The global technology group Freudenberg, Weinheim, has managed the crisis well.
Although sales in 2020 was at Rs. 75,305 cr (8.8 billion Euro), it was significantly below the figure of Rs. 80,646 cr (9,467 million Euro) for the previous year, the company reported a profit from operations of Rs. 5,706 cr (669 million Euro) (previous year: Rs. 6,984 cr (820 million Euro).
The impact was visible in India as well as sales showed a 16% dip to close at Rs. 2,130 cr in 2020 as compared to Rs. 2,532 cr last year.
Despite the effects of the pandemic, the international rating agency Moody’s Deutschland GmbH, Frankfurt am Main, confirmed its credit rating of Freudenberg at A3, with a stable outlook, as in the previous year. The Group therefore continues to hold an excellent single A rating.
In addition to stringent cost management, the significant improvement in the economic environment at the beginning of the fourth quarter of 2020 helped Freudenberg achieve these financial results. Furthermore, the Group reacted rapidly in the crisis and implemented targeted measures that took effect.
Freudenberg globally continued to invest in future growth. Freudenberg conducted research and development activities amounting to Rs. 3,799 cr (446 million Euro) (previous year: Rs. 4,096 cr (480 million Euro) . This represents 5.0 percent of sales (previous year: 5.1 percent). Research and development expenditure remained at a high level.
Especially for the Business Groups producing for the automotive, textile and mechanical engineering sectors, the economic environment globally and in India, at the beginning of the year was extremely challenging.
Business group
Assessing the Freudenberg performance in 2020 Freudenberg India Regional Representative Georg Graf said in addition to the pandemic, the transformation in mobility (specifically automotive sector which is our key industry) has led to seven of the company’s ten Business Groups having to contend with, in some cases, sizeable losses.
“In contrast, three Business Groups have experienced a positive impact on their business. Freudenberg Home and Cleaning Solutions (FHCS) is benefiting from more stringent hygiene measures, Freudenberg Filtration Technologies (FFT) from the launch of mask production and Freudenberg Medical (FM) from a positive demand for new products,” said Georg Graf.
To tackle the crisis, Georg Graf said Freudenberg is continuing to adhere to its strict cost management and the related measures.
“Investments are being reduced to as low a level as possible without jeopardizing future growth, and we have avoided making cuts to our research and development activities. These different, and in some cases divergent, developments show just how important its broad-based positioning is for Freudenberg,” said Georg Graf.
“We have also made good progress with our strategic focus topics of e-mobility, digitalization and sustainability. Furthermore, we have continued a high level of research and development activities as an innovative technology group globally,” he added.
Freudenberg’s seven Business Groups in India have a total workforce of some 2,852 employees at around 50 locations – running six R&D centers and 15 production sites with state-of-the-art shop floors in India.
Research and development
Research and development expenditure remained at a high level. Freudenberg continued to invest in future growth. In 2020, Freudenberg conducted research and development activities spending to the amount of Rs. 3,799 cr (446 million Euros) (previous year: Rs. 4,096 cr (480 million Euros)).
This represents 5.0 percent of sales (previous year: 5.1 percent). Freudenberg generates more than a third of its sales (34.1 percent; previous year: 34.7 percent) with products that are less than four years old.
One example: As demand for face masks rose in 2020, the Freudenberg Business Groups started to develop various materials for protective masks. Freudenberg Filtration Technologies began production of certified medical face masks with a filter efficiency of over 98 percent.
In addition, filter media for FFP2 face masks providing high-level protection against viruses were developed. These masks have now also been certified by the FDA (Food and Drug Administration) in the USA.
Sustainability
The sustainability of products and processes has been part of Freudenberg’s corporate responsibility for many years. In 2016, the Group developed a Group-wide sustainability strategy. In addition, sustainability was made an integral part of the strategy process.
In the “Sustainability Drives Climate Action” project, the Group is developing a position with respect to the challenges and opportunities of climate change. Firstly, Freudenberg intends to reduce CO2 emissions by 25 percent by 2025. Secondly, the opportunities and costs of climate neutrality for Freudenberg are to be identified in 2021.
In this context, Freudenberg has adopted a four-stage strategy. The top priority will be to reduce energy consumption. The second stage will be to cover the remaining energy demand using electric power to the greatest extent possible. Thirdly, the Group’s energy balance is to be improved by purchasing green electric power. Fourthly, Freudenberg is committed to offsetting CO2 emissions.
Sustainability has two dimensions for Freudenberg. Firstly, the sustainability strategy is concerned with how Freudenberg develops its own processes and uses plants to conserve resources. Secondly, Freudenberg develops products and solutions that make customers’ production more efficient and sustainable or allow products to be manufactured with greater resource efficiency.
Freudenberg Group portfolio improved through acquisitions on the basis of our strategy and strengthened our business. In May, Freudenberg acquired 100 percent of the shares in Low & Bonar PLC, London, United Kingdom, now Low & Bonar Limited, Edinburgh, United Kingdom. Low & Bonar is a global manufacturer of technical textiles with few branch offices present in India.
Acquisition
The company will be integrated in the Freudenberg Performance Materials Business Group. Through this acquisition, Freudenberg is strengthening its business with performance materials and will further expand its technical know-how with the innovative technology of Low & Bonar.
At the end of December 2019, Freudenberg Performance Materials had already acquired the Filc Group, Škofja Loka, Slovenia. Filc produces needle punch nonwoven textiles and laminated materials. Despite the restrictions due to COVID-19, very good progress has been made with the integration of the two acquisitions.
Furthermore, Klüber Lubrication, München SE & Co. KG (part of Freudenberg Chemical Specialities), Munich, Germany, acquired Traxit International GmbH, Schwelm, Germany, in January 2020. This company is one of the world’s largest producers of wire drawing lubricants and has supplied a full range of lubricants for all applications to the wire drawing industry for about 140 years.
Outlook
For 2021, Freudenberg once again expects a generally challenging overall economic environment. Following a significant downturn in the world economy in 2020, especially because of the spread of COVID-19, economic growth is expected to recover in 2021. Despite the challenges of working in India, German companies are still very convinced of the long-term Indian opportunity, with its young well educated and connected population and its evolution as an IT and R&D powerhouse for global players.
Freudenberg has held business ties with companies in India for more than 90 years. The Group has 15 production sites around India and employs around 3,000 people at 50 locations.
Freudenberg is a global technology group that strengthens its customers and society long-term through forward-looking innovations. Together with its partners, customers and research institutions, the Freudenberg Group develops leading-edge technologies and excellent products and services for about 40 markets and for thousands of applications: seals, vibration control components, technical textiles, filters, cleaning technologies and products, specialty chemicals and medical products.
Innovation strength, strong customer orientation, diversity, and team spirit are the cornerstones of the Group. The more than 172-year-old company lives by its core values: a commitment to excellence, reliability and pro-active, responsible action. In 2020, the Freudenberg Group employed some 48,000 people in around 60 countries worldwide and generated sales of more than 8.8 billion Euros. For more information, please visit www.freudenberg.com.
