On 8 April 2013, the Management Board and Supervisory Board issued the statement pursuant to section 289a of the German Commercial Code (HGB). The declaration, along with the gorporate governance report, is permanently available on the website of the Company under www.unitedpower.de. com/en.
Outlook
According to the international monetary fund (IMF), global growth is expected to stabilize in 2013, but at 3.5% it would remain relatively subdued. In the current year the economic situation is still mainly influenced by the unstable economic situation in Europe. This causes headwinds for global de-
mand and the global economy in general. The Euro Area is expected to contract by 0.2% in 2013. Apart of that the fiscal situation in the US with automatic spending cuts and tax increases could have a negative effect on the US market. Currently the IMF estimates a GDP growth of 2.0% for the US. The growth in the emerging markets is expected to con- tinue to be significantly higher than in industrial countries. China and India continue to be growth engines in Asia with an expected GDP growth of 8.2% and 5.9%, respectively. The growth of the United Power Technology Group contin- ues to be driven by the pursuit of our three-pronged strat- egy, which comprises further geographic expansion and penetration, broadening the range of engine-powered products and scaling up the size of its products in order to further expand their commercial and industrial usage of its products.
The investment plan is concentrated on capacity expansion. Our current investment budget this year is around RMB 250 million (about EUR 31 million), based on a currency rate of EUR/RMB of 1:8.1 approximately 80% of which is desig- nated for property, plant and equipment and the remaining funds for R&D, sales and distribution as well as general working capital requirements. The Company has the ability to finance its investment through operating cash flow and its existing cash balances. In the second half of 2013 or in 2014 we consider to commence with building a third phase of our newest and third factory, Gaoqi Industrial Park, and install another four to seven new product production lines. This would include investments in production lines for all our major products including residential and commercial generators as well as outdoor power equipment. We may adjust our investment plan in light of the demand prevailing at the time and capacity utilisation conditions. We will also continue to evaluate M&A opportunities.
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United Power aims to gain further market share in its prin- cipal markets Europe, North America and China. Further- more, we plan to leverage our standing and quality recog- nition in established developed markets to penetrate and expand into emerging markets. We have plans to expand our global and domestic sales and distribution network though all major distribution channels including direct sales, wholesalers, specialized dealers and manufacturers. In 2012 we have successfully continued to widen our inter- national customer base acquiring more than 50 new cus- tomers around the world, bringing our total number of cus- tomers to more than 250 in 60 countries. Also, in 2013 we intend to further expand our network of Chinese distribu- tion agents.
Our company intends to further establish its own or li- censed brands in new markets and enhance them in mar- kets that have already been penetrated through various distribution channels to make its brands known. As a ma- jor long-term strategy, we seek to further strengthen our reputation of reliability and to enhance brand awareness, especially outside China. It is intended to achieve strength- ening of the Group’s brands by enhancing marketing ef- forts such as participating in industrial trade fairs or exhi- bitions in local markets, media, internet and outdoor advertisement campaigns as well as through promotional campaigns, which can be launched together with local partners. Meanwhile, the Group further explores to estab- lish regional sales subsidiaries/branches to directly ex- plore the local market for United Power branded products and reinforce the customer relationship.
While there appear to be green shoots in the US markets, the situation in Europe, our largest market by end custom- er remains fragile. Also, the recovery in our home market
China has been somewhat volatile. Overall therefore, the global economic environment continues to be fragile, prone to downside risks and vulnerable to a multitude of poten- tial shocks. However, we remain confident about our con- tinuing profitable growth prospects particularly over the medium to long term. For this year, we do expect the weakness in our key export market Europe and weak Euro currency as well as still uncertain Chinese recovery con- tinue to weigh on growth and profitability. Despite the ad- verse conditions in Europe and China (which are our two largest markets by end customer), we do however aim to continue gaining market share globally.
Assuming a stable EUR:RMB exchange rate and generally improved trading conditions in the later part of this year and next year, our current expectation for revenue growth is about 8% for 2013 and similar growth for 2014. We ex- pect that our commercial generator segment will continue to grow at a rate exceeding that of the residential genera- tor segment over this period in line with our strategy. Also, we do expect our outdoor power segment to grow dispro- portionately faster this year. The components sector con- tinues to be less strategic sector, which will be driven by opportunities presenting themselves in the market place. We expect our average EBIT margin over the next two years to be in line with our EBIT margin of 2012.
Eschborn, 10 April 2013 United Power Technology AG Management Board
Xu Wu Zhong Dong Huang Oliver Kuan
Co-CEO Co-CEO CFO
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Management Report