Page 12 - Annual Report 2019

Supervisory Board Report
Group Management Report
Consolidated Financial Statements
Annexes

Employment levels in the German textile and fashion industry declined overall (-2.2%) this year
due to the prevailing economic conditions. The textile segment saw a -3.3% drop in employment,
while the apparel segment held steady (+0.1%).

Wage and salary levels rose counter to employment levels. The textile segment paid -0.4% less
than the previous year, while wages in the apparel segment rose by +2.7%.

Exports also rose during the year under review (+2.5%). The export volume in the textile segment
remained below the previous year’s level at -2.9%, while the apparel segment’s exports climbed by
another +5.6% this year.

2.3. Overview of business performance
Like the entire German economy, the Hoftex Group experienced a difficult fiscal year in 2019. As an
internationally operating, export-centric corporation, divisions were particularly negatively impacted
by international trade conflicts and Great Britain’s decision to leave the EU. Uncertainties among
customers and suppliers ultimately resulted in weakening global demand. The threat and imposition
of punitive tariffs for a variety of goods also distorted competitive trade conditions for companies
in the Hoftex Group. These developments were exacerbated by the fundamental structural shift in
the German automotive sector – Germany’s key industry and, responsible for well over half of sales
generated, the Hoftex Group’s largest buyer. Once the negative trend became clear during the
second half year, we communicated this and adjusted our 2019 financial targets accordingly.

TENOWO Division
Our largest division’s sales increased by 0.7% to EUR 134.9 million in 2019 (prior year:
EUR 133.9 million). TENOWO was thus able to maintain a solid position in the marketplace despite
the difficult conditions overall. As early as the third quarter of 2019, it was clear that the division
would not be able to achieve its unit sales and sales growth targets for 2019. The weakening
automotive economy was the main driver behind this lack of growth. TENOVO’s nonwovens make it
an established supplier among domestic and international automotive suppliers. Thus, the division
was considerably affected by the sluggish global demand. Worldwide vehicle demand dropped
by 5% in 2019, primarily influenced by demand in China plummeting by nearly 10%. Demand also
declined in India, Japan, Russia and the US. The European car market reached levels slightly
higher than the prior year (source: https://www.vda.de/en/services/facts-and-figures). The lack of
buyer interest in 2019 resulted in a global decline in vehicle production. TENOWO’s international
locations also felt the effects of the weakened demand. Automotive sector sales slowed at the
international locations in the US and China and at TENOWO’s German sites. The US and Chinese
locations faced the greatest drops in sales, which ultimately led to imbalances and fluctuations
in capacity utilisation. Due to the versatility of their systems and special applications, the German
locations were able to avoid greater declines in unit sales in the automotive segment.

TENOWO experienced positive effects during the fiscal year just ended as a result of many years of
strategic focus on new markets and applications in the industrial segment. Industrial was able to
add sales revenues and unit sales with its business sectors, thus compensating for the dip in sales in
the automotive segment. Above all the Hof and Reichenbach locations are increasingly growing into
competence centres for filtration, medical and construction applications.

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