Alfa Laval in brief
>30% market share
25-30% market share
10-12% market share
- 42 major production units
- ~110 service centres
- Presence in 100 countries
- Sales of about SEK 35.6 billion in 2016
- Operating margin 15.6%
- Aftermarket's share of order intake: 33%
- ≈16,900 employees
- ≈2,500 patents
- A global company, founded in 1883
- Highly engineered products
- Global market leadership
- Large customer and geographical diversification
- Large base of installed products
- Strong brand recognition
Gabriella GrotteInvestor Relations Manager
Beata ArdheExecutive Assistant
Business concept, vision and strategy
To “help create better everyday conditions for people” by offering efficient and environmentally responsible products and solutions in the areas of heat transfer, separation and fluid handling.
Based on its three key technologies – heat transfer, separation and fluid handling – Alfa Laval offers products and solutions that are in line with its business concept: “To optimize the performance of our customers’ processes, time and time again.” In other words, Alfa Laval aims to help its customers become more productive, energy-efficient and competitive.
In order to achieve its vision, implement its business concept and attain its growth, profitability and capital utilization goals, Alfa Laval has established various strategic priorities. These cover both products and market presence and are mainly to be achieved organically, but also through acquisitions. Furthermore, improvement initiatives are continuously carried out in all areas of the company.
Read more about Alfa Laval's strategic priorities
Financial goals and benchmark values
Alfa Laval’s operations are conducted according to its financial goals for growth, profitability and return. By achieving or exceeding these goals, Alfa Laval is able to create shareholder value in the form of an annual dividend and by increasing the value of the company. This also enables continuous investments in organic and acquired growth, in line with the company’s strategy, as well as investments in research and development.
Alfa Laval’s operations are governed to realize its business concept, while at the same time meeting the financial goals established with regard to growth, profitability and return.
5% Alfa Laval’s growth target was revised during the year. The new goal is to achieve average annual growth of at least 5 percent over a business cycle. This goal was deemed realistic given the prevailing business situation and Alfa Laval’s performance in recent years.
15% Alfa Laval is to achieve an operating margin – adjusted EBITA – of 15 percent measured over a business cycle. This goal was established based on historical margins, while also taking the company’s growth ambitions into consideration.
20% The goal is to have a return on capital employed of at least 20 percent, a realistic ambition based on a combination of organic and acquired growth.
Financial benchmark values
In addition to the Group’s financial goals, the Board has established benchmark values for three key financial ratios, which further specify the framework and goals for the operation of the company.
Net debt in relation to EBITDA
2x In the long term, net debt in relation to EBITDA, meaning operating profit before depreciation and amortization of step-up values, is not to be more than 2. Although the ratio may exceed the goal in connection with major acquisitions, this should be viewed as a temporary situation, since the company’s cash flow is expected to offset this effect.
2% The benchmark value states that 2 percent of sales should go to investments. Given the investments and capacity expansion carried out in recent years, this investment level is deemed sufficient to create the scope for replacement investments and an expansion of capacity that matches the organic growth of the Group’s core products.
Cash flow from operating activities
10% Cash flow from operating activities is to amount to 10 percent of sales, including investments in fixed assets. This value is lower than the goal for the operating margin, since organic growth normally requires an increase in working capital. In addition, taxes are paid in an amount corresponding to approximately 28 percent of earnings before tax.
Alfa Laval’s target is to have an average annual growth rate of at least 5 percent measured over a business cycle. Growth must be profitable and the target should therefore be viewed in combination with the profitability target of an operating margin of 15 percent.
Organic growth is the foundation of Alfa Laval’s growth strategy. This means growth of existing operations, for example through the identification of new application areas or new markets for existing products and key technologies, the development of complementary aftermarket services as well as the development of sales channels, new products or new market concepts to meet new needs, all around the world. Alfa Laval’s existing products and key technologies comprise an excellent base for continued profitable growth since the products’ high quality and energy efficiency have become increasingly important criteria for customers. Another significant factor is the ongoing research and development work to continuously enhance the existing offering, not to mention, the company’s strong market position and its broad geographic coverage for new and aftermarket sales.
Alfa Laval’s goal is to also carry out complementary acquisitions. The acquisition strategy closely reflects the strategy for organic growth since acquisitions must be made with the aim of strengthening existing key technologies, developing the aftermarket business, adding new products to application areas where Alfa Laval is already active, as well as adding complementary sales and distribution channels.
Acquisitions are a core component since they enable the company to rapidly meet changing needs with new offerings or to rapidly expand and strengthen its local presence. Work on acquisitions is led by a special unit, which is also responsible for supporting the growth objectives of the various segments and developing new market concepts.
For more detailed information on Alfa Laval's strategies, as well as acquisitions carried out between 2011 and 2015, download the "Strategy" document.
Read more about Alfa Laval's strategy
Demand for Alfa Laval’s products and solutions in the areas of heat transfer, separation and fluid handling are naturally driven by individual customer requirements, but also by more general external factors. Alfa Laval takes a proactive approach to understanding and analyzing these external changes, as well as the underlying dynamics. The goal is to identify existing and potential future requirements and respond to these requirements by having a presence in the right markets and offering the right products. The following description provides an overview of four structural changes that are expected to impact demand for the company’s products.
The world's growing energy demand can be met in two ways - through increased energy efficiency and increased production. Both alternatives generate opportunities which can boost demand for Alfa Laval's products.
Environmental problems arise in the wake of a growing world population and continued urbanization. Alfa Laval's products can reduce emissions, purify liquids and reduce the consumption of water and energy.
With improved living standards comes changed eating and drinking habits as well as demand for food of better quality. A supplier to the food industry since 1883, Alfa Laval has a long history of providing reliable products for clean applications.
The ongoing globalization means continued demand for transportation.Alfa Laval offers specialized products and solutions for use on trucks as well as onboard vessels.
Read more about Alfa Laval's research and development
Research and development
In a competitive world with continuously changing customer preferences, investments in research and development (R&D) are crucial to success. The ability to respond to new demands and changing needs by offering new product designs and an updated offering is what ultimately enables companies to boost their competitiveness, capture market shares and improve their profitability.
Alfa Laval has always been characterized by a focus on continuous development. Since 1883, the company has developed numerous new products and worked steadily to implement these in a growing number of applications and industries. However, Alfa Laval’s definition of innovation goes beyond this: “People creating and implementing new ideas that create value.” Inspiration is all around us – customers who express new needs, new legislation, experimenting with new manufacturing materials, other companies, new market trends and new production technologies, to name only a few examples. It does not necessarily need to result in new products or even upgraded versions of existing ones. It can just as well be about finding new ways to do business, new production methods or new features that can change the overall customer experience, such as the addition of service packages. Alfa Laval’s fundamental belief is that everything can be developed and improved, and all initiatives are carried out with the aim of staying a step ahead of the competition and remaining the customer’s first choice for new equipment, spare parts and service.