Business model / Strategy
The Dürr Group is one of the world’s leading mechanical and plant engineering firms. Our technology boasts automation and a high degree of digitalization in order to help customers make their production more efficient while at the same time conserving natural resources.
Business Model
Business with automotive manufacturers and their suppliers accounts for around 50% of our sales. Approximately 40% comes from machinery and systems for the woodworking industry and related services. Other customer segments include the chemical, pharmaceutical, and medical technology industries. 58% of Group sales come from mechanical engineering and 42% from plant engineering. We focus on technological niches and achieve high global market shares in the range of 25% to 50%.
Our core competence is the engineering of efficient production technology. We offer our customers a full range of options from individual machines to turnkey manufacturing systems. Our vertical (in-house) depth of production is rather low, enabling us to respond more flexibly to phases of economic slowdown. As a result, our business risk is much lower than that of companies with a high degree of vertical depth. We are striving to boost services in order to ensure that this high-margin business will account for at least 30% of our total sales. Our offering comprises a wide spectrum: from plant modernization and optimization to software updates and training, to maintenance and repair, to spare parts supply. The Dürr Group typically achieves a high return on capital employed (ROCE). Due to its comparatively low vertical depth of production and strong focus on Net Working Capital (NWC) optimization, it successfully generates high operating cash flows and free cash flows.
The investment behavior in the automotive and furniture industries, as the main sectors in which our customers operate, has a very strong influence on our business success. Growth drivers include demographic growth, as well as the trend toward more sustainable mobility and sustainable housing practices. Emerging markets, and above all China, are playing a predominant role in this context. In terms of order intake, they account for a relatively high share of 40% to 50%.
Mid-term strategy
The current mid-term strategy was adopted in late 2019. It provides the roadmap for profitable growth and for our evolution as a mechanical and plant engineering group that seizes opportunities in different market niches and customer segments. Our strategy is linked to four medium-term performance targets:
- Sales growth: In 2019, we committed ourselves to increasing sales organically by 2% to 3% p.a. in the following years and generating further sales growth through acquisitions on the level recorded in 2019. We are currently reviewing this target in two respects:
- In 2020, the coronavirus crisis resulted in a sharp decline in sales (–15.2%). Due to the low baseline, sales growth in 2021 (+6.4%) significantly exceeded the target rate defined in the strategy. We likewise anticipate substantially stronger growth in 2022.
- In some business areas, market volumes and sales potential have increased significantly since 2019, due in part to acquisitions. This particularly applies to sustainable production technologies, battery coating technology and the solid wood sector (production technology for timber construction elements) as well as the recently added medical technology business. The additional growth opportunities in these areas have not yet been factored into the definition of our strategic sales target as they were either not sufficiently concrete or we were not yet active in the relevant business areas.
- High profitability: We expect the EBIT margin to reach the target of at least 8% in 2023, or 2024 at the latest. A longer-term profitability target is currently being calculated.
- Attractive return on capital: We are aiming for an ROCE of at least 25%, underpinned by high EBIT contributions from mechanical engineering and low capital employed in plant engineering.
- Increased share of service business: With its higher margins, service business is to consistently contribute at least 30% to Group sales.
In order to achieve our goals and expand our leading position in the world market, we continue to push ahead with digitalization (digital@DÜRR) as the central element of our strategy. In addition, we have identified four more strategic fields: global presence, innovation, efficiency and life cycle services. We have also defined four enablers, i.e. supporting functions that are particularly important for the successful implementation of our strategy: sustainability, mergers & acquisitions, finance management and people development.
Automation, digitalization and sustainability are the key drivers of our business. From individual machines to the industrial manufacturing landscape, we offer our customers smart and resource-saving solutions. They can also rely on us for implementation.