Alfa Laval on the March, But Headed Where Next?

After an occasional mention in these pages previously, the latest news stories from Alfa Laval make a closer review of the broad spectrum of its activities overdue.

Another factor in presenting this is that stories about the Alfa Laval activities attract the highest numbers of Google search led visitors to the INSIDER blog website, www.iainsider.com. Key products are heat exchangers, separators, pumps and valves―producing a turnover reported in Swedish Kronor of SEK26 billion ($3.8 billion) in 2009, and an operating profit of $670 million (18%). The company has a market value of approx SEK57 billion ($8 billion). Company market share in heat exchangers globally is stated to be 30%, and the company growth rate over the period 2002 to 2009 averages 8% per year, based on a strong presence in the world's fast growing economies.

Lars Renström, president and CEO of the Alfa Laval Group, reported at the company’s Capital Markets Day in Copenhagen at the end of November: "There are a number of key factors that will contribute to driving the company's growth in the future: Alfa Laval's leading position in three key technologies and its focus on R+D to ensure that this position is maintained; the closeness to its customers on a global scale; and the short pay-back time customers can achieve by choosing Alfa Laval products. These factors, together with a strategic plan for M+A, are significant for the company's ability to capitalize on structural changes involving energy, the environment and food, and maintain a profitable growth."

Automation History

It was 1998 when Alfa Laval appeared to turn its back on industrial automation and control, as it sold its automation division, Sattcontrol, to ABB. Possibly because of its current interest in the growth markets created by drives to energy efficiency, carbon capture and air cleaning systems, it may once again become involved in control and automation. In 2008 it signed a deal with Beijer to jointly develop standard operator panel solutions for its processing equipment. Its most recent acquisition in December 2010 is of Aalborg Industries for SEK5 billion ($730 million): Aalborg Industries has some 2600 employees and is expected to generate sales of about SEK 3.3 billion ($500 million) in 2010.

The latest major acquisition

Headquartered in Aalborg, Denmark, the company is a provider of critical products, systems and service solutions mainly to the marine and off-shore markets, but it also has an increasing exposure to the power industry and other industrial markets. Its offering includes boiler systems, thermal fluid systems, waste heat recovery systems and inert gas systems. The acquisition is said to complement and strengthen Alfa Laval's global position by adding a strong product offering that focuses on energy efficiency. As a result, meaningful top- and bottom-line synergies are expected to be derived from this combination.

Alfa Laval can provide an attractive platform to continue Aalborg Industries successful development, for instance, in applications like exhaust gas cleaning.

"Aalborg Industries is an excellent fit, and I'm very pleased to welcome a strong and well-run company into Alfa Laval," said Renström. "Aalborg complements our offering of energy-efficient and environmental solutions. It represents a significant business opportunity as it not only supports the development of our offering to the marine and off-shore markets, but also we can introduce its product offering to new industrial end markets and customers."

Over recent years, Aalborg Industries has acquired several leading marine and industrial equipment companies. During this time, and partly as a result of the acquisition track record, production, engineering and after-sales services have been developed in strategically important and faster-growing economies such as China, Vietnam and Brazil. The Aalborg exhaust gas cleaning solution has in testing been able to remove nearly 100% of the sulphur and up to 80% of the particles from effluent gas streams.

Instruments and Valves

In Orangeburg, N.Y., there is another company with a similar name, Aalborg Instruments and Controls: It manufactures various styles of flowmeters, such as vortex meters, VA flowmeters, and mass flow controllers working on the thermal mass principle, and is well-known in automation and control circles. However, Allan Briggs at Caché Instrumentation, the U.K. sales distributor for Aalborg Instruments and Controls, confirms that there has never been a connection between these two companies called Aalborg.

There have been other recent acquisitions by Alfa Laval, first in the flow control valve area. In November it acquired the Definox activities from Defontaine: Definox designs and manufactures stainless steel valves and equipment for the food processing, pharmaceutical and cosmetic industries. "Definox fits our strategy to capture growth opportunities, in this case driven by quality and safety demands from the food and pharmaceutical industries," said Renström. Definox had annual sales of about SEK 200 million and some 120 employees, with offices and manufacturing in Gétigné close to Nantes, France. and subsidiaries in the United States and China.

Heat exchangers

In December, Italian company Olmi SpA was acquired, a specialist in the design and manufacture of shell and tube heat exchangers and air coolers for niche applications in the petrochemical, power, and oil and gas industries. Here Renström commented. "The acquisition of Olmi will substantially strengthen our platform to expand into the high-pressure, high-temperature heat exchanger market. At the same time, Alfa Laval's strong global presence allows us to take the offering to new geographical markets and customers." Olmi had sales of about SEK 700 million, with approximately 240 employees.

Alfa Laval recently confirmed that its company strategy is to acquire local heat exchanger manufacturers, such as those emerging in Korea and China, if they grow significantly and "do well." In September 2009, Alfa Laval acquired 90% of the shares in LHE in South Korea, a supplier of compact plate heat exchangers to the local market, with sales of about SEK 750 million in 2008, and some 170 employees.

Earlier in 2009 Alfa Laval had acquired HES Heat Exchanger Systems in Germany, focused mainly on the process industry. In 2005, Alfa Laval bought Packinox in France, a world leader in large, welded-plate heat exchangers for oil and gas and refinery applications, and in 2007 it acquired Netherlands-based Helpman, and Fincoil of Finland, both leading European suppliers of air heat exchangers. Helpman products are used for commercial refrigeration, for example in the sensitive logistic chain for food: Fincoil is particularly strong within industrial power cooling.

The late 2010 acquisition activity was possibly triggered by the failure of Alfa Laval’s bid in August for Munters in Sweden, a supplier of humidity and climate control. Here a bid of SEK5.5 billion ($800million) was insufficient in the face of a rival bid from Cidron Intressenter AB.

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