 2006The Auto division will continue to pursue its aim ofmarket leadership in terms of quality and in absoluteterms on all active markets by employing measureswhich fit the various markets.
NEW SALES RECORD
Auto division
Share in total salesAuto division
16.4 %
SalesAuto division
in EUR million
Sales staffAuto division
2001 2002 2003 2005
1,100
1,000
900
1,134
2004
1,049
987
964
913
2001 2002 2003 2005
9,000
8,000
8,988
7,000
2004
8,505
7,695
7,156
6,391
57
The Metal division again generated record sales infiscal 2005: EUR 1,198 million. Investments in thefield service and the related enlargement of the salesforce by 424 to 7,325 employees are paying off. TheMetal division is represented in 37 countries todayand has more than 620,000 customer contacts world-wide. Internationally, the Metal division’s sales climbedby 12.1 percent to EUR 889 million. In Germany,sales were up 4.7 percent to a new record of EUR 309million. Concentration at an international level on theMaintenance subdivision has started to bear fruit, asdemonstrated by the growth rate of 33.3 percent.
South America is still the fastest-growing regionThe success story in South America remains unbroken.Sales growth of 71.9 percent speaks for itself. Evenour long-established company in Brazil closed the fiscalyear with a growth rate of 72.9 percent. The companiesin Argentina (+45.2 percent) and Chile (+85.3 percent)improved their market positions again in 2005. Brazilis planning to increase its sales force to 400 in theMetal division in the current fiscal year which wouldmark a ten-fold increase in the space of seven years.
ORSYInnovative concepts and the continuous expansion ofthe C-parts management are priorities in the Metaldivision. The special focus of 2005 was on the placementof our storage and storage system ORSY. This triedand tested storage and retrieval system is specificallytailored to the customer’s space and workflowrequirements as well as the product needs. ORSY istherefore a central systems component which alsooffers our customers tailored cost management.
Outlook for 2006The economic prospects for 2006 are good, whichgives us reason to expect double-digit growth. In orderto reinforce our market presence in Russia and China,the Metal division has launched market activities inthe Ural region and the Chinese cities of Shanghai andTianjin. Additional impetus should come from themetal companies in the USA and New Zealand, whichstart operations in the current fiscal year.
A SUCCESSFUL YEAR FOR THE METAL DIVISION
Metal division
Share in total salesMetal division
17.3 %
Sales Metal division
in EUR million
Sales staffMetal division
2001 2002 2003 2005
1,200
1,100
1,000
1,198
2004
1,088
1,019
986
948
2001 2002 2003 2005
7,000
6,000
7,325
5,000
2004
6,901
6,086
5,800
5,039
Group Management Report of the Würth Group > Würth Line
58
The Wood division closed the fiscal year 2005 very suc-cessfully with sales growth of 8.1 percent and recordsales of EUR 946 million. This was the steepest jumpin four years, taking the dynamic growth of the previousyear another step further. After massive expansion ofthe global sales force in 2004, the top priority in 2005was to stabilize the field service and integrate the newsalesmen and saleswomen in the Wood division.
Around the globe, more than 3,600 employees selldirectly to just under 370,000 customers in the wood-working and processing trade. The international sharein the Wood division also rose further in 2005. Whereastwelve years ago more than 50 percent of total sales ofthe Wood division were being generated in Germany,today, the international part of the division accountsfor a share in sales of 87 percent with a continuous up-wards trend.
North America remains strongest sales regionThe Wood division achieved sales of EUR 820 millionin its 30 international companies in 2005. This is anincrease of 9.0 percent. Except for southern and centralEurope, all regions recorded double-digit growth rates.The North American region again successfully expan-ded its position as the key international market in theWood division. With virtually area-wide market coverage,the United States and Mexico generated sales of EUR328 million, which represents an increase of more than12.1 percent.
Positive sales trend in GermanyThe division recorded growth of 2.4 percent in Germanyto sales of EUR 126 million – the first noteworthygrowth in ten years. The interior finishing segment, offe-ring mainly furniture fittings and drawer slides, realizedan increase of 5.7 percent. Operating in what remains a difficult environment, the windows segment closedwith a decline in sales of 0.6 percent.
Outlook for 2006Further moderate expansion of the global sales organi-zation to a sales force of 3,800 is planned for 2006.Besides the primary growth markets for the Wood divi-sion central and eastern European countries, we willalso focus on expanding our market position in the USA.
HIGHEST INCREASE IN SALES IN FOUR YEARS
Wood division
Share in total salesWood division
13.7 %
SalesWood division
in EUR million
Sales staffWood division
2001 2002 2003 2005
900
800
700
946
2004
875
825
867854
2001 2002 2003 2005
3,500
2,500
3,653
1,500
2004
3,590
3,2213,155
2,800
59
Growth in the European building sector was rathermodest in 2005. In this context, the development ofthe Construction division is all the more pleasing: atotal sales staff of 2,111 generated sales of EUR 365million in Europe in the past fiscal year (prior year:EUR 341 million), which equals an increase of 7.0 per-cent. Whereas 60 percent of total sales of the Con-struction division were being generated in Germanyten years ago, the ratio has been reversed and morethan that, the focus of sales clearly is on the interna-tional part of the Construction division today.
Market position significantly enhanced across EuropeThe Construction division was present in Germany andtwelve other European countries. A construction divi-sion was established in the Czech Republic, thus furtherexpanding international trading activities in the buildingsector. The international construction companies had atotal of 1,621 sales staff in the reporting period. Owingto the substantial capital expenditures made to expandthe European distribution network, sales in the Con-struction division at international level grew by 12.3percent in 2005 to annual sales of EUR 228 million(prior year: EUR 203 million).
Difficult market situation in GermanyDetached from the difficult economic development inthe building and civil engineering as well as finishingtrades, the Construction division bucked the trend ofrecession with sales of EUR 137 million (prior year: EUR138 million). Building activity picked up noticeably inthe second half of the year. The Construction Sites sub-division benefited most from this impetus, achieving a4.7 percent rise in the sales of our construction sitespecialists, who mainly serve construction companiesand customers on construction sites.
Outlook for 2006Further expansion of the international sales networkwill remain a cornerstone of the Construction division’sgrowth strategy for 2006. On that basis, we expectsound double-digit growth rates for the current fiscalyear in our international business. By introducing con-struction divisions in Ireland and Denmark at the startof 2006, we are venturing into new markets. Prepara-tion is already underway for construction divisions inPoland, the UK and Slovakia.
FURTHER DOUBLE-DIGIT GROWTH
AT INTERNATIONAL LEVEL
Construction division
Share in total salesConstruction division
5.3 %
Sales Construction division
in EUR million
Sales staffConstruction division
2001 2002 2003 2005
350
300
250
365
2004
341
311
286
274
2001 2002 2003 2005
2,000
1,500
2,111
1,000
2004
2,006
1,772
1,559
1,373
Group Management Report of the Würth Group > Würth Line / Allied Companies
60
The Industry division seized the opportunity for strong,organic growth in a stable economic environment. Salesjumped 18.4 percent to EUR 463 million, exceedingexpectations equally across all sales regions.
WINWORK expanded to include markets with potentialfor the futureHaving established divisions in eastern Europe the prioryear, we focused on volume markets with high potentialfor the future in the reporting period. New companiesgeared to supplying industrial customers with connec-ting technology were incorporated in Canada, India andagain in China, to name but a few. The Würth IndustrialNetwork now comprises 19 companies in Europe, NorthAmerica, Asia and Oceania and ensures that nationalcompanies and our globally operating clientele in parti-cular can access the infrastructure to manage procure-ment at international level.
Optimized process quality and greater engineeringcapacityContinuing the development of the past few years,logistics concepts were fine-tuned, the process qualitywas optimized and productivity increased in 2005. Thisway, supply reliability was guaranteed for our customersat all times despite the difficult procurement marketwith supply bottlenecks and price hikes. In addition toimproving efficiency in business processes, we wereable to meet the increasingly voiced customer demandfor engineering capacity by making large-scale invest-ments in staff.
Growth in Germany requires further capital expendituresIn Germany, both the upwards trend in demand andprojects of new customers produced sales growth of15.0 percent. To ensure sustained growth in Germanyand the neighboring European countries, exceptionalinvestments were required for the third year in a row.In 2005, spending focused on expansion of the automa-tic high-bay warehouse to house another 22,000 pallets.
Outlook for 2006With promising new projects, the Industry divisionstarted the new year 2006 with optimism. We will keeppace with the continuing relocation of production capa-city to growth countries by forming new companies andacquiring existing entities in Asia and South America.
STRONG GROWTH IN A STABLE ENVIRONMENT
Industry division
Share in total salesIndustry division
6.7 %
Sales Industry division
in EUR million
Sales staffIndustry division
2001 2002 2003 2005
450
300
150
463
2004
391
303308304
2001 2002 2003 2005
350
300
361
250
2004
343
312
283
245
61
NEW RECORD SALES IN ELECTRICAL WHOLESALE
With 9.4 percent growth to EUR 664 million, theElectrical Wholesale unit grew substantially in itsmarket segment. The growth rates at internationallevel and in Germany were 42.2 percent and 6.7percent respectively. The company added to the unit in fiscal year 2005 was Eichmann Elektrofachgroß-handel GmbH in Austria. Adjusted for this acqui-sition, total growth still amounts to 8.2 percent andinternational growth to 26.4 percent.
The unit employed 2,225 persons as of year-end,320 of which were sales staff and 1,905 office staff. InGermany, the figures are 265 sales staff and 1,620 of-fice staff, which is a total of 1,885 employees. The lowrate of increase in staff compared to the higher salesgrowth means that productivity per employee is muchimproved, and combined with the focus on a currenttotal of 88,000 customers – another figure which clim-bed at a double-digit rate – this resulted in a positiveoperating result for the Electrical Wholesale unit.
Outlook for 2006Across the board, all electrical wholesalers in the variouscountries are planning a positive sales developmentfor 2006. In Germany in particular, we are procee-ding on the assumption that the recovering economyand the crumbling reluctance to spend will have apositive impact on our business.
Electrical Wholesale
2001 2002 2005
2,000
1,500
2,202
1,000
2,225
2003
2,027
2,315
SalesElectrical Wholesale
in EUR million
Sales staffElectrical Wholesale
2001 2002 2003 2005
600
400
200
664
2004
607
523557
578
2004
2,124
Group Management Report of the Würth Group > Allied Companies
62
GROWTH HAMPERED BY RELUCTANCE TO INVEST
Difficult business development with signs of recoveryThe companies in the tool wholesale business wereagain faced with a difficult environment in 2005. Totalsales only rose by 2.4 percent to EUR 336 million. Thestagnating low level of demand for capital goods inmeasuring and testing technology as well as worksequipment and machines was only partially offset bythe surge in sales performance of consumer goods.The upswing in the last six months of the year was awelcome development.
Dynamic developments regarding new companiesThe business development was decisively influencedby stagnation of the high sales share in Germany. Incontrast, the young companies in eastern Europe andthe volume markets of Asia displayed a positive deve-lopment. In order to satisfy the growing interest ininternationally operating suppliers, we established onecompany in Romania and set up our third company incentral China. Another focus of spending was theconsulting competence in the field.
ATORN quality brand well received by the marketThe sales growth in consumable tools is supported by theincreasing share in sales of the ATORN quality brand.Development work in 2005 concentrated on expansionof the metal cutting range. In close cooperation withleading manufacturers, the gaps in our range werefilled and the brand positioned as a quality standardfor tools provisioning offering unrivaled value formoney for industrial users.
Outlook for 2006In light of the developments in the second half of 2005,we should experience a tangible revival of growth atthe tool wholesale companies in 2006. In addition, ex-pansion will be pursued in the strategically importantmarkets of Asia and America in order to remain inter-nationally accepted as the preferred supplier of tooltechnology. The quality of our range of products offe-red will be optimized further. This will be particularlyevident in the refinement of the ATORN brand.
Tools
2001 2002 2005
1,250
1,000
1,325
750
1,392
2003
1,3441,342
Sales Tools
in EUR million
Sales staffTools
2001 2002 2003 2005
360
240
120
336
2004
328333338
383
2004
1,323
63
More than 290,000 customers across EuropeFollowing years of strong expansion, the fiscal year2005 was used to establish and stabilize the many newcompanies. The companies reca China, reca Bulgariaand reca Romania started operating on the market inthe course of the year and were quite successful already.At the end of the fiscal year 2005, the reca group con-sisted of 40 companies in 23 countries. The headcountincreased by 192 in the fiscal year to 3,572 and saleswere up 8.8 percent to EUR 384 million. Today, morethan 290,000 customers rely on the products andservice provided by the reca group.
Innovation with reca Power ProductsIn our core business, we offer our customers in thetrades and metal and construction business an exten-sive range of products and services. reca Power Productsdocument the competence and innovative power of thereca group. These products give us a unique sellingpoint on the market, convincing customers with a topquality.
International supply conceptA further success factor of the group is its internationalsupply concept. Customers in eastern Europe are sup-plied directly by our Austrian subsidiary Kellner & KunzAG. In western Europe, the reca customers are suppliedvia the parent company RECA NORM and automotivecustomers via Normfest headquartered in Velbert. Thesubsidiary Scar in Italy has also chosen the direct supplystrategy for its further international expansion.
Outlook for 2006The reca group will continue to drive expansion throughenlargement of the sales staff in order to gain furthermarket shares. Besides the competitive, high-qualityrange of products all companies in the reca group areaware of the importance of services to save their custo-mers time and effort, and ultimately costs.
reca group
RECA GROUP CONCENTRATES ON DIRECT SALES,
POWER PRODUCTS AND SERVICE
2001 2002 2005
3,000
2,000
2,737
1,000
3,572
2003
3,062
2,458
Salesreca group
in EUR million
Sales staffreca group
2001 2002 2003 2005
350
300
250
384
2004
353
328
305
287
2004
3,380
Group Management Report of the Würth Group > Allied Companies
64
POSITIVE BUSINESS DEVELOPMENT
AGAINST THE INDUSTRY TREND
Under the roof of the Würth Group, the 46 companiesthat now make up the Trade unit in the AC Line achie-ved growth of 22.0 percent and sales of EUR 560 mil-lion in the fiscal year 2005. The number of employeesin the whole Trade unit came to 2,163 in fiscal 2005,which again represents growth of 5.6 percent.
The Trade unit operates in a difficult market environ-ment in the specialist dealers and DIY and hardwarestores sector, which is characterized by modest spendingand excess capacity. The trade branches of the screwmanufacturers REISSER Schraubentechnik GmbH andSWG Schraubenwerk Gaisbach GmbH concentrate onthe German and French markets. REISSER Schrauben-technik GmbH and its subsidiaries in Poland, Hungaryand Romania also cover the eastern European market.
Further expansion of the market position of Conmetalland DIY WorldThe Conmetall group successfully defended its marketposition, pursuing its expansion strategy with a focuson southern and eastern Europe. With 484 employees,the companies generated sales of EUR 110 million withDIY and hardware stores in Germany and Europe.
The company headquartered in the Netherlandsvan Roij Fasteners Europe B.V. is specialized in thesale of flat roofing products. At year-end, van Roij tookover the Belgian company Duvimex, thus pursuing itsexpansion in the Benelux countries. In eastern Europethe flat roofing segment is successfully covered by itsHungarian subsidiary van Roij Fasteners Hungaria Kft.
Realignment of Schössmetall GmbH & Co. KGFollowing comprehensive restructuring of the businessprocesses and the disposal of unprofitable operations,the company already proved to be a reliable supplierfor customers in the metal trade and specialist dealersin 2005.
Outlook for 2006The aim in the current fiscal year is to expand and gainfurther market shares while consolidating earningspower. Primary focus will be placed on enhancing andimproving our quality and services. At the same time,we will continue the optimization of our internalprocesses.
Trade
2001 2002 2005
2,000
1,500
1,370
1,000
2,163
2003
1,290
1,403
Sales Trade
in EUR million
Sales staffTrade
2001 2002 2003 2005
500
400
300
560
2004
459
305291
272
2004
2,049
65
Acquisition of the tool manufacturer TIL and the screwsmanufacturer SWG Shanghai FastenersBy acquiring the British TIL group, the Würth Groupreinforced its commitment in the tool manufacturesegment in 2005. TIL’s range of products includesrecess tooling. The necessary expertise was obtained in2005 by taking over TIL Werkzeuge GmbH andTeudeloff GmbH & Co. KG. The screws manufacturerCN-SWG Fasteners Shanghai joined the Würth Groupon July 1, 2005 and the fittings manufacturer Grasslaunched its sales activities in China in the fall of 2005with its subsidiary CN-Grass (Shanghai) InternationalTrading Co. Ltd. The establishment and expansion ofsales and production activities of the Würth Group inChina is thus making steady progress.
Good sales development and higher production costsThe Production unit included a total of 27 companiesin 2005. The majority of our customers are from thewood and metal trade, but our international clientelealso includes large customers in the furniture, electri-cal and electronic as well as automotive industries. Asof December 2005, the unit had 3,517 employees andhad generated total sales of EUR 348 million. Thisrepresents growth of 17.2 percent compared to the prioryear, not least thanks to the new companies integratedin the Production unit. Production costs went up as aresult of in some cases spiraling prices for energy andraw materials and could not always be charged tocustomers or compensated by higher productivity. Inconsequence, the operating result remained slightlybelow expectations.
Outlook for 2006Prices for raw materials and energy are expected tocontinue to rise in the current fiscal year. In order toensure an upwards trend in profitability, we will con-centrate on measures to improve productivity andreduce costs in the production process. In addition,our production program will in future focus more andmore on fastening parts subject to approval by buil-ding authorities and on innovative new products worthpatenting. This way, we hope to compensate for ourhigher costs on the procurement side by sales priceswhich are adequate for the quality, degree of noveltyand customer benefit that our products offer.
Production
EXPANSION OF SALES AND
PRODUCTION ACTIVITIES IN CHINA
2001 2002 2005
3,000
2,000
1,465
1,000
3,517
2003
1,6521,592
SalesProduction
in EUR million
Sales staffProduction
2001 2002 2003 2005
300
200
100
348
2004
297
169159165
2004
3,087
Group Management Report of the Würth Group > Allied Companies
66
TUMULTUOUS TIMES
Whether printed circuit board production, the productionand sale of electronic components and passive compo-nents or photovoltaics: 2005 was another year thatheld considerable challenges in store for all areas ofthe Würth Elektronik Group with respect to the marketon the one hand and decisions within the group withimplications for the future on the other.
No wavering from the course for record growthFollowing on from the prior year which was conside-red one of the best in the history of the company, theWürth Elektronik Group outperformed all sales andearnings records again in 2005.
Many strategic decisions of recent years started tobear fruit in 2005. The printed circuit board plant inSchopfheim, acquired in 2003, reached the profit zone,and the integration of iBE in the Würth ElektronikGroup went smoothly, too. This basis made it possibleto decide in favor of establishing a production plant forinterference suppression chokes in China and put thedecision into practice in record time.
The circuit board technology set up a company ofits own in the growth market India where it providescustomers with circuit board samples and small seriesmade in Germany.
A decision of paramount importance for the WürthGroup in 2005 was the investment of EUR 55 millionon the construction of a large series production facilityfor CIS (copper indium selenide) photovoltaic modulesin Schwäbisch Hall (CISfab). With this step, renewableenergies are firmly entrenched in the long-termcorporate strategy.
Outlook for 2006The forecasts for 2006 for the Electronics unit are onceagain positive. As in the past, the main challenge will be to consistently offer customers added value whileexpanding sales activities at an international level.
Electronics
2001 2002 2005
2,000
1,500
835
1,000
2,065
2003
1,093
838
SalesElectronics
in EUR million
Sales staffElectronics
2001 2002 2003 2005
200
150
100
238
2004
183
139
117124
2004
1,209
67
The Screws and Standard Parts unit comprises 30companies in 21 countries. Of these, six are headquar-tered in Germany. The unit’s main business activity isthe sale of DIN and standard parts. The majority of thecompanies specialize in the sale of stainless steel parts.
The business activities are divided into three areas: ■ Sale of DIN and standard parts,
as well as of stainless steel products■ Manufacture and sale of specialty fastening parts■ Repairs and maintenance of high pressure
hydraulic lines
In fiscal 2005, the unit raised sales by 12.3 percent toEUR 155 million with 776 employees. The businessactivities were mainly geared towards small and medium-sized industrial enterprises, specialist stores as well asboat builders and shipyards.
Stainless steel works wondersThe importance of stainless steel as a material ingeneral and for fasteners and connecting elements inparticular has been steadily on the up and up in recentyears – and the end of this trend is not in sight yet. Theimplications do not stop at the food and plumbingindustry. Medical technology and household appliancesare also finding more and more uses for stainless steel.
Outlook for 2006The rising demand for stainless steel as a material hasautomatically created a tendency towards price specu-lation. The listing of nickel, for example, which deter-mines the price of stainless steel, fluctuated betweenUSD 11,000 and USD 18,000 per metric ton in 2005.This volatility requires a high degree of flexibility whencalculating prices and making offers. Long-term priceforecasts are virtually impossible, but there is a tenden-cy for stainless steel products to gain further in signifi-cance. The Screws and Standard Parts unit has plannedten percent growth for 2006 and aims to increase itsstaff to 806 by December 2006.
Screws and Standard Parts
INCREASING DEMAND FOR STAINLESS STEEL
2001 2002 2005
600
400
613
200
776
2003
656
586
SalesScrews and Standard Parts
in EUR million
Sales staffScrews and Standard Parts
2001 2002 2003 2005
150
100
50
155
2004
138
116109
2004
706
111
Milestones in the Company’s History
68
Ω 1969
The firm’s premises at the railway station in
Künzelsau reach the limit of their capacity.
The offices are moved to a new building in
the Gaisbach district of Künzelsau.
The Wurth Screw and Fastener
Corporation is set up in the USA, Würth’s
first company on the American continent.
Ω 1981
Würth establishes its first company in
Australia.
Ω 1985
Adolf Würth GmbH & Co. KG celebrates
40 years in business, and Reinhold Würth
celebrates his 50th birthday.
Ω 1987
Würth enters the Asian market by acquiring a
company in Japan and establishing its own
subsidiary in Malaysia. Würth is now repre-
sented on all five continents.
Ω 1989
Adolf Würth GmbH & Co. KG is awarded the
German Marketing Prize.
Ω 1990
The company opens its first branch office in
former East Germany, in Dresden.
Ω 1945
With 20 years’ experience in this line of business,
Adolf Würth establishes a wholesale firm in
Künzelsau, in the Hohenlohe region of southern
Germany, supplying screws, nuts, and bolts.
Ω 1954
Death of Adolf Würth, founder of the firm,
at the age of 45. His 19-year-old son Reinhold
takes over the running of the business.
Annual sales at the time are around
EUR 80,000.
Ω 1962
Reinhold Würth ventures outside Germany
and sets up the company’s first foreign
subsidiary, Würth Nederland B.V.
Ω 1965
Adolf Würth OHG is converted into a limited
commercial partnership (“KG”). The general
partner is Würth-Verwaltungs-GmbH. The
limited liability partnership capital is con-
tributed solely by the family.
MILESTONES IN THE COMPANY’S HISTORY
194019411939 1942 1943 1944 1945 1946 1947 1948 1949 1951 1952 1953 1954 1955 1956 1957 1958 1959 1961 1962 1963 1964 1965 1966 1967 1968 1969 1971 1972 1973 1974 19
Ω Ω Ω Ω Ω Ω
1950 1960 1970
Ω 1970
Würth celebrates 25 years in the business.
Sales rise 50 percent to EUR 32.9 million,
and the first Würth company is established in
South Africa.
Ω 1978
A new distribution center goes into operation
in Künzelsau-Gaisbach.
69
Ω 1992
On May 15, 1992, the new headquarters
building in Künzelsau-Gaisbach is officially
opened. The modern office complex includes
a museum of art that is open to the public.
Ω 1994
On January 1, 1994, Reinhold Würth retires
from operational management and takes the
chair of the Advisory Board of the Würth
Group. Dr. Walter Jaeger is appointed Chairman
of the Board of Management of the Würth
Group. Rolf Bauer becomes Deputy Chairman
of the Board of Management.
Ω 1995
On April 20, 1995, Adolf Würth GmbH & Co.
KG celebrates its 50th anniversary. In the
jubilee year 1995, the Würth Group achieves
record sales of EUR 2.2 billion.
Ω 1998
Two Würth Group companies steeped in
tradition, toolmakers HAHN+KOLB Werk-
zeuge GmbH in Stuttgart and the Arnold
Umformtechnik GmbH & Co. KG screw
factory in Ernsbach, celebrate their 100th year
in business.
Ω 1999
Reinhold Würth is appointed Professor for
Entrepreneurship at the University of
Karlsruhe in recognition of his outstanding
entrepreneurial achievement and teaches there
until the end of the summer term 2003.
Ω 2000
The Würth Group rounds off an outstanding
fiscal year in the history of the company by
setting new records, the company’s sales
exceeding EUR 5 billion. This represents the
fulfillment of the target set by Prof. Dr. h. c.
Reinhold Würth. His “Vision 2000”, formu-
lated back in 1987 when group sales were
just EUR 700 million, becomes reality.
Ω 2001
On January 1, 2001, the Würth Group is given
a new management structure. The members
of the new Board of Directors are Dr. Walter
Jaeger (Chairman), Rolf Bauer (Deputy Chair-
man), and Bettina Würth.
Ω 2003
Despite the challenging economic environ-
ment and a focus on consolidation, the
company continues to invest heavily in
expanding its worldwide sales force. This
policy is rewarded by record sales of EUR
5.45 billion.
Dr. Harald Unkelbach is appointed to
the Board of Directors of the Würth Group
on January 1, 2003.
Ω 2005
The Würth Group celebrates its 60th
anniversary in business. Festive activities
culminate in the official ceremony to mark
the anniversary on April 22, 2005, to which
guests from politics, business, art and
culture are welcomed at the company.
The fiscal year 2005 is the most successful
year in the history of the Würth Group.
Sales reach a new record of EUR 6.9 billion
and, at EUR 455 million, the Würth Group
also generates a record operating result.
Robert Friedmann takes over the role of
Chairman of the Board of Directors from
Dr. Walter Jaeger when he retires on June 1,
2005. Dr. Roland Hartmann is appointed to
the Board of Directors on June 1, 2005.
75 1976 1977 1978 1979 1981 1982 1983 1984 1985 1986 1987 1988 1989 1991 1992 1993 1994 1995 1996 1997 1998 1999 2001 2002 2003 2004 2005 2006 2007 2008 2009 2011
Ω Ω Ω Ω Ω Ω Ω Ω Ω Ω Ω Ω Ω Ω Ω
1980 1990 2000 2010
70
Imprint
Published by
Würth Group, Künzelsau
D-74650 Künzelsau, Germany
www.wuerth.com
Contact details
Press and public relations
Phone +49 7940 15-1186
Fax +49 7940 15-4400
Content responsibility
Robert Friedmann
Editorial responsibility and coordination
Markus Hable, Sarah Meckel, Dieter Münch, Sigrid Schneider, Martina Skibowski,
Monika Troppert
Design
Hilger & Boie GmbH
Büro für Gestaltung, Wiesbaden
Typesetting and lithography
Scanner GmbH, Künzelsau
Edited by
Büro Gloger, Konstanz
Printed by
Bechtle Druck & Service GmbH & Co. KG, Esslingen
© Würth-Gruppe, Künzelsau
© Succession Picasso/VG Bild-Kunst Bonn, 2006 for the work of Pablo Picasso
Printed in Germany. All rights reserved.
May not be reproduced, in part or in whole, without prior consent.
Photo credits
Kai Bienert (p. 49)
J. Hyde (p. 46)
Eva Maria Kraiss (p. 43, 47)
Sammy Minkoff (p. 15)
Volker Naumann (p. 44)
Julia Schambeck (p. 47)
Andi Schmid (p. 3, 5, 14, 16, 22, 24, 53)
Georg Schreiber (p. 9)
Archiv Würth (p. 2, 4, 6, 8, 10, 11, 12, 13, 45, 48, 50, 51, 52, 68, 69)
The editorial team would like to thank the many colleagues who helped prepare
this annual report.
This annual report is published in German and English.
Both versions are available on the internet at www.wuerth.com, together with
additional information about the Würth Group.
1GFP-MWK-BG-SC-BE-7,5’-05/06