Höganäs 2012 Annual Report: CEO Alrik Danielson reviews a challenging 2012
April 10, 2013
In Höganäs AB’s 2012 Annual Report, CEO Alrik Danielson reviewed what was a difficult year for all companies connected to the global automotive industry; however a number of positive developments that took place during the year were highlighted.
Danielson commented, “Just like every other company in 2012, we were affected by the global economic downturn in the second half-year. This resulted in somewhat lower sales, of SEK 6.7 billion, down 5% on 2011. We were also affected in profit terms, but still succeeded in achieving an operating margin of 14.1% excluding restructuring expenses in the fourth quarter, compared to our long-term target of 15%.”
“2012 started better for Höganäs than we had expected. In the first quarter, we achieved good sales performance and market acceptance of new powder products in surface coating and component manufacture was positive. Then, in the spring, we saw a clear demand slowdown—our customers, and their customers, were affected by a weak business cycle. Our sales and order levels deteriorated gradually quarter by quarter. We adjusted the production rates in our plants accordingly.”
“The savings actions we initiated in autumn 2011 continued, but were not enough. So in autumn 2012, we started a major rationalisation programme to adapt our capacity to market demand and cut our costs.”
Danielson added, “Overall, this means we will save some MSEK 60 in 2013, so we are better equipped for an uncertain future. Work on identifying further cost savings continues. The strong Swedish krona only affected our profits to a limited extent in the year because of currency hedging, but present a significant challenge going forward in our efforts to reach our financial targets. Essentially, metal price surcharges compensated for raw materials price increases. We expect metal prices and currencies to remain volatile in 2013.”
The impact of reduced car production
“Our Components business area consists of powder manufacture and sale to component manufacturers. Its customers are mainly in the powder metallurgy industry, who often produce large batches. Decreasing car production, especially in Europe, combined with generally lower industrial production, negatively affected the business area’s progress. Demand from subcontractors for garden equipment, tools and household appliances also levelled off. However, the launch of the latest generation of metal powder solutions for component manufacturers was successful in many markets. Overall, Components’ turnover was down somewhat on 2011,” stated Danielson.
Commenting on regional market variations, Danielson explained, “Höganäs’ performance on its geographical markets was mixed. Sales in Europe decreased in the year due to the economic slowdown. The European car industry is struggling with overcapacity—the estimated capacity surplus in 2012 is 2-3 million cars, or 15-20%. Sales in Asia progressed positively, especially in the first half-year, with sales recovering after the Japanese tsunami and flooding in Thailand. Sales in most Asian countries were fairly good in the year, while progress in India slowed due to factors including the country’s economic problems. Our underlying sales in North America are positive, while the South American market started poorly, but improved in the year, through means including growth-promoting stimulus measures for the Brazilian economy.”
A move towards new technologies: Inductors, MIM and Additive Manufacturing
Commenting on Höganäs’ move into new market areas, Danielson stated that, “The launch of Inductit (Höganäs’ own inductors) in the spring gained a very positive market reception. The first orders were shipped in the second quarter and deliveries continued for the rest of the year. The development of injection-moulded components based on our metal powder, termed Metal Injection Moulding, MIM, is another good example of new applications. The combination of unique production technology and the right binding agents enable the usage of coarser powders for larger MIM components, for applications such as medical and dental instruments, tools and household products. This coarser powder can be produced at a lower cost, enabling the production of larger components for a relatively low cost. This will mean lower costs for our customers compared to traditional, finer MIM powders.”
Höganäs’ acquisition of Fcubic AB and the formation of the Digital Metal® segment sees the company making a move into the rapidly evolving area of Additive Manufacturing (AM). Commenting, Danielson stated, “This acquisition is an important step towards strengthening our competence in additive manufacturing, or 3D printing. We expect Digital Metal’s technology to be an important part of component and system manufacture of the future, because it creates significant value for customers for minimum development lead-times, superior performance and customer-specific components on a large scale.”
“Economic conditions in 2013 are highly uncertain, which is also affecting Höganäs’ markets. In 2012, we witnessed how the debt and liquidity crisis affected the global manufacturing market. We are convinced that this trend will continue in 2013, although the extent remains unclear. Against the background of uncertain market conditions, the rationalisation measures we decided in autumn 2012 become more important. In 2013, we will be focusing on adapting our organisation and capacity to market demand and ensuring the necessary cost savings. But continued initiatives in research and development will also feature in 2013,” concluded Danielson.
The full 2012 Höganäs Annual report is available for download from www.hoganas.com