In this interview, Andreas Lapp, Chairman of the Board at Lapp Holding AG, elaborates about the factors that have kept the company’s growth stable despite some strong negative factors in various regions across the globe, and also outlines his vision for the way ahead.
Headquartered in Stuttgart, Germany, the Lapp Group is a leading supplier of integrated solutions and branded products in the field of cable and connection technology. The group’s portfolio includes standard and highly flexible cables, industrial connectors and screw technology, customised system solutions, automation technology and robotics solutions for the intelligent factory of the future, as well as technical accessories.
Could you elaborate about the company’s India operations?
Lapp India is a 100% subsidiary of the Lapp Group. Having started its operations in 1996, Lapp India provides about 150,000 km per year of power, control, instrumentation and data cables along with connectors, accessories and end-to-end systems to over 5,000 customers pan-India. Its customers are spread across different industry segments such as automation, textile, automotive, machine tools, oil and gas, renewable energy, process industries, as well as in the infrastructure and building sectors. In 2012, Lapp India completed the first phase of its second manufacturing plant in Pilukedi, Bhopal which produces more than 2,16,000 km of single core cables per annum, catering mainly to the building cable segment. The production area at Jigani was also doubled in 2014 and a new multi-core line was commissioned in Bhopal with a total investment of over Euro 5 million. Some of the best known registered brands of Lapp include Ölflex, Unitronic, Etherline, Hitronic, Epic, Skintop, Silvyn, and Fleximark.
How has the company been doing worldwide?
All signs point to continued growth for the Lapp Group. In the previous financial year 2015-16, we were able to improve our performance considerably. The net sales increased to Euro 901.5 million. We have increased our customer base worldwide. We are very proud of this, as it shows just how well-received our products and services are in the market. Our earnings before taxes increased by 3.9% to Euro 42.9 million. The number of full-time positions increased by 140 to 3,440, while a total of 3,530 employees work at Lapp. The equity capital ratio in percentage is 55.4 and therefore remains at a high level. Thanks to our 2020 strategy, the course is set for sustainable and stable growth in the coming years as well.
Didn’t the slump affect the company?
Despite the difficult situations in some sectors, the Lapp Group was able to hold its own. If the copper prices had not continued to sink considerably across the course of the year, and if the exchange rates had also remained stable, the company would have been able to record a turnover increase of almost 8%. The negative influences are mainly a result of the lower copper price, which sank by an annual average of 17% from Euro 527 per 100 kg to Euro 438 per 100 kg. As the actual price of a cable is calculated daily based on the current price of copper, the turnover automatically decreases when the copper prices sink. Negative currency developments outside the Euro zone also played a role. These factors combined to lower the net turnover by approximately 6%.
However, this does not accurately reflect the actual performance of the company. The Lapp Group was able to extend its business, for example, with the ready-to-connect system solutions under the Ölflex Connect brand. The organisational requirements for marketing were optimised for the food industry and renewable energy target markets. Lapp is entering another new sector: the cabling of rail vehicles. The Lapp Group has created a complete product portfolio with Ölflex Train and other brand products for this sector.
What is the company’s development region-wise?
Europe is the most important market for the Lapp Group with a 69% share in the total turnover. The turnover there grew by 5% to Euro 620.6 million. The most important single market is Germany, with a turnover share of almost 30% and an almost unchanged revenue of Euro 268.2 million. In Europe, the turnovers in Benelux, Spain, Poland and Italy have developed particularly positively. The region of America - USA, Canada, Central and South America - managed to increase its turnover slightly by 1% to Euro 109.0 million. In Asia (with Africa, Australia and New Zealand), however, the turnover sank by 9% to Euro 171.9 million for project-related reasons.
Are you making any new investments?
The largest construction project was the new Lapp European headquarters at the company’s home in Stuttgart-Vaihingen. Around 400 employees moved in there at the end of the year. The new building provides new opportunities to combine Lapp’s strengths even more effectively and to provide even better support for customers throughout Europe, Africa, the Middle East and South America. The investment sum borne by Lapp Immobilien GmbH & Co. is approximately Euro 28 million. At Euro 20.3 million, the investment volume of the Lapp Group is on par with the previous financial year 2015-16. Investments were also made in Lapp Russia, where a new management and logistics centre was opened. Other important projects were investments in the equipment at the production plants and the continued roll-out of the new SAP software ECC 6.0.
What about innovations?
The Lapp Group was awarded the Top 100 seal in 2016 for its innovation. This seal is awarded by a committee under the scientific direction of innovation researcher Nicolaus Franke from the University of Vienna. Processes which aid companies in being innovative are honoured in particular. We want to tap into new markets with our innovations, but we also always want to offer the newest and best products. A strategic partnership with OPVIUS (formerly Belectric OPV), market leader in organic photovoltaic systems, will aid in the development of new connector technology for the future-oriented technology of organic photovoltaics.
Some current examples of innovation and projects at the Lapp Group include:
Ölflex Connect Servo: This is the new generation of servo assemblies. Lapp has collected and standardised all the assembly activities globally under the new name Ölflex Connect. To this end, Lapp built up corresponding engineering, production and assembly capacities in America, Europe and Asia. The number of sites thus increased from five in 2015 to 12 in 2016. The new Ölflex Connect Servo is a particularly successful product. This is a new generation of servo products with which the connection solutions for electrical drives are improved, made more efficient, and are available worldwide in the same high quality.
Antistatic cables: The Lapp Group was the first manufacturer in the world to develop cables to help prevent catastrophic events. These antistatic cables immediately discharge static charges and provide greater safety in locations where sparks caused by static charges can lead to disasters, for example on oil drilling platforms, in refineries or when processing wood or flour. They are already used by the Norwegian company Aker Solutions on oil drilling platforms.
What is your outlook for the current financial year?
The Lapp Group is expecting a slight turnover growth for the current financial year 2016-17, too. Turnover increases are expected above all in Europe. The company believes the purchase in October last year of the Italian company CEAM Cavi Speciali, one of the leading manufacturers of data cables for special industrial applications, will provide important impetus. With this purchase, Lapp is looking to strengthen its position as market leader in industrial data transfer systems. We have put everything on the right track to secure sustainable growth for our company and customers over the next few years, despite the increased social and political tension.