CMD 2019

Sep 19, 2019

Slides

Also we look at From the Altek at Littelengrenperspective, so here is some sort of Altek Also, Ad Life Automation on Sista Steg. So Jantlen Poueng and Joviljaramen have built any deals at VISA at Viharlika's Tackla Ollika Kriese Ollika us. But if it's well, it's a very high level of flexibility at our other than Tupenov's production. Or they come with our MIRAM structs. And you send Unifar over at some CFO. Nikkom Faramir of May Siamare. In Andes, we announced for Components Sweden and however that we are whole little well to lead towards concept. We have some financials in the long, long Equal opportunities. Presentation in English just to make sure that everybody understands what I'm saying in detail. I have a tendency to sometimes not speak loud enough. So if some of you in the back could maybe raise your hand just if you have difficulty in hearing during the presentation, I'll be attentive to that. Otherwise, I am happy here to present you for Industrial Process. I'm going to talk to you about how we operate, how our organization looks like, some of our potential business opportunities in the future and also right now. And I'm also going to talk a significant part of the presentation is about the marine industry that I already feel that has a big interest in the crowd. So first off, this is just a picture to show that together with the team of Anders, the Business Controller and Daniel, the Deputy Business Area Manager. We are the management team of Industrial Process. Daniel focuses on Industrial Solutions, and I focus on the Process Technology Business Unit. We are quite diversified in the product range, you could say. And just to mention a few, for instance, in Industrial Solutions, we have seals, we have chains and transmission products, we have electrical motors, fire sprinklers and also machines and consumables for surface treatment. In Process Technology, the core was built around Process Instruments, and we have built further on with the sort of air technology companies within regulating and fans for the airflow and also recently Tuhonertenik that are in processing of flows in the chemical industry and TLS that measure energy consumption. The 2 business units have approximately 50% of the turnover each. Our distribution of the market in geographically is Sweden is still quite big, but you will also see that other is a quite significant part in our business area. So we have a lot of exporting. And this is also due to we have a lot of our own brands in the group that we are actually able to export to countries in the Nordics, but also Central Europe and in China. Segment wise, customer segment wise, we have a lot of the segments is, of course, towards Process Industry. Even if you take Mechanical Industry, some of that part actually goes for OEM customers building machinery for the process industry. So a very significant part goes into process industry and also end users. What we say we do with our business idea in Industrial Process is that we optimize solid, liquid and gas flows. And what's important for our customers is that, of course, that we create value either technically or financially, but also that we help improve the environment or safety in our customers' environments. Again, the segments that we address is, again, very process oriented, but we also have within vehicle and mechanical engineering, of course. And our technology areas, so to say, are that we either have products that move the flow, you could say, for instance, if you remember on the Industrial Solutions Business Unit or they control the flow or even process the flow. And you could say Process Technology is more in this circle and Industrial Solutions is more in this circle. And both have companies in the processing part also, but this is where we have a big potential. Some of our thinking, which is not unique within EdTech, but we have made this model how we work with our companies and within the business area. And just to explain a little bit, if build on the base of our product offering either for the whole group or within each company. We work with each company to segment their markets until that they have a niche where they can be unique. That could, for instance, be the gas analyzer market and then gas analyzers for the marine segment and then specifically, for instance, for emission measuring. And that leads to some unique features, maybe new solutions. That means that you can have leading market positions and based on that, grow further and maybe even also internationally. And an example of how we use this also within the network that we have in EdTech. This is a combined heat and power plant. And we had a segment meeting around this where we gathered as many companies that were selling to this segment as possible. And then each of them were presenting what they did for this segment, learning from each other how what was important for the customer in this part of the production. So and also some had the possibility of opening doors for each other. We had one company that had the opportunity for suddenly going to Germany and meet customers where they otherwise wouldn't have had the opportunity and so on and so forth. So the thinking is that we like to have as many of our companies into the same segments as possible so they have something in common to talk about and use the network and some of the synergies that has been mentioned before as well. Another example of the same movement of the pyramid is from our chain group FB, where the Managing Director in Germany for had been visiting many power plants and had seen the same issue over and over again that these scrapers that are mounted to the chain running on the infeed conveyor to a power plant would sometimes get damaged by metal parts or rocks in the fuel. And so, in order to fix this problem, he came up with the idea that changing the metal scrapers to special compressed wood and which has a much longer lifetime. It breaks if something gets stuck, so it doesn't keep the whole fuel in feed system for running. And it's also much lighter, so it saves a huge amount of energy at the same time. So again, working closely with the customers, seeing the problems that they have, coming up with solutions either together with the customer or with their own ideas is that's the way we try try to push the thinking in the boardroom. And luckily, we also have a lot of entrepreneurs supporting that. So growth opportunities in general, I would say with we have good organic growth opportunities in all areas, especially the control area with instruments because in order to optimize and improve process plants, they have to measure first or analyze and document. And that's what we do to a large extent in this business unit. And then, of course, we have a lot to do in adding on new businesses within the processing area as well. From a segment perspective, power generation, especially biomass conversion, is something that we see is increasing. And there we have products within air cleaning and, of course, in general, optimizing of the fuel effect. Wood, Pulp and Paper segment is also an industry which is undergoing a huge transformation structurally. There's, of course, less paper being used, but that is being the opposite trend of is that bought for packaging and yes, for packaging and also the transformation of plastic to wood is supporting a growing trend instead and also fibers for textiles. In the food and beverage industry, fish farming in the Nordics is something which is growing quite a lot. In Norway, they expected that in approximately 10 years from now that it might be bigger than oil and gas actually. And generally, processed food is a market that is growing. And then, of course, the marine industry. There's a lot of things happening. The 3 main ones are this sulfur cap of 0.5%, which is being enforced from 2020. It's ballast water that needs to be contained and cleaned. And then the consumption data of the fuel has to be locked and reported. So now we dive into Marine as a segment. And why Marine is processed is because a ship is like a floating town or a power plant actually. There's a lot of energy that is produced by combustion. So there's a lot of fuel that is bound and there's gas that is emitted. And yes, a lot of different types of wastewaters and so on. So there are huge optimization possibilities. Just to give you a perspective, 90% of the world trade is transported by ship. And if shipping was a country, it would be the 5th biggest country emitting CO2 in the world and in line with Germany or Japan. And the 15 biggest ships in the world in a year emits as much particles from nitrogen and sulfur as the whole car fleet in the world. And then one of the colleagues I have in the company said to me some time ago that the operational efficiency in the marine industry is like it was on power plants 30 years ago. So they have not been using their resources very well, you could say. And just to give you an idea of how much fuel is consumed, if you take a smaller than average vessel, that would consume around 8,000 tonnes of fuel per year or equal something like SEK 50,000,000. So it's quite a lot of fuel, both in money and in volume that is consumed in this industry. And the global fleet is some 90,000 ships. So there's quite a huge market. And there's really a lot of possibilities to optimize. And these examples that are standing here are just examples. You cannot add all of them up together if you were to invest in those, but these are the ranges that you can work within. And our focus is on fuel efficiency. You had Intertek before on the water management. And they have also, for Marine actually, successfully developed a solution where they by yes, starting in another way, saying that today it's actually like that when you have to measure the fuel consumption, that's done by analog. They have what they call a new report, where the crew reports in what the fuel consumption has been for the last 24 hours. And that, of course, has a high degree of inaccuracy. And it also leaves room for the crew to actually skim some money for themselves. So first of all, you can in order to address that, you have to measure. And so by installing flow meters that are digital and collecting the data, you start with a baseline to measure on an ongoing basis, 24 hours per day you can measure. So that's step number 1. So they do that and they do that all over the world actually. And then next step is to help customers to learn. So you build on some of the other systems that is on the ship, weather routing or the depth, the waves and so on. And then you can start tracking how the fuel consumption is in relation to operation conditions. And then you can start learning from how things are working. And then on top of that, you can get Intelligent software that helps you with, call it, traffic lights, tell you that maybe you should look at this system is using more fuel that under the prescribed conditions than it should. So maybe you should look into switching off something or so on and so forth. And that's on the ship and on the bridge. And then it's possible to get that for the whole fleet, for a fleet manager or a ship owner, So they can sit and actually have one person survey this in a central office. That's a solution that they have come up with and is doing good at the moment. And then the hot topic, the scrubber market. And just for those of you who don't know the scrubber market, what's happening is that the International Maritime Organization, which is an organization under the United Nations. They have made a legislation that exhaust gas from ships from 1st January 2020 may only have a content of 0.5% of sulfur or sulfur oxides and particles. And that comes down from 2% to 3% actually. So it's quite a significant change. And exactly, it's the biggest change in the oil market history. So the solution is that either you buy distillate fuels, meaning fuels which is blended or refined, to a lower percentage than what is normal today. You can also, of course, buy and you have to change the ship for to run with liquid natural gas or methanol, but it's something that normally takes to build a new ship. Or you can install what's called scrubbers that cleans the exhaust gas. And this is something that has been going on for some years now and ship owners choosing what to do. But there's still a lot of concerns what's going to happen. 1st of all, fuel availability, because in order to supply enough of the low sulfur fuel, it means that all the refineries supplying, they have had to do investments and changes in their setup to distillate the fuel. And so that's one thing. And then it also actually affects the operation in a quite significant way with, yes, what do you call it, lubrication of the machines and engines and stuff like that. Fuel price or rather the fuel spread between the old fuel, the heavy fuel and the new fuel is also something that's the key issue to the investment in scrubber or buying distillate fuels. They say if that's over $200 that's spread, then it's going to be a lot of scrubbers. If it's beneath, it will be less scrubbers. And then, of course, the fuel quality is also a big question because it might be distillated, but the quality can be different every time. And some are speculating in what happens if we don't do it. So there's still some questions that are not quite clear yet from the market exactly how this is going to work. But of course, it has a major impact on the market. Our general perception with the companies we are working with in the market, a couple of them are working directly with scrubber manufacturers and some are working sort of Tier 2, is that we still believe that there will be a good and solid market for at least 3 to 5 years. And again, if the fuel spread is above 200, then for 10 plus years. And for new buildings, it's also still a market in the future. So what products do we supply to that market? Well, first of all, we have Norsk. So, this is a scrubber system. It's installed on the ship. This is, you could say, the scrubber part that is cleaning the exhaust gas. And to this, this connected a lot of pumps and other devices as well. But part of that system is that to actually measure the exhaust gas, what comes out. And we have Norsk and Olusse that has their own solution to do that. And we have Summit that supplies the dampers that are regulating the airflow into the scrubber. And we have BV that are supplying in Tier 2 though electrical motors for the pump systems regarding the scrubbers and also ballast water. And we have BTEC that supplies gaskets for several flanges around this. So this is the companies working in this area. Okay. So my name is Kim Niketin. I'm the COO for the Seltek Group, which in Adtech is responsible for the business related to batteries. So I'm more hands on guy. I'm building the strategy with the management team for our group operation and then I get the privilege to start executing that one. Little bit first about us, what we are today, then about the history, how we came from the small, small company, from the small, small town to be the leading player of the battery field in our business field in the Europe and how we see that we are going to grow even further in the future. So today, we as a group, we're founded 84. I have 1 140 colleagues working with me. And we work with the 8 sales offices and 3 factories, 1 in Sweden, 1 in Finland, 1 in China. Our group turnover is €50,000,000 so that makes us a quite significant player on the battery field that we choose to operate. We don't work with the car starter batteries or such, which are big part of the business. We work more on the industrial and specialized batteries. We get our business at the moment from the 3 different main customer segments. First one on the left one is Systems. These are Railways, UPS Systems, Telecom Industry and more and more industrial vehicles. We still have significant part, not the biggest part, is a standard business. We are doing the trading business mainly through the big electrical wholesalers like Onin and AllCell and Wirth. And then strong part of our current business is a customer business. We have device manufacturers who make industrial devices that require batteries. Normally with batteries are devices that work in somehow harsh operational conditions. And there, we do from the evaluation up to the final product and the after sales. So this is how we have divided our business segment. Today, our customer base comes mainly from the market leaders. Our best and biggest customers tend to be in top 3 on their own business area. They work globally. They expect us to support globally. They have a long product lifespans compared to the consumer electronics. So if we now design a battery or battery system for a customer, one of the key features can you deliver in 15 years from now and think about how the world looked 15 years ago. And this is the important part where when talking about the new project. And then they have a need for complete solution provider. They want that, okay, not just the battery. What can you do more? Can you take a design? Can you do that? Can you do that? What about the testing, certification, logistics? There's an endless amount of questions that they actually want us to do. And during the years, we have adopted our way of working to meet these demands. So a time line. We started, like I said, 'eighty four here in Sweden, a small town called Selvesborg, with producing buoy batteries. I don't know how many you know what is a buoy. It's a light that guides you when you go with your boat in the track order. And that was the foundation of the SailTech Sweden and doing the business. And from that, the whole thing started. The business developed. More and more battery applications came out, technically advanced. The next milestone is a little bit more personal for an important for me, not maybe so much for Celltech, maybe a little bit. I got my first paycheck when I was 15 and part of the Celltech. So I have been working with the batteries more than 5 years, more than 10 years, more than 2 decades. And this is partly due to the fact how we do the work. At that time, I wasn't working in the warehouse, so working for the cleaning, working for that. And today, talking to you, I have been able to grow and do many, many other things in this wonderful group of companies. In the early '90s, Adtech acquired Seltec Sweden and starts to build the energy storage unit and give up the boost for the business. That time, we started to do going on the more production of customized batteries because there's started to be a boom of mobile phones. And we had Ericsson in Sweden, Nokia in Finland. And the accessory battery business for those was a big, big thing. Maybe some of you remember that you bought the mobile phone, you get the standard battery, but you want to have a little bit extra time because it was like 2 hours dead. And we designed and made our own batteries and that was a significant part of business for us. And that was the start when we start to have R and D and engineering and testing facilities in our group. In the late '90s, 2000, we expanded and had a lot of more battery companies to come in under the AdTeq umbrella. Individually, all of these had grown in their own countries, basically the same way that the Sweden company had gone. We started to have 1st technical jump in the battery technology with the lithium batteries, which you see today as a standard. Then it was like a really, really high difficult thing and you couldn't access to these components. But with the history of being with the mobile phone batteries, we were able to build this relationship with the manufacturers and suppliers. But at the same time, the whole mobile phone and customer electronic business was starting to go more and more built in Asia. So we made a strategic change that we have to start looking for industrial customers. And that was one big strategic change that we made that, okay, we cannot compete anymore with the aftersales market. We have to start finding industrial customers and doing design work for them. We did that one. And one of the significant milestones of that business, what we actually start in the service body, where everything started to build up energy storage containers. Containers, 20 foot containers full of batteries and electronics to be used in the industrial backup systems. And that was the start for us why we today can see that we have a capacity to go on the electrification of industrial vehicles with the lithium technology, which I'll let a bit talk later for. Then came 2012. Niklas had the meeting with Anders, agreed things with Okay, called me, Kim, go and build a factory in China with Anders. And that started a nice now 7 years journey. It has been an interesting one. But luckily today, I can say that we have a state of the art customized battery factory in China, fully running it by own with the Chinese staff. And like I said, we want to have also female. So we are running the Chinese factory with almost fully female management. So but that was something that opened us the businesses in Asia, from Hong Kong, where we have sales office today and in China to do the domestic sales. So we can say for the battery business also, we are more and more rapidly going out from the Scandinavian market. Then few years ago, we actually decided that we are going to be called as a sell the group on the marketing wise, that we are big enough. We are working with the customers who want to work with the bigger entity. We still are independent companies. We still everybody runs their business very, very independently, but we have a lot of, lot of co creation, cooperation in the positive way under our group. So I or Per, who is in the group management, we don't tell what to do. We more or less listen what the guys need that we can make the cooperation more better. So that's the history of how we have come today to the €50,000,000 Why do we believe that we have a future with the Why this is not the roof? And it's linked to the many, many topics that we have heard today. Electrification of vehicles is going strongly. And as we see it, it's going to speed up more and more and more. And we have chosen and analyzed to go in the industrial or off highway vehicles on that segment. Renewable energy is coming. That won't stop. That generates need for energy storage systems, where the batteries is not the only option, but it is mostly very, very useful option. We have the Internet of Things, Industry 4.0. Basically, world is getting wireless. And if it's getting wireless, it needs energy from somewhere. And we have lots of projects related to these industries where the customized batteries are needed. So we have end up in the situation that we used to do with the lead acid and that's it. And now we have this few megatrends that are happening at the same time today in the world, and they all part of them happening is the development of the battery and the battery technologies. Well, that development is not so easy. On the left side, it's a development of the computer processor. And that's a law called Moore's Law, which states that every 18 months, the calculation capacity of the CPU will be doubled. And that has been the fact for almost 30 years. So the electric industry have benefited from that one that core processing power has grown and grown and grown and grown. On this now we are talking about electrification and what's for the batteries. How much energy we can have on the battery hasn't been growing so fast. So all the development that we are today doing has to be done basically the same building blocks that we have had for last 5, 10 years. And we don't see super significant improvements in next 10 years. So that means that we have to have a better system, better engineering, better solution. And that means, in our point of view and how we see with our customers, that we have to be able to have the idea and offer a complete solution for different kind of environments. I take a topic, industrially high cost, where we are working hard now. And we see this business really booming for us. We go and meet vehicle manufacturers who have their needs and they have time to market and they don't have the know how, they don't have the components, They basically come for us today that, hey, we have this. Please, can you tell us what to do? And we are like, yes, we can. And at the same time, why I have chosen this picture, under the AdTech umbrella, we have several other companies who work in the same industry, nothing to do with the batteries. But at the same time, we can do cooperation. We have many projects with Adeco. I have a talk today with the CTAB that how we could have and go. And if I go to the customer and say, hey, yes, have you heard about the Arrigo? You have this we have this Arrigo. They are working with electric motors that could be suitable for you. The purchase of that company said, yes, please send a contact. So we have like a huge amount of doors open because of our setup how we are doing. And we are doing it, I would say, quite successfully. Then last, I want to see picture that Kerstin told that it's a monster and it's meant to be scary. This is when I used to be in sales, showed the last one to the customer, battery can be a really, really simple product. You go Alibaba and buy it. And this is sometimes I have a purchaser who say, well, why not buy from you? But when you start digging in the world we're living in, what we are working in, it starts to be much more complex. So we need to have a good technology solution. But all around this also is something that our customers need and value and what we offer. And in this day, when the electrification is going extremely fast in larger scale, These things around the actual item are the major things why the customers choose us. The local partner who know them, who know their needs are there for them and not somebody else.