KROMI publishes 2019/2020 annual report: Interview with the management
On September 30, 2020 KROMI Logistik AG published its eagerly awaited financial report for the fiscal year 2019/2020 (July 1, 2019 to June 30, 2020), which was characterized by highly volatile developments. Despite the economic downturn, KROMI was on a growth path in the first six months. However, as part of the corona pandemic, many customers massively reduced their production levels from March 2020 onwards, with a corresponding impact on KROMI's business. Despite consequently lower revenues for the full fiscal year of EUR 69.4 million (previous year: EUR 74.8 million), KROMI not only recorded a significantly improved, slightly positive EBIT of EUR 0.1 million, but also an increase of cashflow on operative business of EUR 9.0 million.
Bernd Paulini: The coronavirus pandemic arrived at an absolutely inopportune time for us. We had successfully restructured our business model, received very positive feedback from the market, and were back on track for growth in the first half of the year, recording four percent year-on-year revenue growth. From March 2020 onwards, however, the impact that the coronavirus pandemic exerted on our customers' production levels, and thereby on tool consumption, was tremendous. Thanks to the numerous optimization measures we launched in 2019, we achieved a slightly positive EBIT result despite the loss of revenue.
Christian Auth: In summary, we have come through the crisis in comparatively good shape. The fact that we have been pursuing intensive cost and working capital management since the start of the fiscal year has made a significant contribution in this context. Although the coronavirus crisis hit us hard on the revenue side in the second half of the year, we were not entirely unprepared thanks to the optimizations and cost reductions. As a result, we performed significantly better in the second half of the year in terms of EBIT, and ultimately posted the positive result we have already mentioned. We achieved a significant improvement on the liquidity side, and increased our cash flow from operating activities by EUR 9 million. It goes without saying that we have also implemented numerous employee protection measures since March. Thanks to effective distancing and hygiene rules, and the possibility of mobile working, we were ready to serve our customers at any time.
Paulini: This reliability is important for our customers because we are identifying unbroken interest in our services, despite the coronavirus pandemic. We see that – especially in the crisis – companies are increasingly looking at outsourcing solutions in order to realize cost savings. This was also demonstrated by the 2008/2009 financial crisis. Accordingly, at present we are conducting significantly more talks with potential new customers than in the months before. In a number of highly interesting projects, we are also already in final negotiations. We are experiencing a clear revival in terms of new customers.
Paulini: Sustainability is a major issue for both us and for our customers. With our services, we enable more efficient resource utilization, and are thereby making business models more sustainable. This is not only beneficial from an environmental point of view, but also has a positive financial impact on the companies concerned. On average, KROMI enables its customers to reduce their tool costs by 15 percent. Which is a huge effect. For this reason, and especially in the crisis, tool utilization optimization is highly relevant for companies. However, it's not just about selecting the right tool. For example, we also integrate professional regrinding processes for our customers. Only a very few companies leverage this potential effectively. At KROMI, we clearly define which tools can be regrinded, and we also take over the entire further process. Here, we work together with local regrinding companies that have qualified as KROMI partners.
Auth: In the past fiscal year, we delivered almost 159,000 reground tools to our customers, thereby making important contributions to sustainability. However, sustainability does not end with environmental concerns. As a listed company in the Regulated Market, we have established stringent systems in order to comply with its high transparency and compliance requirements. And naturally, we are dealing with issues relating to employee development and retention. These topics will secure our sustainable success and profitability.
Paulini: Clearly, this topic is of concern for all manufacturing companies, regardless of the industry or country in which they operate. This is why we are already active in 13 countries. Incidentally, this is also something that we note time and again in conversations with our existing customers. In the case of larger companies, supplying a site is often only the starting point for a gradual roll-out to other countries. A very recent example is one of our major customers from southern Germany. After having taken over supplies at the parent plant in 2019, we are now in the planning phase for the plant in the Czech Republic. We are currently holding many very promising talks with our customers. As a consequence, despite the coronavirus crisis, the expansion of our business activities is a highly topical issue for us.
Paulini: KROMI has already been active in international markets for many years. For this reason, the topic is basically not a new one for us. Our activities are not limited to the region of the European Union. We have also been active in Brazil for over ten years – and meanwhile at three locations there. During this time, we have also grown extremely rapidly – from around EUR 30 million of revenue to over EUR 80 million in the 2017/2018 fiscal year. We have created structures that are designed for further growth. We have centralized and streamlined various areas of responsibility within the Group and, where necessary, established an additional level.
Auth: For example, we have set up clear regional responsibility, although this has not necessitated any hiring. The German and foreign locations now no longer report directly to the Managing Board. In addition to the Germany region with one person responsible overall, the Central Europe region, among others, is responsible for the markets of Poland, the Czech Republic and Slovakia, as well as for the Iberia region, for Spain and Portugal. We can now manage much more efficiently within the new structure, and are well positioned for additional growth in the future.
Paulini: In 2020, we also created the central "Operations" area at Group level, which bundles the responsibilities that were previously regionally distributed. This was necessary due to KROMI's size, but also in order to leverage synergies. The Operations area is responsible for the operational planning and procurement of tool requirements, and for customer support. We have hired an experienced manager who is responsible for this division.
Auth: Over the past years, we have consistently further developed our business model, realigned structures, and established expansion plans – and we have a very good mix of both experienced staff and new colleagues who bring fresh ideas with them. As a consequence, KROMI is well equipped for further international growth.
Paulini: Our customers are aware that, thanks to our high-performance software solutions, they always know exactly what is happening on site. Via eControl, for example, you always have an overview of your tool consumption, while you always able to access the entire tool data via the KWM digital tool catalogue. We have integrated our software solutions into the central KROMI eCloud database, which can be accessed via web services and also via app. KROMI supply systems' data technology connection – which completely documents all tool stocks and withdrawals in real time – enables transparent consumption analysis. Actual consumption can be allocated to respective cost centres with the help of the KROMI eControl KCo. In a comparison with the machines' actual production output quantities, actual tool costs per part can be reliably determined, enabling a comparison between planning data and actual data. Consequently, our customers are ready for Industry 4.0.
Paulini: In the past fiscal year, we worked very determinedly and consistently on the further development and implementation of the new business model. For the respective modules of TOOLS, LOGISTICS, TECHNOLOGY and DATA, we have created the service levels in detail, and defined the resultant customer benefits. We are now in a position to provide our customers with a transparent offering consisting of our core tool management services package tailored to their requirements. Customers still have the option of selecting services in the individual modules above and beyond the core package, which we take into consideration in our offering. In the fourth quarter of the past fiscal year, we tested this approach in the preparation of offers for new customer projects, and received positive feedback. We are confident that this transparent presentation of our services will enable us to market our business model successfully, and that this approach enjoys a promising future.