Mature Europe

EMEA: differentiation and innovation in a shifting market

Bekaert in EMEA
Combined sales: € 823 million
Capital expenditures:
(Property, plant and equipment)
€ 53 million
Total assets: € 784 million
Employees: 6 200
Number of manufacturing sites: 28


Although still fragile, the world economy began its recovery during the second quarter of 2009, driven by wide-ranging public intervention. The emerging markets, and Asia in particular, recovered early. In China, growth surged, supported by a rapid increase in bank lending and the implementation of an impressive government-initiated fiscal stimulus package. For 2010 forecasts by institutions like the IMF and the OECD explicitly point to growth driven by China, India and several other Asian countries. In EMEA and North America, market demand was weak, especially in the automotive and construction markets in the first year-half. Economic growth, there, is suggested to be modest in 2010.

Industrial activity in Europe has been hit hard during the first half year of 2009: the steep drop in steel prices, combined with credit restrictions, halted buying and resulted in reduced inventories for all parties in the supply chain. At a certain point, production nearly came to a standstill. Towards the second year-half business picked up again as customers were restocking. End 2009 no one was able to assess the structural impact of the global economic recession and the long-term visibility on the development of the industrial landscape was limited.

Bekaert too faced a lower order intake at its European plants, especially in the first half of the year. Despite temporary relief from various stimulus programs, car and truck production dropped sharply. The replacement tire market was impacted due to less fleet miles but also due to significant inventory depletion along the value chain. All this had a negative impact on our sales in steel cord. However, towards the end of the third quarter, Bekaert’s steel cord production regained its targeted capacity utilization in Europe as a result of increased demand.

Our steel wire offerings too were affected, especially in the first quarter of 2009. This was the case for both our industrial products (e.g. hoisting rope wire; cable armoring) and our specialty products (e.g. bookbinding wire and spring wire). In the second and third quarters, sales improved. The European building materials industry entered a sharp decline. Private investments in the construction sector, notably in industrial flooring and residential house-building, had almost dropped to zero. This resulted in reduced sales volumes for Dramix®, Murfor® and Stucanet®. Bekaert therefore reoriented its business model to target large government-financed infrastructural projects in the European Union and to other regional markets, such as China, India and Latin America. As for the oil industry, lower demand for energy caused oil prices to drop. Oil companies in Europe consequently postponed investments in output optimization projects, thereby delaying orders for Bekaert products like flexible pipe reinforcement wire.

Thanks to the flexibility of our plants and high service levels to our customers Bekaert has been able to maintain its position in the market. We reacted promptly by adjusting productive capacity to mirror market needs and by monitoring inventories and credit exposure closely. Strict cost control and a greater focus on cost savings proved effective and brought down the breakeven point of the plants. These measures contributed to minimizing the impact at the operating result level.

In order to align its capacity with the changed market demand, Bekaert has been further reconfiguring its manufacturing footprint. The Bekaert production plant in Burgos (Spain) was confronted with diminished demand because of our customers’ growth stop or restructuring programs. In addition, exports from the region fell back. We therefore restructured the plant and refocused its production activity on the domestic markets. In the U.K. we announced the closure of the Cold Drawn Products plant in Scholes following continued declining sales in wire for retaining rings and hose clamps for the automotive industry as customers are relocating to emerging countries such as India. Production will now be centralized at the Bekaert facilities of Low Moor (United Kingdom) and Pune (India).

In 2009 Bekaert applied stringent working capital and cost control throughout all activity platforms and drove up volumes of basic products in order to increase capacity utilization.

In Turkey Bekaert finalized the full integration of Bekaert Izmit into its international production platform. The product portfolio of hose reinforcement wire as well as steel cord and bead wire for the tire industry, can now be exported to customers within the entire EMEA market.

Bekaert further focused on developing new and cost effective processing and improved wire products, by increasing the tensile strength performance and corrosion resistance of specific coatings for instance. Our development programs for next generations of existing and new wire products were sustained without restriction and, in some cases, even accelerated. We introduced new wire products, such as biodegradable coatings, Bezinal®3000 coatings, next-generation flat blade wiper components and new profiled wires.

At its plant in Zwevegem Bekaert expanded the productive capacity of flat and shaped wire for heavier profiles, for example high-strength wires and wires with high resistance for oil transport in corrosive environments.

For our industrial coating offerings, during the first year-half, Bekaert especially felt the effects of the downturn in the glass industry in Europe. In the second half of 2009 Bekaert initiated several major upgrade projects for sputter hardware, resulting in a much better year-half for its industrial coatings offering. In addition, Bekaert won a number of lucrative projects in new applications beyond the glass and photovoltaics industry, a sign of good potential for the years to come. Future prospects for the wind energy segment in Western Europe are also looking positive.

Bezinal3000, next-generation coating

Bezinal®3000 and Bezinal®PLUS: raising the standard in corrosion resistance

In 2009 Bekaert introduced Bezinal®3000, the next generation of its high corrosion resistance coating for high-carbon wires. Compared to zinc coating, the corrosion resistance of Bezinal®3000 is ten times better.

Although zinc provides a barrier to corrosion in most environments, specific conditions such as acidity, industrial emissions, special water treatment or use of fertilizers accelerate the corrosion process. That is why Bekaert, drawing from its deep expertise in coating technology, has developed a third-generation, advanced zinc/aluminum coating: Bezinal®3000.

Superior corrosion resistance makes Bezinal®3000 ideally suitable for marine environments and heavy-duty applications, such as spiral strands for offshore and deepwater mooring; fishing ropes; nets for rock protection; subsea power and telecom cables and electro-mechanical cables, such as for ROVs (Remote Operating Vehicles) and tow leaders. Energy transmission system operators too can take advantage of Bezinal®3000 to protect the steel cores of conductors used in overhead power lines. For underground mines – another specific corrosive environment – the use of Bezinal®3000 results in outperforming mining rope endurance.

Bekaert also introduced a new generation coating tailored to spring wires in the course of 2009: Bezinal®PLUS. The Bezinal®PLUS coating eliminates expensive supplementary coatings for many applications, thus ensuring increased wear life for spring wire applications.

Salt spray performance

(*hours exposure before appearance of 5% Dark Brown Rust - DBR)

Redrawn wires Bezinal®3000(class B according to EN-10244-2)

Final coated wires Bezinal®3000(class A according to EN-10244-2)


Salt spray tests (to determine how many hours of exposure it takes before 5% dark brown rust (DBR) starts to appear) indicate that Bezinal®3000 scores three times better than first generation Bezinal® and even ten times better than zinc.

Emerging Europe

Emerging Europe

Slovakia – Czech Republic

To achieve economies of scale, Bekaert realigned its manufacturing platform in Slovakia by integrating the tire cord activities of its plant in Hlohovec into those of its plant in Sládkovičovo. The latter continues to be developed as the Bekaert tire cord production platform for Central and Eastern Europe. The plant is optimally equipped to meet our strategic goals and customer requirements on the related markets.

The Hlohovec plant, which manufactures a wide variety of wire products and advanced cords, was granted all the necessary ISO certifications and is systematically being upgraded. Both Hlohovec and Bohumín (Czech Republic), which received additional production quotas after last year’s adjustments in the European platform, performed at their maximum capacity and boasted strong results. The Bohumín plant made great strides in the areas of flexibility and customer focus and assisted considerably in preserving our market share in Central and Eastern Europe.

At start-up, the new plant in Lipetsk employed 92 people. Another 320 jobs will be created along with the continued investments planned through 2013.

Russia

In the course of 2009 Bekaert finalized the building of its first steel cord plant in Russia. Our global market leadership position and a fast developing local automotive sector driving the demand for top-quality steel cord were the main reasons for establishing a steel cord plant in the region. Bekaert Lipetsk produces steel cord for reinforcing radial passenger car, truck and bus tires.

We are confident that the country’s economic growth potential and its government’s investment programs, e.g. in highway construction and related infrastructure, will further fuel this demand.

First Belgian investor in Lipetsk

To optimally locate the plant, Bekaert opted for the Lipetsk Special Economic Zone (SEZ), some 400 km south of Moscow, because of its strategic proximity to target group markets and raw material suppliers, its logistical advantages, and easy access to energy supplies and skilled labor. Our presence in the SEZ has provided us with a ready infrastructure, simplified administration, tax incentives and a duty-free customs regime, thus creating optimal beneficial conditions in which to set up our operations.

As the first Belgian investor in Lipetsk, Bekaert is a pioneer in the area. We successfully rounded off the plant’s construction in just over one year – quite an achievement.

Bekaert is investing close to € 100 million in the Lipetsk plant, spread over three phases in a five-year timeframe, lasting till 2013. At the start-up, around 90 people were employed at the Lipetsk plant. We expect to at least quadruple our workforce there as we reach the final investment phase.

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