Characterised by the varying developments in global markets and the uncertainties in the Eurozone, the Stuttgart-based Lapp Group recorded moderate growth in the financial year 2011/2012 (1 October to 30 September). The leading provider of integrated solutions and branded products for cable and connection technology increased revenue by 1.5% to around 860 million euros (previous year: 847 million euros).
Growth would have been higher without the drop in copper prices (by 8% annual average), as the price calculation per cable is based on the daily market price of copper. In the previous year, revenue rose by 7% due in part to a rise in the average price of copper. The situation was aggravated by the double-digit fall in France, Italy and Spain, which have been heavily affected by the Eurozone crisis. Without these factors, revenue would have increased by 3%. The number of employees increased from approx. 3,000 to approx 3,150 worldwide. Pre-tax profits were at 54.3 million euros (previous year: 68.2 million euros), this too reflected an impact of around 7 million euros from the trend in the copper price.
"Our company is fundamentally healthy - despite the Eurozone crisis - and we have positioned ourselves well. We will continue to lead the Lapp Group from a position of strength towards a good and successful future", said Andreas Lapp, Chairman of the Board of Lapp Holding AG.
Uneven development in the regions
The Lapp Group is organised into the three regions Europe, Asia and America. The way countries are allocated into the regions does not always follow geographical lines. South America, Africa and the United Arab Emirates are served by Lapp Europe, for example. North America includes the USA, Canada and Mexico while Asia also covers Australia and New Zealand.
1. Europe: The continuing uncertainty around the future of the Eurozone led to a fall in domestic demand. Revenue came in at 594 million euros (previous year: 620 million euros), a drop of 4%. Within Europe, the individual countries have developed very differently. Countries such as Great Britain, Russia, Ukraine and Turkey experienced strong growth. Countries that have been sucked into the European sovereign debt crisis (France, Italy, Spain) only recorded negative growth. As the strongest single market, Germany maintained its revenue share of 36% of the total group revenue. Revenue was 306 million euros, 1.5% higher than the previous year (302 million euros). Over 1,200 people were employed in Germany alone, around 50 more than last year. With a 69% share of total turnover (previous year: 73%), Europe remains the core market for the Lapp Group.
2. Asia: The powerful economic growth in Asia has been particularly positive for the Lapp Group's companies in the region. Growth was at 20%, leading to revenue of 183 million euros (previous year: 153 million euros). Targeted investments in this region supported the above-average growth. This helped the Asia region to increase its share of total company turnover to 21% (previous year: 18%).
3. America: Revenue developed very dynamically in America. Revenue rose by 12% to 83 million euros (previous year: 73 million euros). Revenue development in the USA was particularly positive, with growth of 22%.
Stable earnings and financial situation
Driven by the further consistent expansion of production and staff capacities, staff and material costs rose from 262 to 280 million euros. The price of copper, which was subject to volatile fluctuations throughout the financial year, had a big influence on the moderate growth. In the annual average the DEL quotation (German electrolyte copper quotation for conductors/exchange-traded price of copper) was 614 euros per 100 kilograms, around 8% lower than in the previous financial year (previous year: 667 euros/100kg).
Pre-tax profits came in at 54.3 million euros, a drop of 13.9 million euros compared to the previous year. This drop includes, however, a "copper effect" of around 7 million euros. Despite this, net liabilities to banks were repaid in full. As in previous years, the company showed a strong cash position. At the same time, the equity ratio of the family company rose to 54% (previous year: 50%). "Despite record investments and a very strong cash position, we were able to expand the equity ratio. This means we have all strategic options open and can invest react quickly to market requirements where necessary", says Dr. Uwe Schwellbach, responsible for Finance and Controlling
Significant increase in investments
The Stuttgart-based Lapp Group increased its investments in the 2011/2012 financial year, laying the foundations for further growth. Investments therefore rose to 33 million euros (previous year: 21 million euro). The largest investments came in Germany. For example, the interior construction of the new fully automated service and logistics centre in Ludwigsburg cost 16 million euros. The state-of-the-art goods warehouse (total investment: 48 million euros) entered service last autumn and will be officially opened in mid-2013. Another major investment was the opening of a second Indian production plant in Bhopal and the expansion of production capacities at existing sites such as Contact GmbH in Stuttgart, Camuna Cavi in Italy or Lapp Cable Works in the USA. Further expenses resulted from the 100% acquisition of the long-time sales partner Coelco Trade S.R.L in Romania as well as licence payments to SAP for ECC 6.0 of around 1.3 million euros.
Asia will be the focus of investment for the current financial year. For example, a new plant in Shanghai, China (5.5 million euros) and the further expansion of the plant in South Korea (2.7 million euros) for the production of electron beam cross-linked cables, for example for photovoltaics. In Europe, the construction of a new administration and logistics centre in Poland (approx. 4.1 million euros) is in the pipeline. The continuing implementation of SAP alone will cost 1 million euros in the current financial year. This new information and communication technology will enable the Lapp Group to optimise its processes even further, improve service and fulfil customer wishes even quicker. Total investments for the current financial year are 35 million euros.
Innovations are also being driven forward full steam ahead. In order to bring new high-quality and cost-effective products quicker to market and set new global standards, the product development process is being reorganised using a stage-gate process. The first pilot projects have begun.
In the last financial year, the company was able to prove its pioneer status in cable and connection technology with numerous new innovations. For example, two new innovative versions of power and control cables, proven for over 50 years, were launched on the market: the new ÖLFLEX® Classic 110 and ÖLFLEX® Smart 108 are even more versatile, efficient and with even better performance. The company is particularly proud of the ÖLFLEX® SMART 108, which thanks to the standardisation and recycling of their own PVC reclaimed material can be offered to the market at a much lower cost whilst simultaneously protecting the environment. For the wind energy sector, 20 ÖLFLEX® cables are already on offer that meet the new guidelines for construction and erection of wind power installations in North America (UL 6141).
Extraordinary application examples
Europe’s biggest display system and the third largest in the world was installed at the 13,500 capacity Fenerbahçe Ülker Sports Arena (capacity 13,500) in Istanbul. To enable the "flying cube" to safely move up and down, Lapp planned a 28.5 metre long and 415 kilo SILVYN CHAIN® energy supply chain, which uses ÖLFLEX® connection and control cables to ensure reliable operation.
On the roof of the stadium of German soccer champion Borussia Dortmund, a total of 8,800 thin-film solar modules (total power of 924 kwp) were connected with 4 Y array harnesses. Up to 60% fewer solar cables are required between the modules and the inverters for these solutions.
For the Norwegian company Aker Solutions, Lapp developed durable special cables that are particularly suited to the harsh weather conditions on oil rigs. That is why Lapp was recently officially named as Aker Solutions' preferred supplier for connection technology.
Students from the University of Applied Sciences in Constance took part in the "Solar Decathlon Europe 2012" international competition in Madrid, for which they designed under the project name ECOLAR a building that uses an intelligent energy concept to meet the standard of a zero-energy house. All the required cables were provided by Lapp. The team from Constance came 4th in the competition.
The charging systems developed by Lapp for e-mobility are also prevailing on the market. Their use in mass production is growing continuously. For example, a French manufacturer's e-vehicles are being equipped with Lapp charging cables. The start of series production for complete Lapp charging systems at several German premium manufacturers is just around the corner. Demand is high, especially for the innovative LAPP HELIX charging system. This is a "snail-design" charging cable. It offers significant savings in terms of space, weight, materials and costs.
Outlook for the current financial year 2012/2013
The Lapp Group assumes that growth conditions will not change much in the current 2012/2013 financial year. The growth in revenues is single-digit and are roughly similar to the levels from the previous year, slightly lower in some subsidiaries. "We foresee a continuing stable development for the coming years", explains Dr. Schwellbach. Due to the high investments, amortisations and cost increases, profit for 2012/13 is seen lower than in the previous year.
In order to compensate for the increasing expenditure in investments and higher material and staff costs, a programme has been initiated for increasing efficiency and reducing material costs. No job cuts are planned. On the contrary: the total number of staff worldwide is set to increase slightly in the current financial year.
A particular focal point in the current financial year is the further development of our staff's social skills. This means improving teamwork skills and encouraging an integrated work method in order to train staff for cross-department projects. Andreas Lapp: "Our staff are highly motivated and performance-oriented. Thanks to their commitment, our company will continue to grow in the future."
News published on 06 / 03 / 2013 by Bharat Vasandani