Each and every valve maker will have found himself thinking about the euro crisis at least once a day. Fortunately, no one is experiencing sleepless nights and orders are also not in decline. The future, however, is still a mystery – and one that can’t be foreseen. Owing to future uncertainty, the crisis is still present and is unsettling the valve sector.
German valve makers currently have nothing to complain about. „The sentiment is good“, declares Christine Lindenau from the German Engineering Federation (VDMA) valve group. Weak domestic demand is not having any impact, either. In the first quarter of 2012, exports in the valve sector grew 5,7 % compared to the same period one year ago. High demand for industrial products had the greatest impact on year-over-year growth. Makers of industrial valves even experienced double-digit growth.
Nonetheless, the euro crisis is a major topic within the VDMA, and one that is making the umbrella organisation, of which numerous valve makers are member, rather nervous. „Europe and the euro are in a state of crisis. The great European project is in danger“, states the VDMA. Everyone is looking for a solution. „No one knows how the crisis can be solved“, Hans-Peter Keitel, president of the Federation of German Industry, told German news agency dpa. „I myself have no silver bullet.“
A solution will have to be found by the European Parliament in Bruxelles, whatever measures it may consist of. This uncertainty surrounding both the solution and the future of the individual crisis states is a cause for unease and is making itself felt in companies. The Linde Group’s gases division is an example: „Business performance was adversely affected by unfavourable economic conditions in the euro zone“, the corporation reported in its interim report. Group sales in the first six month however rose 5,9 % from 6,77 billion, whereas profits climbed to 591 million euro, compared to 566 million euro in the first six months of 2011. The balance sheet profited from high demand in Eastern Europe and the Middle East. The Linde Group has the right strategy: „“Our global footprint and well-balanced spread across different sectors enable us to compensate for faltering demand in some markets or the weakness of certain currencies“, declares CEO Dr. Wolfgang Reitzle.
Dampening effect for companies
Air Liquide also profited from its global presence. Turnover in the first half grew 5,9 % to 7,5 billion euro, the profit also marked an upturn. „In the first half of 2012, activity levels reflect the caution of many of our customers around the world, in the context of an economic environment which is still affected by the sovereign debt crisis in Europe and by further slackening of global grow“, stated Benoît Potier, chairman and CEO Air Liquide. Both Linde Group and Air Liquide are striving for growth this despite, the ongoing euro crisis.
The crisis is also making itself felt at valve maker RS Roman Seliger Armaturenfabrik. „We have been seeing signs for a cooling down or even decline in the market in our traditional business areas over a longer period“, states CEO Dr. Jens Reppenhagen. The euro crisis was having a dampening effect on the company. He nonetheless sees no cause for concern for his company: „Compared to the previous years, the euro crisis is not making itself felt thanks to the new business activities“.
Tapping potential
The right strategy is a great help. RS Roman Seliger Armaturenfabrik is experiencing a boom in business, thanks to new products and new business activities, and especially thanks to high exports. „We for instance were able to effectively double our share of exports compared to the previous twelve months.“ This shows to us the great market potential outside of Germany, which we have been actively tapping for just five years “, says Reppenhagen.
The company doesn’t expect further problems from crisis countries, in which the company has smaller trading partners, and appears unimpressed. „We will keep on continuing our activities in these regions just as before and will not implement additional safety measures beyond the usual scope“.
RS Roman Seliger Armaturenfabrik however did feel effects of the euro crisis when importing certain semifinished products „which we procure from Asia“. Costs increased because of the weak euro. „We were and still are able to offset currency effects through hedging. The perspective however shows us that we will have to prepare ourselves for higher costs of material compared to previous years”, Reppenhagen added.
React flexibly
What do valve makers expect for the future? „We don’t really give any forecasts“, says Reppenhagen. „Just this much: as a company, we need to be able to react flexibly to fast-changing conditions.“ This could include sudden drops in demand, as well as demand peaks – „and all accompanied by strong currency fluctuation and highly volatile prices for raw materials.“ As basic prerequisites for flexibility, companies need a solid capital base, and well-trained, motivated and capable employees.
The German association of the VDMA’s valve group still reckons with revenue growth of about 3 % nominally.
In whichever way the sector will find itself heading, the euro will play a major way. „The euro is our commercial basis within Europe.
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