Expanding the global footprint Oerlikon further expands in growth markets
According to the International Monetary Fund (IMF), China’s economy grew 6.9 % in 2015, lower than the 7.3 % in 2014. China’s economic deceleration was unanticipated at the beginning of 2015 and is largely the result of overcapacity in key industries and a generally sluggish world economy. In 2015, Oerlikon generated 24 % of Group sales in China, where it employed over 1 500 people at 22 sites. To sustain its economic growth, China’s government is seeking to transform and upgrade the country’s industrial structure. Its “One Belt One Road" strategy, for example, aims to redirect investments in infrastructure that enhance trade, coordination and connectivity across Asia. The government is also investing in digitizing manufacturing, along the lines of robotization, 3D printing and Industry 4.0. Another area is industrial services. With these programs and its 13th Five-Year Plan (2016–2020), a large number of new industries and new businesses have emerged, which could help balance out the economy. China remains an important and attractive market for Oerlikon over the medium to long term, where it enjoys a good standing thanks to its leading technologies and its established trusted relationships with key customers and the relevant industrial associations. In particular, the Manmade Fibers Segment, which generates over 60 % of its sales in China, is a well-respected partner for the textile and apparel sector. For many years, it has been a VIP participant at the China Annual Textile Round Table Forum, organized by the CNTAC (China National Textile and Apparel Council). In the business of polycondensation, the Segment has also laid a strong foundation for potential growth through its joint venture with China’s Huitong Chemical, creating the only company in the world to offer comprehensive industrial solutions, from continuous polycondensation to finished end products in chemical fiber spinning or PET bottle-grade material. The Chinese automotive market is another sector where the Group enjoys strong relationships with major domestic players, such as Dongfeng Motor, one of the largest Chinese automobile manufacturers. In 2015, the Group held an “Innovation Technology” and “Advanced Manufacturing” event with Dongfeng, featuring both its surface solutions and drive systems technologies.
In a year when most emerging markets struggled, India proved to be a bright spot in the global economy, with robust growth in the services and manufacturing sectors helping fuel strong economic acceleration. According to the IMF, real GDP grew by 7.3 % in 2015, making India the fastest growing large economy, surpassing China. The country was not without its challenges. Its agriculture market was sluggish due to rainfall from the monsoons at 12 % below normal levels, and India also saw flat growth in its automotive industry. In 2015, India accounted for 5 % of Oerlikon’s sales and the Group operated 16 sites across the country, with over 2 500 employees. India has implemented some important structural and economic reforms and has an agenda to put in place further reforms to reduce supply bottlenecks and stimulate domestic and export trade. The IMF projects that India will grow slightly over the next two years.
The activities of Oerlikon in India, as in China, are focused mainly on serving customers based domestically. The Surface Solutions Segment, which has a regional network of 10 service and production centers, is expanding in step with the longer term growth of the automotive industry. With the opening of its third plant in Sanard, in the state of Gujarat, the Drive Systems Segment has increased its production capacity to better serve automotive customers with a range of high-tech products, from transmission synchronizers to assemblies for full and final transmissions, including continuously variable transmissions for agricultural tractors, transaxles for leisure vehicles and axles for wheeled loaders and other on- and off-road applications. Given India’s growth in the textile industry, this market is gaining importance for the Manmade Fibers Segment, which has been operating in the country for more than thirty years. To reinforce its foothold in India, in 2015 the Segment began the construction of a new customer service center in Vadodara (former Baroda).
Europe began the year on a high note, with first-quarter GDP growth at 0.5 % — the equivalent of an annualized rate of 2.1 % — and the best showing since the recession in Europe ended in the spring of 2013. As the year progressed, Europe’s recovery slowed and growth was uneven: France experienced an uptick late in 2015, but Europe’s biggest economy, Germany, slowed along with Italy and Spain, while both Greece and Finland reported negative growth. Nonetheless, the region did benefit from a fall in energy prices and a policy of quantitative easing undertaken by the European Central Bank (ECB). The accommodative monetary policy kept the euro weak, boosting exports, and led to the Eurozone notching a large current account surplus. For the full year 2015, real GDP growth for the Euro Area was 1.5 %, according to the IMF. In 2015, Europe accounted for 38 % of Oerlikon’s sales and serves as the base for the Group’s global headquarters. A total of 6 972 employees work at 83 sites across the continent, representing around 50 % of the Group’s global workforce.
According to the IMF, Europe’s GDP is expected to remain stable for the next few years at around 1.7 %, supported to a certain degree by the continued quantitative easing program by the ECB. Europe is and will remain Oerlikon’s most important region in terms of share of the Group’s revenue and is also a vital research and development hub for Oerlikon – in which the Group continues to strongly invest in order to protect its technology and market competitiveness. In 2015, the Manmade Fibers Segment opened a new technology center in Chemnitz, Germany for the development and testing primarily of extrusion systems for tapes and monofilaments along with take-up heads and inline texturing devices, twisting machines and carbon fiber winders. The Surface Solutions Segment also strengthened its presence in Europe with the opening of its first automotive competence center in Slovakia. Italy remains a main hub for the Drive Systems Segment, where it continues to develop and produce innovative solutions for passenger, hybrid and electric vehicles, as well as for customers in the agricultural, oil & gas and construction sectors.
After a slow start, the U.S. economy regained momentum thanks to domestic consumption and labor markets. Its GDP grew 2.5 % according to the IMF. The Canadian economy contracted in the first half of 2015 as oil prices fell sharply, but managed 1.2 % growth for the full year. South America continued to decelerate, mainly due to weak commodity prices hurting investments, and contracted 0.3 % in 2015 according to the Economic Commission for Latin America and the Caribbean. In 2015, Oerlikon generated 19 % of its sales in North America, where it employed more than 1 850 employees at 38 sites. Both Canada and North America are expected to continue growing in 2016, according to the IMF. The U.S. market will be supported by domestic demand from higher household incomes and a more robust job market, though the strong U.S. dollar and sluggish global demand will put some restraints on production and investments. For Canada, the federal stimulus in place until mid- 2017 is expected to support near-term growth, but slumping oil prices might lead to further cutbacks in the energy sector. Oerlikon sees growth potential in the Americas for all three Segments. The Surface Solutions Segment currently operates a network of 33 service and production centers, and is a major supplier to the US automotive, aerospace, energy and food sectors. In 2015, the Segment opened its first technology service center in Guelph, Ontario, Canada, offering solutions from both Oerlikon Balzers and Oerlikon Metco for the automotive and aviation industries. The Segment acquired the business of Laser Cladding Services in Houston, Texas, to strengthen its offering for the energy industry. Based in North Carolina, the Manmade Fibers Segment serves mainly manufacturers of bulk continuous filaments (BCF) for carpet production. The Drive Systems Segment develops and produces drives and transmissions for the agriculture, construction, oil & gas and mining sectors from Indiana. In South America, all three Segments operate primarily in Brazil. In 2015, the Drive Systems Segment expanded its network through partners in Argentina, Chile, Colombia and Peru, focusing on the industrial, off-highway, construction and agricultural sectors.