management  |   Interview

“Indian market - unique for us”

Benedikt Goldkamp,CEO, Phoenix Mecano AG, shares his strong belief with Soumi Mitra, on the strength of Indian manufacturing activities and the company’s expansion plans in the subcontinent. Excerpts from the interview follow…

Would you give a brief sketch of your company and a picture reflecting its performance this year? Please share with us some statistics – the percentage growth, and projected escalation for the next year too.

Phoenix Mecano AG, formerly known as Phoenix Maschinentechnik AG, founded in 1975, is headquartered in Stein am Rhein, Switzerland. It is an industrial group that manufactures technology components and operates through three divisions namely enclosures, ELCOM and mechanical components. We will roughly achieve 400 million Euros in revenues in the year 2008. Last year we achieved 390 million Euros. We will be growing by high single digit, approximately nine per cent year-on-year (YOY). Globally we grew by 10 per cent YOY in last few years. The year 2009 might be difficult with the financial crisis. But we foresee a good growth in the Indian market. Few sectors as wind energy and photovoltaic will do well in other markets of the world. With a recessive environment in the emerging markets it is difficult to predict how the mix will pan out, but the outlook is positive for 2009. We don’t see our business being much affected, though the orders from machine tool industry seem to be slowing down. It is easier to give a mid-term forecast as it is basically topline growth rate of 10 per cent. Organically we buy smaller technology companies, help them grow, giving access to global and new markets, taking to global level of our industrial group and lowering costs, providing purchasing & manufacturing opportunities: that’s how we create business value.

Which are the potential regions for Phoenix Mecano’s business worldwide and where does India feature?

In terms of growth potential India ranks at par with China and other Asian markets. The Indian market is unique for us. The domestic demand is very interesting. We rate India on the brink of breaking through industrial and technological backbone. It is a right time to be here. We have been in India for a long time, since 1994, but our growth picked up in 2003-04, when we moved to Pune and set up our first facility. It is important to time your market entry properly. We continue to see growth opportunities in the medium double digits. In today’s world and economic environment India is certainly one of the most important growth markets.

How much is Phoenix Mecano India’s (PMI) contribution to Phoenix Mecano’s total turnover?

PMI’s contribution is more than one per cent, but soon should be three to four per cent in the coming years.

What are your plans for India in terms of capacity expansion? What kind of investments are you planning?

Investing in Indian facilities will bring business. Since past three years we have invested 4 million Euros in India and recently have invested 1 million Euro as a part of our expansion plans. However, it is not only about plant expansions and capacities; it is about building teams, engineering skills, and transferring knowledge from parent companies in Europe to local organisation. We are growth oriented company. Expansions are quicker in India than Europe. You can get a new facility in 6-7 months in India. We are hopeful to be a company with a strong balance sheet and cash flow generation, always ready for investments and opportunities.

Phoenix Mecano has operations and manufacturing facilities in both India and China. How are the two countries different?

The Chinese market is as attractive as the Indian market. Though we manufacture both for the local market and global operations, our manufacturing focus in China is for the local market. Secondly, India has a winning edge over language skill. The knowledge transferring is easier as English serves our internal company language. It is easier to protect intellectual property rights in India than China. On the other hand, the public infrastructure like roads are more advanced in China, the transportation capabilities are better. It is also sometimes easier to deal with municipal or community level in China, because at the government level, the decisions are taken by one person, whereas in India sometimes it takes longer time. But at times there is more sustainability in the process, as it is supported by the community. Both operations are profitable and growing fast, as local markets are attractive at both ends.

Regarding the demands in India, which are the most sought after PMI’s fastest selling products?

The products that fetch voluminous business in India are aluminium enclosures. We provide value added services around the enclosures to customers in India. Mechanical components – the aluminium profile assembly system also give a huge chunk of business. We are also well known for our engineering capabilities that our engineers and design team has in India.

You have clients from various sectors. Which sector brings you the maximum business and is likely to get the biggest growth in the near future?

We serve a diversified industry globally and domestically when it comes to applications. In India the pharmaceutical machinery, machine tool, and the automotive industry, the defence sector, etc, give us maximum revenues. Even distribution for energy sector and instrumentation in alternate energy bring good business. Globally, the ranking of the sectorwise business can be put as machine tools, assembly automation, industrial electronics, renewable energies, photovoltaic and wind energy, oil and gas, etc. We know what customers expect and challenges they face. When it comes to our components and solutions we have more than sector specific solutions, rather those are customer specific solutions.

As Phoenix Mecano’s theme revolves around ‘Innovation in detail’… where do you stand on the innovation and product development front and what percentage of your revenue do you plough back into product development today?

Our business model is driven by application engineering that gives us the input for R&D application. We continuously create and monitor customer specific solutions. We invest about 3.5 per cent of our revenues directly for R&D. For us the lines between R&D and application engineering is not so easy to draw. We don’t sit in an ivory tower and think about the problems of the sector, are really very close to the customers. We make customer specific solutions and analyse the solution for the broader market. We do R&D on a day-to-day basis.

What is your company’s USP, which helps you counter competition?

Customer proximity is our USP. The capability of our sales and applications team to understand and convert the requirements of customers is our asset. In a nutshell our USP is a combination of having standard components designed in a way that allow easy and quick customisation on sight. We produce in the best and lowest cost locations in the world to the highest technological standards. We do not outsource our manufacturing process. Our local engineering team and sales organisation have the capability to analyse customer specific requirements, take our standard components, and customise them to that application. Hence, the combination of having high quality, high technology, low cost components as a standard available and going to market with them and not selling mainly through distribution but rather through own engineering teams analysing requirements and customising, makes us unique.

Please tell about PMI’s corporate social responsibility (CSR) initiatives.

We believe in building ties with local communities. Phoenix Mecano consists of lots of small organisations typically run by local management; because we believe they understand the local culture better. We try to do our best in our own way. Whenever we move to a new manufacturing facility, we first ensure that the environment is not polluted. We have equipment to process the waste. We help the villagers build bathrooms in their homes. We upgrade their school laboratories. We work with local communities on cultural, social and educational projects in every individual country. We spend most of our resources in social projects in countries where we have low cost manufacturing facilities like Eastern Europe, India, China, and Tunisia.

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