Komax CEO Matijas Meyer: “Electromobility is becoming increasingly significant”
Inside Komax
Does Komax have potential for growth? What influence does electromobility have? What is the forecast for 2021? Matijas Meyer, CEO of the Komax Group, commented in detail on these and numerous other topics in an interview with the business/finance portal cash.ch. He also highlighted the advantages of Switzerland as a business location.
The automotive industry, which is where 80% of Komax revenues come from, is dominated by the topic of electric cars. On the stock market at the beginning of 2021, as well as Tesla, manufacturers like VW, GM or Ford also benefited strongly from an element of e-hype. Komax shares also experienced a sharp rise in price at the beginning of the year – do you attribute this to the general enthusiasm for electric cars?
Matijas Meyer: As a manufacturer of wire processing machines, we have been benefiting from the electrification and modernization of cars for decades. Even cars with combustion engines now contain more and more cables thanks to their intelligent engines, assistance systems, comfort equipment and the installation of numerous sensors. Electromobility, clearly a structural change overall, is now coming out on top. From a perception point of view, it has actually become more “visible” now that the automotive industry has got more to do with electricity.
Is Komax a winner as a result of this trend?
I hope that one day we can say that we are winners. There are definitely a lot of opportunities for us. We need to seize them. We are closer to the issues than our competitors because we are already active in a highly automated field.
How important is the development of the share of electric cars in total production for Komax?
Without electric cars, there would be less need for car manufacturers to rethink their concepts. The change we are witnessing involves a new architecture of the car, new platforms and new production concepts. That makes it an important issue for us. A radical change is taking place that will affect the entire value chain. The development of e-mobility is also acting as a catalyst for other areas. The electric car will be supplemented with other functions such as autonomous driving. New production concepts promote the automation we depend on.
How many of your wire processing machines go into electric car production? Analysts estimate that e-mobility accounts for less than 10% of revenues.
As I said, the development of electromobility goes hand in hand with many other areas for us as a supplier. If you look at the investment behavior of customers very specifically, so just focus on the electric motor, our share of revenues related to e-mobility is still relatively small.
What is your personal assessment of the future market share of electric cars?
Personally, I believe that electromobility will become increasingly significant. A surprising number of new cars already have electric drives of various kinds. If not fully electric, they are at least equipped with a hybrid drive. In Switzerland, with the distances we drive, the restrictions caused by electromobility are minor. Many people are therefore considering having at least an electric variant in their next car.
Automation is a core business for Komax. Car production is now commonly thought of as being done primarily by robots. Is there still enough potential for growth?
If you walk through production halls of car manufacturers today, you get the impression of encountering hardly any people at all. But this is not the case in wire processing: a wire harness is still largely made by hand. Today, about 80% of added value still comes from manual work, which is mainly done in low-wage countries. There is still a lot of potential to shift this more and more to machines.
Will Komax focus more strongly on sectors outside the automotive industry because of a cluster risk that is nevertheless visible?
Looking at the markets, I don't think the revenue mix will change much going forward. If we grow in the automotive market segment with an 80% share of revenues, we would have to grow even more in the other segments for the percentage to decrease. Or we would have to actively lose market share in the automotive industry for the revenues ratio to change. But, of course, we don't want that.
Wouldn't aircraft manufacturing, at least after the pandemic, be a huge business?
We already do business there. An airplane has even more wires than a car and the wire processing is even more manual. But far fewer planes are built than cars, and many of the wires are too long to process on machines. The market for wire processing machines is therefore rather small. Future markets for us are certainly also “smart cities,” trains, home automation, automated transport in general – there is potential wherever power conversion plays a role.
In 2020, Komax generated revenues of CHF 328 million: that's in the middle of the field for a listed company in Switzerland. But will the company be big enough in the long run? Will the company also have to grow through acquisitions?
Our goal is to grow revenues to between CHF 450 and 550 million by 2023. In 2019, our revenues were CHF 418 million and in 2018, which was a very good year, we achieved CHF 480 million. Regarding acquisitions, the issue is that we are in a niche market and there are not a lot of acquisition opportunities for a market leader like us. If we do go that way, we will grow through small, complementary acquisitions. It is often not possible to plan these precisely timewise, as they are often succession solutions. But if an opportunity arises, we will seize it accordingly.
The growth outlook is still rather uncertain after a difficult year for the automotive industry in 2019 and the pandemic in 2020. According to your own information, you are hardly being affected at all by the semiconductor problem in the automotive industry. But customers are having an impact: restrained investment by carmakers is putting the brakes on Komax. Are you anticipating any major setbacks?
What might happen now feels very different from what we have experienced so far. The 2020 crisis was extreme. Customers weren't operating our machines at all for a while, new purchases were almost non-existent during this phase. We are much more aware of potential crises as a result. We can deal with volatility.
A certain skepticism about growth is now being reflected again in the share price, which has been falling since March. The return to pre-pandemic performance in the automotive industry might not happen until 2022, according to market forecasts. The record level seen in the industry in 2018 might not even be reached again until 2024 or 2025. So the recovery may be tougher than expected after all.
The situation in 2019, with the weakness of the automotive industry at that time, had already led us to revise our targets downwards. 2020 should have been a transition year. Then the pandemic came, so two issues overlapped. There is still some uncertainty, but we expect 2019 levels to be regained next year.
Is there currently any forecast certainty for your industry?
As it almost always is, visibility is poor beyond three months. To say so early in the year whether there will be a final spurt by the end of the year, whether budgets will still be opened up, how customers' investment policies might still change: it's difficult to say. If the confidence is there, things could already be noticeably better in the second half of the year.
Komax cut costs last year – is this just a reaction to the crisis, or will the savings also have a structural effect?
We tried to distinguish between the impact of the pandemic and the impact of the 2019 dip in the automotive industry. We countered the effects of the pandemic primarily with short-time working. We also made savings by traveling less and circumstances that were limited. In total, this amounted to over CHF 50 million. On top of this, we also realized that things would not return to how they had been pre-2018 for quite some time. That is why we have reduced excessively high fixed costs by making structural adjustments and therefore by also cutting jobs. We are talking about sustainable savings of over CHF 10 million compared to 2019. This mainly relates to personnel costs in marketing, administration and R&D.
When will EBIT return to double digits?
That depends on the product mix: if the right products start doing well again, EBIT could quickly return to double digits. I don't think it will be this year though. There are still too many uncertainties worldwide. There is still an “accordion effect” in the value chain as a result of the crisis. Order intake will not come to a standstill again, but the consequences of the extreme shut down a year ago will lead to fluctuations.
Will this "accordion effect" be over in a year?
I think that the problem will no longer be an issue in three to six months.
When will you resume dividend payments as a sign of operational strength?
Except for the 2019 fiscal year, we have always been able to maintain our dividend payments. However, I considered it to be the right decision from the point of view of our employees and also the state, which supported us, not to pay a dividend in May 2020, even though we still made a profit in 2019. Our general rule is that 50 to 60% of Group earnings after tax (EAT) is distributed. As soon as we start earning, we'll pay out half again. I hope this will be the case for 2021.
With Europe as your largest sales region, the euro-franc exchange rate has particular significance for Komax. You should currently be benefiting from a somewhat weakened Swiss franc, but what is your forecast for this currency pair?
In the case of the euro, we have managed to benefit more from “natural hedging” over the past few years. We have more added value in Germany and other European countries due to acquisitions. This balances out and reduces the effect of the euro exchange rate. In principle, however, we expect the Swiss franc to strengthen over time. We can deal with that. It's short, violent fluctuations that are challenging.
Will Komax be able to retain its workforce in Switzerland after the pandemic?
The currency situation is a factor for a production location, but not the most important one. Komax has about 2,000 employees, around 650 of whom are in Switzerland. Many factors go in Switzerland's favor: good engineers, a network of suppliers offering high quality, the infrastructure. And Switzerland as a brand is very important.
We are now back in an economic upswing, expecting further steps for opening up in the pandemic soon. As CEO of a technology company, what is your general forecast for the Swiss economy?
This is not the first crisis I have experienced in my time at Komax. I already experienced the crisis of 2008 as a manager and the crises of the 90s as a lower-level employee in another company. As far as the economy is concerned, I am basically optimistic that we are in a good starting position here. Personally, I am very enthusiastic about Switzerland: Switzerland is uncomplicated, things happen quickly and there are plenty of opportunities. Other countries are much more sluggish, much more administrative when it comes to crisis management. The attitude of the employees in Switzerland is to think things through together, and everyone copes well with a crisis that comes from outside. That's an excellent situation to be in. It gives us the chance to emerge from the crisis even stronger.
Contact
Roger Müller has been working for Komax since 2016. Transparent communication with internal and external stakeholders is a key concern for him.
