Phoenix Mecano's business was long considered to be heavily dependent on economic cycles. In 2023, one of its main markets, Germany, slipped into recession. How did Phoenix Mecano manage to hold its own?
Benedikt Goldkamp It’s true that we are less cyclical today. That’s mainly because we’ve focused on structural growth markets in recent years. They fluctuate less. There are occasional setbacks, but overall we can assume that Phoenix Mecano will continue to be less cyclical in the future. There is also a second factor – our geographical diversification. We’ve now developed our sales markets in China and the US to such an extent that, even if there is a slight downturn in Europe, we can offset this to some degree in other geographical regions. We hope that this can be maintained in 2024.
The entire Rugged Computing business area was sold last year. What was the thinking behind this decision and are there plans to sell other companies?
Benedikt Goldkamp This was a portfolio decision that we made when defining our new growth markets. We said at the time that we wanted to build up new structural growth markets based on megatrends such as demographic change, automation technology and decarbonisation. We went through the entire portfolio and found that Rugged Computing wasn’t a market we could develop in line with these megatrends. So we freed up those resources, which we can now invest in our new markets.
This will allow us to generate additional organic growth in Phoenix Mecano’s remaining portfolio. Will there be further investments?
None are currently planned. The portfolio is right for now, but we’ll continue to review it and ensure that we keep streamlining in the future so that we remain a successful, focused business going forward.
The DewertOkin Technology (DOT) Group opened its new industrial park in China in November. What are the benefits of this new location?
Benedikt Goldkamp The industrial park came at the right time. It’s been a major project, allowing us to concentrate five sites at a single location. This makes us more efficient, shortens our lead times and gives us room for additional growth and greater vertical integration. We can also set up a large certified laboratory at the site, allowing us to supply the Chinese care and medical technology market. So all in all, it provides optimal conditions for taking growth to another level in the coming years.
Megatrends such as industrial automation, demographic change and decarbonisation are driving demand for Phoenix Mecano's products. Which of these trends do you see as particularly far-reaching?
Benedikt Goldkamp All three are important. Decarbonisation and automation technology are crucial for our industrial divisions, Enclosures and Industrial Components, while demographic change is the key driver for the DOT Group, where we aim to grow in line with this trend thanks to our electrical systems for functional furniture.
How do you ensure that Phoenix Mecano responds quickly and flexibly to such developments, without getting left behind?
Benedikt Goldkamp Agility is in the Phoenix Mecano Group’s DNA and has been for the past 50 years. Our decision-making is decentralised. We develop our products together with customers, which ensures we don’t miss out on any trends. That has become even more important in today’s world, as the pace of change has actually increased.
But I believe we are well prepared for this and, thanks to our broad geographical diversification, if things don’t go so well in one market, we can make up for it elsewhere.
So overall I’m optimistic that we can continue to develop well, even in the current environment.
Phoenix Mecano performed well in financial year 2023. Which achievement are you particularly proud of?
Dr. Rochus Kobler We actually closed 2023 with record results. As a group, we can be particularly proud that we’ve taken a big step towards achieving our medium-term targets. For example, we’ve already reached our growth target, with growth of 5.8%. We were within touching distance of the 8% EBIT margin for profitability, falling just below this after special items. And the fact that we massively exceeded our ROCE target of 15% is a cause of particular pride.
What will you be focusing on in 2024?
Dr. Rochus Kobler Obviously we won’t be resting on our laurels. We’ve set ourselves differentiated targets. Looking at the divisions, we clearly want the DOT Group return to growth as quickly as possible, maybe even double-digit growth. For our industrial activities, the focus is very much on increasing profitability in those areas where we aren’t yet achieving double-digit EBIT margins.
After a dry spell, the DOT Group division is growing again and making money. What makes you confident that the underlying growth trend is intact and that DOT can return to its previous growth trajectory?
Dr. Rochus Kobler The DOT Group’s dry spell has lasted just over two years now. It started with the coronavirus pandemic, which put supply chains under stress. Then these bulging logistics chains were emptied, the producers had nothing to do and now the largest end market, North America, is grappling with high interest rates and inflation. But DewertOkin has used the time to invest massively in a new factory in China.
We believe that the double-digit growth we’ve seen in recent decades will return. And thanks to the new factory, we are ideally positioned to benefit from economies of scale and efficiency gains.
In summer 2023, Phoenix Mecano celebrated projects developed by young teams with the first Phoenix Mecano Awards. What impressed you most about the presentations?
Dr. Rochus Kobler I think the first Phoenix Mecano Awards was my favourite event of 2023. I was impressed by the diversity. The diversity of subject matter, which ranged from software-as-a-service solutions and digital business models to shop-floor optimisation tools, but also the diversity of the audience. We brought together two dozen young people from across all Phoenix Mecano organisations, and they were able to interact and engage closely with each other.
I am proud of this generation-after-next of Phoenix Mecano employees.
I’m also proud of the quality I saw in the presentations.
The DOT Group, Phoenix Mecano's largest division, now has its headquarters in Jiaxing, near Shanghai. What are the reasons for this strong presence in China?
Dr. Rochus Kobler Our China strategy is constantly evolving.
When we started out there over 15 years ago, we set up a company with a joint venture partner, as was common practice, but this was never set in stone. A few years later, we bought out the joint venture partner and acquired a majority interest, which was the right thing to do at the time.
Then, as the business grew, every five years we invested in a new factory and sold the old one.
And last year we reached a major milestone with the opening of the new technology park in Jiaxing.
A global furniture industry cluster has now developed in the region, and it’s fair to say that we are partly responsible for that. Anyone wanting to be part of the global furniture industry today heads there and has operations in Jiaxing. They become our neighbours, so to speak.
What is the outlook for 2024?
Dr. Rochus Kobler Visibility isn't very high at the moment. We will rely on our strengths, flexibility and decentralised organisation, allowing us to make quick decisions and respond quickly to the situation.
If we look at Europe, the most important market for our industrial activities, the outlook there is gloomy. However, we believe that we’ll be able to weather a mild recession robustly because our areas of application are focused on future-oriented sectors and technologies, in line with growth trends.
North America, the DOT Group’s largest end market, is still characterised by high interest rates and inflationary tendencies, but we are seeing a turnaround in demand.
The question is whether or not things will progress better and faster in the second half of the year.
