Picking winners20 December 2011
Economic turmoil bedevils Western Europe, but Phil Bishop finds there are still some companies that are finding work
Any analysis of the business environment in Western Europe is fraught with hazard. At time of writing, the euro is in crisis and several national economies are at real risk of falling into a deep precipice. Just when it looked like the worst of the global recession was over, the light at the end of the tunnel turned out to be an oncoming train. Whether or not there will be a messy collision, who can say?
For the moment, however, a degree of optimism has returned to the crane business in parts of Western Europe, although confidence remains fragile at best.
“It’s been rough for everyone but the future is again bright. Things have picked up,” says Martin den Ouden, sales manager of Lemmens Crane Systems from the Netherlands.
There was some reorganisation at Lemmens when the downturn hit and one division of the company had to be wound up in bankruptcy. In its domestic market, Lemmens retrenched to maintenance work only but it is now back producing cranes once again in the Netherlands, as well as in its factories in Dubai and Moscow.
Ouden says that the down period only lasted for about five months. “We are now back on the same track as before,” he says. Quotations have picked up and orders are now being placed, he adds.
Lemmens focuses on special cranes and engineering, rather than trying to compete with the majors in standard workshop cranes. Recent projects include two special gantry cranes for a customer Norway, for example, and there is also a 250t overhead crane in production for installation in February for a steel company in the Netherlands.
The experience of recession can make those who survive it become tougher and fitter from the experience. That seems to be the case with the Danish crane company Fodgaard Cranes & Lifting Equipment.
The company was founded by Max Fodgaard in 1950 and his family still owns it today. The company celebrated its 60th anniversary in 2010 with a trip to London for all employees and their partners.
Fodgaard has been a Stahl dealer since the 1950s. Since the early 1980s it has also represented Kito, adding chain hoists and manual hoists.
Fodgaard’s main office is in Copenhagen and it has a branch office in Jutland.
The company grew steadily in the 1990s and most of the 2000s and today has more than 50 staff members, adding lifting gear from European and Chinese manufacturers to its product mix. A separate lifting equipment division was set up in 2004.
Fodgaard also now has a service division too, with close to 20 people.
Group sales peaked in 2008 but fell away dropping 25% to around €10m in 2010. Growth returned in 2011, with forecast sales around €11m.
Like everywhere else, the crane market in Denmark suddenly stopped in 2009 but the suppressed demand is now starting to be released. “We are making a lot of offers now,” says Martin Sønderby, manager of the crane department. June was an especially busy month for Fodgaard, with 15 quotations for cranes sent out in response to enquiries. Some industries are even booming, he says, such as wind turbine producers and the pharmaceuticals sector. Both industries have long supply chains with crane requirements all the way through.
Sønderby is also looking forward to construction starting next year on the €4.8bn fixed link across the Fehrmann Sound between Denmark and Germany. The bridge will carry both road traffic and rail. The construction facilities required for construction will need a lot of cranes, Sønderby says.
Siemens also plans to invest €135m in 2012 in wind turbine production in Denmark.
Siemens is the kind of customer that not long ago was out of Fodgaard’s reach, says Sønderby, but it now has its foot firmly in the door and supplies it with cranes. “Five or 10 years ago our typical customer was a small workshop with 10 or 30 employees wanting a workshop crane of five or 10t. Now we are expanding our activities so that we can satisfy bigger customers like Siemens. That’s a new step for us, taking on companies like Kone, Demag and DCB [Danish Crane Building A/S].”
This push has been led by new managing director Mads Olesen, who joined two years ago and is credited with introducing modern management methods.
Before 2008, Sønderby says, it was barely necessary to have a strategy. Times were so good that winning business required little more than an ability to pick up the telephone when it rang, he says. Since the recession, it is necessary to work rather harder and be more professional. “We have new branding and logos. We now have a strategy, with modern management focusing on the bottom line,” he says.
Another company that has successfully targeted the wind power market—one of the few industries to continue growing through the global crisis—is the UK firm Granada Material Handling, based near Manchester. It is currently nearly a year into a major two-year contract to supply energy company RWE Npower Renewables with 164 separate crane units for the Gwynt y Mor offshore wind farm, off the coast of North Wales.
The multi-million pound contract secures works and income for two years for the Rochdale business, enabling redevelopment of its workshop and providing the financial security from which to grow its staff.
Each of the Granada Python crane units have been specifically designed for the project and its marine environment. The 1.3t cranes will be used to hoist components from the supply vessel to the laydown area on the platforms of the various turbine transition pieces and substations. A Python crane unit will be fitted to each of the 160 transition pieces—the bases of the wind turbines— with two fitted to both of the offshore substations. Each crane unit is approximately 4m high, 3m radius, and weighs 1,000kg.
Each Python crane unit measures approximately 4m in height, 3m in radius, and weighs 1000kgs. The maximum lifting capacity of 1300kgs is needed to hoist the heavier serviceable components from the supply vessel to the laydown area on the platforms of the various transition pieces and substations.
RWE Npower Renewables’ project director Toby Edmonds said at time of the contract award: "Granada has invested a lot of time and effort into meeting with the industry at trade shows and other events to understand what is needed, and then apply this knowledge to position their business. As a result, their product is right for our project and they put together a very strong proposal that was pitched in just the right way to compete successfully against strong competition."
Granada Material Handling sales director Mark Sidwell added: "Granada has ambitious plans for this market sector which involves increasing its workforce and also providing job security for its existing employees.
"We are currently working with designers, wind farm developers and turbine manufacturers to further enhance the product range to ensure the very latest developments in lifting technology are made available to the rapidly expanding and ever developing offshore renewable market."
One thing the past three years have shown, however, since the global credit crisis started, is that even in hard times there are opportunities.
Technical Cranes is a UK crane builder based in Rotherham that, like most companies, was hit hard by the recession. “For a four or five month period in 2009 we had no orders for new cranes,” says managing director Jordan Simpson. “We had a lot of cancelled orders when the market collapsed.” What kept the company not just alive but healthy was the used cranes business, which flourished.
Companies that use cranes have been consolidating during the recession and reorganising their operations. This means factories and workshops closing or merging, sometimes with new – perhaps smaller - facilities opening up in their place. Other companies have merged production lines or brought outsourced work back in house. Whatever changes have been made, there has been a crane requirement to go along with it.
“The restructuring of companies has brought us work,” Simpson says. Wehave certainly benefitted.
“Touch wood, at the moment we are as busy as we have ever been.”
Simpson acknowledges that it is a case of benefitting from the misfortune ofothers. He says: “It’s been tough but we’ve been taking advantage of the situation.”
In September 2011 Technical Cranes took over Lifting Solutions, which is also based in Rotherham. It specializes primarily in lifting attachments and below-the-hook equipment but also offers the full range of lifting equipment services. Technical Cranes has rebranded this company as Technical Lifting Solutions, maintaining it as a standalone company with its own premises just down the road.
There is also a third business in the group: AB Crane & Electrical Services, acquired five years ago. Originally based in Newcastle, Technical Cranes has relocated AB to Sheffield, much closer to its own Rotherham headquarters. After it was acquired, AB Cranes was merged into Technical Cranes, but after changing its strategy it is now standing on its own again with its own identity, offering repair and maintenance services as well as new and second hand cranes.
Simpson says that there are parallels between his strategy and that of Konecranes. As an SWF agent and a competitor of Konecranes UK and Morris Material Handling, Simpson is very familiar with Konecranes. Where Konecranes can bid for work using different brands, often simultaneously, so Technical Cranes can submit bids for contracts from three separate companies. “It gives us three bites of the cherry,” Simpson says.
New crane installations account for only a small proportion of Technical Cranes’ work, at approximately 15%. Repair and maintenance work accounts for 35%, while roughly half is from the used equipment side, however. “We advertise for second-hand cranes. We have got about 50 cranes on stock. It has always been a major part of our business.” The stock amounts to some £500,000 (€580,000) of inventory, but investment in refurbishing them will only be committed once a sale is made.
A lot of the used cranes are sold overseas. “We are doing quite a bit of export,” Simpson says. “It is a growing part of our business.” Technical Cranes has recently sold six reconditioned cranes to Dubai, bought from a Mittal Steel depot that shut down. A goliath crane is on its way to Ghana. And there is an order in hand for two 30m cranes, safe working loads of 50t and 35t, to a customer in Nigeria.
Earlier this year it supplied a 16t goliath crane to an Electro-Motive rail depot in Hagen, Germany.
The end result is that Technical Cranes has seen its turnover return to the £3m (€3.5m) level that it was at before the global economy took a nose dive. As a group, including the two new companies, turnover is around the £5m mark, with all divisions making a profit, he says.
Another UK company that has prospered from the used overhead crane business during the recession is Harold Potter, based in Nottingham.
Dutch-owned since 1996 and part of the same group as lifting gear supplier Holland Hoisting BV, Harold Potter is an agent for Black Bear electric hoists and Masterlift lifting tackle and manual hoists.
Like Technical Cranes, Harold Potter has also benefited in the past couple of years from the misfortune of others, buying used cranes from factories that are closing down, refurbishing them and selling them on.
Among the business failures whose bones Harold Potter has picked over recently is Britspace, a leading UK manufacturer of modular steel buildings which went out of business in August.
An investment of £100,000 bought Harold Potter eight overhead travelling cranes from Britspace’s factory – four Morris and four Street – of 18m span and 15t capacity with twin 7.5t crab.
Business development manager Nathan Gladwin says that the increase in the price of steel has made used cranes a better bargain than ever, since new cranes have become more expensive.
New crane installations make up less than 10% of Harold Potter’s workload, Gladwin says. The majority of the business is either selling used cranes or modifying customers’ cranes that are already installed, often to help them meet changed circumstances.
Jordan Simpson and Nathan Gladwin both say that they have invested a lot of energy, time and money on website developments and search engine optimisation. Harold Potter launched an online store in 2008 and was happily surprised to receive an order, via eBay, for 300 ratchet lever hoists from the Cypriot electricity authority – a single order worth €75,000.
If the worst comes to the worst and the euro is brought down by the sovereign debt crisis, the crane industry will no doubt return to the dark days of 2009 and orders will once again come to a sudden halt. However, crises tend to come accompanied by opportunity and invariably lead to change. There will be many losers, but winners will also emerge.