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We produce fluid power solutions

„Not only good products but also excellent system solutions“

Interview with Christian H. Kienzle, CEO of ARGO-HYTOS and the German magazine O+P in April 2013.

Christian Kienzle

Mr. Kienzle, how do you access the current situation in the BRIC states which are very important for export?

At the moment there is a clear downward turn in the markets which have grown very strongly within the last few years. This applies in particular for China, but also for India. Both markets are showing the first signs of slowdown, however I believe that there will be a positive development in these markets in the future but not as boom-like as in the past.
In the Chinese market it may be noted that there is a massive over-capacity in the construction machine sector. The result is that the supply in the area of hydraulics in these markets has almost come to a standstill for one year now. The consumers were not in the habit of managing such a severe downturn. Warehouses for hydraulic products were massively built up.  We believe, however, that this over-capacity will to some degree be neutralized in the course of the year and that we will return to normality, but at a lower level. On the other hand we believe that this disproportion of the customer hydraulic markets will decline in favour of the construction machines.
The agriculture machine technology will ensure a growth in demand for hydraulic components, as also will the fast-growing industrial hydraulics, especially the machine tool industry by its leading suppliers of always competitive machine tools in China.
In India I see a big difference to the Chinese market; with the OEMs, there are essentially local producers with a low export share, who mainly produce for the Indian market. There the problem does not lie in the over-capacity but in the obstacles in investment in the areas of administration, infrastructure and energy. The Indian state is heavily in debt and therefore the urgently needed investments in the railway infrastructure, road construction and energy are held back. On the other hand the agriculture urgently needs respective rationalization measures.
So there are despite all differences good marketing opportunities for our hydraulic components in the future rapidly expanding sales markets. Furthermore it should be pointed out that the neighbouring markets in Asia will develop into interesting consumers as for example Indonesia, the Philippines, Malaysia and Thailand.
Also in the Brazilian market we realize a significant slowdown as the local consumers or OEM come under considerable pressure by the inexpensive Chinese providers. In particular this is the case in the industrial hydraulics as well as in the mobile hydraulics. On the other hand there are lucrative areas of operation in the mining sector and in the agriculture. Thus I believe that Brazil will for sure moderately develop, but not boom-like. There are different infrastructure projects in the context of the Olympic Games and the Football World Cup but as a rule these will prove to be “a flash in the pan”.
Russia of course is a major purchaser in the field of agriculture technology and there is a huge demand for replacement investments regarding agricultural machines and vehicles. Furthermore the infrastructure has substantially improved. We believe that this market will develop positively.

From your point of view, what are the main growth sectors for ARGO-HYTOS or for the fluid technology in general?

In general, ARGO-HYTOS is as a medium-sized company internationally relatively well-positioned. We are prepared to extend our market shares in all production sectors on all world markets – both in components and systems.
We are represented in four countries with our own component production in order to serve our customers world-wide.
In addition we have built up an own production for hydraulic systems in most of our continental offices in order to offer our customers prototypes in the relevant hydraulic solution very quickly. However a precondition for this is an appropriate competence in these countries, by which we attach great importance, in order to sell not only a good component but to offer also a good system, discussed and developed together with the excellent engineers of the customers.
Thus I can say that we, as a middle-sized company not yet having such important market shares, are making good progress with our application technology in each product area. We focus on certain applications in the fields of e.g. agriculture, construction machinery, industrial conveyor vehicles and certain selected segments of the industrial hydraulic as well as in the wind power.

What is the significance of the international MDA-Fairs to your company?

The Motion, Drive & Automation (MDA) within the Hanover Industrial Trade Fair, taking place every two years in Hanover, undoubtedly is the central hydraulic exhibition world-wide and leading fair for industrial and mobile hydraulics. On the basis of this fair we also intensively discussed in the association Fluid Technology in the VDMA how we could help our middle-sized member companies to develop new markets. Fairs are an excellent tool also for smaller companies to present themselves and their products appropriately on new markets and at reasonable costs. For these reasons is was agreed with the Hanover Fair and the VDMA that we will dock these satellite fairs to the MDA-idea. ARGO-HYTOS as middle-sized company participates in these fairs, partially joining the VDMA-joint stand but also with our own exhibition booths – depending on whether we already have our own company in the respective country or not.

With which expectations does ARGO-HYTOS participate in the international important fairs MDA in Hanover and bauma in Munich?

The MDA as leading fair for hydraulics in Hanover strongly attracts international customers, even if there is no bauma in Munich. We see the MDA first of all as a meeting point for the sector, for customers and for our own sales organization. And we want to live this meeting point. From this side the MDA in Hanover gives us an opportunity to be at the disposal of our representatives and distributors and to present new products on the occasion of this excellent platform and to provide appropriate training.
The bauma again is a highlight of the construction machinery sector showing a certain investment cycle. The fair offers an incredible platform for new machines, also setting out a picture to which extent our company has been successful, namely with how many products our company is represented at our customers. From this angle this is really a big showcase. Furthermore this is an opportunity to conduct talks with engineers of these companies in order to find new solutions or just to be happy to be proud having found a clever solution for one or the other costumer. Thus the bauma is a very important fair for our company to reflect our presence also in this sector.
We have to regard the trend that the MDA constitutes a clear leading fair in the hydraulic sector, but that at the same time there is a clear trend to trade fairs: Whether these are the Agritechnica, EMO, bauma, Entsorga or Wind Energy Fairs, the trend is clearly moving towards specializing in certain industry or application fairs in our sector.

How do you assess the further development of the hydraulic sector in the year 2013?

We assume that in the mechanical engineering there will be a moderate growth of approx. 2% in line with the development in 2012. These are really years of consolidation used by each company in any way to find again greater growth potentials. Making great efforts the companies are trying to improve their position by increasing the effectiveness and the productivity in order to become more successful and nevertheless to achieve a corresponding growth also on markets not growing as strong as before. There will be a pressure on prices too. In my opinion the battle for international market shares will intensify and the companies have to adjust. The hydraulic sector definitely is a cyclic industry, we had very good and strong years. This year will certainly be used by many companies to further consolidate, to get fit for the next upturn.

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