FUCHS continues to expand its business with targeted investments.
EUROPE
Europe is FUCHS’s large, technically sophisticated domestic market. Although the continent only accounts for around 20% of worldwide lubricant demand, which puts it in third place globally, the companies in this region have the highest standards in terms of quality, degree of specialization and speed of innovation. As is the case in many industries, Germany also ranks among the technological leaders in this field.
FUCHS PETROLUB SE, the lubricant specialist, which operates lubricant plants and subsidiaries in most European countries, also expresses its commitment to its domestic market in legal terms. Investments and acquisitions have led to an unusually dense network of mixing and filling plants, grease plants, development and service stations, as well as distribution facilities. The strong position in the European market forms the basis that allows the Group to internationalize its business. With its extensive product portfolio, FUCHS is catering to the increasing specialization requirements in the mature markets. This position of strength also enables the company to utilize growth potential in Asia, Africa, South America and Eastern Europe in two different ways. First FUCHS supports key customers by entering new markets and winning over local customers with tailor-made solutions. Second, this diversification across regions and sectors makes it easier to compensate economic and industry cycles.
Yet despite its global alignment, FUCHS is also making major investments in Europe as a way of maintaining its technological leadership. At its main facility in Mannheim, Germany, the company constructed a new, ultra-modern test bench building. With total floor space in excess of 1,000 square meters, this new building adds a significant amount of additional test bench capacity for various fields of application. In addition, a storage facility for raw materials, additives and finished products is also being constructed. The capital expenditure associated with this project is approximately €13 million. More than 700 people work at the Group’s largest location, and the total number of employees throughout Europe is 3,252.
A modern test rig building is taking shape in Mannheim.
The Yingkou site, one of the largest production sites of the FUCHS Group.
The capacities for OEM lubricating grease production are expanded on a global level.
ASIA-PACIFIC / AFRICA
Accounting for more than 40% of global lubricant demand, Asia-Pacific / Africa is the largest lubricant market in the world. However, it is far from reaching its limits in terms of growth. The per capita consumption of lubricants is extremely low and there is still massive potential. In all probability, around two thirds of the world’s population will be living in Asia by the year 2050. This will be accompanied by a general increase in wealth, which in turn will lead to a need for industrial manufacturing and the types of products that FUCHS offers.
This forecast is based on developments recorded during the last fifteen years, during which time the region’s share of Group sales revenues rose continually from 20% to more than 30%. In fact, this region has been able to increase its sales revenues by an average of more than 10% per year. Following Europe, Asia-Pacific / Africa is therefore the second most important sales market for FUCHS, whereby China represents around 50% of all sales, Australia 25% and South Africa 10%. The company generates the rest of its revenues in this region with its companies in South Korea, India, and with small local subsidiaries.
South Africa represents an important strategic market and indispensable springboard for the company in the region. With its subsidiary in this country, FUCHS believes that it has a solid basis for exporting to the surrounding countries in Sub-Saharan Africa, ensuring that business development goes hand in hand with proximity to customers and excellent service. Another important point that underlines the Group’s sustainability is the fact that FUCHS today operates its own production facilities in many of the region’s countries and is consistently expanding local manufacturing operations. For example, the company opened a facility in Yingkou, China. As one of the Group’s largest production sites this facility supplies the Chinese market, together with the facility in Shanghai. 345 employees work in China, and FUCHS employs about 1,030 people throughout the Asia-Pacific / Africa region.
NORTH AND SOUTH AMERICA
Following Asia-Pacific / Africa, North and South America represent the world’s second largest lubricant region, ahead of Europe in third place. This region accounts for approximately 28% of global lubricant demand. With a total annual volume of around 6 million tons, the US remains the industry’s largest national market. In this market, a specialist provider such as FUCHS is able to thrive on the niche business alone, which for example includes metal-working fluids, lubricants for the underground coal mining and automotive sectors, as well as greases.
FUCHS can reflect on many successes in this region. The US business has grown from sales revenues of just €9 million in 1982 to well in excess of €350 million today, while maintaining a very good return. Approximately half of this growth was organic, while the other half was achieved through acquisitions. The company has consistently integrated the companies it has acquired into its operations and has thereby been able to exploit positive synergy effects and establish a single corporate identity.
More than 500 people are currently employed at the eight facilities in North and South America. An important aspect of the corporate culture is that the management and workforce at the FUCHS companies in the US, Canada, Mexico, Brazil and Argentina each come from the respective country.
The following example of an investment shows how FUCHS conducts its business in the region. The Group invested approximately €23 million to extend and modernize the facility at its central location in Harvey near Chicago. The US subsidiary expanded its mixing plant, installed a fully automated high-bay warehouse system, and set up new, ultramodern LUBRODAL production facilities.
In 2014, FUCHS invested around €33 million worldwide in research and development.
An important aspect in this regard is that the new processes reduce airborne emissions and thereby help the company achieve its environmental protection targets. In addition to this, there are plans for a production facility for high performance greases used by OEMs. In fact, OEM applications represent a key area for the FUCHS PETROLUB Group, in which lubricants for passenger, commercial and agricultural vehicles, as well as equipment for the construction industry, are developed. This project provides an indication of just how important international collaboration has become at FUCHS over the years. In the future, the Harvey location will also benefit from the expertise and many years of experience at the company’s location in Kiel, Germany. In the future, a similar plant is also to be established in China. The Group would then be represented with OEM-quality production in all three major global markets.
Dr. Alexander Selent
Former Vice Chairman of the Executive Board and CFO
5 Questions for
Dr. Alexander Selent
Former Vice Chairman of the Executive Board and CFO
Dr. Selent, what do you consider to be the core of your global growth initiative?
We operate in a market that consumes approximately 35 million tons of lubricant per year. The potential for growth is significant. As a global company that stands for high-performance technology, innovation leadership, market proximity and service focus, we can and will continue to grow. We are therefore investing significantly in new production sites, and in research and development as a way of preparing ourselves for the future.
Could you give us a few examples of this?
FUCHS invested in excess of €25 million in the new Development Center in Mannheim. More than 100 experts research and develop lubricants and related specialties here. We are also strengthening our worldwide infrastructure by investing heavily in growth markets such as China and Russia and, with a more long-term perspective, Brazil. In addition to this, we are optimizing and modernizing our existing facilities, such as in Chicago and at our Group HQ in Mannheim.
Are there any other success factors?
Yes, we are helping our customers set up their own processes more efficiently. Our tailor-made solutions preserve value, for example protecting or extending the useful life of valuable machines. To this end, we are further strengthening our position as a technology-driven company with a strong focus on sales. At the same time, we also benefit from the fact that more and more specialized lubricants are being used and we are able to offer products for many different applications. As a specialized lubricants manufacturer, the ever stricter environmental regulations in the respective local markets are also playing into our hands, for example the requirement to use pollutant-free substances and adhere to strict safety standards.
What part do acquisitions such as of LUBRITENE in South Africa and Australia, and BATOYLE in Great Britain play?
With these acquisitions, FUCHS has been able to successfully expand its specialty business and its global niche strategy, while at the same time strengthening its market position in both Great Britain and South Africa. With its automotive and industrial lubricants, the business of the BATOYLE FREEDOM Group complements our existing portfolio, which is in addition complemented by lubricants for the glass industry. It is a similar story with the LUBRITENE business, which we are using to expand our portfolio with lubricants for the mining industry. The LUBRASA business complements the FUCHS portfolio for food grade lubricants in Southern Africa.
In which markets are you primarily looking to grow?
Wherever it makes economic sense. We already enjoy a relatively high market share in the double-digit percentage range in mature markets such as Germany, so achieving further growth in these is obviously not easy. However, since we can cover such a broad range of applications, there is still potential to be tapped here. Since 2007 alone, we have invested approximately €150 million more than the depreciation charges recognized for property, plant and equipment. So as you can see, we are expanding rapidly – and are keen to continue in this vein.
