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Svedala gives its customers worldwide unmatched total solutions.

The whole is greater than the sum of the parts, but some of the parts are better known than the whole. A conundrum? Not in the case of Svedala Industri AB.

Svedala is an international group, head-quartered in Sweden, and a world leader in the production of equipment and systems for the construction, mining, aggregate, mineral processing, and bulk material handling sectors.

To anyone in these industries, Svedala brand names such as Dynapac or Allis or Stephens-Adamson are practically household words. The Svedala name is not yet so sharply focused. At best, at least to those in the construction, mining, and aggregate industries, the name Svedala has been traditionally associated with crushing equipment from Svedala-Arbra, and not with the products and systems as diverse as iron ore pelletizing plants, road construction machinery, grinding mills, magnetic separators, bulk handling equipment, and harbor installations.

Yet, the Svedala Group encompasses some of the best known names in the world serving these sectors - Allis Mineral Systems, AItairac, Balatros, Barmac, Braham Millar, Conrad Scholtz, Denver Sala, Dynapac, FARO, Flexowell, Hardinge, Kennedy Van Saun, Marcy, McNally Wellman, MPSI, Stephens-Adamson, and Trellex.

Svedala is an international group, headquartered in Malmo in southern Sweden, but with about 90 percent of its operations outside Sweden. It has around 8,500 employees worldwide and has invoiced sales of over SEK 10 billion per year. Individually, Group company origins go back over a century to the first stone crusher manufactured in 1887 by a firm that became known as Svedala-Arbra. Other Group members such as Sala in Sweden and McNally Inc. in the United States were founded around the same time.

The decisive step that led to today's Svedala Group was taken at the end of 1987. This was the acquisition of several companies in the U.S.-based Allis Chalmers group, bringing the embryonic Svedala into the supply of machinery. Operations were expanded, new divisions formed, and these companies now comprise the business areas, Crushing and Screening, Grinding, and Pyro.

Svedala Industri AB was formed on January 1, 1990. The introduction of the Svedala share on the Stockholm Stock Exchange during the summer of 1990 was the starting point for Svedala as an independent Group. One of the objectives of the exchange listing was to provide Svedala with direct access to the risk capital market for financing larger acquisitions and to gain the possibility of using its own shares as a form of payment.

In 1991 Svedala used the latter means to acquire the Swedish company Componenta.

The acquisition of Componenta resulted in the doubling of the Svedala Group's sales. Less than two years after its foundation, the Group had sales of nearly SEK 10 billion selling products ranging from road rollers to grinding mills and from fork lift trucks to ship loaders. This aggressive acquisition strategy has made Svedala one of Sweden's fastest, if not the fastest, growing company.

CLEARLY DEFINED STRATEGY

At first sight this diversity might seem like that of a traditional and unfocused conglomerate. This is certainly not the case. Svedala's clearly defined acquisition strategy has built up an international group of companies designed to serve the total needs of customers involved in maintaining and expanding infrastructural facilities - in both developed and developing countries.

Svedala's business interests are focused in three distinct, but inter-related areas - construction, minerals processing, and handling.

Another factor in Svedala's strategy is not just to be in certain targeted sectors, but to be a main market leader in these sectors. The company has determined to be always one of the main players.

For example, as a result of a number of corporate acquisitions, Svedala has a major position in the world market for large grinding mills for the mineral processing industry. These mills are marketed under such trade marks as Allis Mineral System, KVS, Marcy, and Hardinge.

In some cases the goal may not be to be a main player on the world stage, and to carve out a strong position in a more limited area. For example, in the very crowded conveyor belt business, Svedala is number two in Europe manufacturing. It sells belts under trademarks, such as Trellex, Conrad Scholtz, Flexowell, and Balatros.

Older says that it is vitally important that Svedala should be honest in advising the customer and satisfying his wants. "Our world is so small that we have got to be honest." He also notes that while the Svedala companies have a high sense of responsibility towards the markets they operate in, it is the customers' acceptance of Svedala products which is responsible for allowing Group companies to invest in new developments.

Since some 40 percent of Svedala sales are in spares and replacement parts, a key feature of Svedala's strategy is to be able to service customers well. "Look at the addresses where you can find our companies, 220 or so all over the world," says Older. "We are really aiming at being close to the customer. This is where we get the benefits of the breadth of the Group. If you have only one product you can never afford to serve customers in depth. Many mines or construction sites are in remote areas. You couldn't even afford to go there more than twice a year. But we can be there 24 hours a day, 365 days a year."

Another advantage of the wide range of products and services offered by the Group, says Older, is "you have customers, particularly in the developing world, that want to buy a package from one supplier." He also notes that even in the Western World, many mining companies used to have big engineering divisions, but very few have them now. Svedala Group engineering expertise is available for process design for major projects.

SVEDALA INTERNATIONAL

Due to the rapid growth of investment in mining and infrastructure in countries outside the traditional industrial world, vast potential markets are being opened for Svedala's products and systems. Many opportunities exist in countries where Svedala, as yet has no subsidiary company. In such cases Svedala International has primary responsibilities for representing the whole Group. This means that Svedala International is mainly active in Asia Pacific, Eastern Europe, Africa, and the Middle East.

In these regions Svedala International has established a close working relationship with agents who jointly cultivate markets in more than 50 countries. Contacts from customers and agents are channeled from Svedala's own offices in more than 35 countries to the proper departments and persons within the various sectors of the Group.

PUTTING IT ALL TOGETHER

After swallowing so many companies, Svedala engaged in extensive rationalization and restructuring. This was completed in 1993 against the background of recession in Europe. It was also completed in the period following the de facto devaluation of the Swedish Krona in the fall of 1992. This initially resulted in large exchange losses for the company. However, Older points out that devaluation affects Svedala's business areas in different ways. Swedish production was a strong beneficiary, while several of Svedala's competitors are located in Germany and the United States with stronger currencies.

Commenting on the 1994 results, Older said, "A company is always assessed on its bottom line. Compared with the preceding year consolidated earnings improved by more than SEK 500 million."

In the same report, Older expressed confidence in the future, noting that there is a great deal of optimism among Svedala customers and within Svedala itself. He continues to maintain this upbeat outlook and Svedala's overall business continues on an upward track with order bookings in 1994 up 12%, excluding divestitures over 1993. In the first half of 1994 this increase in bookings was seven percent overall with particularly strong increases in North America of 20 percent and South America by 50%.

Asked if there were any gaps in the range of products and services that Svedala offers to its markets, Older acknowledged that there might be bits and pieces Svedala did not cover, "but there are no desperate needs. I think we can live with this structure for a long period of time without additions - although things can always happen fast."

BUILDING THE WORLD'S INFRASTRUCTURE

In talking to Svedala managers, the word "infrastructure" continually crops up. This is not just a buzz word. It is a commitment and a goal.

Svedala's industrial vocation is not modest, although it is not immodestly stated. It is nothing less than to provide the equipment to help develop and rebuild the world's infrastructure. At the beginning of the 1990s, Older already characterized this last decade of the century as a decade in which major investments will be made in the world's infrastructure. Svedala has assiduously positioned itself, both through the products and services that if offers, and the geographical location of its operations, to be able to meet this demand. As Older remarks, the construction and maintenance of infrastructure creates demand for Svedala's products in the construction industry as well as in the mining and metals industry, and constitutes the most important factor in the Group's growth.

This has proven to be a shrewd strategy. The International Finance Corp. (the World Bank's private sector arm) released a report in the latter part of 1994 noting that private financiers are moving into infrastructure development in volumes, well above expectations of just a few years ago, despite the risks of investing in emerging economies.

The "renaissance" in private sector financing can be traced to several developments. In many countries, both governments and the public are disappointed by the poor performance of state projects. Other governments, with tight budgets, are turning to their private sectors.

In the period from 1988 to 1992 governments in 15 developing countries privatized more than $20 billion of infrastructure-related assets. The rise in private financing and management of power plants, communications, transport systems, and other infrastructure can ultimately deliver better results than projects managed by government, according to the IFC. The IFC also says that project managers are bringing in foreign companies to apply the lessons of environmental management learned in their own countries. This is certainly the case for Svedala Group companies operating out of areas of high environmental regulation such as Scandinavia, Western Europe, and North America.

Thus, Svedala is certainly focused on where the action is when the CEO states that "the need for and benefits of investment in infrastructure are undisputed and are being assigned priority in many markets that are important to Svedala." The degree of investment in infrastructure is related to the development of a society and is thus greatest in countries of high growth rates, but because the need for infrastructure is global, Svedala competes in a global market in most of its product areas.

Most people don't think of mines as "infrastructure," but in the case of developing countries, at least, they most certainly are. They are often the prime stimulus to the development of supportive infrastructure. In addition, the products of mines, whether metals or industrial minerals and aggregates, are the very stuff of which infrastructure is built anywhere the steel rails, the paved highways, the copper or other materials of the transmission lines for power and communications, the concrete dams and harbors - all derive from mining and mineral processing activities. The manufacture and supply of equipment for mineral processing is one of the three pillars on which the Svedala Group stands.

This once again reinforces Older's contention that the "maintenance and expansion of infrastructure are the most important factors that determine demand for the Svedala Group's products." Construction equipment accounts for about 45% of the Svedala Group's sales, mineral processing, 30%, materials handling, 25%.

Svedala has over 90% of its sales outside Sweden, and more than 60% of its sales outside Europe. The Group's largest single market is North America, which accounts for about 30% of sales. Group companies are among the leaders in North American market providing equipment and systems for crushing, screening, grinding, pumping, minerals processing, drying, pyro-processing, incineration, and bulk materials handling.

The Nordic region, with Sweden being the most important part, accounts for about 15% of Group sales. In terms of sales, crushing and screening equipment are the most important areas in the Nordic market. A recent project which went on stream at the beginning of 1995 was the 4 million tonne per year Grate Kiln pelletizing plant at the Kiruna iron ore mine in Arctic Sweden. The pellet plant alone was a $40 million order.

The new plant was part of a major expansion of mining and processing facilities at Kiruna. Other Group companies supplied much equipment, notably Denver Sala with four huge pressure filters for dewatering iron ore concentrates, magnetic separators, a 65m-diameter thickener, magnetic separators for ore concentration, while Trellex supplied mill liners, wear parts, and other rubber products.

Europe, excluding the Nordic region, accounts for about one third of sales, with Germany the largest single market. Operations in the conveyor belt business area are concentrated in Europe.

The Far East and Asia have been Svedala's fastest growing market in recent years. Local units have been established in India, China, Malaysia, and Japan. "Everybody is looking at the Asia/Pacific region," says Older.

Svedala also has a very strong position in South America, especially in the market for equipment used in the mineral processing industry. Deregulation and changes which attracted foreign capital sparked off a mining boom in Chile several years ago. Similar actions in other SouthAmerican countries have been accompanied by similar favorable results elsewhere. Svedala managers cite Chile and Peru as examples of areas where the mining industry has been revived and rejuvenated. Prospects look good for Argentina and Brazil, too. A high level of infrastructural projects provides strong demand for compaction equipment.

MATRIX ORGANIZATION

Svedala's production units and marketing companies operate in a matrix organization. This organization is based on management by objectives and the decentralization of all operating functions. The watchwords are more action and less planning. It is true decentralization with a clearly defined responsibility for profits in each unit. Control is exercised through financial key ratios. Great emphasis is placed on the prompt monitoring of target fulfillment.

Older says that Svedala's rapid expansion and focus on infrastructure projects has created a great deal of interest in the company among international investors. In response to this interest, Svedala in late 1991 became one of the first Swedish companies to remove the so-called "foreign ownership restriction clause" from its Articles of Association. Foreign shareholders now exceeds 50% of ownership.
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Title Annotation:Building the Global Infrastructure; Svedala Industri AB
Author:Older, Thomas
Publication:E&MJ - Engineering & Mining Journal
Article Type:Company Profile
Date:Mar 1, 1995
Words:2402
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