MAHLE METAL LEVE S.A. (A free translation of the original in Portuguese)
Financial statements at December 31, 2015 and 2014
Despite the increasing political and macroeconomic uncertainties and the consequent drop in the consumer confidence, which strongly affected sales and production of vehicles in Brazil, in 2015 MAHLE Metal Leve reported growth in net operating revenue and maintained solid profitability levels.
These results reflect the evolution of the Company's operating and financial indicators, the strength of its management mechanisms and processes and its balanced sources of revenue in the markets it operates.
We seek to mix our sales by balancing the operations in the Original Equipment Manufacturing (OEM) and Aftermarket (replacement parts) sales in the domestic and export markets seeking to offset the variations in these markets and stabilize our profitability margins over time. Accordingly, in 2015 we were able to offset the drop in our OEM sales by increasing exports and maintaining our aftermarket sales.
The graphs below show how the sources of revenue were distributed in 2015 and 2014:
We intend to keep improving our production processes by constantly seeking to reduce costs and increase profitability. To this end, we systematically monitor our competitiveness evolution through quantitative indicators to be able to increase revenues without significantly increasing operating costs and expenses.
Yet with respect to the opportunities of making operational adjustments that are under constant oversight by the Company, the operations of subsidiary MAHLE Hirschvogel Forjas S.A. were discontinued given the phase-out of orders of current customers and lack of perspective for the market of connecting rods within the Company's product portfolio. Such a decision aimed to stay losses that the subsidiary was incurring and therefore will bring positive impacts for the Company in the coming periods.
Concerning the results from the Company's constant R&D investments, our Tech Center in the City of Jundiaí, State of São Paulo, tops the list of patent applicants in the Brazilian automotive segment. Mahle is among the top ten patent applicants in Brazil. The figures reported over the past three years of activities of the Jundiaí Tech Center show that the center deposited 82 new patent applications, many of them to the Patent Cooperation Treaty (PCT), an international body that assists applicants in seeking protection for their innovations internationally.
MAHLE Metal Leve was ranked the 5th most innovative company in the industrial sector and the 18th most innovative company in Brazil according to "Inovação Brasil Survey - The 100 Most Innovative Companies", recently published by Newspaper Valor Econômico.
For the second consecutive year the Company received the Transparency Award 2015 from Brazil's National Association of Finance, Accounting and Administration Executives (ANEFAC). The award highlighted the Company as one of the most transparent companies in the country among the publicly traded corporations with a turnover up to R$ 5 billion, for the quality of the information in its financial statements for 2014.
We believe 2016 will be another challenging year. However, to continue growing under even more challenging market conditions, it is essential to put further efforts and create initiatives to adjust our production capacity and at the same time maintain our investments in research and development of new technologies, which will allow us to maintain competitiveness and our market share over time.
Year 2015 was marked by a negative GDP and high inflation besides other factors that brought more difficulties over the period. When the year began, it was clear the need of fiscal adjustments in the government accounts to seek to achieve a balance necessary for the expected economic stability. The government's spending cuts, however, were not sufficient to achieve the target. The private sector also suffered from lack of investments over the year because of the drop in the prices of oil and metals abroad. In Brazil, the political and macroeconomic uncertainties resulted in lack of confidence by the Brazilian population in general, which impaired sales and production of new vehicles in the country.
According to data from the Ministry of Development, Industry and Foreign Trade (MDIC) and the National Association of Manufacturers of Automotive Vehicle Components (Sindipeças), the trade balance for the autoparts industry reported a deficit of U$ 5.59 billion in 2015, which is 37.9% below that of 2014.
As a direct consequence of the slowdown of the Brazilian automotive market, 2015 ended with 1047 car dealers and autoparts distributors closed in Brazil, causing loss of 32,000 job positions, according to data disclosed by the National Federation of Motor Vehicle Distribution (Fenabrave).
The scenario proves to be challenging still in 2016, with continuous political uncertainties coupled with high levels of inflation, interest rates and unemployment, drop in demand, currency volatility, commodity price depreciation and credit market downturn resulting in an adverse environment for Brazilian companies to manage their affairs. These all flag that the adaptability of companies in 2016 will once again be tested.
In the international market, the European economy is still presenting positive outlook of growth based on the program of inflow of funds into that market and additional measures towards strengthening economy. In Asia, China shows more moderate signs of growth compared to prior years. In the United States there are signs of measures towards normalization of interest rates, flagging that the US economy will recover.
We are a Brazilian autoparts company that manufactures and sells components for internal combustion engines and automotive filters. We manufacture products with state-of-the-art technology and the highest quality, and we continuously invest in research and development of new products and production processes.
We have been developing activities in Brazil since the 50's and offer a broad portfolio of products and integrated solutions that in most cases have been customized jointly with our major customers. We operate in the OEM and aftermarket segments, serving automakers and large autoparts distributors and engine overhaul enterprises.
Our products are manufactured and sold in Brazil and Argentina, and also exported to over 60 countries, among USA, Germany, Mexico, Portugal and Spain, for a diversified portfolio of customers including General Motors/Opel, Volkswagen, Fiat, Ford, Daimler MBB, International, Cummins, Volvo, PSA Peugeot, John Deere, Renault, Scania, Caterpillar, Honda, Hyundai, among others.
We own six industrial plants, five of which are located in Brazil, in the cities of Mogi Guaçu (two units), Indaiatuba and São Bernardo do Campo, all of which are located in the State of São Paulo, and in Itajubá, in the State of Minas Gerais. Our sixth plant is located in the city of Rafaela, Argentina. We have two distribution centers: one in the city of Limeira, State of São Paulo, and one in Buenos Aires, Argentina. We have a technology center located in the city of Jundiaí, State of São Paulo, which we believe is one of the largest and most well-equipped technology centers in Latin America for development of components and solution packages for internal combustion engines. This center allows us to add value to our products and meet the requirements of our customers in a customized and efficient manner, by developing innovative technologies for products and processes.
We belong to the German autoparts group MAHLE, or MAHLE Group, which was established in 1920 and is one of the world's most traditional groups in the autoparts industry. MAHLE Group, including the Company, currently has more than 170 industrial plants in 35 countries on five continents, 13 research and development centers and approximately 75 thousand employees.
As part of the MAHLE Group, which has operations worldwide, we are able to exchange knowledge, have constant access to the latest technology and develop new products together with our customers, which we believe are key factors to the high level of market penetration and customer loyalty that we have achieved.
Brazilian vehicle production in 2015 fell by 23.0%, and sales of the Brazilian automotive industry fell by 26.7%, compared to 2014. These drops are due mainly to the scenario of high inflation, low investments by the private sector and deterioration of job positions in Brazil. All such factors, coupled with increased restriction of credit offer to consumers, affected consumers' confidence in purchasing durable goods.
According to the Brazilian Association of Motor Vehicle Manufacturers (ANFAVEA), vehicle inventory recorded at the end of 2015 totaled 271.1 thousand units, corresponding to 36 days of sales. At the end of the same period of the previous year, the vehicle inventory was equivalent to 28 days of sales (351 thousand units).
The graph below shows the changes in the production, sales and total inventory of national vehicles in 2015 compared to 2014.
MAHLE Metal Leve SA issued this content on 01 April 2016 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 01 April 2016 20:04:44 UTC
Original Document: http://ri.mahle.com.br/en/documentos/955-DEF-MML-2015-(ingles).pdf
