Group Management Report Products Safety and Health Environment Human Resources Social Commitment Consolidated Financial Statements 79
This can lead to decreasing sales revenues, which can be
caused by declining sales volumes or falling prices. Since
in many cases we cannot adjust the cost structure in the short
term, this can lead to a drop in profitability.
We counter sales risks by continually optimizing our
product and service portfolio, above all on the basis of our
innovative ability. In the process, it is decisive that we
cooperate closely with our customers at an early stage of
development work to adapt to market needs. With our
innovation strategy, we can counter increased competition
in our markets.
A loss of, mergers of, or backward integration of customers
can lead to major changes in the customer structure.
Due to our very diversified customer structure, however,
these risks are limited. In addition, we cooperate closely
with our core customers within the framework of our key
account management.
In the group of sales risks, there has been a change in
our estimates of the probability of occurrence and dam-
ages compared to the previous year. The magnitude of the
risk assessed is now classified as low (previously medium).
Risks from Business Combinations and Investments
Apart from operating growth, acquisitions of companies,
business activities, and individual technologies play a key
role for the implementation of the strategy for profitable
growth at ALTANA. Depending on the size of the activities
acquired, inadequate integration can place a burden on
the Group’s earnings situation and limit its financial headroom.
In addition, a business performance that is worse
than what was expected when the acquisition was made can
lead to impairments of assets with a negative impact on
earnings.
To minimize the effects of the risks from business combinations,
we examine our acquisition targets systemati-
cally and comprehensively and analyze them in detail in a
multistage approval process.
Impairment losses recognized in the past fiscal year have
reduced the impairment risk. Therefore, compared to the previous
year, the assessed risk for impairment of assets from
acquisitions, which we continue to classify as medium risk,
has decreased.
Procurement Risks
Limited availability of certain raw materials or substantial
raw-material price increases that we cannot or can only partially
pass on to the markets in the short term constitute
the primary procurement risks. These can have a negative
impact on the Group’s earnings situation.
We continually analyze the situation on the raw-materials
markets that are relevant for ALTANA. By doing so,
we can identify price trends and structural shifts on the part
of suppliers at an early stage and devise suitable measures.
We take this knowledge into account when we arrange supply
contracts. In addition, we take account of the volatility
of raw-materials prices in our customer relations. To be able
to pass on price increases to the markets in the short term,
we use the flexibility of price mechanisms and price lockup
periods.
The group of procurement risks is still classified as
medium compared to the previous year. However, due to a
higher probability of occurrence and increased damages
regarding raw-material procurement, the risk increased in
the past fiscal year.
Financial Market Risks
Financial market risks primarily concern short-term and significant
changes in exchange-rate relations and interest
rates, as well as default risks and the covering of financial
resource needs.
Due to exchange-rate fluctuations, the translation of
foreign currency positions into the Group currency, the euro,
can have a negative effect on the Group’s sales and earn-
ings performance (translation risks). Such negative effects can