Machine Manufacturer KHS Plans Offensive Against Market Leaders

Machine manufacturer, KHS, is planning an offensive against world market leaders. The current No. 3 in the filling and packaging machine market is planning to close the gap on the two market leaders, Krones and Sidel in the coming years. "We are intending above-average growth.

And the appropriate market is there. "The beverage industry's expansion plans in certain regions are impressive, particularly in Asia," according to Reisgen. Experts estimate the worldwide market volume to be almost five billion euros. The German Machinery and Plant Manufacturers Association (VDMA) assesses the overall packaging market at around 15 billion euros. In addition to the beverage industry, this also includes the food and non-food sectors with branches such as foods and personal hygiene, and paints and chemical products.

And it is exactly in this non-beverage area where, according to Valentin Reisgen, there is major growth potential for KHS - the short form of Klöckner Holstein Seitz. Until now, his company has been very strongly focused on the beverage market where 92 percent of sales are realized. In comparison, Krones makes more than 25% of its turnover from the non-beverage sector. "We are aware that no one is waiting for us in this market. But we have the necessary know-how to position ourselves successfully," says Reisgen. All the more so, as the market is very fragmented.

With the expansion of this - from KHS' point of view - high-margin market segment, the company's turnover is expected to grow disproportionately. According to preliminary figures, revenues for 2005 are expected to increase 4 percent to 710 million euros. Profits are said to be in the middle single-figure million range. "We are not yet satisfied with the current figures," says Reisgen. The KHS boss anticipates sales to reach the one billion mark by 2010.

To this end, the Dortmund-based company is relying both on organic growth as well as on acquisitions. In recent years, the KHS group has integrated competitors such as Kisters, Alfill, Metec, and Bartelt. Reisgen is not ruling out further acquisitions in the coming months. However, the return on investment has priority over turnover. In preparation for possible acquisitions, KHS has just fortified its equity capital base. A 75 million-euro loan from the parent company, Klöckner, has recently been converted into actual assets. This raises the equity capital of KHS AG to 185 million euros equaling a share of 41 percent. Previously, this was just 24 percent.

Target countries for the proposed expansion are not so much the still stagnating domestic market but rather boom regions in Asia and Eastern Europe. Even now, the export share of the internationally organized KHS AG is about 75 percent.

"We are building up new local production capacity in order to be able to serve the developing markets better. Proximity to the customer is a must," says Valentin Reisgen. India, for example, where a 25 000 square meter factory is being erected in Ahmedabad in collaboration with a joint venture partner and is expected to start production in the third quarter of the coming year.

"In light of the dynamic growth in China, our next step will be taken in this region," says Reisgen. If only because KHS has to follow the international customers in this market. Whether a new factory will also be built there has not yet been decided, however.