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Interpack 2014 Bosch Packaging Technology aims to keep strengthening its leading position until 2020 Market for packaging machinery in a period of transition
- New locations in Asia and Africa planned
- New markets to be opened up
- PA 2020 strategy unveiled
“We are well on our way to realizing our plans,” Klefenz said. Last year, Bosch Packaging Technology's sales exceeded the one-billion euro mark for the first time. In fiscal 2013, the company increased its sales by 22 percent, from 914 million euros to 1.1 billion euros. This was largely the result of the first-time consolidation of companies such as Hüttlin, Manesty, and Eisai Machinery. After adjusting for consolidation effects, growth was 6.4 percent. Currency effects notwithstanding, Packaging Technology recorded internal growth of ten percent. According to VDMA, a trade association, the packaging machinery sector grew four percent in 2013. Including companies that were consolidated for the first time in the year under review, the company employed 5,600 associates at more than 30 locations, 12 percent more than the previous year.
Moving toward the next decade with the PA 2020 strategy
“We expect to keep up this pace of growth in the coming years as well. By the end of 2015, our annual sales are likely to reach the 1.5 billion euro mark,” said Klefenz. “But our plans also go beyond 2015.” Last year, the company defined its strategy up to the end of this decade with PA 2020. The strategy's central aim is to expand the company's current fields of business and markets and to venture into new ones.
Regional shift expected
At present, Bosch Packaging Technology generates around 40 percent of its sales in Europe, 30 percent in Asia, and a quarter in North and South America. However, for the coming years, a strong regional shift is expected. “Until the end of this decade, we aim to continue growing strongly in the established markets, such as Europe and North America. At the same time, we will generate far more than a third of our sales in Asia,” said Klefenz. Africa and the Middle East are also gaining significance. “Markets in Europe and the Americas will keep developing continuously. This means that the overall market for packaging machinery will grow. However, in the coming years, there will be a shift in the importance of regional markets,” said Klefenz.
Pharma segment growing strongly
The pharma segment is one of the drivers of Bosch Packaging Technology's growth. The company has benefited from the sector's dynamic global development. In the past year, it grew nine percent. In total, this field of business accounts for 52 percent of the company's sales. “This shows that a growing number of people have access to medication. It is also the result of the global growth of the generics business,” said Klefenz. At the same time, more complex substances and the ever-stricter requirements of manufacturers and lawmakers have placed growing demands on the packaging industry. “This calls for major innovative strength,” said Klefenz. In total, Bosch Packaging Technology spent around 4.5 percent of its sales on research and development in 2013.
Food sector: major order in Mexico
The equipment business for the food and confectionary industries also developed well. In 2012, Bosch Packaging Technology acquired the largest single order in the company's history. This year, the company will be delivering two packaging lines to a biscuit manufacturer in Mexico. Each line operates with six horizontal filling and sealing machines with fully automatic cartoning that can package more than 17,000 crackers per minute.
Alongside the sale of machinery for dry foods and confectionary, in the coming years Bosch Packaging Technology intends to significantly expand its business in the selected beverages and liquid food segments.
Service business continues to grow
Just like the entire industry, Bosch Packaging Technology expects to see the scope and nature of the service business change. “For this reason, comprehensive service is an important part of the PA 2020 strategy. Increasingly, customer expectations can only be met by companies with a broad range of expertise and a strong regional presence. We are one such company, and we offer a growing number of solutions that can be combined with one another in a flexible manner,” said Klefenz. As a result, the company's customers can get everything they need from a single source. This includes process and packaging machinery, as well as technologies for product handling, automation, and inspection. “In short, we offer one stop shopping. The customer contacts us once and receives, if desired, a full turnkey solution for their project. This includes not only machinery and equipment, but also the planning and construction of packaging lines, as well as assembly, maintenance, and service,” said Klefenz.
Better packaging also means that millions of people are gaining better access to medications and food. Today, a third of the world's food still goes to waste, often as a result of inadequate packaging and storage. For this reason, Bosch Packaging Technology is involved in the UN's “Save Food” initiative. The project was launched in 2011 at the last Interpack trade show in Düsseldorf. “We are proud to be making a contribution,” said Klefenz. “Creating real value-added is also in line with the Bosch 'Invented for life' leitmotiv.”
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- April 30, 2014
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Annual press conference 2014 Bosch starts new year with strong sales growth in every business sector Bosch uses its broad technological and industrial expertise in the connected world
- 2013: without extraordinary effects, margin of 6 percent
- Sales growth of roughly 7 percent in the first three months of the year
- Growth between 3 and 5 percent expected for 2014
- Market leader in micromechanical sensor technology, a gateway technology
- Opening up new and internet-based market segments
- One billion euros in sales with driver assistance systems by 2016
- Sales to double in Asia Pacific and the Americas by 2020
*Note: Due to a change in accounting policies, the 2013 figures can only be compared to a limited extent with the previously published figures for 2012. The decision to forego the application of proportionate consolidation affects mainly BSH Bosch und Siemens Hausgeräte GmbH and ZF Lenksysteme GmbH with a consolidated sales volume of some 7.3 billion euros.
Stuttgart – The Bosch Group has started the new year with a good increase in sales. In the first quarter, sales grew by roughly 7 percent. After adjusting for exchange-rate effects, the increase was roughly 10 percent. For the current fiscal year, the global provider of technology and services expects its sales to grow 3 to 5 percent. “We continue to move forward with our traditional business and are opening up new fields of business. In so doing, we are benefiting from our broad technological and industrial expertise,” said Dr. Volkmar Denner, chairman of the Bosch board of management, at the company's annual press conference. The Bosch Automotive Technology business sector continued its strong business performance of the previous year, growing impressively in the first quarter of 2014. “We have also seen clear growth in our other business sectors. With regard to the regions, business in Asia Pacific is developing especially well,” said Dr. Stefan Asenkerschbaumer, the Bosch CFO. Bosch also aims to further improve result in 2014.
Sensor technology – global market leader for the technology of the future
Internet-enabled products and internet-based services are one of the focal points of the company's future sales growth. With its hardware know-how and broad technological expertise, Denner believes Bosch is well prepared to move into this direction. “Bosch's traditional strengths – our innovative strength, high standard of quality, international presence, and the integrative force of our corporate culture – are also valuable in the connected world,” Denner said. Moreover, the company is global market leader in the area of micromechanical sensors (MEMS), a key technology when it comes to networking things on the internet. Bosch's strategic objective is to create solutions for connected mobility, connected industry, connected energy systems, and connected buildings.
Intelligent sensors – basis for the internet of things
Sensors enable a new form of technical assistance in day-to-day life. Describing the strategic significance of sensor technology, Denner said: “Whether we are speaking of automated driving or the smart home, a new quality of comfort, safety, and efficiency is developing, and Bosch is creating the technical conditions for this change.” In 2013, the market leader produced one billion micromechanical sensors. This year, a further 30 percent increase is planned. Intelligent sensors are the next level of technological progress. These are equipped with a radio interface and a microcontroller. As a result, sensors are able to transmit relevant data via the internet, for instance to mobile end devices. “Smartphones will not be the only devices to be equipped with sensors. Any 'smart' object will feature internet-enabled sensor technology,” Denner said.
Automated driving – also at higher speeds from 2020
Sensor technology is also a major technological prerequisite for future driving. Modern driver assistance systems require ultrasound, radar, and video sensors. This year, Bosch will produce nearly 50 million ultrasound sensors, 25 percent more than the previous year. The number of radar and video sensors produced will double to more than two million units. As early as 2016, sales of driver assistance systems will exceed one billion euros. By 2020, the company aims to enable automated driving at higher speeds on freeways. In the coming decade, fully automated driving using an autopilot function could become possible. “Automated driving is a technology that saves lives. At the same time, it can spark drivers' enthusiasm, since it offers them support with tiresome driving tasks,” Denner said.
Connected road traffic – new services
For driving to be automated, there has to be connected traffic as well as car-to-x communication. By 2025, almost every new car will be equipped with wireless data communication technology. Even now, the connected vehicle makes a broad range of services possible. In 2013, Bosch began offering its eCall emergency call system. When sensors record that a vehicle has had an accident, an automatic emergency call is made. Last year, the Bosch monitoring center processed a good 30,000 emergency calls. In the area of telematics, Bosch offers fleet management services for leasing and insurance companies. “For us, connectivity on the roads not only means efficiency and comfort, it also means safer driving,” Denner said.
Doubling sales in Asia and the Americas by 2020
Asia continues to be Bosch's number one growth region. By 2020, the company aims to double its sales in the region. For this reason, the level of capital expenditure will remain high. From 2010 to 2014, Bosch will have invested some 3.3 billion euros in the region. The company also aims to double its sales in North and South America by the end of the decade. In addition to expanding its manufacturing capacity, Bosch is strengthening its local development activities. In Guadalajara, Mexico, the company is currently opening a new development and software center. In Africa, too, Bosch aims to significantly increase its sales in the years ahead. In 2014, the company will further expand its presence on the continent. In Europe, Bosch aims to grow faster than the market despite the region's economic situation, which continues to be weak. As it expands its international presence, Bosch is also developing a growing number of products and services that are tailored to local customer needs.
The business year 2013 – improved sales and earnings
In fiscal 2013, Bosch increased its sales by 3.1 percent, to 46.1 billion euros (*based on an adjusted previous-year figure of 44.7 billion euros). The disclosed sales figure takes the exit from crystalline photovoltaics into consideration as well as consolidation effects resulting from changed accounting policies and acquisitions in the previous year. After adjusting for exchange-rate effects, sales grew 6.3 percent. As a result of negative exchange-rate effects to the tune of some 1.5 billion euros, the strong euro had a very negative impact on the sales figure. Excluding burdens from photovoltaics, Bosch disclosed a 6 percent EBIT margin. This translates into EBIT of 2.8 billion euros. The positive developments in the Automotive Technology business sector made a significant contribution to the improvement in result. “Also thanks to our many efforts to cut costs, we have taken an important step toward achieving our target EBIT margin of 8 percent,” Asenkerschbaumer said. Even including the extraordinary burden of 1.3 billion euros resulting from photovoltaics, EBIT margin increased to 3.2 percent. Bosch has discontinued the activities in the area of crystalline photovoltaics. The company has now sold most of its activities in this area. The sale of the remaining activities is planned to be finalized in the first half of 2014.
Headcount increased in 2013 – further workforce expansion planned in 2014
In 2014, Bosch expects headcount requirements to increase mainly in the Asia Pacific growth region. Altogether, some 9,000 university graduates will be hired around the world. In Germany, the company is planning to hire some 800 university graduates. The number of new apprentices in Germany will be same as the previous year, at around 1,400. In 2013, the Bosch Group's workforce grew by about 8,500, to 281,000 (*adjusted previous-year figure: 273,000).
Automotive Technology – strong growth around the world in all divisions
In 2013, the Automotive Technology business sector increased its sales by 6.7 percent (10.3 percent after adjusting for exchange-rate effects), to 30.6 billion euros. Its EBIT of 2.4 billion euros and EBIT margin of 7.7 percent were considerably higher than the previous year.
Industrial Technology – packaging machinery sales of one billion euros
In 2013, the Industrial Technology business sector's sales amounted to 6.8 billion euros, 9.2 percent below the previous-year level (down 6.5 percent after adjusting for exchange-rate effects). The difficult economic situation hit the Drive and Control Technology division especially hard. In contrast, the Packaging Technology division developed positively. Overall, the Industrial Technology business sector recorded a negative EBIT margin of 1.2 percent. EBIT showed a loss of 83 million euros.
Energy and Building Technology – connected products for smart heating
The Energy and Building Technology business sector increased its sales by 3.9 percent (5.9 percent after adjusting for exchange-rate effects) to 4.6 billion euros. The sector improved its result to some 106 million euros. Its EBIT margin came to 2.3 percent. In particular, the Thermotechnology division developed well.
Consumer Goods – market leader for innovative power tools
In 2013, the Consumer Goods business sector generated sales of 4.1 billion euros (note: as a result of changes to accounting policy, this figure includes sales of the Power Tools division only, plus some miscellaneous other sales). After adjusting for exchange-rate effects, sales were 2.9 percent higher than the previous year. In nominal terms, sales decreased slightly. The Consumer Goods business sector achieved an EBIT margin of 10.4 percent. Its EBIT of 415 million euros included the proportionate after-tax profit of the BSH Bosch und Siemens Hausgeräte GmbH joint venture. Even without this result, the business sector's EBIT margin was encouraging.
Europe – growth in a difficult economic situation
In Europe, Bosch sales grew despite the ongoing difficult economic situation. The company's sales in the region increased 2.2 percent (2.9 percent after adjusting for exchange-rate effects) to 25.5 billion euros. Sales increased slightly in Germany as well. Bosch invested 1.6 billion euros in Europe in 2013. Especially in eastern Europe, the company is currently expanding its manufacturing capacity. Last year, Bosch invested more than 900 million euros in Germany.
The Americas – strong growth in North America, recovery in South America
In the Americas, sales in nominal terms varied considerably in 2013. In North America, Bosch sales grew by 3.5 percent (6.8 percent after adjusting for exchange-rate effects) to 7.8 billion euros. This was in part the result of an increase in vehicle production. In contrast, sales in the South American market decreased by 3.6 percent, to 1.7 billion euros. However, after adjusting for exchange-rate effects, sales increased 8.9 percent. Bosch invested some 280 million euros in North and South America in 2013.
Asia Pacific – improvement in China, severe currency effects
In Asia Pacific, Bosch achieved sales growth of 5.8 percent (13.8 percent after adjusting for exchange-rate effects) to roughly 11.1 billion euros. Especially in the Chinese growth market, demand for automotive and industrial technology picked up significantly over the course of the year. Demand for automotive technology was also high in Southeast Asia. In India, poor economic conditions meant that business developed less well than forecast. The same applied to Japan. In 2013, Bosch again made considerable investments in Asia Pacific. With some 620 million euros spent, Bosch focused especially on expanding its manufacturing capacity for automotive components.
Research and development expenditure remains high
Last year, Bosch spent some 4.5 billion euros, or 10 percent of sales, on research and development. Bosch researchers filed nearly 5,000 patents over the course of 2013, some 20 per working day. The company plans to continue expanding its research and development capacity this year. By the end of 2014, Bosch will have some 45,000 researchers and engineers on board. More than 2,000 additional researchers will be hired in Asia Pacific, for instance. The company is also boosting its innovative strength in Germany, with a new center for research and advance engineering in Renningen, near Stuttgart.
Maintaining cutting-edge research – rapid transfer to industrial application
Denner, whose responsibilities on the Bosch board of management also include research and development, called for greater political commitment to promoting innovation: “Policymakers need to set their sights higher.” While Germany is close to spending 3 percent of GDP on research, the private sector has played a greater role in this achievement than the public sector has. Denner deplored the fact that universities were chronically underfunded. In some cases, he said, there was not enough money to pay for the buildings' upkeep. For him, the result was obvious: top researchers were leaving Germany in favor of research institutes in other countries. Denner went on: “In research and development, Germany and other European countries have to measure up to the world's leading countries.” He said that funding must above all benefit basic research, as well as its rapid transfer to industrial application. “Top universities make the regions they are located in more appealing. Companies indirectly benefit from this as well.” Bosch itself is an active member of 250 university research partnerships.
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- April 30, 2014
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Shaping the connected world with broad-based technological and industrial know-how
Presentation by Dr. Volkmar Denner,
Chairman of the Board of Management,
and Dr. Stefan Asenkerschbaumer,
Deputy Chairman of the Board of Management
at the Annual Press Conference on April 30, 2014
And it seems as though the internet and globalization have developed a momentum of their own. However, companies like Bosch can help shape this development. This will be one focus of our annual press conference, to which I would also like to welcome you. By 2015, five billion people will no longer be the sole users of the internet. They will have been joined by six billion connected devices. But what does all this mean? What are the implications of data communication that is costing less and less? And what will it mean if the borders between the hardware and software sectors become blurred? At Bosch, we see these developments as a major opportunity – an opportunity to develop new services that will give our strategic imperative “Invented for life” a new quality and breadth. We are complementing our innovative technologies with innovative services.
At this press conference, we will also be providing an overview of business developments in the past year, as well an outlook for 2014. First, allow me to present the main points:
- In 2013, our business developed positively in a weak economic environment. We were able to improve our sales and earnings thanks to innovative products, but also as a result of hard cost-cutting work. We were especially successful with our automotive technology.
- In 2014, we expect the economic climate to improve slightly. As a result, our business will be able to grow more quickly than the previous year, by an anticipated 3 to 5 percent. At the same time, we want to further improve our result.
- Beyond this year, we believe innovation and quality are the recipe for success. In the shape of sensor technology, we have special expertise in an area that will play a decisive role in the future.
- First, when it comes to promoting innovation, policymakers should set their sights far higher. In research and development, Germany and other European countries have to measure up to the world’s leading countries.
- Second, funding must above all benefit basic research, as well as its rapid transfer to industrial application. First-class universities make the regions they are located in more appealing. Companies benefit from this as well. Countries like Germany must continue to be associated with cutting-edge research.
Key figures 2013: on the right track
Ladies and gentlemen,
Allow me to provide you with a summary of the 2013 annual financial statements and an outlook for 2014. Three things play a decisive role in these figures: major exchange-rate effects, changes in the policies used in the Bosch Group’s consolidated accounting, and the company’s exit from crystalline photovoltaics. As a discontinued operation, the latter has to be disclosed separately in the statement of financial position and the income statement. My remarks today thus relate mainly to continuing operations – that is to say, to our operations without crystalline photovoltaics.
But first I would like to come back to Mr. Denner’s positive statement: in 2013, our company developed favorably in a difficult economic environment. We are on the right path, even though we still have quite a bit of work ahead of us if we want to reach our target EBIT margin of 8 percent in the medium term. This target is not an end in itself. Rather, it is the foundation of our long-term growth and will help ensure the continued existence of our company.
Especially in the first half of 2013, we faced a difficult economic climate. While the situation improved over the course of the year, global GDP grew just 2.5 percent, which was less than forecast. In the European Union, the economy recovered more slowly than expected as a result of the recession in southern Europe.
As concerns our core markets, global vehicle production grew faster than expected, with a 4 percent increase. But the mechanical engineering market was still weak. In fact, in Europe it even contracted. Worldwide growth in private consumption and construction activity was slightly weaker in 2013 than in 2012.
Against this backdrop, we can be satisfied on the whole with the Bosch Group’s sales growth, especially if we look at the figures after adjusting for exchange-rate effects. Year on year, the Bosch Group’s sales were 3.1 percent higher, increasing to 46.1 billion euros. After adjusting for exchange-rate effects, the figure is 6.3 percent. In other words, exchange-rate burdens amounted to some 1.5 billion euros.
The exit from crystalline photovoltaics, as well as consolidation effects resulting from accounting-policy changes and acquisitions in the previous year, are already included in these figures.
For the sake of comparison, the baseline figures for 2012 had to be adjusted retroactively in the 2013 annual report.
The changes concerned our fifty-fifty joint ventures, mainly BSH Bosch und Siemens Hausgeräte GmbH and ZF Lenksysteme GmbH. They are no longer included on a prorata basis in proportionate consolidation. Rather, they are now accounted for at equity, with their after-tax profit earnings being included in the operating result.
As a result of this change, there are significant changes in sales and headcount figures. The sales figure disclosed for 2012 is reduced by 7.3 billion euros, to 44.7 billion euros. Headcount decreases by about 33,100, to 272,800.
As a discontinued operation, crystalline photovoltaics is no longer included in the sales figure, either. The effect for 2012 amounts to roughly 500 million euros.
Automotive Technology developed well, with sales growth of 6.7 percent, or 10.3 percent after adjusting for exchange-rate effects. For example, demand for gasoline direct injection grew strongly, as did sales revenue from sensors. Other positive examples include infotainment and driver assistance systems. Mr. Denner will have more information on this in a moment.
In contrast, developments in the Industrial Technology business sector were unfavorable, with a decrease in sales of 9.2 percent. Even after adjusting for exchange-rate effects, the drop was still 6.5 percent. I have already mentioned the difficult economic situation. The Drive and Control Technology division was hit especially hard by this environment, while Packaging Technology developed well. In the field of packaging machinery, our customers are mainly in the pharmaceuticals and foodstuffs industries, which are less dependent on economic cycles.
In the Consumer Goods business sector, whose sales figures now only include the Power Tools division following the change in accounting methods, sales were slightly lower than the previous year. After adjusting for exchange-rate effects, however, the sector recorded 2.9 percent growth. The Energy and Building Technology business sector grew more strongly, with sales increasing 3.9 percent, or 5.9 percent after adjusting for exchange-rate effects.
When it comes to the regions, our sales growth was strongest in Asia Pacific. Sales growth there amounted to 5.8 percent. After adjusting for exchange-rate effects, the figure was almost 14 percent. After adjusting for exchange-rate effects, sales growth in North and South America was also above average. The dramatic exchange-rate effects in South America are due to the weak Brazilian real. In Europe, we were able to increase sales by just 2.2 percent, or 2.9 percent after adjusting for exchange-rate effects. Even so, this means our sales developed better than the weak European market.
Let us take a brief look at capital expenditure and R&D expenditure: last year, capital expenditure fell to 2.5 billion euros, or 5.5 percent of sales. The reasons behind this are our efforts to reduce fixed costs and reduce capital expenditure in fields of business that faced a very difficult economic situation. The decrease in capital expenditure can also be attributed to the exit from photovoltaics, a field that demanded a high level of investment, and which is still included in the overall figures.
In Europe, capital expenditure came to 1.6 billion euros. This included major projects, such as the new center for research and advance engineering in Renningen, the expansion of the sensor production facility in Reutlingen, the new logistics center in Karlsruhe, and the expansion of our common-rail manufacturing operations in Bursa, Turkey. We invested some 620 million in Asia Pacific, and about 280 million euros in North and South America. In terms of business sectors, we invested some 2.2 billion euros in our Automotive Technology business sector, which is very production-intensive.
At 4.5 billion euros, R&D expenditure was once again equivalent to 9.9 percent of sales, and slightly over the previous-year level. Here, too, the lion’s share was spent on automotive technology, which accounted for 80 percent of total expenditure. Mr. Denner will address our strategic focal points in a moment.
This brings me to our figures for result. We were able to improve our earnings before interest and tax (EBIT), which is the main indicator of our earnings power. We achieved this despite the considerable burdens we faced once again as a result of our exit from photovoltaics, but also without them. Without this major extraordinary burden of some 1.3 billion euros, which we faced for the last time in 2013, we achieved an EBIT margin of 6 percent. This brought us a major step closer to achieving our target margin of 8 percent.
These improvements in result can be attributed in large part to Automotive Technology, where we achieved a margin of 7.7 percent. It should be noted, however, that consolidation changes at our Chinese subsidiary had a positive one-time effect, to the tune of some 370 million euros, or a return on sales of 1 percent. Our result was negatively affected by the unsatisfactory situation in the Industrial Technology business sector, which generated a loss of 83 million euros.
The double-digit EBIT margin in the Consumer Goods business sector was attributable to the pro rata inclusion of BSH’s profit after tax. Without this effect, result is favorable if it is measured against the difficult economic situation of the previous year. The Energy and Building Technology business sector was able to improve its result. However, its margin amounted to just 2.3 percent.
With an equity ratio of around 50 percent, the structure of the statement of financial position is sound. Here, too, the changes in consolidation method had a positive effect. Due to the ending of proportionate consolidation, total assets in 2012 were 3.7 billion euros lower than the initially published figure.
The year-on-year increase in assets is primarily the result of an increase in liquidity as per the statement of financial position, which increased to 13.2 billion euros compared with the previous year value of 11.6 billion euros. Apart from cash and cash equivalents, this liquidity also includes securities and bank balances with a term of more than 90 days.
Cash itself also increased significantly, to 3.8 billion euros, compared with the previous-year level of 3.1 billion euros. At 4.0 billion euros, cash flow was slightly under its 2012 level. However, at 8.6 percent of sales, it reached a good level once again.
On the equity and liabilities side, provisions increased. This was partially the result of the exit from crystalline photovoltaics. Here, we have set up a provision of some 800 million euros. In connection with the antitrust authorities’ investigations into the automotive industry, Bosch is also faced with allegations. As a precautionary measure, and based on current information, we have set up a provision of 150 million euros for this.
Moreover, we have taken advantage of attractive interest rates to refinance bonds worth 700 million euros on schedule, as well as to repay a bank loan of some 500 million U.S. dollars. We were able to place new bond issues amounting to a total volume of 1.5 billion euros on very attractive conditions and with terms ranging between 8 and 20 years.
In brief: as I said at the start, we are on the right path. We will continue to work flat out to improve the cost situation. At the same time, we want to open up new markets. Mr. Denner will explain this in more detail in a moment.
Outlook: good start to 2014
From a current perspective, we expect to see our sales grow between 3 and 5 percent this year. Indeed, 2014 has got off to a very good start. In the first three months of the year, we were able to increase sales by roughly 7 percent, or roughly 10 percent after adjusting for exchange-rate effects. Of course, this was from a weak prior-year level. Business has developed especially well in automotive technology and Asia Pacific. But growth has also been significant in all other business sectors and regions.
Nonetheless, we are sticking to our guarded sales forecast, especially as we have not raised our cautious expectations for the economy.
At present, we expect the global economy to improve only slightly, with 2.8 percent growth. This is because we believe the pace of growth in the emerging markets will be slower than in previous years. When it comes to vehicle production, we expect moderate growth for the year as a whole, with an increase of some 3 percent to around 90 million vehicles. While the market for mechanical engineering is improving, capacity will be underutilized around the world, and this will continue to dampen willingness to invest.
This year too, major exchange-rate effects cannot be ruled out. We estimate that they could reach more than one billion euros once again. This is because we expect a strong euro for the time being. But this has only partially to do with stabilization in the euro zone. To a large extent, it is also the result of the weakness of other currencies.
Last year, the U.S. Federal Reserve’s reduction of bond purchases led to outflows from a number of emerging countries, and this weakened their currencies. At the end of 2013, some currencies were worth up to 20 percent less than in the middle of the year. Of the countries that are important for us, Brazil, India, and Turkey were particularly affected. The currencies of these countries are further burdened by ongoing structural problems. For this reason, we must continue to be on our guard against high levels of volatility.
In light of such dramatic currency fluctuations, we must aim to limit open currency positions as much as possible. This will allow us to reduce their impact on result. The effects on sales are purely mathematical.
This is why a global company like the Bosch Group must strike a natural balance: taking the sales generated in each country as our guide, we must limit risks through local value-added creation and by sourcing locally. This creates cost advantages, while at the same time limiting open currency positions.
This brings my short overview to its conclusion. I would now like to hand over to Mr. Denner once again.
Strategy: the technology of the future is already generating growth at Bosch
Ladies and gentlemen, if I talk about strategy, I do not want to do so solely in relation to megatrends. It goes without saying that globalization, aging, energy efficiency, and connectivity inform our long-term strategy. But we can also show that we have already begun to grow into the future.
Here, it is worth having a look at the product areas in which our growth is strongest. This year, like last year, gasoline direct injection leads the field. In 2014 alone, we will sell nearly nine million gasoline direct injection systems, two million more than in 2013. Especially in light of upcoming climate protection and emissions standards, we have gained significant new orders. These new standards are driving our diesel business as well. This year, we will deliver over ten million common-rail systems for the first time. More than one million of these will already meet the Euro 6 emissions standard.
It should also be pointed out that micromechanical sensors for consumer electronics have now also made it into the top five Bosch products with the strongest growth. If we include micromechanical sensors for cars, Bosch produced more than one billion such sensors for the first time in 2013. This year, we expect the figure to reach 1.3 billion.
What do these successes show? They are examples of two crucial developments at Bosch.
- First, we continue to move forward with our traditional hardware and software business – and this not only with injection systems. Cordless power tools, for instance, continue to grow faster than the market, as does measurement technology for tradespeople and do-it-yourselfers. And with a volume of some 45 million euros, we have acquired the largest order in the history of our Packaging Technology division.
- Second, not only are we opening up new fields of business, we are already growing strongly in them. Micromechanical sensors are the gateway to other technologies of the future. For example, the internet of things and services will only make sense if the things within it have something to say – in other words, if they can record their changing statuses in a sensitive manner. And it is especially with sensor technology that we are growing into the future.
This will give rise to a broad range of new applications, and to unprecedented forms of technical assistance in day-to-day life. Whether we are speaking of automated driving or the smart home, a new quality of comfort, safety, and efficiency is emerging. Bosch is creating the technical conditions for this change.
We believe this will create new opportunities for growth, not only in the emerging countries, but also in established markets. At the same time, we will grow in both traditional and new fields of business. Bosch is pushing ahead – dynamically and on several fronts.
Stronger than the market: growing with driver assistance
Successfully opening up new markets while continuing to develop the established ones is something our largest business sector does particularly well. On the one hand, Automotive Technology can point to a string of successes in classic powertrain systems. On the other hand, it is also working on alternative powertrains. After all, the future of driving will be electric. Even now, Bosch is contributing a lot to this aim:
- Most of the leading automakers are our customers. This year alone, nine further production-related projects will start, including the power electronics for the BMW i3 and the VW e-Golf, as well as the electric motor for the hybrid version of the Mercedes S-class.
- We offer all the components needed for electromobility, from the motor to battery-charge management. Barely any other supplier can draw on such a breadth of systems expertise.
This development from classic to new areas of business has been particularly dynamic in the area of vehicle safety and comfort systems. The business for driver assistance systems is growing especially quickly.
This momentum is driven by the new rating scheme for vehicle safety. In each of the next three years, the market is set to grow by a third. And Bosch is set to grow even more strongly. With driver assistance systems, we expect sales to exceed the billion-euro mark by 2016, which is sooner than expected. Even this year, our unit sales will increase significantly over 2013. For instance, with ultrasound sensors, we expect to sell just under 50 million units, a 25 percent increase. And we will be selling more than two million radar and video sensors this year, almost twice as many as last year.
And this growth continues. In the market, it does so as a result of the growing number of standard features, and the shift from single-sensor to multi-sensor systems. Technologically, we want to go even further, and aim to make the autopilot ready for the road. Here, our engineers are driven by two statistics.
- First, 1.2 million people around the world die as a result of traffic accidents each year.
- And 90 percent of all traffic accidents are caused by human error.
We could put this another way, and say that automated driving is a technology that saves lives. At the same time, it can spark drivers’ enthusiasm, since it offers them support with unattractive driving tasks. Next year, we will be starting series production of our traffic jam assistant, as well as of our remote-controlled parking assistant. Moreover, initial applications relating to highly automated driving are set to hit the market sooner than expected. By 2020, we will make automated driving possible also at higher speeds on the freeway. This requires significant technical progress, not the least of which is 360-degree environment recognition technology. Here, we will benefit from our special expertise both in the combination of sensor data and in automotive systems integration.
The key technology: sensors will make all things smart
At Bosch, sensor technology also has to do with micromechanics. With microscopic precision, we are producing millions of units of vibrating structures that can detect acceleration, pressure, and a great deal more. In fact, in this area alone we already hold more than 1,000 patents. And for quite some time now, we have been bringing this expertise to market well beyond the automotive industry. More than two-thirds of our micromechanical sensors are used for consumer electronics. Every second smartphone in the world is equipped with a Bosch sensor. This success is the result of a strong start-up: Bosch Sensortec. The economies of scale of our wafer fab in Reutlingen have also played a major role. Without them, this success would have been unthinkable. This is a shining example of how a small unit can also benefit from the strength that size brings. However, we not only see micromechanics as quantitative growth; it also means qualitative shifts. Let me give you two examples.
- First, we can measure more and more variables. At the start of 2014, we unveiled a new sensor that can measure pressure, temperature, and humidity. This marks our entry into environment recognition sensor technology, and this is important also for smart home applications.
- And second, we are making our products increasingly smart. We are starting production of the first sensor that not only measures acceleration, yaw rate, and geomagnetic field, but, more importantly, already features a microcontroller for signal evaluation.
This software integration is decisive for the next phase of our micromechanical systems’ advance. Sensors first became increasingly common in vehicles, then in smartphones. Now, they are becoming part of the internet. For precisely this reason, they must include software intelligence in addition to radio chips and batteries. After all, it is not raw data that should be transmitted to the internet, but only information that is relevant. Such local data processing requires the special type of systems know-how that Bosch brings to the table.
We have already started series production of a door sensor that sends warnings of suspicious movements to the homeowner’s smartphone. In the future, windows will be equipped with unobtrusive sensors that control the house’s heating or alarm system. Sensors fixed to bracelets will also be able to call for help when the people wearing them have fallen. Smartphones will not be the only devices to be equipped with sensors. Any “smart” object will feature internet-enabled sensor technology.
This goes well beyond the connectivity of our appliances. Even today, Bosch generates more than half its video-surveillance sales with internet-enabled cameras. Even heating systems are increasingly online. In 2014, Bosch will likely sell 50,000 internet-enabled boilers, twice as many as in 2013. And much more can still be connected via sensors – in the end, everything can be connected with everything. With sensors, things that were free of electronics in the past, such as doors or windows, can transmit data on their status to the internet. It is only through micromechanics that everything can be connected to the internet.
Connecting smart things: our internet solutions
We are not only creating the necessary technical conditions for the internet of things, we also aim to develop new solutions. Another start-up, Bosch Connected Devices and Solutions GmbH, is opening up this new field of business for us. Since it made its first appearance at the start of this year at the Consumer Electronics Show in Las Vegas, the new company has received its first orders, mainly in the area of smart homes. The company also focuses on the logistics and transport segment. In the future, critical freight deliveries will automatically transmit data on unusual status changes to logistics centers.
We could say we are now moving into the internet of things and services with two spearheads: Bosch Connected Devices and Solutions complements our Bosch Software Innovations systems unit. The two companies cooperate closely with one another. Ultimately, the aim is to create new services using sensor information. And these services require rules-based software platforms like the ones our systems unit has developed. Sensor technology, software, and services – this is our 3S program for the connectivity business.
In developing internet-based services, we benefit from our in-depth hardware expertise. This puts us one step ahead of the IT industry. But hardware innovations are no longer enough to stand out from the field. Today, an additional service offering is decisive to maintain a competitive edge.
Our internet-enabled video cameras are thus only one aspect. The other is the cloud-based services we derive from them. Our portfolio already includes monitoring centers that can offer internet-based video surveillance for large construction sites or freeway parking lots. For such applications, Bosch Software Innovations works closely with our traditional divisions. In fact, this has already given rise to some 100 projects related to the internet of things and services. Our connected city pilot project in Monaco is especially ambitious. There, we are creating links between such things as the bus network, road work, and parking lot management. It is significant that internet-related projects involve nearly all our divisions. In a connected world, broad industrial expertise will play a decisive role – and this is an advantage that we intend to exploit.
- Our solutions for vehicle connectivity are already multifaceted. By 2025, nearly every new vehicle worldwide will be equipped with wireless data communication technology. We already offer a range of services in this regard. Take eCall, for instance. In 2013, our monitoring centers processed a good 30,000 automatic emergency calls from road users. In the area of telematics, we are launching applications for the fleet management of leasing and insurance companies this year. For example, on the basis of control unit data, we can make forecasts about wear and tear, and predict when vehicles will need maintenance. We also offer services in the realm of e-roaming. As part of the "Hubject" project, our software platform makes it possible to recharge electric vehicles at the charge spots of different operators. So connected driving clearly supports electric driving – and not least automated driving. This is because the more vehicles there are driving autonomously on roads, the more they need car-to-x communication. In other words, they must be able to warn each other of obstacles. At Bosch, connectivity on the roads not only means efficiency and comfort, it also means safer driving.
- When it comes to connected production, Bosch sees itself both as a leading provider and as a leading user. The aim here is to use the internet to optimize manufacturing and logistics networks and to further encourage the merger of information technology and factory automation. Bosch Rexroth recently created the condition for such a merger: with open core engineering, machines can now be programmed via a smartphone app.
- A common language for all domains is also decisive when it comes to the connected home. For instance, if the dishwasher is to time its start to coincide with the best electricity price, and if the air-conditioning and heating systems start depending on the weather forecast, the devices involved must be able to understand each other. This is why, together with a number of partner companies, Bosch aims to create an open standard for smart homes. The initiative also aims to establish a software platform for service providers.
Here, we pay heed to two things:
- First, to how things are to be used. Connected products should not be overly complex. Their benefit must be obvious, and they must be easy to use. This is especially important for vehicle applications. For instance, our mySPIN solution makes it easier for the smartphone to be integrated into the car. It is to go into series production at Jaguar Land Rover within the next few weeks. mySPIN makes it possible to control apps via the car’s dashboard – and for the first time, regardless of whether drivers use iPhones or Android smartphones. It will initially feature ten apps that are especially important for drivers.
- The second thing we need to heed is data security. For data transmission, we use state-of-the-art encryption technologies, for instance the security software of our subsidiary escrypt. In addition, transparency and customer discretion are the main focus of our data use policy. After all, the internet of things cannot be successful unless people can trust it. Our clear aim is to ensure that the benefits of connectivity by far outweigh the risks.
These high-tech solutions mainly target the mature markets of the industrialized nations. Even though Europe’s weak economic growth continues, we are confident that our sales there will grow faster than the market. By contrast, we want to grow strongly in the emerging countries of Asia by offering the low-cost solutions that customers there are demanding. As our airbag light control unit for the Chinese market and our electronic hitch control for an Indian tractor manufacturer show, local success is the product of local expertise. By the end of this year, we will have some 45,000 research and development associates on board. Of these, a good 17,000 will be located in Asia Pacific, 2,000 more than at the start of the year.
Local development plays a significant role in regional growth. Over the past ten years, sales in Asia Pacific have more than doubled, to some 11 billion euros. By 2020, we aim to double our sales in the region once again. To this end, we are making significant upfront investments in Asia Pacific. From 2010 to 2014, we will have invested 3.3 billion euros in the region.
But at Bosch, globalization is far more than dynamic growth in Asia. We have also set ambitious goals for the world’s other regions.
- In the Americas, we also aim to double our sales by the start of the next decade. There, too, local technical expertise will play a central role in our success. This year, for instance, we are opening a new research and development center in Guadalajara, Mexico.
- Last, but not least, we also aim to significantly increase our sales in Africa in the years ahead. The continent’s economy is growing at an above-average pace, and we want to take part in this growth with our technologies “Invented for life.” This year alone, we will be opening new regional companies in Kenya and Nigeria.
- And once again: In Europe as well, we want to and can grow faster than the markets.
As a matter of principle, we are not only globalizing our business, but also the standards according to which we do business. Wherever Bosch is present, our compliance rules and environmental protection policies apply. As you heard in Mr. Asenkerschbaumer’s presentation, Bosch is also currently confronted with antitrust proceedings. On the basis of information currently available, this led us to set aside provisions of 150 million euros in the financial statements for 2013 as a precautionary measure. It is of fundamental importance to us that our associates around the world observe the basic idea of our company founder Robert Bosch, who believed that business had to be done in an honest and fair way. To support this aim, we have introduced training programs that our associates around the world have to regularly participate in. We rigorously follow up and get to the bottom of any suggestions of violations. After all, we believe in competition, and in winning customers over by virtue of the quality of what we offer. Anything else would not only be unlawful, but would also contradict the fundamental principles and values of our company – and will therefore not be tolerated.
More internal and external collaboration: our future
To create solutions for the connected world, our associates are cooperating across divisional and company boundaries more than ever. I would like to extend my sincere thanks to them for their commitment and openness. As always, we need efficient divisions and departments in our business operations. But we also need to open up this vertical organization. Bosch not only stands for networked technology, it also sees itself as a networked company. We promote this network with a broad range of measures:
- At present, more than 5,600 Bosch associates are working on extended assignments as expatriates outside their home countries. Moreover, short-term assignments are also on the increase. We support both forms by providing intercultural training programs.
- Some 110,000 associates are already using the “Bosch Connect” social media platform on a regular basis. Since it was launched in the fall of 2013, more than 13,000 communities have taken shape.
- With an investment of 300 million euros, the new research campus we are building in Renningen, near Stuttgart, will also promote direct knowledge-sharing across disciplines. For us, research also means exploring the business models of the future, which are becoming increasingly diverse in the internet age. Our newly established start-up platform is important for this kind of exploration.
- More than ever, alliances are complementing our traditional relationships with customers and suppliers. This type of open development is especially important for the internet of things and services. Our software and systems unit is already engaged in 80 partnerships with other companies.
- First, new business areas can only be opened up if we have a sound core business. This sound basis is currently becoming even sounder, thanks to the kind of success we are enjoying with our injection systems. And Bosch’s traditional strengths – our innovative clout, high standard of quality, international presence, and the unrivaled integrative force of our corporate culture – are also valuable in the connected world.
- Second, Bosch can connect many different things to one another, not only as a result of its multifaceted hardware and software expertise. Even more importantly, we are the global market leader for micromechanical sensor technology, which is a gateway technology for the internet of things. All this allows us to develop new business models with internet-based services. This is a major opportunity for Bosch, as a supplier of both technology and services.
Curriculum Vitae Dr. Volkmar Denner
Curriculum Vitae Dr. Stefan Asenkerschbaumer
- April 30, 2014