Long-term strategy focuses on optimizing growth rather than growing sales
Xerium Technologies, Inc. is one of the paper industry's leading global suppliers of paper machine clothing and roll covers. Its corporate strategy for the next five years is to optimize growth instead of aiming to generate higher sales. The strategy will be based mainly on investments targeting growth markets, a high innovation rate for game changing product technologies in the Huyck.Wangner (PMC) and Stowe Woodward (rolls covers and spreader rolls) divisions, together with the group's traditional strong customer focus, which will be further expanded by adding new offices and sales organizations. In the EMEA region, Xerium has also been able to further expand its market share over the past few quarters, and was selected as the supplier for countless paper machine expansion projects.
The unrelenting transformation of the paper industry, with significant declines in the newsprint and graphic papers segments, presents suppliers with ever greater challenges. Since 2010, production in these important Xerium target segments has shrunk by twenty-five and fourteen percent respectively. This market situation, together with currency exchange factors, is reflected in Xerium's 2015 earnings. Overall revenues were down about four percent year over year, coming in at 477 million US dollar. Having foreseen these developments, the company launched strategic initiatives, and was able to not only hold its EBITDA percentage steady, but even boost it slightly.
In contrast, tissue and packaging papers continued to be reliable businesses marked by steady growth. Tissue paper production rose fourteen percent from 2010 to 2015, while the packaging papers segment was up eight percent. Industry associations are forecasting growth for packaging papers in the EMEA region of 5.6 million tons between now and 2020.
Overall, it is estimated that 65 percent of EMEA paper production is on a growth track. Xerium's priority is therefore to boost its market share in these markets and at the same time limit declines in the newsprint and graphic paper sectors as much as possible.
Investment focus on strategically important market and growth segments
Xerium has initiated a long-term investment program focused on strategically important market growth segments. The plan is supported by the resources the company has made available for new offices, factories and product development. A strong customer focus and solid advisory services play as great a role as does the enhancement of key technologies in all product segments. The company's new sites in Kunshan, China, and Çorlu, Turkey have successfully started operations. But the strategic aim is clear: Europe is to manufacture for Europe, or the EMEA region, and China for Asia and Australia. This will guarantee close proximity to customers and faster service, as well as greater flexibility, shorter lead times, lower logistics costs and efficient supply chain management.
The European factories in Reutlingen and Gloggnitz were a high priority and here the company invested heavily: 12 million US dollar in 2015/16 for new seaming technologies, four new looms, a new needling machine and an additional finishing machine. This not only boosts capacity and manufacturing, but also reinforces the company's claim that it is able to quickly and flexibly deliver all products in line with customary European top-quality standards. In parallel, a number of operational continuous improvement projects were rolled out, including in the area of process systems, procurement management, data collection and the all-important employee development.
Basic research – valuable asset and competitive advantage
The strong capital spending for basic research is a testament to the importance that Xerium attaches to this corporate asset. It impacts both enhancement of its core competencies, as well as key technologies and new product concepts. For example, in 2014 alone, Xerium's spending on R&D projects for innovative analysis and simulation tools totaled close to 1 million US dollar. The entire product portfolio of every segment has been revamped over the past three years. The rate of innovation has never been this high: twenty-five new patented products introduced to market, often including groundbreaking new material or design concepts.
Products form the foundation. If this foundation is not solid, products will not work properly on a paper machine. In the past, the successful launch of a product was based to a large extent on the experience and specialized knowledge of the engineers and those responsible for the product, in addition to risky empirical half-knowledge.
In order to determine whether current performance parameters are still valid, Xerium examines every application to see if efficiency could potentially be improved by changing one or more criteria. It is how the company ensures that Xerium products successfully run on paper machines. Designers also use unique digital measuring and analytic processes developed in-house in order to clearly and understandably present to customers the pros and cons of the structural and performance attributes of various applications.
Expanding market share by pacesetting innovations
Xerium can easily justify its claim to being the pioneer and technology leader when it comes to paper machine clothing. The company aims to meld its technical knowledge with more than 200 years of market experience since its founding. Since 2014, patent applications have been submitted for 100 developments and 65 inventions have been announced – a clear indicator of the rising pace of innovation. Thanks to this research and development drive, the company has set new benchmarks: the SSB and EDC technologies, the QS and Booster technologies and the SMART® technology for roll covers to name just a few. These patented developments not only testimonialize Xerium's expertise, but are also the basis for developing various products, adapting and enhancing them, and introducing new performance features, all in accordance with customer and market requirements.
Exclusively from Xerium: Game changing paper machine clothing and roll cover technologies
Key technologies and innovative product solutions secure sustainable growth
This approach fundamentally differentiates Xerium from the competition. New, future-proof forming fabrics and felt technologies, combined with unique material and design concepts – especially for tissue and packaging applications in proven growth markets, as well as for the nonwovens/industrial textile product range – offer significant value added: exclusively from Xerium. At the same time, it reinforces the company's high demands of not only providing customers with products that function flawlessly, but also working with them in close partnership to supply individually tailored product solutions, which in turn enables papermakers to develop the right strategies for the future, seize new market opportunities and ensure long-term success.
Furthermore, the decision to continue to conduct research and development on basic technologies for its core competencies at its European locations and to supply products to customers in the EMEA region from there is an added plus. It means that the company is obliged to continue to offer the paper industry top-quality innovative products.
Xerium Technologies Inc. at a glance:
Xerium Technologies Inc. is located in the United States in Youngsville, North Carolina, and incorporates the leading paper industry brands Huyck.Wangner, Weavexx, Stowe Woodward and Mount Hope. In 2015, the company generated consolidated sales of about 477 million US dollars. About 64% was attributable to paper machine clothing and 36% to rolls. Xerium has approximately 3,000 employees at 30 manufacturing facilities in 13 different countries. Its established technology leadership is reflected in intensive research and development work, as well as hundreds of patented, registered product inventions, all of which serve to improve customers' papermaking processes.
The Xerium Podium:
• Ernst Kerschhofer, Vice President Sales & Marketing Xerium Europe
• Oliver Baumann, Global Vice President Machine Clothing Technology
• DI Dr. Robert Marchhart, Global Product Manager