New Perspectives New Opportunities

Transcription

1 New Perspectives New Opportunities New Perspectives New Opportunities Annual Report 2003 Annual Report 2003 Thiel Logistik AG

2 Key figures for fiscal year 2003 and 2002 (in accordance with US GAAP) in v Change Net sales Specialized Sector Solutions 622, , % Air & Ocean 281, , % Regional Logistics Services 794, , % Other 1,386 28, % Total 1,699,861 1,396, % Segment results Specialized Sector Solutions 15,512 (1,629) N/A Air & Ocean (979) (986) 0.7% Regional Logistics Services 10,154 11, % Non-allocated results (22,917) 7,467 N/A Operating income before restructuring and impairment 1,770 16, % Net income (loss) (156,207) (5,258) N/A Earnings per share in v (1.82) (0.07) N/A Operating cash flow 40,793 39, % Capital expenditures 36,890 37, % Share capital 107, ,187 Total shareholders equity 279, , % Number of employees 10,872 11, %

3 THIEL AUTOMOTIVE THIEL FASHION & LIFESTYLE THIEL MEDIA Specialized Sector Solutions Air & Ocean BIRKART GLOBISTICS Regional Logistics Services QUEHENBERGER SÜDKRAFT

4 THIEL FURNITURE THIEL FRESHNET Thiel Logistik AG of Grevenmacher, Luxembourg, develops complete logistics and service solutions as an external partner for businesses. Thiel Group employs more than 10,000 people in 44 countries, and, with more than 350 subsidiaries located on every continent, is present not only in the major European markets, but also in every important procurement and sales market worldwide. The Group offers regional logistics services with a focus on Central Europe including air and sea freight transportation, as well as specialized solutions for the sectors Automotive, Fashion & Lifestyle, Media, Furniture, and Food and Restaurant Chains. In these core businesses, Thiel Logistik AG ranks among the market leaders. Thiel Logistik AG is listed on the MDAX segment of the Frankfurt Stock Exchange. The majority shareholder is DELTON AG of Bad Homburg, Germany, with percent of the share capital. DELACHER

5 Thiel Logistik AG 2003 Thiel Logistik AG 2003: New Perspectives New Opportunities Letter to Shareholders 8 Thiel Stock 10 Corporate Governance 14 Management Report 22 Specialized Sector Solutions 30 Thiel Automotive 31 Thiel Fashion & Lifestyle 32 Thiel Media 34 Thiel Furniture 35 Thiel FreshNet 35 Air & Ocean 36 Regional Logistics Services 38 Quehenberger 39 Südkraft 41 delacher 42 Financial Position as of December 31, New Management and Staff Development 52 Outlook 57 Consolidated Financial Statements 58 Notes to Consolidated Financial Statements 66 Auditors Report 103 Glossary 104 Financial Calendar, Contacts, Publication Credits 106

6 2003 New Perspectives New Opportunities Thiel Logistik AG Focusing on core competencies and effective management. 2

7 Thiel Logistik AG 2003 Consistent implementation of strategic and operational objectives for business success. Dr. Klaus Eierhoff, Chief Executive Officer 3

8 2003 New Perspectives New Opportunities Thiel Logistik AG Restructuring and transparent Group structure. 4

9 Thiel Logistik AG 2003 On the way to becoming a high yield, European logistics group. Martin Löffler, Chief Financial Officer 5

10 2003 New Perspectives New Opportunities Thiel Logistik AG Strengthening organic growth 6

11 Thiel Logistik AG 2003 and market position. Leveraging the reputation of our established brands. Stefan Delacher, Chief Marketing Officer 7

12 2003 Letter to Shareholders Thiel Logistik AG Fiscal year 2003 was dominated by a thorough reorientation of the Thiel Logistik Group. A financial review conducted in spring of 2003 by the new Executive Board identified a need for comprehensive strategic and operational action throughout the Company. In response, the Executive Board decided to concentrate on core businesses, sell off peripheral activities that no longer offer any growth potential, establish an effective management structure, implement an efficient human resources management system, and improve the capital structure. Moreover, the need was evident to return to organic growth, establish a uniform Group-wide system of control and significantly improve profits. The new alignment involved considerable reorganization and restructuring. It quickly became apparent that values for goodwill and obsolete assets would have to be adjusted. These measures were necessary and, overall, led to a yearly loss of Euro million in the Company. During the strategic restructuring we emphasized the fact that, while a firm the size of Thiel Logistik AG can have no claim to being a global player, we nevertheless wish to grow globally with our customers, offering services along the entire value chain. In consequence, Thiel Group today concentrates on industry-specific solutions and regional logistics services with an emphasis on Central Europe, as well as on international air and sea freight services. We are well-positioned in four core segments Automotive, Fashion and Lifestyle, Media and Furniture because in some areas we are already the market leaders. Additionally, our FreshNet division provides an opportunity to profit from the growth potential in the fast food sector, which develops very favourably. We no longer saw this same potential in the HealthCare field, and believed that appropriate returns could not be achieved in this area. For this reason, we took the decision to leave the Healthcare business. Our three regional companies, Quehenberger, Südkraft and delacher, are all successful in their respective regions and well-positioned for future growth. The ongoing eastward expansion of the European Union offers additional growth opportunities, particularly since the Group already maintains sites in many of these countries. Our expertise in air and sea freight will help us realize this potential. Strategic restructuring entails that only such businesses should be developed, and only such business areas invested in, that show adequate potential for growth. Any business activities that do not meet these requirements have therefore been sold or closed. For instance, as part of our divestment strategy, we sold our shares in the BTL Group of Switzerland. The Group also sold several of its real estate properties. Operational responsibility has been transferred from the holding company to the eight management companies. The implementation of this decentralized structure means that the Grevenmacher Holding no longer performs any operational tasks. In a related move, we have consolidated all important core functions at the holding company. This involved the expansion and implementation of key corporate functions, such as financial control, audit and strategic planning. On the whole, however, holding company costs fell significantly. This can be seen, for example, in the reduction from 110 to 70 employees at the holding company. 8

13 Thiel Logistik AG 2003 A change in personnel also took place in the first and second management tiers. A management audit of the top managerial tier, as well as a job evaluation exercise with the help of external consultants, were performed and are expected to result in significant improvement in the management quality and considerably enhance the Group s overall performance. The Thiel Excellence Program, initiated last year, is helping to produce a noticeable increase in profits in the medium term. A key contributor to these results is the new reporting structure designed to correspond to the new corporate structure. Simultaneously, a uniform Group-wide system of controls has been implemented. These measures assist significantly in quality improvement and productivity increases. The Executive Board is aware of the challenge posed by the restructuring process for all of the employees. All members of staff have played a significant role in the turnaround of the Group. We would like to thank them all for their great commitment. These comprehensive measures have already had a positive effect on last year s key indicators and we have thus achieved the improvements we promised you. In the third quarter of 2003, the Group was successful in registering organic sales growth. This trend was continued in the fourth quarter. The gross margin also improved during the year. Operating income (EBIT), initially severely depressed by restructuring costs and goodwill impairment, was considerably improved during the second half of the year and returned to profitability. Despite substantial costs, we were able to operate in the black on an annualized basis during the last fiscal year before restructuring and impairment charges. As a result of this positive development, shares of the Thiel Logistik Group experienced disproportionate appreciation compared to the MDax and our peer group of competitors. The increase in share capital to be implemented in March 2004 and fully supported by the principal shareholder, DELTON AG, will significantly reduce corporate debt and strengthen the equity base. We will finalize the remaining restructuring activities and divestment projects by the end of the first half of We no longer anticipate any significant restructuring costs or goodwill impairments. We are planning an increase of 3 percent in annual sales for the current fiscal year on a consolidated basis. Our aim is also to achieve an operating income (EBIT) of approximately 1.1 percent of annual sales. The success of our restructuring effort has confirmed that we are on the right track. As a result, we are confident of reaching our goals in the current year as well. Grevenmacher/Luxembourg, February, 2004 Dr. Klaus Eierhoff CEO and Executive Member of the Board of Directors 9

14 2003 Thiel Stock Thiel Logistik AG The year 2003 Turnaround in the European capital markets and Thiel AG s stock Stock exchanges reached a low at the beginning of 2003 Eurostoxx 50, DAX and MDAX rose significantly during the course of the year Thiel shares began recovery in the third quarter Buy recommendations for Thiel shares towards the end of 2003 European stock markets in 2003 were marked by a series of ups and downs in share prices. Whereas the indices all stood at record lows at the beginning of the year, key European exchanges were able to finish the year with a positive return. The Eurostoxx 50 (an index of the 50 most important European stocks) achieved an increase of 15.7 percent by year-end. During the first quarter of 2003, the Iraq Crisis dominated the European stock markets. The resulting weakness of the dollar, combined with the strength of the Euro and the rally in oil prices had an adverse effect on the share prices of European companies. In March, the Eurostoxx 50 stood at 2,000 points, the lowest level in almost six years. During the second quarter of 2003, the European Central Bank reduced the prime rate to 2 percent. This was one reason for the rise in share prices on the European stock markets. During the third quarter of 2003, European share prices sparked by positive U.S. economic news, a brighter business outlook, and a marked depreciation of the Euro reached their highest levels of the year. The Eurostoxx 50 officially traded around 2,640 points at the year s high. Renewed U.S. dollar depreciation, however, brought the upward trend to a halt. The decrease in the oil production quota by OPEC together with rising oil prices and weaker than expected figures from the U.S. economy, led to a significant decline in share prices both in the USA and in Europe. At the beginning of the fourth quarter of 2003, renewed optimism sparked by U.S. economic indices, a strong dollar and better than anticipated quarterly figures from some companies generated a rise in stock prices on Wall Street, boosting Europe s stock markets as well. As a significant recovery is widely expected for the European economy in 2004, Europe s indices reached new annual highs just before year-end

15 Thiel Logistik AG the 8th best year since 1965 for the DAX The German DAX reflected the trends on other European stock markets. On March 12, 2003, the leading index hit 2,200, the lowest point since From that low, it started to climb and by May had crossed the psychological threshold of 3,000. It surpassed this level and continued to climb until reaching a new high of 3,670 for the year in early September of At this point deterioration in the economic outlook caused the index to fall below 3,300 points, thereby losing all the gains made during the summer months. Starting in October, there was good news as businesses reported better than expected income. Renewed hope in the economy once again pushed prices higher on the DAX. By the end of December, the DAX had reached a level of 3, points. This performance represents a 37 percent increase over the previous year and was significantly better then the Eurostoxx index which gained 15.7 percent MDAX climbed faster than DAX MDax (Performance-Index) Dax /03 03/03 05/03 07/03 09/03 11/03 01/04 Dec was also a successful year for the MDAX the index where Thiel Logistik AG is listed. The MDAX ended the year successfully at 4, points, reflecting annual growth of 47.8 percent. 11

16 2003 Thiel Stock Thiel Logistik AG 2003 a very active year for Thiel shares MDax (Performance-Index) Thiel Logistik AG /03 03/03 05/03 07/03 09/03 11/03 01/04 Dec Shares of Thiel Logistik AG started the year on January 2, 2003, at 3.50 Euro. Publication of the 2002 Financial Statements depressed the share price for the first two months of Thiel shares traded at their all-time low of 2.45 Euro on February 25, In March, Thiel shares started trading on the MDAX as a result of the new segmentation of the German capital market. Announcements concerning the new composition of the Executive Board pushed the share price up to 3.66 Euro on April 11, On May 21, 2003, however, the share price fell to 2.59 Euro on the release of worse than expected figures for the first quarter of The first presentation of the new management to the capital markets led to a rebound of the Thiel share price between June and mid-august to well over 4.00 Euro. This recovery was stopped by the release of financial figures depressed by restructuring and impairment charges for the first half of 2003, caused in part by the high level of goodwill impairment. This was the beginning of a downwards trend, which proved irreversible until December. The recovery of the share price was due in part to the announcement of the sale of BTL Logistics and the first noticeable operative improvements. Further, Thiel s newly minted presence was not missed by analysts and investors and this was reflected in the share price at the beginning of December, after which the first buy recommendations for Thiel stock were made. 12

17 Thiel Logistik AG 2003 The efforts of the Company proved even more fruitful during the early weeks of The Paris road show involving management on January 16, 2004 and further buy recommendations drove the share price to a new 52-week high of 6.25 Euro with high trading volumes (often significantly more than 500,000 shares per day) in early February. Summary of Analysts Recommendations Bank Analyst Recommendation Date Sal. Oppenheim Hartmut Moers OUTPERFORMER 02/2004 Cazenove Justin Waine BUY 02/2004 Deutsche Bank Dr. Lars Slomka BUY 01/2004 CAI Cheuvreux Georg Remshagen OUTPERFORMER 01/2004 Equinet Jochen Rothenbacher HOLD 12/2003 HypoVereinsbank Markus Hesse SELL 12/2003 M. M. Warburg Nils Machemehl SELL 12/2003 DZ Bank Raimon Kaufeld SELL 11/2003 The situation at the end of 2003 and beginning of 2004 gives rise to optimism for the current trading year. At 4856 points, the MDAX reached a new high since March 2001 on February 12, Thiel Logistik stock received favourable recommendations from several financial journals and also climbed to a new 70-week high of 8.00 Euro in February Shareholder Structure 85,749,990 non-par value shares had been issued as of December 31, Of those, a total of 14,367,090 shares had not yet been approved for trading on the stock exchange. According to Company information, the shareholder structure is as follows as of December 31, 2003: DELTON Vermögensverwaltung AG 50.26% Freefloat 49.74% Thiel stock is listed on the following indices: Index ISIN number Symbol Classic all Share DE CLXP HDax DE HDax L-MDax DE MDXL MDax DE MDax MIDCAP Market DE MIDP Prime all Share DE PXAP Prime IG Logistics DE IILB Prime Transportation & Logistics DE CXPL 13

18 2003 Corporate Governance Thiel Logistik AG Thiel AG s Board of Directors (from left to right): Dr. Klaus Eierhoff, Berndt-Michael Winter (Chairman), Prof. Dr. Werner Delfmann, Dr. Antonius Wagner (Deputy Chairman), Dr. Yves Prussen CORPORATE GOVERNANCE REPORT Responsible and transparent corporate management and supervision exert a significant influence on the level of confidence in the business policies of Thiel Logistik AG. Therefore, good corporate governance forms the basis for all Thiel Logistik s decision-making and supervisory processes. Thiel Logistik AG is a company with worldwide operations, having its registered office in Luxembourg. The Company s management and oversight structures are based on Luxembourg law, the Company Statutes, and German capital market laws (due to its admission to the Prime Segment of the German Stock Market and its membership in the MDax Select Index). Thiel Logistik AG has also implemented a company-specific version of the German Corporate Governance Code, which contains only a few exceptions. The Executive Board and the Board of Directors of Thiel Logistik AG have made the following declaration of conformity in accordance with 161 of the German Stock Corporation Act ( AktG ), which is available to shareholders on the Thiel Logistik AG web site at 14

19 Thiel Logistik AG 2003 Joint voluntary declaration of the Executive Board and Board of Directors according to Art. 161 of the German Stock Corporation Act concerning the recommendations of the government committee on the German Corporate Governance Code On December 22, 2003, the Executive Board and Board of Directors of Thiel Logistik AG resolved to adapt their declaration of conformity under Art. 161, German Stock Corporation Act dated March 18, 2003, in line with changes to the German Corporate Governance Code (as amended 21 May, 2003) and therefore declare: The Company hereby declares its compliance with recommendations made in the July 4, 2003, publication in the electronic Federal Gazette of the government committee on the German Corporate Governance Code (as amended May 21, 2003), with the following exceptions: 1. Clause Paragraph 3.8 The Company s existing D&O (directors and officers liability insurance) policy does not cover intentional damage to the company through violation of the rules of proper corporate management. Insofar as liability insurance exists, deductibles do not apply for members of the Executive Board or for members of the Board of Directors. Among the companies listed on the stock exchange, there has been no uniform application of the Code regarding the deductible for corporate board members for D&O insurance, despite the recommendation of the German Corporate Governance Code. The Company, therefore, rejects application of a deductible at this time, but will review this position during Clause Paragraph 4.2.2, para. 1 The recommendation to have compensation of the members of the Executive Board determined by the Board of Directors does not appropriately reflect corporate law in Luxembourg, whereby a company may have an Executive Board and both executive members and non-executive members on the Board of Directors. It is, therefore, deemed correct that compensation of the executive members of the Board of Directors and the Executive Board be determined solely by the Human Resources Committee constituted only of non-executive members of the Board of Directors. 3. Clause Paragraph 4.2.4, sentence 2 The right to privacy protection prohibits the reporting of individual compensation of the members of the Executive Board or executive members of the Board of Directors. 4. Clause Paragraph 5.4.5, para. 2 The members of the Board of Directors are entitled to stock options based on the existing Stock Option Plan. The Stock Option Plan specifies the maximum number of stock options for the relevant group of authorised shareholders, but is not designed as performance-related compensation. 5. Clause Paragraph 5.4.5, para 3 Privacy rights prohibit the reporting of individual compensation amounts for nonexecutive members of the Board of Directors. 15

20 2003 Corporate Governance Thiel Logistik AG 6. Clause Paragraph All information is included with respect to the list of third party companies in which the Company has an investment that is considered of corporate significance, with the exception of information related to results. We expect to include such information in future. Grevenmacher, Luxembourg, January 12, 2004 Berndt-Michael Winter Chairman of the Board of Directors Dr. Klaus Eierhoff Chairman of the Executive Board Management and corporate structure Thiel Logistik AG, which has its corporate headquarters in Grevenmacher and is subject to Luxembourg corporate law, has implemented a two-tiered management and oversight structure with an Executive Board and a Board of Directors. It has thus adapted itself to the corporate governance rules for a German stock corporation, to the extent permissible under Luxembourg corporate law. In addition to the Board of Directors, the General Shareholders Meeting is the Company s second governing body. All boards are obliged to act in the interests of the shareholders and the Company. The Board of Directors The Board of Directors has five members: four non-executive and one executive member. The Chairman of the Executive Board is the executive member of the Board of Directors. Most of the supervisory and oversight functions are carried out by the nonexecutive members of the Board of Directors. Members of the Board of Directors serve for a maximum of six years. The Board of Directors has given itself rules of procedure, which govern the Board s tasks and mode of operation. The Board of Directors is elected by the General Shareholders Meeting and, as already indicated, has both managerial and supervisory tasks. In the reporting year, the Board of Directors performed the tasks for which it was responsible under the laws and the Statutes. The Board of Directors met 11 times during the reporting year and adopted eight resolutions by written procedure. All the members of the Board of Directors took part in the meetings. The Board of Directors adopted resolutions primarily on the following topics: Personnel changes in the Executive Board and a new management structure Strategy, investments and disinvestments Preparation of the individual and consolidated financial statements Guidelines on Directors dealings Declaration of conformity with the German Corporate Governance Code, and Risk Report for fiscal 2003 To the extent members of the Board of Directors might have had conflicts of interest with respect to matters referred to in the section on Related Party Transactions in the Notes to the consolidated financial statements ( 21), the affected Board members refrained from participating in the deliberations and the adoption of resolutions. 16

21 Thiel Logistik AG 2003 From among its own membership, the Board of Directors has formed a Finance Committee with four members, an Audit Committee with three members, and a Human Resources Committee with three members. These committees fulfill the functions delegated to them by the rules of procedure in the name of and on behalf of the Board of Directors. The Finance Committee met four times in fiscal 2003 and dealt mainly with the budget, financial and investment planning, the disinvestment program, and the effects of the Thiel Excellence Program. The Audit Committee met quarterly and dealt with the individual and consolidated financial statements, the quarterly reports, the risk management system, the expansion of internal auditing, and the emphasis in audits of financial statements, among other things. The Personnel Committee met six times in fiscal 2003 and dealt primarily with personnal changes in the Board of Directors and the Executive Board, the principles for compensating Executive Board members, and personnel policies in the corporate group. The Executive Board The Board of Directors appointed the Executive Board, which currently consists of three members, and delegated to it the management of day-to-day business. The Chairman of the Executive Board is simultaneously the executive member of the Board of Directors. The Executive Board is obliged to act in the interests of the Company and is oriented toward increasing the value of the Company over the long-term. The Executive Board s tasks include elaborating a corporate strategy, preparing the corporate budget, allocating resources, and supervising the management of the strategic business units. In conjunction with the Board of Directors, the Executive Board prepares the quarterly reports and the individual and consolidated financial statements and implements the risk management system. The Executive Board collaborates closely with the Board of Directors and provides it with full, regular, timely oral and written reports with respect to all questions of strategy and implementation relevant to the Company as a whole, planning, corporate developments, the financial situation, results of operations, and corporate risks. The General Shareholders Meeting The General Shareholders Meeting, which is held in April in accordance with the Company Statutes, is the decision-making body of the shareholders of Thiel Logistik AG. The shareholders of Thiel Logistik AG participate in making basic decisions through this body. Thiel Logistik AG enables its shareholders to exercise their voting rights through proxy holders (who must follow the shareholder s instructions) without participating in the General Shareholders Meeting in person. The Chairman of the Board of Directors chairs the General Shareholders Meeting. The General Shareholders Meeting adopts resolutions on all matters assigned to it by law, and these resolutions are binding on all shareholders and the Company. This includes, in particular, the approval of the individual and consolidated financial statements, the appropriation of profits, the release of the Board of Directors from liability for its management activities, and the choice of an auditor for the annual financial statements. Amendments to the Statutes and capital measures are adopted exclusively by the General Shareholders Meeting and implemented by the Board of Directors. 17

22 2003 Corporate Governance Thiel Logistik AG Risk management Thiel Logistik AG has a system for recording and monitoring business and financial risks. By order of the Board of Directors, the risk management system was audited by an independent auditor in accordance with the provisions applicable to German companies listed on the stock exchange. It is designed to recognize corporate risks at an early stage and control them. In addition, it is intended to ensure the attainment of corporate goals. The principles of the Thiel Logistik AG internal control system are defined and established to guaranty accurate and timely accounting for all business transactions and provide reliable information about the Company s financial situation for internal and external use. However, since, in general, even the internal control and risk management system cannot avoid risks, it is not possible to obtain absolute protection against losses or fraudulent acts. Accounting and auditing The Thiel Group does its accounting in accordance with U.S. Generally Accepted Accounting Principles (US GAAP). The individual financial statements for Thiel Logistik AG are prepared in accordance with the accounting rules of the Grand Duchy of Luxembourg. The financial statements are prepared by the Board of Directors and the Executive Board, audited by an independent auditor, and approved by the General Shareholders Meeting. The independent auditor is chosen by the General Shareholders Meeting. The Audit Committee of the Board of Directors determines the focus of the audit and the auditor s fee and checks the auditor to ensure it is independent. Individual and consolidated financial statements The individual and consolidated financial statements for Thiel Logistik AG as of December 31, 2003 were prepared by the Board of Directors and the Executive Board and audited by Ernst & Young, which expressed an unqualified auditors opinion. The auditor confirmed that the management report and the consolidated management report were in accord with the financial statements. Financial disclosures Thiel Logistik AG places a high value on transparency. The Company simultaneously informs its shareholders and all capital market participants, financial analysts, shareholder associations, the media and the interested public about the Company s status and all material business developments through regular, open, and current communications. The compensation of the Executive Board The Personnel Committee of the Board of Directors is responsible for determining the Executive Board s compensation. The compensation of the members of the Executive Board of Thiel Logistik AG is based on the amount and structure of the compensation of Executive Boards in comparable companies. The special areas of responsibility of members of the Executive Board are taken into account in setting compensation. Starting in 2004, the compensation system introduced in 2003 applies to all Executive Board members. It is based on the following elements: 18

23 Thiel Logistik AG 2003 The compensation has two components: fixed compensation and a variable bonus. The bonus depends on the attainment of certain fixed financial and qualitative goals. The goals can be set for one or several years. The three measurement criteria are: The Economic Value Added (EVA) of the Thiel Group The Earnings before interest and taxes (EBIT) of the Thiel Group Qualitative strategic goals An annual target income is set by contract, which assumes that the goals have been fully met under all three criteria. The relative proportion of the variable compensation component of the target income increases with its amount and is between 30 percent and 55 percent for 2004, if all the goals are reached. Depending on quantitative results and qualitative performance, the bonus can be between 0 percent and 200 percent of the target bonus. There is no minimum guaranteed bonus. The amount of Executive Board s compensation is, therefore, highly dependent on performance. The Personnel Committee can provide special compensation and issue stock options within the framework of the law and the resolutions adopted by the General Shareholders Meeting. GOVERNING BODIES OF THE COMPANY Board of Directors Non-executive members: Berndt-Michael Winter, Chairman Chairman of the Management Board of DELTON AG, Bad Homburg Other positions: Chairman of the Supervisory Board of DELTON Vermögensverwaltung AG, Bad Homburg Chairman of the Supervisory Board of CEAG AG, Bad Homburg Chairman of the Supervisory Board of Microlog Logistics AG, Frankfurt am Main (until 06/03/2003) Member of the Board of Directors of CeDo Household Products Ltd., Telford (UK) Dr. Antonius Wagner, Deputy Chairman Member of the Management Board (CFO) of DELTON AG, Bad Homburg Other positions: Sole Management Board member of DELTON Vermögensverwaltung AG, Bad Homburg Member of the Supervisory Board of CEAG AG, Bad Homburg (since 05/20/2003) Member of the Supervisory Board of Kraftverkehr Bayern GmbH, Munich (until 06/27/2003) Member of the Board of Directors of CeDo Household Products Ltd., Telford (UK) Member of the Supervisory Board of Microlog Logistics AG, Frankfurt am Main (until 06/03/2003) 19

24 2003 Corporate Governance Thiel Logistik AG Dr. Werner Delfmann Professor at the University of Cologne Other positions: Chairman of the Supervisory Board of KNOWTICE AG, Frankfurt am Main Chairman of the Executive Board of Arbeitsgemeinschaft Verpackung und Umwelt, Berlin Member of the Board of Directors of European Business Forum Ltd., London (UK) (until 12/31/2003) Chairman of the Community of European Management Schools, Paris (France), (until 12/31/2003) Dr. Yves Prussen Attorney in Luxembourg Other positions: Member of the Board of Directors of Banque Audi (Luxembourg) S.A. Member of the Board of Directors of Richemont Finance S.A. (Luxembourg) Member of the Board of Directors of Alliance Capital (Luxembourg) S.A. Member of the Board of Directors of Robert Fleming (Luxembourg) S.à.r.l. Executive member: Dr. Klaus Eierhoff (since 04/09/2003) Chairman of the Executive Board of Thiel Logistik AG, Grevenmacher (Luxembourg) Other positions (in the Group): Chairman of the Supervisory Board of Microlog Logistics AG, Frankfurt am Main (since 06/03/2003) Chairman of the Supervisory Board of Kraftverkehr Bayern GmbH, Munich (since 06/27/2003) Member of the Advisory Council of LOG Beteiligungs GmbH, Bad Lippspringe (since 07/14/2003) Board of Directors members who departed during fiscal 2003: Günter Thiel (until 03/18/2003) Christian Fürstaller (until 05/31/2003) Finance Committee Berndt-Michael Winter, Chairman Prof. Dr. Werner Delfmann Dr. Klaus Eierhoff Dr. Antonius Wagner Human Resources Committee Berndt-Michael Winter, Chairman Dr. Yves Prussen Dr. Antonius Wagner 20 Audit Committee Dr. Antonius Wagner, Chairman Dr. Yves Prussen Berndt-Michael Winter

25 Thiel Logistik AG 2003 Executive Board Dr. Klaus Eierhoff, Chairman (since 04/01/2003) Martin Löffler (since 06/01/2003) Stefan Delacher Other positions: Member of the Advisory Council of Bertsch Holding GmbH, Bludenz (Austria) In the group: Chairman of the Supervisory Board of delacher Logistics AG, Wolfurt-Bahnhof (Austria) Chairman of the Board of Directors of delacher & Co. Transport AG, Muttenz/Basel (Switzerland) Member of the Supervisory Board of Microlog Logistics AG, Frankfurt am Main (since 06/03/2003) Member of the Supervisory Board of Quehenberger Logistik AG & Co. KG, Bergheim (Austria) (since 12/12/2003) Members of the Executive Board who departed in fiscal 2003: Günter Thiel, Chairman (03/18/2003) Rodolphe Schoettel (04/30/2003) Christian Fürstaller (05/31/2003) Dr. Andreas Goldschmidt (12/31/2003) EQUITY HOLDINGS Equity holdings of the members of the Board of Directors and the Executive Board as of December 31, 2003: Members of the Board of Directors (Non-Executive) Equity Holdings Options Berndt-Michael Winter Dr. Antonius Wagner Prof. Dr. Werner Delfmann Dr. Yves Prussen Total 0 0 Members of the Board of Directors (Executive) and Members of the Executive Board Equity Holdings Options Dr. Klaus Eierhoff 5,700 - Martin Löffler - - Stefan Delacher - 8,000 Prof. Dr. Andreas Goldschmidt (until 12/31/2003) 1,200 - Total 6,900 8,000 21

26 2003 Management Report Thiel Logistik AG Management Report Restructuring impacted 22

27 Thiel Logistik AG 2003 fiscal year Three newly focused segments form the solid foundation for a successful future. 23

28 2003 Management Report Thiel Logistik AG Re-alignment and consolidation Setting the course to a results-oriented future for the Group Defining and growing businesses with growth potential Focusing on core businesses and resulting divestments Establishing an effective Group management structure STRATEGIC RESTRUCTURING In fiscal year 2003, Thiel Logistik AG faced a difficult economic environment and intensified competition, but also problems stemming from inadequate integration of numerous acquisitions in the past. An extensive business portfolio, along with deficiencies in receivables management and financial control, contributed to an unsatisfactory income situation. Focus on three segments A strategic analysis was undertaken in cooperation with a well-known consulting firm, which resulted in the identification of the following strategic objectives: Define and grow businesses with growth potential Focus on core businesses; divestments Establish an effective Group management structure Define and grow businesses with growth potential In compliance with the new corporate strategy, the business was focused on the three operating segments: Specialized Sector Solutions, Air & Ocean and Regional Logistics Services. The Specialized Sector Solutions segment provides customers with specialized, transregional solutions at each point in the value chain. Within this segment, Thiel concentrated on the Automotive, Fashion & Lifestyle, Media and Furniture sectors. These core business areas were supplemented by the promising FreshNet business (Food and Restaurant Chains). Based on the unique customer needs in these sectors, integrated total logistics solutions were created. Within its business segments, Thiel has designated certain subsidaries as managing companies for their respective sub-segment. The managing companies are responsible for functions such as operational management and product development. 24

29 Thiel Logistik AG 2003 The Quehenberger buildings in Bergheim/Salzburg The Air & Ocean segment offers integrated, intercontinental logistics solutions for air and sea freight. The Birkart Globistics managing company is the lead coordinator for this sector. The Regional Logistics Services segment is known for transportation and warehousing logistics, contract logistics and value-added services. Regional Logistics Services are provided by the following management companies: Quehenberger (Austria, Eastern Europe), Südkraft (Germany, Luxemburg), and delacher (Vorarlberg, Switzerland, Southwestern Europe). In addition to characteristic strengths in their respective regional business activities, these newly organized partners also operate across multiple sectors. Focus on core business; divestments The most important divestment in the fiscal year involved the shares of BTL Logistics of Switzerland. The sale of this company to the Swiss Post was part of our strategic return to our core business areas and also eliminated a large source of loss to the Group. In Germany, the sale of our Healthcare business was significant. This business was sold due to the improbability of satisfactory profits in the medium term. In addition, the divestment program was able to identify and sell real estate properties no longer required for operations. Discontinue peripheral activities Structure follows Strategy : Establishing an effective management structure The Group s restructuring into three segments was completed in the third quarter of fiscal year For organizational purposes, each subsidiary was assigned to a respective managing company of each of the three segments. Parallel to this was the development and implementation of a uniform, corporate-wide, reporting and control system that is consistent with the Company s new organizational structure. Core functions have been centralized at the Group headquarters in Grevenmacher. A large 25

30 2003 Management Report Thiel Logistik AG number of staff in the first and secondary management tiers was replaced. In another major organizational change, responsibility for operational activities no longer exists at the holding level. This function has been decentralized and is now exclusively performed by the subsidiaries. Executive Board of Thiel Logistik AG Martin Löffler Dr. Klaus Eierhoff Stefan Delacher CFO CEO CMO Specialized Sector Solutions Air & Ocean Regional Logistics Services OPERATIONAL IMPROVEMENTS The new corporate strategy is supplemented by consistent implementation of the following operational goals: Stronger organic growth Improved margins Cost reduction Integration of acquired businesses Exploitation of synergistic potential Optimization of the balance sheet structure One initiative implemented to achieve these goals is the Thiel Excellence Program, which involves analyses, measures, milestones and monitoring as well as reporting. Within the framework of this initiative, a comprehensive cost-reduction program was implemented. Adapted to the individual circumstances of each subsidiary, this program has led to improved operating results. These charges arising from restructuring and special write-offs primarily affected the first half of the year and were significantly reduced during the year. In the second half of the year, the Group generated organic revenue growth again. With an increase 26

31 Thiel Logistik AG 2003 in the gross margin during the second half of the year operating results showed a profit by the third quarter. Thiel Logistik was able to operate in the black for the fiscal year as a whole. In fiscal 2003, the Group made a loss of million Euro. Thanks to the restructuring of parts of the group, we again managed to achieve an operating profit (before restructuring, write-offs and the losses made by discontinued operations) on an annualized basis. Organic sales growth from the second half of 2003 onwards Beyond the sale of BTL Logistics and the Healthcare business units, key areas of improvement included the sales and income situations in the subsidiaries and cost savings at the holding company in Luxemburg. SYNERGIES WITHIN THE GROUP Intragroup co-operation intensified in order for synergies within the Group to bear fruit. These included: taking advantage of cost synergies, such as by using shared infrastructure facilities like delacher and Quehenberger s office buildings in Hungary co-operating in client projects, such as the ones by Quehenberger and Südkraft in Russia under the name of Russdirect taking advantage of more favorable conditions, such as by sharing the central purchasing of vehicle fleets In fiscal 2004, cross-selling activities will be intensified. With much more intense co-operation, these include in particular exploiting the potential of major customers and making better use of capacities for avoiding trips without loads. Deep-freeze storage at 24 C at Thiel FreshNet in Hamburg (left) An employee at Südkraft in Karlsfeld (right) 27

32 2003 Management Report Thiel Logistik AG ECONOMIC DEVELOPMENTS European economy slow in 2003 The sluggish economy of 2003 was the decisive factor for the developments in the various business sectors in Europe. Although the logistics industry, too, was affected by hesitant economic growth, it nevertheless was considered a growth market segment. Great significance is also attached to the future of the logistics sector. Activities within this sector are expected to benefit in particular from continuing globalization and the growing outsourcing of logistical processes in the manufacturing and trading sectors. On the European level, a very important development for the logistics sector is the ongoing eastward expansion of the European Union. The entry of new countries into the European community will create one of the largest economic areas in the world. Logistics in our core markets In the most important markets for Thiel Logistik AG (Germany, Switzerland and Austria) economic development was uneven. The gross domestic product (GDP) of Germany stagnated, Austrian GDP growth remained under 1.0 percent, and Switzerland reported a drop in GDP of 0.5 percent (source: OECD). Germany, the largest European domestic market and most important European transit country, has a key position in the European logistics market. The sluggish economy and uncertainties concerning the introduction of a truck toll system in Germany have significantly influenced the logistics sector. The topic of the truck toll system will continue to engage the logistics sector this year. Another hotly debated topic is that of recycling logistics in connection with the introduction of a deposit system for recyclable aluminum cans. Competition in the fragmented logistics market further intensified during the year. There were, however, relatively few mergers and acquisitions. A positive growth rate between 1.2 percent and 1.6 percent is forecast for the three core countries Germany, Austria and Switzerland in 2004 (source: OECD). The eastern expansion of the European Union will be an additional stimulus for growth. The key task of linking the two economic spheres together falls to the logistics sector. Thiel Logistik AG, given its subsidiaries and their local presence, is in a good position to accomplish this task. Greater transparency through new reporting structure GROUP OVERVIEW The consolidated financial statements as of December 31, 2003 have been prepared in line with the new organization of our operating business units, thus increasing transparency. The method of presenting sales and income by region, as done in the quarterly report of September 30, 2003, has been replaced with a format reflecting the new reporting segments: Specialized Sector Solutions, Air & Ocean and Regional Logistic Services. 28

33 Thiel Logistik AG 2003 The management companies of the Thiel Logistik Group have been assigned to one of three segments according to their major source of income. For greater transparency and comparability, the financial figures for the preceding fiscal year 2002 are also presented in the new organizational format. Sales of the Thiel Logistik Group increased from 1,397 million Euro to 1,700 million Euro in The primary reasons for this increase were the newly acquired companies of the Overbruck subgroup and the full consolidation of Microlog as well as the organic sales growth recorded in the two final quarters of Group net sales increase to 1,700 million Euro Net income was affected by the high cost of restructuring, impairment of goodwill and long-lived assets and losses made by discontinued operations, in particular, BTL Logistics in Switzerland. Group operating income before restructuring costs and impairment was 1.77 million Euro. Impairment of long-lived assets of 5.26 million Euro and of goodwill of million Euro and restructuring costs of million Euro led to an operating income (EBIT) of million Euro. Income from continuing operations before income taxes were million Euro and earnings per share based on the net loss for the year were also negative ( 1.82 Euro). Forklifts at work at Südkraft in Karlsfeld (left) Coordinating the export of automobiles (to the USA and Asia) at Thiel Automotive in Bremerhaven (right) 29

34 2003 Management Report Thiel Logistik AG Specialized Sector Solutions The four core sectors Automotive, Fashion & Lifestyle, Media and Furniture are complemented by FreshNet, a promising new sector Growing demand for logistics services in the automotive sector Well positioned with dks in Fashion & Lifestyle Opportunities arising in the media and furniture industry as efficiency and cost pressures increase outsourcing Our Specialized Sector Solutions provide our customers with logistics services specifically tailored to meet their unique requirements. The four core sectors are coordinated by experienced management companies. With its new strategic focus, Thiel Logistik is well prepared to meet the challenges of the future. The Specialized Sector Solutions segment had net sales of million Euro in 2003 with a segment result of million Euro. Management companies for this segment are: Microlog for the Automotive sector, Birkart (under the brand dks) for Fashion & Lifestyle, Overbruck for Media and LOG for Furniture. In this segment, Thiel develops Specialized Sector Solutions, supported by contract services. These Specialized Sector Solutions are implemented for customers on an individualized basis with the goal of achieving internal synergy by means of industry expertise and economies of scale. From receiving and container management to quality management and individual delivery sequences, Thiel offers completely integrated solutions. Specialized Sector Solutions are based on the business processes in the respective sectors and can be adapted as necessary to satisfy individual customer needs. Established sectors are supplemented with other promising sectors exhibiting especially high growth rates. One of these is Thiel FreshNet. 30

35 Thiel Logistik AG 2003 Key financial indicators (in v 000) Sales by segment 2003 (in %) Sales Result Segment assets ,183 1, , ,555 15, ,530 Specialized Sector Solutions 36.65% Air & Ocean % Regional Logistics Services % THIEL AUTOMOTIVE Thiel Automotive has a wide product range The focus of the Automotive sector is on supplying logistics services to selected manufacturers and suppliers in the areas of procurement, manufacturing and distribution processes. The managing company for the Automotive sector is Microlog. Thiel s pioneering IT concepts and advanced logistics designs are especially geared to assist in supply chain integration between manufacturers and suppliers, and take into account customer requirements such as just-in-time and just-in-sequence delivery. The rise in sales is mainly based on Microlog being fully consolidated. Thiel Automotive Sales (in u 000) , ,787 Loading, shipping and scanning vehicle data at Locton in Bremerhaven 31

36 2003 Management Report Thiel Logistik AG The range of services offered encompasses management and organizational consulting, logistics and IT planning, facility and plant planning, as well as project management. Close cooperation within the Microlog Group allows Thiel to develop and implement solutions directly. Thiel customers benefit from one-stop logistics. Rising demand for logistics services Shorter product life-cycles and an increasing variety available in terms of models and configurations are generating a higher demand for logistics services. In the Automotive sector, outsourcing of logistics services continues to define the market. This is because of increased competitive and cost pressures. THIEL FASHION & LIFESTYLE Fashion logistics The textile and fashion industry includes the value chain from manufacturers of raw materials and finished goods up to wholesalers and retailers. A growing number of companies in the fashion industry are moving their production operations to low-wage countries, from which goods must be shipped to their respective sales markets. The challenge for the global logistics chain lies in harmonizing organizational activities and ensuring physical transport and a secure data flow throughout the entire value chain. Delivery time is a decisive factor in the textile and fashion industry because of extremely short product life-cycles. Thiel Fashion & Lifestyle In addition to fashion and textiles, the Fashion & Lifestyle sector also includes, the perfume business. However, the emphasis is clearly on fashion. Sales (in u 000) , ,118 dks is the market leader in the area of fashion Under the brand name DEUTSCHE KLEIDERSPEDITION (dks), the Thiel Group has developed into one of the leading logistics providers for the transportation of hanging garments within Europe. Most of our activities are centered on the provision of logistics services to clients in the German fashion market. Thiel Fashion & Lifestyle coordinates an integrated and intercontinental supply chain and associated value-added services for its primary clients, the retailers. Fashion & Lifestyle performs services in the countries of manufacture as well as in European markets. Thiel Fashion and Lifestyle maintains its own warehouses with adequate capacity for meeting customer requirements even in peak season. Furthermore, Thiel employees perform value-added services such as quality control and preparation for sale activities such as labeling. Upon receipt of merchandise in the respective country, 32

37 Thiel Logistik AG 2003 Thiel Fashion & Lifestyle coordinates the warehousing and distribution of goods to wholesalers and retailers in the country of destination. Thiel Fashion & Lifestyle offers a comprehensive service package for the transport and storage of hanging garments. Services include all the tasks of order processing, from order entry, address control, and pickup from the shipping companies to final distribution to the retailer. Thiel Fashion & Lifestyle offers additional logistics services to the Lifestyle sector, for example, the organization and distribution of merchandise to perfume outlets. The proximity of the destination perfume shops to fashion stores in city centers and pedestrian zones enables Thiel Fashion & Lifestyle to optimize its transport capacities. Integrated supply chain management for the fashion & lifestyle industry The fashion sector faces a difficult market environment The market for logistics services in the fashion industry is now characterized by a shrinking fashion market and structural excess capacity. According to the survey Top 100 in Logistics 2003 (source: Top 100 der Logistik research report), Thiel Fashion & Lifestyle, with dks, is number one in Germany in the sub-sector hanging garments. Hanging garment commissioning at Thiel Fashion & Lifestyle in Nuremberg 33

38 2003 Management Report Thiel Logistik AG THIEL MEDIA Logistics partner for print media and paper The logistics market in the media sector can be divided into logistics for print media (newspapers, magazines and other print media including advertisements and catalogues, etc.) and logistics for paper. The primary requirement of customers in the paper transport sector is the reduction of storage costs and the assurance of just-in-time shipping requirements. Thiel Media Sales (in u 000) ,104 Market leader in press logistics The managing company for the media sector is Overbruck, acquired by Thiel in 2003 from Axel Springer AG. Since April 1, 2003, Overbruck appears in the fully consolidated financial statements of Thiel. Along with the subsidiary Eichberg, Overbruck is the market leader in this sector. The company develops logistics solutions for the timely delivery of printed products to wholesalers and for deliveries of paper products from manufacturers to printers. Growth opportunities despite stagnation The entire print media market in Germany is stagnating. In consequence, producers of printed products and other mass media find themselves under intense pressure to increase efficiency and lower costs. In spite of this many publishing houses continue to process their own logistics internally rather than subcontract to external logistics services providers. Consequently, there is a high demand potential for such services in the print media logistics market. Magazine commissioning at Thiel Media in Ahrensburg (left) A glimpse of the furniture warehouse at Thiel Furniture in Bad Lippspringe (center) Loading frozen goods at Thiel FreshNet in Hamburg (right) 34

39 Thiel Logistik AG 2003 THIEL FURNITURE Logistics specialist for the furniture industry The economic environment in the furniture industry is characterized by fragmentation among manufacturers and a trend towards consolidation among dealers. The managing company in the furniture sector is LOG, a majority holding of Thiel Logistik AG and also a holding of Schieder Möbel Group, Europe s largest furniture manufacturer. In addition to providing transportation and other logistics services to manufacturers, suppliers, and dealers, Thiel Furniture has developed a specialized solution for the Schieder Möbel Group. The solution is customized to satisfy the unique requirements of the furniture industry. Thiel Furniture maintains a platform for manufacturers, suppliers, and dealers designed to minimize warehousing and transport capacity requirements and to shorten delivery times. The goal is to minimize warehousing costs and costs of capital employed by following the principles of just-in-time logistics. Materials and fabrics ordered are delivered to the manufacturers and, if needed, directly to retailers and, occasionally, even to end customers. Thiel Furniture Sales (in u 000) , ,121 Cost pressures indicate market opportunities Many logistics services functions are still handled by the furniture producers themselves. The hotly contested market is likely to force furniture manufacturers to seek additional ways of reducing costs and increasing efficiencies. Outsourcing logistics to external providers will increase and lead to higher demand for logistics services in future. THIEL FRESHNET Food and restaurant chains offer growth potential The promising sector of Food and Restaurant Chains is well positioned to become a core sector of Thiel over the medium term, if sales and income expectations are met. In this business sector, Thiel provides logistics services for two restaurant chains. These services include transport and coordination of all logistical processes, order processing, warehousing, and financial management. Thiel Logistik organizes the transport of the required food products and other goods from the place of manufacture to the affiliated restaurants. Thiel FreshNet Sales (in u 000) , ,425 35

40 2003 Management Report Thiel Logistik AG Air & Ocean Air and sea freight solutions for medium-sized business customers Birkart Globistics provides a worldwide network of logistic facilities with inventory management and value-added services The Air & Ocean sector supports Specialized Sector Solutions Removal of trade barriers set to increase international exchange of goods Air & Ocean combines air and sea transport activities for Thiel Logistik AG and supports implementation of Specialized Sector Solutions and Regional Logistic Services. The logistics services we provide are designed for medium-sized businesses. Globalization and the increasing removal of trade barriers open up new opportunities for the future. In the Air & Ocean sector, Thiel combines its international and intercontinental air and sea freight activities. Both areas offer completely integrated logistics solutions which expand the Regional Logistics Services and the Thiel Group Specialized Sector Solutions. The managing company for the Air & Ocean sector is Birkart Globistics. Air & Ocean reported sales in 2003 totaling million Euro and a slightly negative segment result of 0.98 million Euro. Birkart Globistics offers a broad range of services Thiel Air & Ocean has a local presence in the most important global markets with subsidiaries owned or rented warehouses and logistics centers. These include the specialized automotive centers in Hamburg, South Africa and Singapore, and the Ship Spares Logistics System. This Thiel subsidiary performing global spare parts supply service includes direct delivery to ships at sea and ensures a smooth repair of international ocean transport ships. Primary international activities involve business in Europe, Asia, South America and South Africa. The global network is supplemented by partnerships and mutual cooperation agreements. 36

41 Thiel Logistik AG 2003 Key financial indicators (in v 000) Sales by segment 2003 (in %) Sales Result Segment assets , , , ,726 Air & Ocean 16.55% Specialized Sector Solutions % Regional Logistics Services % Our customers are medium-sized businesses as well as the operating units of large corporations. In addition to intercontinental air and sea shipping, they also benefit from our supplemental services such as supply chain management, value-added services and distribution logistics. Growth opportunity with globalization The globalization of markets and the increasing establishment of multinational production networks over the past decades have significantly increased the importance of air and sea transportation. A corollary to this is the heightened demand for and use of global and integrated logistics services. With its own network, Thiel is able to coordinate international transport with logistics services for the rapid implementation of complete solutions all from one provider. From the port in Hamburg to loading at the airport, Birkart Globistics (Air & Ocean) 37

42 2003 Management Report Thiel Logistik AG Regional Logistics Services The comprehensive service range of the Thiel Group is accessible to mediumsized business clients Thiel Logistik designates Quehenberger, Südkraft and delacher as management companies Management companies benefit from a trend towards total solutions Quehenberger and Südkraft cooperate on Russdirect project Historical local roots and strong customer relationships make the Quehenberger, Südkraft and delacher subsidiaries ideal management companies for the Regional Logistics Services segment. The range of services extends from transportation services to contract logistics. In addition, the segment will profit from the sustained trend towards outsourcing of logistics functions. The Regional Logistics Services segment is focused on selected regions in Central Europe, which have traditionally shown strong customer relationships. The segment reported sales of million Euro and a segment result of million Euro in fiscal Logistics services at the regional level The subsidiaries comprising this segment provide logistics services at the regional level. These logistics services range from transportation services to contract logistics, and can cover the entire value chain. Thiel has designated the following companies to be the respective management companies: Quehenberger, Südkraft and delacher. The Group subsidiaries in this segment are primarily operating in Germany, Switzerland and Austria, in addition to Central and Eastern Europe, where they enjoy the advantages of historical roots and traditionally close customer relationships. Through the intensive use of cross-selling to their predominantly medium-sized clients, these regionally strong Thiel subsidiaries facilitate access to the complete range of services offered by the Thiel Group. Customers now have the opportunity of obtaining national and international surface transport as well as air and sea freight services all from one source. A fully automated highbay warehouse at the Südkraft subsidiary in Karlsfeld 38

43 Thiel Logistik AG 2003 Key financial indicators (in v 000) Sales by segment 2003 (in %) Sales Result Segment assets ,919 11, , ,849 10, ,165 Regional Logistics Services 46.80% Specialized Sector Solutions % Air & Ocean % This table presents sales of the management companies and their respective Group companies responsible within the Thiel Group for the Regional Logistics Services segment. QUEHENBERGER Quehenberger impressive in Austria and Central Eastern Europe Quehenberger focuses its business primarily on Austria and the Central European markets. Quehenberger provides comprehensive logistics outsourcing for large national and international companies in the industries of consumer goods, automotive, household appliances, chemicals, high-tech and air conditioning. The Quehenberger Logistic Group manages several levels of the supply chain between its clients and their suppliers and customers from procurement through warehousing, and distribution to disposal. Quehenberger Sales (in u 000) , ,268 Customized complete solutions The service portfolio includes numerous value-added services that are implemented in the context of logistics services. These include, for example, merchandising services like packaging and recalls, administrative services like purchasing accounting, settlements of accounts and collection, and even technical services such as equipment installation, repair and disposal of equipment. Quehenberger s own powerful transportation and warehousing software guarantees not only the interface with the customer s IT systems, but also a dependable mapping of business processes, and thereby management of the entire supply chain. Quehenberger also provides its customers with on-line shipment tracking services via the Internet. The integrated IT systems provide meaningful management reviews. 39

44 2003 Management Report Thiel Logistik AG Opportunities above all in Eastern Europe While the home market of Austria shows only moderate growth, the Eastern European countries are growth regions. In Austria, Quehenberger has established an extensive network and is considered to be one of the leading logistics providers. The company uses this strong market position to maintain enduring customer relationships especially with multinational groups and medium-sized companies. In Eastern Europe, Quehenberger also enjoys a large network of partners and subsidiaries in 13 countries that benefits not only the customers in Austria. The network is one of the strongest logistical networks in Eastern Europe and provides a good basis for participating in the economic growth of this region. Project Russdirect off to a successful start In a cooperative project with Südkraft initiated in the spring of 2003 under the name of Russdirect, Quehenberger, for instance, has successfully been transporting goods from Central Europe to Russia. This valuable service includes not only local Russian customs clearance but also the detailed distribution of goods once inside Russia. The entire region of Central and Eastern Europe will continue to be an important local point for Quehenberger s own business development in the future. The Quehenberger warehouse in Bergheim 40

45 Thiel Logistik AG 2003 SÜDKRAFT Südkraft: Coordinator of logistics business in Germany and Benelux As a regional managing company, Südkraft coordinates activity for the Thiel Group in the German and Benelux markets in the area of Regional Logistics Services. In addition to transportation and warehousing logistics, Südkraft offers contract logistics and value-added services for all modes of transportation road, rail, and inland waterways. Südkraft provides transportation services between multiple manufacturing locations and the respective supplier locations. Clients include large German automobile manufacturers and European chemical corporations. Südkraft also organizes the distribution of food products in FreshNet s Food and Restaurant Chain segment. Südkraft and Luxembourg logistics providers Südkraft Group also comprises certain logistics providers based in Luxembourg, some of which posted a negative contribution to Group income due to restructuring measures and unsatisfactory capacity utilization. A positive income contribution from these firms is expected in the current fiscal year. Sales (in u 000) , ,339 Chemicals logistics As a logistics partner to the chemical industry, Südkraft undertakes a variety of projects using its own experts and equipment. In addition to standard chemical products, hazardous goods are also transported. Südkraft possesses special cleaning and decontamination points for tanker and silo trucks. A silo transporter in front of the main building of Südkraft in Munich; conveyor belt transports packaged goods 41

46 2003 Management Report Thiel Logistik AG Warehousing In Germany and Belgium, Südkraft undertakes warehousing. The range of options runs from simple storage of paletted goods in existing block storage systems all the way to fully automated high-bay warehouses. Pick & pack, packaging, sophisticated merchandising concepts and, for example, detailed solutions for small parts in lower-shelf bins, are commonplace for Südkraft. Archiving Market influences like the growing flood of information, increasing governmental regulation, increased cost pressures and high rental expenses have led Südkraft to introduce a new product for the archiving of original documents. This sophisticated concept optimizes all applicable activities from sorting and documentation of content through special destruction of documents following expiration of the required retention periods, to professional storage of documents and efficient retrieval of specific files. Customers include banks, insurance companies, law firms, bankruptcy trustees and financial auditing firms. Well placed in a fragmented market The German logistics market is fragmented. Südkraft enjoys a significant portion of the market share by virtue of its own extensive network in Southern Germany and its regional cooperation partnerships. The ongoing trend toward outsourcing of logistics functions is expected to continue as the main positive influence on the market growth. Südkraft, in cooperation with its affiliate Quehenberger, is among the leading providers in the Central and Eastern European countries. delacher delacher Sales (in u 000) , ,242 delacher a leader in Southern Europe delacher is the managing company offering customized solutions as a logistics provider in the regions of Switzerland, Western Austria, France, the Netherlands and Turkey. As a traditional, internationally operating transportation and logistics company with core competencies in road, rail, water, and air transportation, delacher provides top quality services at a local level. delacher is the leader in the field of transportation to and from Southern Europe, specializing in steel, paper and chemicals products. A comprehensive supply chain management system for fruits and vegetables completes the range in Switzerland. Delacher also takes advantage of synergies by sharing its Swiss locations with Birkart Globistics. 42

47 Thiel Logistik AG 2003 Encouraging outlook in Eastern Europe While the markets in Switzerland, Western Austria (Vorarlberg) and the Benelux countries have been characterized by only moderate economic growth, Turkey and the Eastern European countries represent growth markets for the managing company delacher. In general, the pressure to compete in the market for logistics services is great. As a result of the comprehensive network and long-term client relationships, the companies and brands of the delacher managing company place it among the top providers of high-quality logistics services. Most importantly, the ongoing and sustainable market trend towards complete solutions means the potential for growth will continue over both the short and medium terms. delacher truck and the delacher headquarters in Wolfurt, Austria (right) 43

48 2003 Management Report Thiel Logistik AG RECONCILIATION OF SEGMENT RESULTS TO GROUP OPERATING INCOME The operating business segments achieved sales of 1,700 million Euro in fiscal year The holding companies contributed additional sales of 1.39 million Euro. Sales of discontinued operations were not included in the sales of the operating business segments. They were included in Group net income after reconciliation of segment results in the line item Loss from discontinued operations. Operating segments with positive results In 2003, operating segments achieved results of million Euro (2002: 9.18 million Euro). Offsetting these results were the amortization of customer contracts of 4.06 million Euro of the acquired investment in Microlog and Overbruck, depreciation of long-lived assets that could not be allocated to the operating segments amounting to 2.63 million Euro as well as the holding expenses of million Euro. This gives an operating income before restructuring costs and impairment of 1.77 million Euro. Goodwill impairments of million Euro, impairments of long-lived assets in the amount of 5.26 million Euro, and the costs of restructuring of 16.3 million Euro have resulted in negative operating income (EBIT) after restructuring of million Euro. Reconciliation of segment results to Group operating income in v 000 Segment results 24,687 Holding expenses 16,227 Impairment, Depreciation 46,016 Restructuring costs 16,302 Operating income (EBIT) 53,858 44

49 Thiel Logistik AG 2003 FINANCIALS AS OF DECEMBER 31, 2003 RESULTS OF OPERATIONS Restructuring costs In order to improve the transparency of its operating results, Thiel Group has decided to choose another format for the presentation of its consolidated statements of income. All one-time expenses of the current period not attributable to operating activities have been disclosed under income statement line item Restructuring costs. Restructuring costs mainly comprise one-time termination benefits paid or to be paid to employees 6,37 million Euro, consulting fees regarding the elaboration and implementation of the new corporate strategy 3,83 million Euro, losses incurred from disposals of long-lived assets related to divesture programs 0,76 million Euro as well as other expenses incurred in the course of the restructuring of the operations of Thiel Group 5,34 million Euro. Impairment of long-lived assets As part of Thiel Group s re-orientation, an impairment test was performed for long-lived assets. As a result, an impairment loss was recognized for individual intangible assets (primarily software). Impairment losses for long-lived assets totaled 5.26 million Euro. Impairment of goodwill During the first half of 2003, Thiel Group s goodwill was subjected to a comprehensive impairment test by the Group s new management. As a result, the amount of million Euro was written off in the second quarter. No further goodwill impairments became necessary during the fiscal year. During the preparation of the consolidated financial statements for 2003, an impairment test concluded that goodwill of million Euro was recoverable on December 31, Statement of income (in u 000) Goodwill impairment ,067 Restructuring costs ,302 Result from discontinued operations ,588 Once restructuring costs and impairment of long-lived assets and of goodwill are taken into consideration, operating income for the year amounts to a loss of million Euro (prior year: income of million Euro). Financing of acquisitions during fiscal 2003 by means of bank liabilities led to corresponding interest expense of million Euro (previous year: 8.68 million Euro). Other financial expenses at a level of 7.7 million Euro (previous year: 0.86 million Euro) primarily contain impairment charges on other investments that arose during the sale of the Healthcare business division. A thorough analysis of recoverability of deferred tax assets resulted in a valuation allowance on deferred tax assets for those companies requiring a lengthy period of time to utilize their tax loss carry-forwards according to budgeted amounts. Total tax expenses amounted to 7.92 million Euro (previous year: 2.29 million Euro). Commissioning packaged goods 45

50 2003 Management Report Thiel Logistik AG Discontinued operations In the course of restructuring the operations of Thiel Group, the new management has decided to dispose of a number of businesses not deemed relevant in the pursuit of the new corporate strategy. These businesses include divisions that were sold or discontinued in 2003 and those that are to be sold or discontinued in 2004 and have been reported in the line item Loss from discontinued operations in the consolidated statements of income. Income from discontinued operations over the past fiscal year amounted to a loss of million Euro (prior year: loss of million Euro). Key business units included in this item are the BTL Group, the General Hospital Supply division, the shares in the diagnostics software specialist Dorner, shares of Thiel Technical Logistics + Services GmbH, as well as IT companies from the Microlog Group. As a result of these one time expenses, the net loss for the year increased from 5.26 million Euro in 2002 to million Euro in Presenting Thiel at the international tradeshow Transport Logistic held in Munich in May of

51 Thiel Logistik AG 2003 FINANCIAL POSITION Total assets were reduced by million Euro to million Euro (previous year: 1, million Euro). This is primarily the result of the divestment program and of disposals of companies or parts of companies. Further reasons for the reduction in assets included impairment of long-lived assets, of goodwill and of other investments. Assets Property, plant and equipment (in u 000) , ,705 Trade accounts receivable increased by million Euro as of December 31, 2003 as a result of the acquisition of the Overbruck Group. By stringent management of receivables terms during the second half of 2003, trade accounts receivable at million Euro were held at a level of million Euro above the amount of million Euro at the previous year s balance sheet date. Significantly shorter receivables terms were achieved particularly in the management companies Quehenberger and delacher, as well as in the Sector Solution Fashion & Lifestyle. Assets held for sale amounting to 4.9 million Euro (previous year: 4.33 million Euro) mainly include real estate property belonging to the managing company Quehenberger Hungary. The property is to be sold during the first half of Assets of discontinued businesses held for sale decreased from million Euro as of December 31, 2002, to million Euro as of December 31, This reflects the sale of the Healthcare division, shares in the diagnostic software specialist Dorner, shares in Thiel Technical Logistics + Services GmbH, impairment of goodwill related to discontinued operations of million Euro as well as impairment of long-lived assets of the BTL Group of 10.8 million Euro. Property, plant and equipment decreased from million Euro in the past fiscal year to million Euro. Asset additions amounting to 34.3 million Euro were offset by asset disposals of million Euro, as well as depreciation in the amount of million Euro. Implementation of the divestment program resulted in impairment charges and sales of investments in associated companies, as well as other investments. Investments in associated companies were reduced to 1.32 million Euro (previous year: 4.46 million Euro), other investments to 3.52 million Euro (previous year: million Euro). Intangible assets (in u 000) , ,391 Goodwill (in u 000) , ,087 Deferred tax assets underwent a comprehensive recoverability analysis in fiscal Appropriate adjustments to the valuation allowance on deferred taxes were made in the case of companies requiring a lengthy period of time to utilize their tax loss carryforwards according to budgeted amounts. Consequently, long-term deferred tax assets 47

52 2003 Management Report Thiel Logistik AG Liabilities and Shareholders Equity Current liabilities (in u 000) , ,812 of million Euro were diminished by 5.03 million Euro to million Euro. Intangible assets increased during the fiscal year by 4.48 million Euro from million Euro to million Euro. The allocation of the Overbruck Group acquisition price to a customer contract (10.68 million Euro) was offset by asset additions of 4.24 million Euro and amortization in the amount of 9.13 million Euro. Goodwill rose by million Euro from million Euro to million Euro. Increases from the acquisition of the Overbruck Group (50.36 million Euro), an increase in the stake held in the Microlog Group (from percent to percent) of million Euro, as well as other changes of 4.03 million Euro were offset by impairment losses of goodwill in the amount of million Euro. Financing acquisitions during fiscal 2003 raised short-term borrowings by million Euro, from million Euro as of December 31, 2002, to million Euro as of December 31, Non-current liabilities (in u 000) , ,702 Trade accounts payable were higher by million Euro at the accounts balance sheet date as a result of the Overbruck Group acquisition. Reductions in trade accounts payable at the managing company KVB contrasted with increases at the management company Quehenberger. In total, trade accounts payable rose by million Euro, from million Euro to million Euro. The outstanding purchase price obligation from the acquisition of Overbruck Group in the amount of million Euro increased Other liabilities. On the whole, Accrued expenses, other liabilities and deferred income in the current fiscal year rose by million Euro from million Euro to million Euro. Long-term debt decreased by million Euro from million Euro to million Euro on account of loan repayments that had fallen due. Gross financial liabilities increased by million Euro, from million Euro to million Euro. The drop in minority interests by 5.28 million Euro, from 7.52 million Euro to 2.24 million Euro, was caused primarily by the increased stake in Microlog Logistik AG (from percent to percent). The net loss for the year of million Euro reduced shareholders equity from million Euro to million Euro. The resulting equity ratio as of December 31, 2003 was 28.0 percent. 48

53 Thiel Logistik AG 2003 Automated inventory management and goods distribution for high-performance supply chain solutions (left) The main administrative offices of Thiel Logistik AG in Grevermacher, Luxemburg (right) STATEMENTS OF CASH FLOW The cash flow statement shows the sources and uses of funds during fiscal years 2002 and 2003 and is therefore of key significance in assessing the financial position of the Thiel Group. Cash funds reviewed in the cash flow statement are equivalent to the balance sheet item Cash and cash equivalents. Net changes in cash from discontinued activities is represented as a separate line item in the cash flow statement. Cash flows from operating activities (in u 000) , ,793 Cash flows from operating activities in 2003 sharply positive Net cash provided by operating activities in 2003 amounted to million Euro (previous year: million Euro). Based on a loss for the year of million Euro, the reconciliation of net cash provided by operating activities indicates that fiscal 2003 was very strongly influenced by impairments of long-lived assets (5.26 million Euro), of goodwill (34.07 million Euro), and of other investments (7.73 million Euro), in addition to scheduled depreciation and amortization of million Euro and the loss from discontinued operations of million Euro. The clear focus on stringent Working capital management showed first results in the fourth quarter of 2003; the net effect was a positive cash effect of million Euro in fiscal 2003 (previous year: million Euro). Funds inflow from lower trade accounts receivables levels and other assets amount to million Euro. 49

54 2003 Management Report Thiel Logistik AG Investiting activities Cash outflow (in u 000) , ,332 Financing activities Cash inflow (in u 000) ,042 * ,867 Cash outflows from investing activities due to acquisitions Net changes in cash used in investing activities amounted to million Euro in 2003 (previous year: 61.3 million Euro). Conscious reservations in making investments and profitability-oriented investment management caused a decrease in capital expenditures for investment in 2003 to million Euro (previous year: million Euro). Capital additions in 2003 were 34.3 million Euro in property, plant and equipment and 4.24 million Euro in intangible assets. The new Group strategy, with its focus on the divisions of Specialized Sector Solutions, Air & Ocean and Regional Logistics Services, required several divestments to be made. These included the sale of properties belonging to the management companies Quehenberger, Südkraft and delacher. Proceeds from divestments totaled million Euro in The divestment process will be concluded in the first half of fiscal 2004 and will generate further proceeds. The sale of trading securities generated proceeds of 1.93 million Euro (previous year: 4.44 million Euro). Proceeds from changes in other loans granted of 8.73 million Euro was affected by the settlement of receivables of former Group companies; in 2002 changes in other loans granted resulted in cash outflows of 3.79 million Euro. Payments related to acquisitions, net of cash acquired, include the acquisition of a 100 percent share of the Overbruck Group constituting million Euro, an increase in the share of the Microlog Group from percent to percent of million Euro, as well as lesser acquisitions amounting to 1.08 million Euro. Cash and cash equivalents of 1.62 million Euro were acquired as part of the acquisition process. * excl. capital increase Discontinued operations Cash outflow (in u 000) , ,484 Cash inflows from financing activities Net cash provided by financing activities was million Euro during fiscal The cash outflow of 2002 amounted to 1.04 million Euro without the capital increase. Significant acquisitions in fiscal 2003 required an increase of short-term borrowings of million Euro. An increase of long-term debt of 6.78 million Euro was necessary million Euro were repaid. Repayments of debt arising from finance leases led to cash outflows of million Euro. 50

55 Thiel Logistik AG 2003 Cash outflows from discontinued operations The line item net cash used in discontinued operations in fiscal 2003 contains all those corporate divisions that were assessed as to be discontinued operations according to US GAAP criteria. These include divisions that were sold or discontinued in 2003 and those that are to be sold or discontinued in The proceeds from the sale of the corporate divisions during the past fiscal year are also included in this line of the cash flow statement. Cash and cash equivalents Dec. 31 (in u 000) , ,012 Cash outflows from discontinued operations amounted to million Euro in fiscal 2003 as compared to million Euro in fiscal Cash and cash equivalents of million Euro as of 31 December 2003 Cash and cash equivalents were impacted by exchange rate effects, particularly the rising Euro. The effect was 1.4 million Euro. As a result of the individual items, in particular disbursements for acquisitions, the Thiel Group reported total cash and cash equivalents of million Euro as of December 31, 2003 (previous year: million Euro), representing a return to normal levels. Loading magazines at Overbruck in Ahrensburg (near Hamburg) 51

56 2003 Management Report Thiel Logistik AG NEW MANAGEMENT AND STAFF DEVELOPMENT Optimized management structure in Grevenmacher Over the course of the year under review, the Executive Board optimized the management structure of the Grevenmacher holding company. As part of the restructuring process, leadership functions within the Group were reorganized or expanded, responsibilities redefined, and all central functions moved to the headquarters location at Grevenmacher. Simultaneously, all operational functions were delegated to the subsidiaries themselves. This had the effect of reducing the number of employees from 110 to 70 at the holding company in Grevenmacher. The BTS-Delhey buildings in Mannheim-Rheinau Development of a comprehensive human resources management system State-of-the-art compensation system introduced Thiel Logistik AG also undertook a number of measures to establish a comprehensive human resources management system. With the support of a well-known consulting firm, job evaluations of 175 management positions were conducted at the subsidiaries, based on standardized methods. The value of individual positions was assessed and internally compared, along with a review of the Group s overall organizational structure. The results of the evaluation form the basis for developing an up-to-date compensation system with variable components at all tiers of management. These variable compensation components are linked to mutually agreed personal objectives and the quantitative Company success. This system of setting individual goals will be implemented throughout the entire organization in fiscal year The evaluation not only provided a basis to compare salaries with market data but also serves as the basis for a fair advancement and promotion policy. In addition, a management audit was performed of the top managers of the Group, aided by a renowned human resources consultancy. The purpose was not only to obtain individual personality profiles, but to assess the quality of management and to establish a basis for professional qualification and future development of management personnel. Headcount decreased The number of employees through the first six months of the year climbed to 11,515 in part due to the acquisition of Overbruck. With the new orientation on defined core businesses, Thiel Logistik AG sold its interests in several companies, such as the BTL Group, the Roeser Corporation or Dorner. As a result of restructuring and reorganization, the number of employees at year-end had decreased to 10,872. On a full-time basis (FTE), this was equivalent at the end of 2003 to a figure of 10,215 or 9,309 excluding discontinued operations. At December 31, 2002, there were 11,337 employees. The reduction in headcount was a serious challenge for the employees. Their cooperation and commitment contributed significantly to the turnaround of the Group. 52

57 Thiel Logistik AG 2003 Barrels of chemicals at the Quehenberg subsidiary LogoChem in Salzburg and individual commissioning at Südkraft in Karlsfeld RISK MANAGEMENT Management of a logistics corporation with global operations demands an efficient management structure as well as an effective system of controls. The Thiel Logistik Group, therefore, implemented a Group-wide risk management system in 2003 based on the requirements of the German Law on Control and Transparency in Business (KonTraG) and voluntarily underwent an audit. The audit revealed that the system is suited to achieving the goals listed in KonTraG. Risk management in the Thiel Logistik Group signifies an early warning system for the prompt identification of operational and financial risks that may have a detrimental effect on the future health of the Group. A common understanding of the risks in the logistics business as well as overall business risks is used as the basis for analyzing and handling of known risks. A distinction is drawn between risks reported by several partners that can impact the entire Group, and individual risks, that may affect a single subsidiary or business segment. Political and macro-economic risk Changes in the legal or regulatory requirements are common risks to logistics services provider. For example, the financial impact that results from the introduction of a toll system in countries like Austria or Germany, and the market changes that accompany such an event, cannot be fully foreseen and provided for. Moreover, business forecasts for individual Group subsidiaries are based on assumptions regarding macro-economic factors that may have a lasting effect on cost structures, e.g., a change in fuel prices. Political developments in certain operating areas, such as Southeastern Europe or the Near East, could put existing business as well as the fundamental business models in jeopardy (e.g., freight shipments to Greece or Turkey). 53

58 2003 Management Report Thiel Logistik AG Risks from the use of land and buildings As a property owner and tenant (lessee) of logistics real estate, some companies of the Thiel Group are subject to additional risks inherent in the use of land and/or buildings, e.g., environmental risks, construction defects, etc. Because recorded values only partially reflect the underlying assets, changes in use and income potential may require balance sheet adjustments. Implementation of a Group-wide, uniform risk management system Risks from financing and exchange rate fluctuations Thiel Logistik AG as a Group holding company is the debtor for bank liabilities benefiting the Group as a whole or the guarantor of financial debt extended to one of the Group s subsidiaries. The continuity of existing financing agreements is extremely important to the successful restructuring of the Thiel Group. As an internationally active logistics company, Thiel Logistik AG, in some cases together with a subsidiary, is exposed to exchange risk. These risks apply in particular to those operational transactions that are not invoiced in euros. Risk of losing key accounts In the Specialized Sector Solutions business segment, the loss of key customers could materially impact the results of the subsidiaries affected. Risks in the Air & Ocean segment In the Air & Ocean segment, access to large global transportation networks must be ensured, requiring competitive conditions. The racks for transporting hanging garments at dks in Nuremberg (left) The flow of goods is digitally monitored at Quehenberger in Bergheim (right) 54

59 Thiel Logistik AG 2003 Competitive risk The Regional Logistics Services segment is particularly subject to intense competition that could threaten the attainment of targeted operating margins. Risk arising from divestment policy As part of the restructuring process, Thiel Group undertook several divestments in fiscal year There is a possibility of risk from claims that could be made for contractual guarantees by the seller. Regarding the sale of the Swiss BTL Group, comprehensive, although customary, guarantees for instance related to environmental risk, were made to the buyer. Control through risk management No risks have been identified during fiscal year 2003 that could be considered either by nature or in scope to be a threat to the continued existence of the Thiel Group in the foreseeable future. With the new strategic orientation of individual business segments and reporting structures within the Thiel Group, risk management should play an important role in future in the timely identification and effective handling of corporate risks. PERSPECTIVES A variety of promising perspectives have appeared for the newly restructured Thiel Logistik AG. The strategic focus on Specialized Sector Solutions, Air & Ocean and Regional Logistics Services gives Thiel Logistik the necessary strength to meet the challenges of change in the logistics branch. The same applies with the eastward expansion of the EU, as we have a presence through various subsidiaries in Eastern European countries. In addition, the expansion of our product list to include logistically demanding services and value-added services reinforce competitive strength in the Thiel Group. Growth potential in Specialized Sector Solutions With our specialization in selected segments, our customers now have access to comprehensive, differentiated and customized services at all points along the supply chain of their respective industries. Increasing market pressures are forcing competitors into strategic alliances and joint ventures. This development offers Thiel Logistik additional opportunities. Joint use of transportation and warehousing resources may provide improved logistical processes within the sectors, leading to significantly more efficient processes. Air & Ocean: Development of the global sales market In the air and sea freight segment, we will continue to emphasize our ties to the global sales and procurement markets within the framework of an intercontinental supply chain management. For example, we plan further expansion of our own global network in the emerging markets. As part of the strengthening of the leading air cooperation, 55

60 2003 Management Report Thiel Logistik AG Future (Top3/IATA statistic), and the sea cooperation, Group 99, in each case over 200 destinations/ports will be expanded. This allows us to extend the global structures required by our customers in the future, especially in the Specialized Sector Solutions Automotive and Fashion & Lifestyle. Regional Logistics Services: Expansion of our logistics network Our focus on selected regions in Central and Eastern Europe and the intense development of these markets has enabled the Thiel Logistik network to realize a cost advantage. The Thiel Group also benefits from the cooperation with the Specialized Sector Solutions segments with respect to the required transportation, warehousing and distribution capacities, as well as from the mutual advantages of cross selling. The goal is to further develop the logistics network of the Thiel Group, using existing alliances in the field of packaged goods. Growth through Eastern European EU accession countries As a result of dynamic economic growth and despite the current slowdown in demand for customs clearance services, strong medium-term growth is anticipated in the logistics sector in Central and Eastern European countries joining the European Union. A change in the traditional direction of the flow of goods and services from west to east is unlikely. This development is likely to benefit the Austrian logistics group, Quehenberger, which already occupies the leading service provider position in this regional market. Focus on sophisticated logistics services The continued development of sophisticated logistics services allows the Thiel Group to offer its customers individual solutions at every step in the supply chain. This means highly profitable new business for each of the three segments. Customers in the Lifestyle sector, for example, can be offered re-engineering of their entire value chain and, with the aid of industry-specific supply chain software, even a customized product beginning with a supplier audit in Asian countries of origin, through the per item pricing process, up to delivery to the retailers. Increasing demand for value-added services The rising trend in outsourcing reinforces customer demand for value-added services. These supplemental services encompass not only manufacturing processes, but also to an increasing degree, administrative tasks as well. Among these are archiving services for industrial firms, insurance firms, and government authorities, and office equipment maintenance. As part of the merchandising logistics concept, for example, numerous services beyond warehousing are offered. These include the entire process from the preparation of catalogues and order entry functions to payment processing and final delivery of the items to the end users. The customer benefits from an extensive range of customized services. Thiel Logistik has the opportunity of strengthening customer loyalty and developing business fields with growth potential. 56

61 Thiel Logistik AG 2003 OUTLOOK For the current fiscal year, the Thiel Logistik Group expects a moderate growth in sales and aims to achieve a positive operating result (EBIT) in the lower double-digit million range. The achievements in restructuring have made it clear that the Thiel Logistik Group is on the right track. The Company is confident to meet the targets its has set itself for the current fiscal year. Grevenmacher (Luxembourg), February 2004 Board of Directors and Executive Board of Thiel Logistik AG The high-bay warehouse at Südkraft (left) A view of the illuminated building at the branch in Karlsfeld (right) 57

62 2003 Consolidated Financial Statements Thiel Logistik AG Consolidated Financial Statements 58

63 Thiel Logistik AG 2003 Meaningful and detailed financial reporting in accordance with US GAAP with a high degree of transparency. 59