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Family businesses and a rally of profits

Last year was a tumultuous time for markets on the back of fears of a second recession, but some family businesses look to have weathered 2011 remarkably well, reporting record revenues and profits.
Family businesses Ford and Bosch have announced strong results, while H&M has seen profits take a hit

Last year was a tumultuous time for markets on the back of fears of a second recession, but some family businesses look to have weathered 2011 remarkably well, reporting record revenues and profits.

Take for example the Bosch Group, the German car parts supplier controlled by descendants of the founding family. Revenues at the Stuttgart-based family business exceeded €50 billion for the very first time last year, according to preliminary figures released by the company this week.

Much of this was thanks to strong growth internationally – while sales in Europe rose by 9.5% to more than €30 billion, Asia-Pacific and the Americas also made their mark, boosting revenues by 9% and 7%, respectively.

The privately owned business, which is the world’s largest provider of auto parts, was founded by Robert Bosch in 1886. It is 93% owned by the Robert Bosch Foundation and also has its long-term strategy to credit for its strong growth and high targets for 2012.

“We are sticking to our strategy. With our broad portfolio, global presence and innovative strength, we will take advantage of the opportunities for our company, which remain significant,” said Franz Fehrenbach (pictured), chairman of the management board, in the statement.

Moving along the same lines, an American family business is also looking to set some records by posting its biggest profit figures since 1998. Ford Motor Company, controlled by members of the founding Ford family, will reportedly post 2011 net income of more than $20 billion (€15.2 billion) tomorrow (27 January).

This record-breaking figure – Ford’s highest so far was $22.2 billion in 1998 – will largely be due to a one-time gain. The elimination of a valuation allowance against deferred tax benefits could raise about $14 billion, according to a report by Bloomberg.

  Revenues will also likely rise to around $135 billion in
  2011, up from $129 billion the year before. But strong
  sales will come as no surprise for the carmaker headed by
  fourth-generation Bill Ford (pictured).

  The family-run automobile manufacturer, founded in
  1910, announced in December that it would resume
  paying dividends
to its shareholders. The payment, after a five-year gap, was thanks to Ford’s strong financial growth over the last few years – after losses of $15 billion in 2008, it reported profits of $454 million the next year.

Although businesses in the auto making industry look to be going from strength to strength, it hasn’t been all good news for a family company in the clothing retail sector. Hennes & Mauritz, the Swedish fashion chain controlled by the Persson family, saw its full-year 2011 profits fall to SEK 20.94 billion (€2.36 billion), from SEK 25.09 billion the previous year.

The fall was largely due to “negative currency translation effects” and high purchasing costs, the company said in a statement. Sales saw an increase of around 8% in local currency to SEK 109.9 billion (€12.38 billion), also due to the family business’s long-term outlook.

“Despite increased purchasing costs, we chose a strategy of strengthening our customer offering and market position even further relative to competitors. We are convinced that this will gradually become more evident to customers and will strengthen H&M’s already strong market position even further,” said Karl-Johan Persson (pictured), chief executive of H&M and the grandson of the company founder.

The 36-year-old, who took over at the helm of the retailer in 2007 during a particularly challenging period for the clothing retail industry, also emphasised the family business’s focus on expansion. H&M opened 266 new stores over the year and entered five new markets, he said in the release.

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