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Line competence made by Bosch
Presentation by Friedbert Klefenz,
President of Bosch Packaging Technology,
at the press conference for the Achema trade show on June 15, 2015
- June 15, 2015
- Packaging Technology
- Images: 12
I too would like to extend a warm welcome to you here at Achema 2015 and to the Bosch Packaging Technology annual press conference. I am very pleased that you have taken the time to review the previous year with us, to take a look at the current year, and to discuss the direction Bosch Packaging Technology and the industry as a whole are taking.
Achema is key date in our calendar
As you know, Achema is always a key date in our calendar because it is the world’s leading trade show for the processing industry. We meet up with more of our current and potential customers here than at any other trade fair worldwide. And here in this comparatively small space, it is also clear to see where our industry will be going in the next few years. Many of these developments have a common theme, forming what nowadays is called a megatrend. This megatrend is called line competence. It forms the cornerstone of the content we are presenting here at the trade show and is also something that will occupy me even more so in the future. But more about that in a moment.
A year full of extraordinary developments
I would like to begin by looking back at the previous fiscal year. 2014 was marked by several extraordinary developments that led to somewhat more modest sales growth than we are accustomed to – by 70 million to approximately 1.18 billion euros. This represents a nominal increase of 6.3 percent. According to figures from the VDMA, one of the largest engineering associations in Europe, that indeed puts us above the industry average of around 4 percent. And we continue to be the world leader in packaging equipment for the pharmaceutical industry. But to be frank, we had set our goals slightly higher. Without the revenues from the former Ampack GmbH, which were first consolidated in 2014, we would have seen only 2 percent organic growth. Total growth was 6.7 percent with 2.3 percent organic growth, adjusted for currency effects. Currency fluctuations pulled us in very different directions last year. The greater portion of our machines are still manufactured in the eurozone, and thanks to the high percentage of machines being exported, the slide in the euro at the end of 2014 has had a positive impact on our competitiveness outside the eurozone. At the same time, value creation outside the eurozone has become more expensive for us because of the higher costs. Furthermore, Russia’s extremely weak ruble had a negative impact on revenue – as have the political events of the past few months.
Year-on-year order intake much higher
In addition to currency effects, two other reasons were the main cause of our moderate growth: changes in our acquisition plan and the development of the Asia-Pacific market.
Regarding the first reason: in the past, Bosch Packaging Technology’s growth has comprised roughly equal parts of organic growth and growth through acquisitions of other companies. This strategy has definitely paid off for us, and we are sure it will continue to be the right path in the future. That is why we had planned to supplement our sales in 2014 through acquisitions. There were also a host of possible targets that had technologies or products that we believed would have been a good fit for us. Unfortunately, more detailed scrutiny showed that some of the bars we set when examining potential targets were simply too high. As a result, we achieved no external growth last year. However, in February of this year, we brought on board the food sector’s Osgood Industries from the United States. And as the year progresses, we shall continue to look for sensible external growth opportunities as usual. Happily, the prospects for moderate organic growth are also better, because order intake in 2014 was up more than 11 percent year on year, at 1.23 billion euros.
As of the end of 2014, Bosch Packaging Technology employed 6,100 associates worldwide. That’s about 440, or 7.7 percent, more than the previous year. A large proportion of them – 4,600 – work at our European locations.
Growth regions show surprisingly restrained development
An even more important reason for our modest development in 2014 is the unexpected weak progress in markets that just a year before had outshone the rest with their high growth rates in mechanical engineering. I am referring here to certain areas in the Asia-Pacific region in particular, where we had to record a drop in sales. However, we are encouraged by this year’s prospects because we have taken countermeasures, especially regarding costs, and also expanded our product range. Mr. Harbauer will discuss this in more detail as it applies to the pharmaceutical segment.
Our order intake in China has picked up strongly in the first quarter, despite the economic slowdown there. This is good news in the sense that after several boom years, the Chinese government is expecting growth of only around 7 percent in 2015. Just as a reminder: China’s economic growth rate of 7.4 percent in 2014 was their lowest in nearly a quarter of a century.
We are also experiencing increased local competition in Asia. Our competitors cannot provide the same complex, high-performance equipment that we do, but their simply designed systems with a standard range of functions makes them quite competitive. In response, we have developed products that compete well with Asian suppliers without compromising on quality, both in terms of cost and functionality.
Joint venture in India
We expect to get an additional boost in the Asia-Pacific region from our new stake in the Indian company Klenzaids, for which the relevant antitrust authorities have given the green light. Klenzaids is known primarily as a manufacturer of clean-room equipment for the pharmaceutical industry. The joint venture, in which Bosch holds 49 percent of the shares, puts us in the growth zone three times over: The demand for clean-room equipment is constantly growing, India’s domestic market is expanding, and the location is ideal for supplying the Asia-Pacific region with these products. We do not yet expect this joint venture to have any major impact on the numbers in 2015, but this partnership holds a key strategic role by being another important step in building up our presence in the region.
Growth in Europe and North America
Although we have had moderate growth in Europe, we are well into the double digits in North America. In the United States, Canada, and Mexico – the NAFTA region – we benefited primarily from high-revenue contracts from our customers in the food industry. In addition, the demand for medications is on the rise, which drives up the demand for equipment for production, filling, and packaging of pharmaceuticals.
Major project completed in Central America
In Latin America, we had a very mixed year. Pharmaceuticals in Central America also reported double-digit sales growth, a trend that is set to continue thanks to a major project there. In this project, we have designed, planned, delivered, and set up an entire production operation with several lines and links among the individual production parts. Further attractive projects are soon to be awarded. On the other hand, we had to accept significant declines in the food sector; overall, our sales remained well below the previous year’s figures. Most of the reasons for this can be traced to the general economic situation. After nearly a decade of strong growth rates, Latin America’s economy has become decidedly sluggish in recent years. High inflation rates, climbing national debt, and minimal growth in some Latin American countries are just some of the reasons why the climate for investment is poor. Yet as I finish my remarks on the development of emerging world markets, allow me to say: Africa and the Middle East have performed well, with an increase in the mid-single-digit range.
Synopsis and prospects for 2015
All in all, 2014 was a year of consolidation for Bosch Packaging Technology. The first four months of the current fiscal year leave us optimistic, however. Compared to last year, we can once again report high order intake, an important basis for reaching our sales targets in the years ahead. And the sales we have generated so far demonstrate that the high order intake in 2014 is gradually paying off. We are on track, but we must continue to work hard until the end of the year to meet our targets. And since we are already looking ahead, let us take a look even further forward to the year 2020.
PA 2020: expanding markets further
Ladies and gentlemen, last year we presented our PA 2020 strategy to you. It consists of two main parts: expanding the markets and expanding our areas of business. Although some growth regions did not develop last year as expected, we remain committed to our goal of generating one-third of our sales in Asia by 2020. Currently that figure is 23 percent. We also plan to build up our business in Africa and the Middle East. To that end, we already have four locations on the African continent: Egypt, Nigeria, Kenya, and South Africa. Accounting for 43 percent of sales, Europe remains our strongest market; North America is not far behind with 25 percent at the moment. Here, too, we want to continue to grow faster than the market. But despite the considerable – and in the case of North America, even huge – growth rates in 2014, we expect the growth regions of Asia, Africa, and Latin America to significantly expand their share of sales in the next few years.
PA 2020: expanding business areas further
As most of you know, sales in the two product areas Pharma and Food are more or less evenly balanced. This proved true in 2014 as well. Our strategy aims expand business by a significant percentage by 2020, especially in liquid foods, and we continue to see great potential in the consumables market. This means for example valves for coffee packaging in the food sector and single-use systems in pharmaceuticals – with help from such items, we could achieve even more customer benefits.
Connected industry and line competence
Across the board in all product areas, we see two key drivers of growth: connected industry and line competence. You all know the term “Internet of Things” – its close relative in manufacturing is Industry 4.0, which we here at Bosch call connected industry. The far-reaching connectivity of various technology areas aims to make our lives even easier and safer in the future – both in a private and an industrial context. In manufacturing, this means improving upon how all steps are interlinked in the value chain and ensuring equipment operability and product quality. This is accompanied by substantially more flexibility in manufacturing. Above all, connected industry holds the key to improved service. Our recently developed Remote Service Portal should be mentioned here. It establishes a secure data connection between the customer’s equipment and Bosch’s Remote Service Center so that customers can be assisted quickly and efficiently without requiring a site visit. Mr. Harbauer will tell you more about that shortly.
More than the sum of its parts
Let us return to the line competence I mentioned at the beginning. Line competence means expanding the focus away from individual systems and expanding it to include the entire production line – and in doing so, taking materials handling as well as all upstream and downstream services into account. Ultimately, this is the industrial implementation of the well-known saying “the whole is more than the sum of its parts.” Line competence offers customers true added value. For instance, they no longer have to worry about how two individual system parts should be joined together. This saves on planning capacity as well as time, because the new line can be up and running significantly faster. Mr. Harbauer will elaborate this further as well. Furthermore, the customer knows the new line will produce the desired results, because we of course will have tested the line structure and all its elements in practice beforehand. We have already implemented diverse projects with complete processing and packaging lines – in Russia, North Africa, and in the Americas, for example. These projects included processing and packaging lines for both liquid and solid pharmaceuticals. For liquid medication, the lines cover processing, formulation, filling, inspection, and sterilization as well as cartoning. For solid pharmaceuticals, the lines handle granulating, tableting, and capsule filling, as well as primary and secondary packaging. Customers receive extensive services as part of the line, such as qualification and validation, or project and site management, independent of the pharmaceutical’s delivery form.
Focus on treatment areas
It is our belief that, in addition to hardware, software, and technical and professional expertise, line competence also includes a consistently customer-oriented mindset. That is why at our booth we will be presenting five sample lines which have been configured with an eye to medical indicators. Because that is how our customers think: they want to manufacture medications to treat gastrointestinal ulcers, autoimmune disorders, diabetes, or cancer. And we know which system components they need in their line to do this efficiently, reliably, and in accordance with respective laws and regulations.
Ladies and gentlemen, thank you for your interest. I would now like to give the floor to Uwe Harbauer, head of the Pharmaceuticals business unit. He will provide you with a more detailed description of the new projects and approaches for the pharmaceutical industry that we have brought with us to Frankfurt this year.
Following this, we look forward to your questions. Thank you.
Contact for press inquiries:
Phone +49 711 811-58503
Based in Waiblingen near Stuttgart, Germany, and employing 6,200 associates, the Bosch Packaging Technology division is one of the leading suppliers of process and packaging technology. At over 30 locations in more than 15 countries worldwide, a highly-qualified workforce develops and produces complete solutions for the pharmaceuticals, food, and confectionery industries. These solutions are complemented by a comprehensive after-sales service portfolio. A global service and sales network provides customers with local points of contact.
RF00253 - June 15, 2015