SMS group notices reluctance to place orders. Sales expected to remain at previous year’s level

The SMS group has noticed a reluctance among its customers to place orders. It is estimated that order intake in the year coming to a close will total EUR 3.2 billion, putting it below 2011’s EUR 3.42 billion. Sales in 2012 are anticipated to reach just above EUR 3 billion (2011: EUR 3.07 billion).

Dr. Heinrich Weiss, Chairman and CEO of the SMS group, stated: “Right now our customers are very reluctant to place orders, not only because of the weak steel market, but also due to the expected effects on the global financial system of Europe’s national debt and euro crisis. Originally, we planned an order intake of more than EUR 3.5 billion in 2012.“ That means capacity utilization in the SMS group next year is set to settle at the lower end of the limit. Currently, the average employment level is secure through to early in the new year. The recent acquisition of the majority share in Luxembourg company Paul Wurth, a market leader in the construction of blast furnaces, coking plants, and sintering plants, gives SMS an extra order volume of some EUR 500 million.

The number of employees this year has increased to 11,500 (2011:10,600) – due to the takeover of some smaller companies and a staff recruitment drive in China and India.

Dual strategy: Globally networked manufacturing

To ensure high quality, SMS remains committed to producing the most complex components of its machinery and plants in Germany. That is why the company invested heavily over recent years in expanding and upgrading its facilities in Hilchenbach and Mönchengladbach. Yet, parallel to these measures, it expanded its production capacity in China. Here it is mainly about better customer service on the ground as well as special products designed for the Chinese market. These can be produced at a lower price locally.

Overall, the aim is to further cut manufacturing costs by focusing on production-optimized design, greater efficiency in logistics, plus increased productivity in both engineering and production. Using the same strategy as that pursued after the first financial crisis a few years ago, the company will make the most of the weaker order intake to drive technological development. Equally important is intensifying on-the-job training and qualification of their experienced core personnel as well as training new staff.

“Carrying out these activities,“ says Heinrich Weiss, “means we strengthen our ability to supply both high-tech and low-cost plant and machinery. That will enable our customers to produce even more competitively. We are also expanding our presence outside Europe by hiring qualified personnel as well as building production and service facilities in our key markets of China and India.

This is how we will be able to meet our customers’ demands for a locally-produced share of supplies without increasingly losing these types of orders to local competitors.“

Based on Siemens Group information