What's it all about, Alfa? Alfa Laval is all about valves and other industrial processing equipment. The company is organized around its three main product lines: Separation (centrifuges), Fluid Handling (pumps and valves), and Heat Transfer (heat exchangers). Its equipment and services are designed to help optimize processes such as heating, cooling, separating, and transporting products (beverages/food, biofuels, chemicals, petrochemicals, and pharmaceuticals). The group introduces more than 35 new products each year, which are sold worldwide. Alfa Laval counts BASF, Bayer, Heineken, Shell, and Tetra Laval as customers. Gustav de Laval, who invented the centrifugal separator, founded the company in 1883.
Throughout the world, Alfa Laval has about 30 production units and 60 service centers. Fifteen of its production units are in Europe, where the group generates close to 40% of its sales. The company has four production plants in the US, as well as facilities in Asia and Latin America. Underpinning production, Alfa Laval organizes its sales and marketing groups into two main divisions: Equipment and Process Technology.
Alfa Laval tailors its portfolio to the regions in which it operates. In the more developed economies such as North America and Western Europe, where the installed equipment base is older, the company focuses on providing aftermarket products and services, such as maintenance and upgrades. Rapid growth of food industries in Central and Eastern Europe provides fertile ground for introducing new products and installing complete systems. Russia is the world's second-largest producer of oil, and its facilities are poised for upgrades. In Asia, the company has leaned toward serving the process industry, energy and environment, and refrigeration segments.
All the tailoring in the world couldn't keep Alfa Laval from being negatively impacted by the economic crisis of 2009. While the company had previously set a goal to grow its business 5% annually, suffice it to say, it didn't achieve it. Companies worldwide suffered through a minimum of two years of low consumer demand and a massive credit crunch; each business experienced varying rates of recovery. Alfa Laval got its first taste in the second quarter 2010 when its orders increased by 20%. Even with the improvement, by year end 2010 the company only managed to eke out a revenue increase of less than 1% (by US currency conversion) over 2009; however, its net income jumped more than 20%. The company attributes the improvement to a better economy, a change in product mix, and positive currency effects. Alfa Laval has since revised its annual goal of revenue growth to be 3% to 4%.
The company continues its plan to develop up-to-date technologies, products, and services; grow its aftermarket business; and devise new marketing concepts to expand into emerging geographic regions. So far, its number one way of increasing its business is through acquisitions and alliances. Alfa Laval looks for companies with complementary niche products. In the last five years, it has acquired almost 40 companies; several of which were purchased in 2010. The two that Alfa Laval deems as most important are Denmark-based Aalborg Industries, a manufacturer and supplier of marine boiler systems, and Italy-based Olmi, a high-pressure/high temperature heat exchanger manufacturer.
Alfa Laval's purchase of Aalborg Industries, for approximately $783 million, expands Alfa Laval's heat transfer offerings. The Danish company brings with it a global service network to tap fast growing markets such as Brazil, China, and Vietnam. Aalborg will also bulk up Alfa Laval's position in the marine, and oil and gas industries. Olmi was bought for approximately $105 million. Its shell-and-tube heat exchangers address niche applications in petrochemical, power, and oil and gas industries.
Other 2010 acquisitions include Astepo, an Italy-based maker of aseptic packaging technology (bag-in-box fillers and heat exchangers) for the global fruit juice concentrate industry. France-based Definox, a stainless steel valve manufacturer, was purchased from Defontaine. This acquisition brings manufacturing facilities in China, France, and the US, as well as a host of customers from the food processing, pharmaceutical, and cosmetic industries. The company reached East to acquire a majority share of Si Fang Stainless Steel Products, a China-based company that targets the food and beverage market in-country. Alfa Laval also purchased two US companies -- Champ Products (a supplier of engine cooling products), as well as an unnamed centrifuge service provider.
Carrying on with its regional and product market strategy, the company is savvy to the recent focus on climate and environmental issues and is actively developing products that minimize energy consumption and emissions, especially in the area of water purification (through desalination). Alfa Laval landed its biggest order ever (valued at approximately $37 million) in late 2010 to deliver decanter centrifuges to the largest wastewater treatment plant in the world, which is located in Chicago. Delivery will be completed sometime in 2013.
Some of the products the company has launched include PureBallast, a system based on ultra-violet light for cleaning the ballast water in ships, and Alfdex, used to separate oil and particles from engine crankcases. Alfa Laval sees great potential in its aftermarket business for parts and services, which accounts for about one-third of sales. The aftermarket business helps to build Alfa Laval's long-term customer relationships. – less