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Currencies
The Group has operations and subsidiaries in a large number of countries outside the Eurozone and a significant portion of its Sales and costs are denominated in non-Euro currencies, particularly US dollars,
pounds sterling and other currencies. The currencies in these countries may be subject to substantial fluctuations in exchange rates. Although the Group attempts to hedge the net currency exposure against any material currency risks, these
fluctuations can result in the recognition of exchange rate losses in the Group’s consolidated income statement. Developments of exchange rates may also have negative effects on Sales, whose value is converted into Euros and on the Earnings of the
Group. In addition, shifts in exchange rates may affect Andritz’s position relative to its competitors. Also, the Shareholders’ Equity of the Andritz Group is susceptible of being affected by changes in the exchange rate.
Competition
The Andritz Group works in a very competitive market for each of the Business Areas. Some of the markets
in which the Group competes are highly fragmented, with a few large, international manufacturers competing against each other and against a high number of smaller, local companies. This has in some cases adversely impacted Sales margins realized by
certain of the Group’s businesses. With persistent and intensive research and development work, the Group has succeeded in updating the technologies offered to customers to the latest state-of-the-art. The Andritz Group invests
approx. 3% of its total Sales in Research and Development and has a strategy of continuing the offer its clients the latest technological developments. There is, however, no assurance that the Group can maintain and defend this position in the future.
Acquisition and integration of complementary businesses
One of the Group’s strategic goals is to become a comprehensive supplier of systems and equipment
in all of its Business Areas through organic growth and complementary acquisitions. In the course of implementing this strategy, the Group has acquired and integrated a number of companies with worldwide operations since 1990. However, no
assurance can be given that the Group will be successful in identifying and acquiring appropriate acquisition candidates in the future, or that suitable candidates will be available, or indeed that sufficient financing can be provided. Furthermore,
once a company has been acquired, it needs to be integrated. Although Andritz has a good track record in integrating newly acquired companies, it cannot be excluded for future acquisitions that the planned objectives and synergies cannot be reached
wholly, and that this affects the economic development of the Group. Legal proceedings
In the course of its activities, the
Andritz Group is party to numerous legal proceedings before both administrative and judicial courts and bodies and arbitration tribunals. The substantial majority of such proceedings are of a nature considered typical of the Group’s business.
Where appropriate, provisions are booked to cover expected outcome of proceedings to which Group companies are a party, to the extent that negative outcomes are likely and reliable estimates can be made. However, even if provisions are made,
there is no guarantee that these will always be sufficient. Andritz Inc., a subsidiary of the Company, was, as of February 1, 2004, one of many defendants in a total of 61 asbestos cases
in the USA. In aggregate the cases involve a total of 18,082 plaintiffs. Nearly all of these cases involve claims by multiple plaintiffs against multiple defendants. Andritz Inc. does not believe it should be found liable in connection with
any of these claims and plans to vigorously defend each claim. Predecessors of Andritz Inc. supplied equipment that contained gaskets and/or packings purchased from sub-suppliers which may have contained encapsulated asbestos. Andritz Inc.
has not settled any asbestos claims or had a judgement of liability rendered against it in connection with an asbestos claim.
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