Annual Results: Freudenberg Grows Profitably, Invests Heavily

Weinheim, March 29, 2023. The technology company Freudenberg demonstrated resilience in a difficult environment during fiscal year 2022. It was able to increase both sales and profits during the year. Aside from the impact of the war in Ukraine, the Freudenberg Group had to grapple with disrupted supply chains, high inflation, and the availability of energy and raw materials. “We have handled the current challenges well so far,” said Dr. Mohsen Sohi, CEO of the Freudenberg Group, as its financial figures were made public. “Freudenberg is growing profitably, investing heavily, and driving the energy transition.”

• Sales of more than €11.7 billion (increase of 17 percent)

• Operating profit of €941.8 million (increase of 7 percent) 

• Despite the pandemic, more than €2 billion invested in research and development. In 2022 alone, €577 million (increase of 15 percent)

• Investments in future mobility technologies 

The figures in detail

At €11,753.1 million, sales for 2022 were significantly above the figure of €10,038.7 million for the previous year. The increase largely resulted from inflation-related price increases of about €700 million, positive exchange rate effects of about €500 million, and an increase in sales volume of about €400 million.

In 2022, Freudenberg was able to achieve an operating profit of  €941.8 million. This was significantly higher than the figure of €877.3 million for the previous year.

At €607.7 million, cash flow from ongoing business activities was below the amount for the previous year, which was €861.8 million. One reason for the change was a substantial rise in working capital. The already comfortable equity capital ratio increased again in the year under review and is now 54.0 percent (previous year: 50.2 percent).

The international ratings agency Moody's Deutschland GmbH, Frankfurt am Main, has continued to give Freudenberg an “A3” rating with a stable outlook. The Freudenberg Group has thus earned the excellent “Single-A Rating” once again.

Research and development

“Our business success enables us to invest in the future of the company – in research and development, machinery and equipment, and the technologies of the future,” Sohi said. Freudenberg has significantly increased its spending on research and development. During fiscal year 2022, it invested €576.8 million (previous year: €500.2 million). That is an increase of about 15 percent. It brings the total investment in research and development to more than €2 billion since 2019. Out of our total sales, the proportion of new products – those less than four years old – is 31.6 percent (previous year: 32.4 percent).

Here are two examples: The hermetically sealed housings for lithium ion vehicle batteries require special attention to equalize pressure. DIAvent was developed by Freudenberg Sealing Technologies, one of our Business Groups, to meet this need. DIAvent combines several functions in a single part: It equalizes pressure during normal operation; opens up quickly and reliably for emergency degassing, and then closes after the successful pressure equalization. The element not only ensures greater safety – it is also more robust than conventional solutions. During its development, DIAvent started out as a single product, but it has now become a complete product family for a wide array of potential uses. We have received numerous series orders from vehicle and battery manufacturers.

Freudenberg Performance Materials facilitates the transmission of clean energy with water blocking tapes that it produces for use in undersea cables. The newly developed materials for this application are indispensable for a successful energy transition. They ensure that high voltages can be reliably transported over great distances underwater from offshore wind turbines.

Investments

Adjusted for acquisitions, investments in intangible and tangible assets as well as real estate held as a financial investment amounted to €401.5 million (previous year: €304.8 million.)

The Freudenberg Group has invested worldwide: Formed in April 2022, the new Business Group Freudenberg e-Power Systems has started to build up its production and assembly capacity for battery systems in Midland, USA. In Parets des Vallès, Spain, Freudenberg Sealing Technologies has begun building a state-of-the-art factory for the production of elastomer products for the auto industry.

Vibracoustic has expanded production and assembly capacity for bellows in Europe, the USA, and Mexico. And Freudenberg Performance Materials has continued to invest in facilities for needle-punched nonwovens at its Škofja Loka production facility in Slovenia.

The investments in Germany come to €144.3 million (previous year: €88.0 million). Freudenberg Performance Materials expanded its factory for gas diffusion layers – key components for fuel cells – at its Weinheim facility to meet future demand in the fast-growing market for the systems. Production is due to begin this summer. Vibracoustic increased its capacity for the production of air suspension systems in Hamburg. EagleBurgmann launched modernization projects at the Innovation Center at its Wolfratshausen site and for the production of mechanical seals and other products in Eurasburg.

Portfolio

In December 2022, the Freudenberg company SurTec International GmbH in Bensheim, Germany acquired Munich-based omniTECHNIK Mikroverkapselungs GmbH, which specializes in thread-locking products. The transaction included the acquisition of all shares of Precote USA LLC, East Lansing, Michigan, USA, by SurTec Inc. of Upper Arlington, Ohio, USA.

Employees

Last year, Freudenberg hired about 7,800 employees. That is about 1,000 more than during the previous year and an increase of 14 percent. Europe, North America, China and India were the main focuses of the hiring.

Freudenberg is investing in training for young people: During 2022, 123 people began training programs (previous year: 91) at Freudenberg companies in Germany. That is roughly one-third higher than the figure for the previous year. In all, 351 people were in training programs in Germany alone. The company also provides training in 14 other countries.

Climate-neutral by 2045 – a multistep strategy

“We are driving the energy transition,” Sohi said. “One example is the expansion of the battery and fuel cell business. Another is our ambition to be climate-neutral by 2045.” Freudenberg is turning to a multistep strategy of energy savings, electrification, and purchases, along with compensation for CO2 emissions and its own production of green electricity. This is making the in-house generation of green electricity increasingly important. The approach mainly relies on photovoltaic systems on the roofs of buildings at Freudenberg facilities around the world – from China to Mexico to Spain.

Freudenberg is supplementing its in-house power generation programs with the purchase of green energy. The Freudenberg Group is considered to be a reliable partner, enabling it to conclude long-term contracts with energy companies for the supply of green energy. In one case, solar energy is being supplied by the Tramm-Göthen Solar Park, the largest facility of its kind in Germany. In another, the company receives a share of the electricity produced by the Offshore Windpark Nordsee Ost. At the end of 2022, Freudenberg sites in Denmark, Sweden and Austria were purchasing 100 percent green electricity. Other sites will follow in 2023. In Germany, the company’s facilities in Berlin, Hamburg, Oberwihl and Emmerich are among its CO2-neutral facilities. During 2022, Freudenberg increased its share of electricity from renewable sources from 21 to 30 percent of its total electric power consumption.

Social commitment

Freudenberg has been socially committed since its founding. With its “Education and Environment” program, its social involvement is being strengthened. The goal is to give people access to jobs and education while promoting environmental protection. Since the start of the program in 2015, the Freudenberg Group has provided €18 million to promote charitable projects and has funded 170 of them, including 40 in Europe.

Here’s one way the funds are being used: Many children in Vietnam live in harsh social and economic conditions. Abandoned by their families or orphaned, they are on their own. SOS Children's Villages in Vietnam cares for children in these situations. Last year, Klüber Lubrication employees in Vietnam supported the work of SOS Children's Villages in Ben Tre and Da Lat in South Vietnam.

Outlook

We can expect economic and political uncertainties to continue. Challenges and risks are emerging, sometimes exacerbated by the war in Ukraine and the COVID 19 pandemic. They include the energy supply, raw material bottlenecks, price increases, suppliers' delivery problems, and labor shortages. To deal with these challenges, we will continue to be agile at each of our locations and respond quickly and flexibly to the constantly changing requirements – with an unflinching customer focus. This principle applies to every industry and region. We will meanwhile continue to invest in long-term projects. For us, the key strategic themes continue to be the transformation of mobility, digitalization and sustainable solutions.

About the Freudenberg Group

Freudenberg is a global technology group that strengthens its customers and society long-term through forward-looking innovations. Together with its partners, customers and research institutions, the Freudenberg Group develops leading-edge technologies and excellent products and services for about 40 markets and for thousands of applications:

seals, vibration control components, batteries and fuel cells, technical textiles, filters, cleaning technologies and products, specialty chemicals and medical products.

Innovation strength, strong customer orientation, diversity, and team spirit are the cornerstones of the Group. The 170-year-old company lives by its core values: a commitment to excellence, reliability and pro-active, responsible action. In 2022, the Freudenberg Group employed over 51,000 people in around 60 countries worldwide and generated sales of more than €11.7 billion.