Basic HTML Version
LISI 2011 —
89
— financial report
Risk factors
on the environment and to ensure healthy, safe working conditions
for all its employees and service providers, as part of the Global
Compact. Commitment No. 7 states that “businesses are encouraged
to apply the precautionary approach to environmental challenges”.
Commitment No. 8 plans to undertake “initiatives to promote greater
environmental responsibility”. Finally, Commitment No. 9 promotes
“the development and dissemination of environmentally friendly
technologies”. In order to comply, LISI AUTOMOTIVE has implemented
three specific measures: standardization of practices and definition of
indicators, risk management organized around the COSO benchmark
and implementation of action plans for environmental safety.
4.4
Legal risks
The Group is involved in a limited number of legal proceedings with
third parties (not customers). All these disputes have been reviewed
with our Auditors and the most significant were appreciated by the
Audit Committee. The amount of provisions for legal disputes set
up for that purpose stands at €0.2m. Generally speaking, all legal
positions are determined and reviewed by third-party and in-house
specialists.
Except for the disputes referred to above, for a period covering at
least the last twelve months, no governmental, legal, or arbitration
proceedings (including any proceedings of which the Group is aware,
which is pending or of which it is threatened) are to be reported that
may have or have recently had significant effects on the Group's
financial situation or profitability.
4.5
IT-related risks
For each of its divisions, the Group has identified an IT safeguard
action plan likely to be implemented in the event of a serious
failure. In addition, the Group has insured risks of interruptions and
malfunctions of its IT systems with a specific policy.
4.6
Other risks
4.6.1 Rawmaterials risks
The LISI Group is potentially exposed to changes in the costs of the
raw materials (steel, alloys, plastics, aluminum, and titanium) used
in the course of its business activities. Nevertheless, the Group
estimates that such price increases are unlikely to impact negatively
on its profit margins. Indeed, some contracts include price-revision
formulae which allow prices to be varied in accordance with changes
to raw material costs. Suppliers work to limited time frames based on
guaranteed-price contacts. At December 31, 2011, the LISI Group uses
no financial instruments to manage its future exposure to changes in
the costs of such raw materials.
4.6.2 Energy-related risks
To cover its energy costs, the Group entered into a supply contract
with electricity company EDF for its French sites, which is due to expire
in 2013. For foreign sites, annual contracts have also been entered into,
particularly in Germany and the USA.
4.6.3 Commercial risks
For the record, the Group manufactures several thousand different
items using various raw materials (steels, alloys, aluminum, various
plastics, titanium, etc.) and employing a range of technologies (cold
and hot forming machines, forming, machining, die trimming and
stamping, plastic injection, thermal processes and surface treatment).
As a result, the commercial risk is spread over a considerable number
of products manufactured at the 40 LISI sites around the world. The
main product families are developed in collaboration with customers,
and the proportion of turnover from patented products plays only a
secondary role in total consolidated sales.
4.6.4 Customer-related risks
Looking at the figures for 2011, only 4 clients accounted for more than
5% of the LISI Group’s consolidated sales. Our 10 largest customers
accounted for 51.5% of total sales; this list includes clients of all
3 divisions, LISI AEROSPACE, LISI AUTOMOTIVE and LISI MEDICAL. Our
38 largest customers accounted for 75% of sales.
Figures for our 3 largest customers have evolved as follows:
2011
2010
2009
CUSTOMER A
12.0%
7.8%
8.4%
CUSTOMER B
8.3%
9.0%
10.4%
CUSTOMER C
7.1%
6.9%
6.0%
4.6.5 Product-related risks
The LISI Group is exposed to the risk of actions for liability or to
enforce a guarantee by its customers regarding products sold. It is
also subject to liability actions in the event of product fault leading
to injury or damages. To protect itself against such risks, as described
in paragraph 5 below, the LISI Group has third party liability cover
for use of its products after delivery. The LISI Group’s liability is often
limited to compliance with the original product specifications or
customer-defined specifications; it cannot be extended to the ways
in which products are used. However, it is possible that the insurance
policy taken out may not be sufficient to cover every possible financial
eventuality linked to such claims, particularly in the USA.
4.6.6 Supplier-related risks
As a general rule and in view of the nature of its manufacturing
activities, the company does not rely exclusively on any one supplier or
strategic subcontractor. The company’s main suppliers are those that
provide it with raw materials.
Outsourcing is confined mainly to technical applications, primarily
specific thermal treatment and finishing operations (surface
treatment and assembly), since most of the Group’s activities are
integrated. For 2011, the various operations outsourced by the
Group’s sites represented approximately 6.8% of consolidated sales
revenue.