Bekaert’s Steel Wire Solutions business unit develops, manufactures and supplies a very broad range of steel wire products and solutions for customers in construction markets, consumer goods and agriculture, energy, utilities and mining, and the industrial sector in general.
To serve customers worldwide, the business unit has a global presence with manufacturing plants in EMEA, US, Latin America and Asia and a sales and distribution network worldwide.
*sectorial breakdown of SWS Combined Sales
The extended diversity of sectors, geographies, and competitive landscapes in which the business unit Steel Wire Solutions is active makes it impossible to identify the economic evolutions and growth indicators that fit all. When focusing on our main markets, the following indicators are key in evaluating the business climate in 2019 and the growth drivers in the coming years:
The business unit Steel Wire Solutions reported a sales decrease of -3.3% compared with last year. The positive effects of price-mix (+3.7%) and currency movements (+0.8%) partially offset the impact from passed-on wire rod price decreases (-2.6%) and lower volumes (-5.2%).
The economic uncertainty affecting the automotive, other industrial and agricultural market demand drove sales down in EMEA, North America, and South East Asia. The business climate in Latin America further worsened due to significant protest actions across the region in the last quarter of 2019. The steel wire activities in India and China delivered robust growth.
Underlying EBIT was € 51 million, 11% lower than last year and resulting in a margin on sales of 3.4%. Several factors accounted for the profit decline: the low volumes in North America, South East Asia and some business areas in EMEA; the structurally weak performance of a number of plants, which drove the decision to close two production plants; and the sharp wire rod price decreases and obsolete inventories led to inventory valuation corrections at year-end.
In 2019 we also started to see the benefits from recent profit restoration programs and we expect to see further margin improvement in 2020.
The one-off items related to the plant closures and various restructuring programs totaled € -25 million and are driving the decline in reported EBIT.
Capital expenditure (PP&E) was € 28 million and mainly included investments in Slovakia, China, the US and Chile.
To restore profitability and react to the deteriorating market conditions in certain markets, we have decided to close the production facilities in Shelbyville (Kentucky, US) and Ipoh (Malaysia).
Where we do see possibilities for a successful turnaround, we invest in new markets, in production capacity, and in team capabilities. Examples of such profit restoration programs where we have started to see the benefits in the course of 2019 are Qingdao (China), Bradford (UK), and Proalco (Colombia).
Bekaert Qingdao in China improved its operational capabilities with new technologies and investments. They succeeded in significantly improving the product quality and mix and in growing volumes to much higher levels. Doing so, the team turned the plant profitable and realized good margins in 2019.
Proalco-Bekaert in Colombia had been suffering from weak competitiveness and margins in the past years. The turnaround actions implemented in 2019 have proven to be very successful. The new management team engaged all employees in implementing the Bekaert Manufacturing System, hereby realizing major cost savings and better standardization. In addition, several actions were implemented to improve the product mix of the plant. In 2019 Proalco-Bekaert achieved strong margin growth and brought down the working capital to less than 3% on sales at year-end.
The business unit sees downstream integration and strategic alliances as an opportunity to grow good margin business activities in promising markets. A first partnership was concluded at the end of 2019 with the creation of the AGRO-Bekaert joint venture.
To expand beyond our core, we have established a joint venture with AGRO, a world leading manufacturer of high quality innersprings, to develop and produce high-end steel wire mattress spring systems in Colombia. Where Bekaert will contribute steel wire technology and regional market expertise, AGRO brings in steel spring technology and sectorial market know-how. AGRO-Bekaert Colombia SAS will start operations in the 2nd quarter of 2020 and will co-develop, manufacture and promote superior value solutions for mattress and upholstery manufacturers in Colombia, Central America and the Caribbean. Experience and expertise come together in a brand new production site in Barranquilla, Colombia, to make this ambition real.
Renewable energy trends create opportunities for the armoring wire portfolio of Bekaert Steel Wire Solutions.
Submarine power cables transfer electricity from offshore wind farms to land. Bekaert’s a-magnetic armoring wire with galvanized stainless steel lowers the total cost of ownership by reducing energy losses and heat dissipation, and offering a predictable and reliable coating lifetime.
Thanks to its low permeability, stainless steel reduces energy losses in the armoring that otherwise occur by the cable’s magnetic field. This increases the cable’s efficiency without having to change the cable design, as is the case with other armoring solutions. In addition, a-magnetic armoring helps reduce the need for insulation materials to prevent heat dissipation, which is a technical and environmental concern for HVAC cable manufacturers. Finally, the heavy zinc layer protects the wire against pitting and crevice corrosion.
