Freudenberg strengthens future viability with strong investment in China

SHANGHAI,April 8,2020 -- Freudenberg,the global technology group,performed well in the 2019 financial year,in spite of the difficult economic and geopolitical market environment. At CNY 73.1 billion (or €9,467.8 million),sales in 2019 were at about the same level as in 2018 (€9,455.4 million). In Greater China,Freudenberg's sales grew by 1.6% to CNY 8.6 billion. Investment in the local market rose by a substantial 83% to CNY 547.7 million.

"We once again invested heavily in our future,in machines,equipment,acquisitions and,above all,in the three focus areas of our strategic planning period: Mobility,Digitalization and Sustainability," says Dr. Mohsen Sohi,CEO of the Freudenberg Group.

Investments in 2019

To secure the Group's future,Freudenberg invested a total of about CNY 5,260 million (or €681 million) worldwide in 2019 (2018: €555 million). Among the total CNY 547.7 million invested in China,state-of-the-art manufacturing facilities were one focus. The Freudenberg Performance Materials Business Group continued work on the construction of a new line in Taiwan and is building a new interlining factory as part of re-location project of its existing facility in Nantong. Both the state-of-the-art factory and the line are expected to start up later this year.

Freudenberg Filtration Technologies invested in a new 55,000-square-meter production and office complex in Shunde for the newly acquired Freudenberg Apollo Filtration Technologies.

Managing innovations successfully

"As an innovative technology group,we also considerably intensified our already very high levels of research and development activity," says CEO Dr. Sohi. In the 2019 financial year,Freudenberg conducted research and development activities in the amount of CNY 3,714 million (or €480.9million). That figure is equivalent to 5.1percent of sales (previous year: 4.7percent). Freudenberg measures the effectiveness of its R&D activities as the share of new products (those less than four years old) in total sales. This share rose to 34.7percent (previous year: 33.6percent).

Freudenberg spent a total of CNY 239.2 million on R&D in China in 2019 – a 17% increase compared with a year ago. "Our innovative and sustainable solutions are the key for our success in China. We work together with local customers to develop products in China for the local market," says Bettina Schoen-Behanzin,Freudenberg Regional Representative Asia.

Portfolio

In a volatile environment,it is beneficial to be a broadly diversified company. Freudenberg reduced risk by strengthening the various business areas through additional acquisitions in 2019. Below are two examples for the Group's global activities:

At the beginning of 2019,Freudenberg Sealing Technologies increased its stake in XALT Energy,LLC to more than 50 percent. Among other products,the company headquartered in Midland,Michigan,USA,develops and produces lithium-ion technology solutions for heavy-duty mobility applications. In April 2019,Freudenberg Medical increased its share in the medical technology specialist Cambus Teoranta,Spiddal,Ireland,from 40 to 90 percent.

As for China-related acquisitions,Freudenberg Filtration Technologies in April 2019 acquired a 75-percent share in Apollo Air-Cleaner Co.,Ltd.,Foshan,China,a leading provider of air and water filtration solutions. In addition,in September 2019 Freudenberg Performance Materials made an offer to acquire 100 percent of the shares of Low & Bonar PLC,London,United Kingdom,a globally active manufacturer of technical textiles with two factories in China. The proposed transaction is subject to approval by the antitrust authorities.

Freudenberg companies continue to invest in China. In January 2020,Klüber Lubrication München SE & Co. KG,Munich,Germany,acquired TRAXIT International GmbH,Schwelm,Germany. The company is one of the largest wire drawing lubricant manufacturers in the world with manufacturing sites in Germany,China and the USA.

Corporate Citizenship

Freudenberg's commitment to corporate social responsibilityextends beyond the value chain. In 2019,many Group companies,sites and employees in China and elsewhere around the world volunteered in small initiatives and complex projects. The e² (education and environment) program,with a budget of CNY 109 million,has been a key element of our corporate citizenship activities since 2015. The goal is to provide people with access to education and employment and support environmental protection.

In 2019,Freudenberg turned 170. The Group celebrated this anniversary by planting trees in the areas and communities surrounding its sites as a symbol of its commitment to society. Freudenberg employees from 10 different cities in China planted more than 2,000 trees across the country.

Outlook

"Following the coronavirus-related shutdown,our companies in China have almost reached normal operating levels again,with strict hygiene measures in place. Together with our colleagues,customers and partners we are doing our part to pave the way for long-term growth," says Schoen.

All considered,Freudenberg expects the environment to remain challenging in the 2020 financial year. The economic and geopolitical uncertainties are unlikely to ease.

Furthermore,the spread of the coronavirus and the containment measures have resulted in macro-economic risks that will have a negative financial impact on the global economy and the Freudenberg Group. This development not only impairs demand,but also production,the procurement market and the supply chain. The impact will depend on how long the crisis lasts.

Against this backdrop,Freudenberg is planning cautiously for the coming year and expects business developments in the markets relevant for the Group to be subdued.

Freudenberg intends to continue investing in long-term projects. The mobility transformation,digitalization and an expansion in sustainable solutions will remain central components of Freudenberg's strategy.

About the Freudenberg Group

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 170-year-old company lives by its core values: a commitment to excellence,reliability and pro-active,responsible action.

In 2019,the Freudenberg Group employed some 49,000 people in around 60 countries worldwide and generated sales of more than €9.4 billion. For more information,please visit www.freudenberg.com

Freudenberg has held business ties with customers and partners in China for more than 100 years. The Group has a workforce of some 7,400 people at more than 70 sites in the country. In 2019 Freudenberg generated sales of over CNY 8.6 billion in Greater China.