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June 14, 2010 02:00 AM

KraussMaffei CEO sees growth returning

Chris Smith
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    The downward trend is broken, according to KraussMaffei AG CEO, Dietmar Straub, who expects the plastics machinery group to be back on a growth trajectory in its next financial year.

    With incoming orders up 25 percent over the 2009 period, Straub is “cautiously optimistic” that KM has seen the worst of the downturn. Speaking in Zurich at a meeting to lay out the group's K show plans, Straub said he expected sales for the period to the end of September this year to total around 750 million euros ($900 million).

    That result will be slightly ahead of 2009 sales of 742 million euros, but a long way short of the record 1.05 billion euros achieved in its 2007-08 financial year.

    However, with incoming orders for 2009-10 predicted at 800 million euros, up from 644 million euros last year, Straub believes the group — which includes KraussMaffei, Berstorff and Netstal Maschinen AG — is firmly back on a growth path.

    “The rubber and plastic machinery industry in Germany was in deep recession until the beginning of 2010. This applied to most markets except China and to some extent India and it continued until spring of 2010. But we are now seeing a rise in incoming orders … we can say we have broken the trend,” he said.

    Straub's caution in his prediction is due to factors beyond the firm's control, especially ongoing uncertainty surrounding the euro-zone economies. That concern is tempered, however, by his certainty that KM has used the downturn months to improve its manufacturing capabilities.

    “We have had to adjust capacities and control costs but we have also made investments,” he said, detailing a spending of 4 million euros ($4.8 million) at KM's main plant in Munich during the 2009 financial year. This included new painting lines and improved internal work-flow capabilities.

    Staffing across the KM companies has been cut from around 4,000 before the downturn to 3,400 today. However, Straub said that all of its plants are now running on full-time schedules.

    The firm has also benefited from more flexible working practices and improvements in management control that it has been implementing since well before the global financial crisis, he said.

    While the economic picture is improving, Straub said that the plastics machinery market has “shifted irrevocably” in terms of geography.

    “Growth is moving to the emerging markets. No one would have thought at the last K [2007] that our markets in the BRIC [Brazil, Russia, India, China] countries would be almost double that in the U.S. But Asia now accounts for 20 percent of our business volumes.”

    As in previous global downturns, the U.S. is picking up earlier than other developed markets, but Straub is quite clear that it will not return to historic record levels due to the long-standing shift of manufacturing out of the country to lower-cost locations.

    “This is the third phase of shrinkage [in the U.S. market]. It may go back to its pre-crisis levels but I do not expect it to go back to its record levels,” he said.

    While recovery in Europe is expected to be slower, Straub believes it will be more sustained.

    “In Germany and Switzerland, policies to support manufacturing have been seen to work, so in Europe we do see market recovery, although there will be a move from west to east.”

    Despite these regional variations, one theme Straub reports seeing worldwide is a shift toward more highly automated investments and complete production systems, particularly in emerging markets where companies may have less-developed internal development capabilities.

    “In the case of standard machines we are at such a high level of performance that developments yield only fractional benefits. On the other hand, system and process solutions can slash cycle times for production of complex parts,” said Straub. “Across the board in sales terms, 70-75 percent of delivered machines are either systems or machines with some automation.”

    Highly automated system solutions, such as the company's Coverform process for applying scratch-resistant coatings within the molding cycle, will be a key feature of its display at the K show in Dusseldorf, Germany, to be held Oct. 27-Nov. 3.

    Munich-based KraussMaffei is owned by U.S. private equity group Madison Capital Partners, of Chicago.

    The German group manufactures injection molding machines, extrusion lines and reaction processing equipment.

    Copyright 2010 Crain Communications Inc. All Rights Reserved.

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