The IVLV/VDMA document “Hygienic filling machines of class V according to VDMA: Testing of packaging sterilisation devices for their efficiency” has been revised.
The document specifies test microorganisms for testing of sterilisation devices of this machine class and defines the procedure for carrying out a count reduction test or an end-point test.
This document was compiled in 2002 under the title ‘Testing of aseptic systems with packaging material sterilisation devices for their efficiency’ in the VDMA working group “Interface problems with aseptic systems” in consultation with the Industrievereinigung für Lebensmitteltechnologie und Verpackung e.V. (Industrial Association for Food Technology and Packaging). Compared to the previous version from 2008, the following changes were made:
Restructuring of the trade association publication
Alignment of definitions with other VDMA technical association publications
Revision of the section “Requirements for test germs for testing packaging sterilisation devices for aseptic filling machines”.
Revision of section “Procedure for inoculation of the packaging”.
Revision of section “Germ reduction test” (additions to the practice with machines with multiple treatment stations)
Revision of the section “Endpoint test” including the calculation example in the appendix (addition to the recommendation for the determination of the initial germination scale; additional criterion for the evaluation of the stability of the sterilisation process)
Updating and addition of references
Deletion of appendix “Growing conditions for Bacillus subtilis SA 22 and Bacillus atrophaeus and preparation of the spore suspension”.
Update of annex “Sources of spore suspensions”.
Additional appendix “Example of a sensitivity test of the spore suspension to the disinfection medium – using hydrogen peroxide as an example”.
The trade association publication is available in German and English and can be downloaded free of charge from VDMA.org using the link below.
An overview of all publications of the working group on the topic of low-germ and aseptic filling with links for free download is also available from there.
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SIG turns innovative food and beverage ideas into commercial reality
SIG is delighted to announce that the first of three application rounds in 2021 is now open for their SIGCUBATOR program. Food and drink start-ups and small companies eager for an amazing no-strings attached opportunity can apply at no-costs until February 28th at www.sigcubator.com.
SIGCUBATOR is SIG’s accelerator program for new businesses who need just the right spark to ignite the next novel food or drink innovation.
Anna Rabanus, Global Category Manager at SIG, explains the program: “We understand that getting a product off the ground is often a challenge for start-ups. The SIGCUBATOR program supports entrepreneurs with the production facilities, the knowledge and connections in the food and beverage industry. Our team of experts will be there to guide start-ups through the most crucial period of their innovation: from testing prototypes in SIG’s combiLab in Germany through to a final product and package concept that’s ready for consumers.”
SIG is keen to identify and engage with entrepreneurs at an early stage and attract potential like-minded partners who share the same vision for delivering nutritious food and beverages which excite and improve peoples’ lives in a sustainably packaged way. Forward-thinking food and beverage start-ups are one key to driving industry innovation and value creation. SIG will evaluate concepts based on their innovativeness within the space, their market entry strategy as well as principles of future acceleration in the market with co-manufacturing partners.
One new start-up business which has already successfully launched its exciting range of shakes to market via SIGCUBATOR is UK-based GROUNDED. Filling two SKUs in SIG’s combiLab, GROUNDED recently launched its innovative plant-based protein shakes in SIG’s unique carton bottle combidome. Products are now available online and in retailers such as Selfridges and Planet Organic – a UK based organic supermarket chain where they already are #1 selling protein drink range within 3 months of launching.
Gabriel Bean, Founder at GROUNDED: “Just one small idea can change an entire industry and we identified a gap in the market for a clean, genuinely natural, plant-based shake – with no compromise on natural ingredients and packaging. The team and people at SIG were just as aligned on values, and we couldn’t have found a better partner with which to launch these products. They supported us all the way, from our first contact with their UK team, through to their exceptional combiLab operation in Germany. We look forward to continuing our partnership with such professionals in their field.”
O-I Glass, Inc. and Germany’s Krones AG signed a strategic collaboration agreement that aims to elevate glass by innovating together and to jointly create solutions for the growing glass market.
“For O-I, glass is the preferred packaging solution in a world that increasingly values health, premium products and the environment. Not only does it maintain the integrity of the products and protects the environment, as customers and consumers intend, but it also offers magnificent opportunities for establishing brands and implementing sustainable solutions,” explains Andres Lopez, President and CEO at O-I. “This agreement is the first step that O-I and Krones are taking together in order to offer clients completely integrated, end-to-end solutions in the future.”
Focus areas include improvements in glass filling and packaging line speed and efficiency; enhanced agility and flexibility of responding to market trends; development of innovative and sustainable glass systems; and advancements in digital solutions such as direct-to-glass digital printing technology.
“In production facilities all over the world, the products of O-I and Krones are already encountering each other. So it was absolutely logical to improve still further the compatibility of Krones’ complete lines and the glass containers from O-I,” adds Christoph Klenk, CEO of Krones AG.
With this agreement, the two companies are combining O-I’s specialized knowledge of glass with Krones’ leading competence in manufacturing machines and filling lines for the food and beverage industries.
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The careful handling of raw goods and top quality standards are priorities at VOG Products. To continue upholding these standards in future, the company has made significant investments in the modernisation of its production lines.
Each year, VOG Products processes and refines around 300,000 tonnes of raw goods. On the one hand, the fruit processing company established in 1967 builds upon the long fruit-growing tradition in the heart of the Dolomite Alps. That tradition is embraced and maintained by a total of 13,000 members who belong to 18 cooperatives in South Tyrol and Trentino and 4 producer organisations. On the other hand, VOG Products also consciously relies on innovation and advanced development – particularly when it comes to technical equipment.
Innovation at VOG Products
In March 2020, two new production lines for fruit purée were commissioned on the 8-hectare company premises in Laives. They represent a significant portion of VOG Products’ concrete modernisation and development plan.
A fully automated plant for aseptic filling marked the beginning in May 2019. That was a key step in the effort to satisfy rising demand and at the same time, to bring the infrastructure up to date with the latest technology.
In September 2019, a new optical sorting system was installed in the low-temperature area. It guarantees maximum precision and quality to customers and ultimately, consumers.
Johannes Runggaldier (l), Chairman of VOG Products & Christoph Tappeiner (r), General Manager
The purée production modernisation completed in 2020 is the centrepiece of the extensive investment strategy, but not its final measure: by the beginning of 2021, the production line for fruit juice will also have been renewed. “That will mark our achievement of the fourth and last step of our current infrastructure modernisation strategy. Innovation and advanced development are and will remain major themes at VOG Products, however, because they are essential to our effort to continue satisfying the market’s increasingly rigorous requirements in future while meeting top quality standards,” said Christoph Tappeiner, CEO of VOG Products.
The commissioning of the two production lines for fruit purée was a key step in that direction. It increased the company’s capacity and VOG Products now has two separate lines, which happens to be a decisive characteristic for product safety in the processing of organic goods. And now the raw goods are inspected by the optical sorting system to guarantee the highest quality standards in the purée segment as well.
Further, raw goods are not handled in bulk at VOG Products. Instead, large boxes with a maximum mass of 300 kg are used exclusively. “After all: you need excellent raw goods to produce an excellent end product. Our 13,000 members – most of which are small family-run enterprises – ensure our excellent quality. They cultivate fruit with lots of passion, and we continue its processing in the same spirit: as much care as possible when handling the product and top quality standards are our main priorities. Our new, functional plants equipped with state-of-the-art technology fit perfectly into this philosophy,” confirmed Tappeiner.
The KHS Group has invested €20 million in modernizing its headquarters on Juchostraße in Dortmund, Germany. In a bundle of measures underway since 2015 the company has built a huge, approximately 4,300-m2 production shop and fully renovated another. As one of the world’s leading providers of filling and packaging systems for the beverage industry KHS is thus ensuring that it stays competitive in the long term.
The last construction machines will disappear in the spring, marking the end of the extensive process optimization and other measures at the KHS production site in Dortmund. According to plant manager Dr. Joachim Konrad these were absolutely essential to strengthen KHS’ competitiveness. “As a company active worldwide we find ourselves in a competitive situation and want to carry on manufacturing in Germany. We’ve therefore further digitalized and automated our infrastructure and processes in Production.”
Here, key elements of the modernization included extending the production area and renewing the machine park. At its production site on Juchostraße KHS has erected a completely new production shop. In an area measuring 4,300 square meters the systems supplier has now created conditions that enable the relevant technology for container and pack conveyors to be merged and order processing to become more efficient. KHS has also modernized one of the oldest production buildings on the company premises. With an investment volume of six million euros for this project alone the engineering company has not only renewed the shop floor and roof; it also optimized its Sheet Metal Manufacturing Department housed in the hall, incorporating new technology that includes a faster, more efficient fiber laser, a combined punching/laser machine and a larger, fully networked sheet metal warehouse.
This yields many benefits for KHS customers in the beverage industry, among them leading brands from around the globe. “Demands are becoming more complex. Like when you configure a new car nowadays, we can customize our filling and packaging systems to suit the precise requirements of the respective customer,” states Konrad. “We cater for the huge individualism of each customer with our cleverly compiled, standardized product modules that allow systems to be designed and constructed in automated processes.” Production sequences have again been considerably simplified during the course of numerous optimization measures.
Strong signal to the regional economy
Local employees also profit from the site’s extensive modernization. KHS has now renewed the factory canteen and various office complexes, including the workstations in various company departments. With around 1,200 personnel the company in Dortmund manufactures machines for labeling, pasteurization and bottle washing, among other equipment, plus container conveyor technology for industrial beverage production.
For KHS, the modernization is a big commitment to the production facilities on Juchostraße, says Konrad. “The Dortmund plant is extremely important to the KHS Group, also because of its standing as our international company headquarters. With our investments we’re making it fit for the future. This sends out a strong signal to the regional economy.”
KHS also aims to make local commitments above and beyond this. The enterprise is helping to devise a Science 2.0 master plan that the Dortmund council adopted in November of last year. In the field of production technology KHS is engaged in an exchange of expertise together with representatives from other companies and the TU Dortmund. “We’re pleased to be doing our bit for a strong regional economy and can apply our practical experience in this area. As a large industrial employer we also benefit from well-trained specialist workers,” Konrad concludes.
The war on packaging waste is fought on many fronts in the beverage industry – from the manufacturers of packaging materials to the bottler. KHS is helping to develop new standards in this field, from which beverage producers and consumers alike are set to profit.
The way to produce ever more sustainable primary and secondary packaging involves two major lines of approach: recycle and reduce. The first requires that packaging materials are kept in constant circulation by them being reclaimed, processed and continuously reused. The second entails finding many different ways of using less and less packaging material in order to save on resources and avoid waste. “The greatest challenge for us is the processability of the packaging materials,” says Karl-Heinz Klumpe, packaging product manager for KHS in Kleve. He explains what he means in the following example. “Shrink film made of recycled plastic demonstrates very different shrinking properties versus film made of new material. As an engineering company we can’t provide all the answers ourselves but instead have to coordinate closely with the film manufacturers.”
To this end KHS is staging a number of workshops this year. These aim to find out how the percentage of recyclate in film – as stipulated by the new German Packaging Law, for example – can be increased. “You make a few changes to the chemicals or recipe of your film and we adjust the air fl ow or temperature accordingly,” is how Klumpe loosely summarizes the topics up for discussion. “Providing that there’s a standard of quality which is accepted by the big bottlers’ marketing departments, of course. With film made of 100 % recyclate the shrink results aren’t yet satisfactory. Together we still have to work out how to close the gap here between recycling requirements on the one hand and the demand for packs of ever increasing quality on the other.”
Another avenue film manufacturers are exploring is to reduce the thickness of their film. “The material’s getting thinner and thinner,” states Klumpe. “To provide the same stability the materials have to be more and more complex. This has its limitations when used for beverage packaging: below a thickness of 35 microns it’s possible that the price per kilogram for film then again rises. When it comes down to it, neither bottlers nor their customers want to pay for this.”
Spotlight on economy
Klumpe well realizes that the striving for greater sustainability is often rooted in aspects of economy rather than ecology. “Everything we do to reduce the amount of material used primarily has a financial motive and aims to cut costs for bottlers. Or – if we’re talking about recycling – film manufacturers of course have to continue to develop and adapt so that their business model can be further maintained even in the face of stricter legal requirements.”
What applies to plastics also applies to cardboard – chiefl y when it comes to reducing the amount of material used. Paper factories are experimenting with thinner cover layers and lower ridges in the manufacture of corrugated cardboard. “The stability and durability are OK,” assures Klumpe. “However, we have to answer the question of how suitable these materials are for use with machinery. What happens when the cardboard absorbs moisture? If the cardboard is thicker on the outside than the inside, it bends rather like a bimetal and can only be processed on machines with certain restrictions or not at all. What can we do to counteract this?”
In terms of recycling less attention is paid to cardboard than to plastic. Yet here, too, the reuse of this material is an issue, for example in how far print can affect the recyclability of the paper.
KHS is itself also experimenting with new packaging materials. For instance, a manufacturer from Sweden recently approached the company with a newly developed, award-winning cardboard looking for partners for a market launch. “Our top requirement is that we can be sure that we can process the cardboard without any problems,” Klumpe stresses.
Constant process
The packaging experts in Kleve are also in constant dialog with the manufacturers of adhesives and adhesive application systems. “Here, we explore how we can avoid having to heat the glue so intensely or how we can reduce our consumption of adhesive,” says Klumpe. “We’re now applying smaller and smaller dots of adhesive as opposed to the diamond shapes we used to use.” All told, sustainable product innovation is a constant process which KHS is undergoing with both proven and new partners. The focus is always on the question of which approach can be adopted to save on materials, time and energy on the machines.
One example of how energy can be saved is the shrink tunnel with porous gas burners. To heat the air KHS has decided not to use electricity as the energy transfer medium but to work directly with gas to prevent energy being lost during transport from the producer to the consumer. This saves up to 50 % in energy costs and CO2 emissions are cut by as much as 60 %.
In the last few years KHS has also set standards in many other areas with its resource-saving packaging machines. Both Fully-Enclosed FilmPacks and nested and shifted packs have done away with the need for stabilizing cardboard pads or trays. “We don’t need any more cardboard at all here,” smiles Klumpe. “The taut film gives us a good shrink pattern and a sturdy pack.” In a countermove the DisplayPacker has also been developed where large packs are placed directly onto cardboard trays without the need for an extra wrapping of stabilizing film.
However, one of the most outstanding examples of how material can be reduced is the Nature MultiPack™. In 2018 it was launched to market as a six pack of cans by the Carlsberg Group under the name of Snap Pack. A few dots of adhesive developed specifically for this pack which hold the cans together and a stabilizing carrying handle make any further packaging material redundant. Once the new pack format has been fully rolled out, by completely eliminating the use of shrink film for cans Carlsberg is set to make a plastics saving of up to 76 % – that’s more than 1,200 metric tons a year. Danone Waters first made successful use of the Nature MultiPack™ to launch its prestige PET bottle for Evian in 2016.
“In the development of sustainable packaging we see ourselves acting as an interface between all those involved and the beverage industry,” Klumpe sums up. “We’re helping to develop new standards which marry ecological demands and legal provisions with bottlers’ economic interests.” A challenge which is sometimes tantamount to the squaring of a circle.
KHS plans to build a new plant and service center in Kunshan, China. VIP guests from the local government and KHS Group attended the groundbreaking ceremony. The Kunshan plant project is a clear statement of the company’s commitment to China and its Chinese customers.
As one of the leading global manufacturers of filling and packaging systems, KHS has been serving the Chinese beverage industry since 1904. In 2008, KHS entered the China market with its first representative office in Beijing. Following the opening of its headquarters in Shanghai in 2014, KHS now intends to build a new plant and service center in Kunshan, enabling the company to respond more quickly to the local market.
Kunshan’s deputy city mayor, party secretary and head of Zhangpu attended the groundbreaking ceremony of the KHS Kunshan plant on October 17, 2019. The executive management board of KHS GmbH and CFO Mr. Martin Resch, Managing Director Mr. Thomas Karell from KHS Corpoplast GmbH as well as William Wu, KHS China CEO, were present and gave speeches during this milestone event.
Strategic partnership for a lasting win-win situation
With a total investment of around €10m, the new around 10.000 m² large factory will make engineering, production, logistics and service more efficient. KHS will be an important partner for the city of Kunshan and offer greatly enhanced support in the further development of the regional industry. Furthermore, the broad-scale plant will also help KHS expand its business within Asia as a whole. A continuous win-win situation can be expected for both sides involved.
“Kunshan is an attractive city for the beverage industry with skilled workers, well-developed infrastructure and widespread logistics networks for this kind of project,” said Mr. Martin Resch with great thanks to the deputy city mayor of Kunshan, Li Hui. “We are now able to produce a larger product portfolio including single blow molders, fillers, and labelers as well as in various block versions, increasing the expertise in handling entire line projects,” claimed Mr. Resch. “With our product range, KHS maintains its position as one of the global market leaders and a pioneer of filling and packaging technology. This also says a great deal about the innovative strength of the team in China.”
Innovative German technology, efficient local manufacturing
Mr. Thomas Karell with the representative of the management board of KHS China expressed great delight at launching the new factory at the ceremony: “All of the KHS Group’s knowledge and capabilities will be on show at our new location in Kunshan. Thanks to the use of innovative technologies, the production system being established will set new standards for productivity and sustainability.”
“Our goal is to improve the production efficiency of our customers throughout the entire life cycle of their engineering, providing state-of-the-art technology and services,” stated Mr. Karell. “The new plant in Kunshan establishes an important local basis to meet this goal, focused on our Chinese customers.”
Sustainable economic benefits, greater social influence
Based on more than 150 years of experience and a constant focus on core expertise, KHS is able to help customers achieve long-term social and ecological responsibility goals. Willian Wu is full of expectations for the future of the Kunshan plant and KHS China: “We will combine economic success with socially and ecologically responsible behavior. Along with top technical performance, maximum sustainability is particularly close to our hearts.” He also indicated that KHS China is respected not only for its highly efficient products and systems, but also for its round-the-clock, local and on-site service which extends far beyond the commissioning of systems.
“KHS China now assumes technological and environmental leadership with solid and innovative German technology for optimum products and solutions,” emphasized Mr. William Wu. Looking to the future, KHS China will constantly strive to realize superior quality and ensure sustainable development in the Chinese market.
The difficult economic conditions and uncertainties such as the unresolved trade conflict between China and the USA increasingly affected Krones’ business in the first half of 2019. After strong growth in the first quarter (by 10.3 %), revenue from April to June increased by 0.7 % year-on-year. In total, the company’s revenue from January to June 2019 improved by 5.5 %, from €1,790.8 million in the previous year to €1,889.3 million. Adjusted for acquisitions and currency effects, growth was 1.8 %.
The slowdown in the economy and the uncertain economic outlook are also affecting investment confidence among Krones’ customers. The company experienced weak demand in parts of its portfolio between April and June 2019. However, Krones was largely able to compensate for this due to its broad product range. Order intake from January to June 2019 increased by 1.2 %, from € 2,014.8 million to € 2,038.6 million. Adjusted for acquisition effects, the contract value of orders increased by 0.4 % in the first six months of 2019.
High costs and unfavourable product mix impact profitability
Earnings before taxes (EBT) decreased year-on-year in the first half of 2019, from € 112.7 million to € 47.9 million. The EBT margin dropped from 6.3 % to 2.5 %. Krones’ profitability was impacted by high material and labour costs. The product mix also had an adverse effect on earnings. In the second quarter of 2019 in particular, revenue was lower than expected on products with a large proportion of own value added, such as machines and lines in plastics technology. That led to capacity underutilisation in this area. Another major reason for the lower earnings is that revenue in parts of the high-margin after-sales business was above 2018 but below budget in the first half of 2019. Krones generated consolidated net income of € 33.3 million from January to June 2019 (previous year: € 76.9 million). This corresponds to earnings per share of € 1.06 (previous year: € 2.45).
Krones has improved the ratio of average working capital to sales over the past four quarters. The ratio decreased from 28.8 % in the previous year to 26.0 %. Free cash flow went down to – € 259.4 million (previous year: – € 56.2 million). Krones having a negative free cash flow in the first half year is a seasonal effect and is nothing out of the ordinary for the company’s business.
Krones expects better earnings in second half year
The Executive Board has taken further action to offset the negative impacts on earnings. This includes among others a recruitment freeze and measures to reduce material costs. We are progressing well with the expansion of our global footprint. The new plant in Hungary, for example, is fully on schedule and on budget. Krones will start producing there in the course of this year and will generate positive earnings contributions from the Hungarian plant from 2020 as planned.
Krones expects, in line with previous year, that especially in Q4 the production capacity utilisation will increase as well as the high-margin life-cycle services (LCS) business. Therefore Krones expects better earnings in the second half of 2019 than in the first six months.
In total, the company expects growth of 3 % in 2019. The EBT margin is expected to be around 3 %. For its third performance target, working capital to revenue, Krones expects a figure of 26 %.
Krones working on structural measures and adheres to mid-term targets
The strategic measures launched to date, such as the price rises and expansion of our global footprint so far, are not enough for the earnings targets to be attained on a long term basis. The Executive Board is therefore currently working on further structural changes for a sustained increase in profitability. These changes focus on reducing complexity, rapid response to market needs and shaping an even more customer-centric business organisation.
Krones is maintaining its mid-term targets. Depending on the overall economic situation and developments in the company’s markets, the Executive Board expects average annual revenue growth of 3 % to 5 % excluding acquisition effects, an EBT margin of 6 % to 8 % and working capital at 22 % to 24 % of revenue.
Krones has published the complete Interim Report for the first half of 2019 online at www.krones.com
Based on the actual available figures Krones, the world’s leading manufacturer of filling and packaging technology, adjusts its earnings outlook for the fiscal year 2019. The uncertain macroeconomic developments, like the unsolved trade conflict between China and USA, as well as the discussion about the sustainability of PET-Packaging, negatively influence the customers of Krones and their willingness to invest. Nevertheless, the revenue growth of Krones in the first six month of 2019 were still satisfactory. However, the earnings before tax (EBT) for this period will be significantly below the expectations of Krones.
Increased costs and unfavorable product mix burden the profitability
The profitability of Krones is influenced by high costs, in particular the material cost ratio remains on high level. Krones expected, that the weaker economic outlook in other important industries in 2019 would have resulted in a small easing in the increasing of material costs. Also, the additional measures, which are implemented by Krones to reduce the material costs materialize with a delay. Furthermore, the product mix has an unfavorable effect on the earnings for the period January till June 2019. Especially in the second quarter 2019 the sales of products with a high own value added, like machines and lines for the plastic technology, were lower than expected. In the plastic technology Krones offers extensive products and services for the packaging and filling of beverages in plastic containers like PET-bottles. However, the current discussion about the PET-packaging solution will open opportunities for Krones for innovative solutions.
Another important reason for the actual earnings development is the sales growth of the high-margin after sales business (LCS), which were in the first 6 month of 2019 below expectations. This results from the demand of the customer of Krones for some parts of the LCS product and service offering, which were negatively influenced by the macroeconomic uncertainties. In the second half year this LCS business is expected to recover.
Outlook
Krones still expects an unchanged growth target of 3 % in 2019. The EBT margin is planned around 3 % (prior target: around 6 %). For its third target, working capital to revenue, Krones expects an unchanged figure of 26 %.
The board has taken measures in order to counteract the earnings decline. This includes among others a hiring freeze and measures to reduce the material costs. The current global footprint is on track. For example, the new plant in Hungary is according to budget and time schedule. During the second quarter of 2019, Krones will increase its production in Hungary with a positive margin contribution in 2020.
By its global footprint Krones will not only use competitive cost advantages, but also take advantage of regional market opportunities. The closer Krones is to its customers, the better the company can understood customer needs and local requirements.
The strategic measures that Krones has introduced so far, like the price increase and the development of the global footprint are however not sufficient to reach the ambitious targets. Hence, the board is working in additional structural changes in order to strengthen its earning level in the long run. Focus areas are reduction of complexity, an agile reaction to market needs as well as a corporate structure, which serves the customer even better.
Krones keeps its mid term targets. Depending on the macro economic environment and development of Krones markets, the board envisages a year-on-year revenue growth of 3 to 5 % without acquisition effects, an EBT margin of 6 to 8 % and a working capital to revenue ratio of 22 to 24 %.
Krones will publish the interim report as of June 30th of 2019 by 25th of July 2019.
What started out small 40 years ago today has in the meantime grown significantly – and has long since developed into one of the world’s leading manufacturer of innovative checking, inspection, rejection and labelling systems for a continuous in-line quality assurance when filling and packaging beverages, food and pharmaceuticals: HEUFT SYSTEMTECHNIK GMBH was founded on 1 April 1979!
Bernhard Heuft started the company back then in Burgbrohl in the Volcanic Eifel (Germany) with just twelve skilled people he knew. The fact that the strength of his highly motivated team has increased a hundredfold over the past 40 years to over 1,200 employees worldwide impressively illustrates that this was the right decision at that time for putting the young family business on the road to sustainable success.
In fact in the truest sense: HEUFT received the first patent for a truly ingenious invention by the company founder which still defines the state of the art today regarding the accurate upright high-speed rejection of faulty empty and full containers – the HEUFT DELTA-FW multi-segment flow rejector.
Over 500 further patents have been added since then – and therefore genuine unique technological features which not only optimise in-line quality assurance when filling and packaging beverages, food and pharmaceuticals sustainably but also the efficiency of complete lines.
From the first optical fill level detection to the fill management system with multi-processing capabilities, from the first empty bottle inspector in an efficient straight-through system to the all-surface empty container inspection on less than one square metre of floor space, from the unique pulsed X-rays to the company’s own real-time image processing system, from clean labelling to the precise marking inspection, from the harmonious conveyor control system to the comprehensive line analysis: a wide range of innovative technologies from the modular HEUFT system has been setting the standards for efficient in-line quality assurance for 40 years.
Basic research and the development of solutions not only focused on maximum automation during precise product tracking, reliable fault detection and specific fault rejection but also consistent user support from the start. In this way HEUFT introduced the very first systems with a monitor into the bottling hall for a simply better overview. The company’s own graphical user interface was soon to follow, then the audiovisual HEUFT NaVi user guidance and most recently even real voice control for full operational reliability and productivity.
It is not only innovative striving forward with countless technological pioneering achievements over the past 40 years which has set the medium-sized family business on a sustainable course for success but also the resulting continuous growth regarding company premises, international sales and service locations as well as competent employees i.e. in research and development, production, project planning and support.
Krones, the world’s leading manufacturer of filling and packaging technology, continued to grow in 2018 despite difficult conditions. The company benefited as a full-service provider from its extensive product and service range and broad international footprint.
Krones achieves growth target for 2018 financial year
Revenue increased by 4.4 % year-on-year, from €3,691.4 million to €3,854.0 million. The company thus achieved the revised target of 4 % revenue growth announced in autumn 2018. Revenue grew operationally (i.e., adjusted for currency and acquisition effects) was around 5 %. Krones increased revenue, in some cases significantly, in Europe, China and South America/Mexico. Revenue was down in the Asia/Pacific region, the Middle East/Africa and in North and Central America.
Despite the high prior-year figure, order intake increased by 4.5 % in 2018, from €3,786.8 million to €3,957.3 million. Growth in order intake was above average in Western and Eastern Europe and in China. Krones had orders on hand totalling €1,261.1 million at the end of 2018. This once again exceeded the very high prior-year figure by 1.7 %.
Krones continued to invest in the growth of its workforce in 2018, primarily for the expansion of its global footprint. The company employed 16,545 people worldwide at the end of 2018. This represents an increase of 1,246 employees on the previous year, about 400 of which related to acquisitions.
Profitability affected by one-off expenses, mainly for reorganisation
Krones’ earnings were significantly impacted by higher material and labour costs in 2018. The 5.3 % EBT margin includes approximately €42 million in one-off expenses, mainly for reorganisation.
Had these expenses not been incurred in 2018, the EBT margin would have been 6.4 %. The costs related to establishing the production site in Hungary account for the largest share of this amount. In total, earnings before taxes (EBT) in 2018 were down by 21.1 % or €54.5 million year-on-year to €204.3 million (EBT margin: 5.3 %).
Earnings decreased in both segments. In the core segment, Machines and Lines for Product Filling and Decoration, EBT went down by 15.2 % year-on-year, from €263.3 million to €223.3 million. Expenses for reorganisation reduced segment earnings here by around €25 million. In the Machines and Lines for Beverage Production/Process Technology segment, EBT deteriorated from –€4.5 million in the previous year to –€19.0 million. This mainly related to a total of around €17 million in one-off expenses.
Krones improves free cash flow by €271.4 million
Krones was able to significantly reduce working capital between October and December 2018. This had a positive impact on free cash flow, which improved in 2018 by a substantial €271.4 million compared with the prior year, to €120.7 million (previous year: –€150.7 million). The ratio of average working capital over the past four quarters to revenue developed slightly better than expected, holding stable at 27.3 % in 2018. Net cash went up to €215.1 million at the 2018 reporting date (previous year: €157.4 million). Due to the increase in total assets, the company’s equity ratio decreased slightly to 43.2 % (previous year: 43.8 %). Overall, Krones continues to possess a very robust financial and capital structure.
With the above figures, Krones has confirmed the preliminary figures published on 21 February 2019. No significant changes arose in the course of the auditing process.
Shareholders to receive stable dividend of €1.70 per share
At the Annual General Meeting on 5 June 2019, the Executive Board and Supervisory Board of Krones will be proposing a dividend of €1.70 per share for the 2018 financial year. The proposed dividend is stable relative to the previous year. The planned payout is 35.7 % of consolidated net income.
Outlook
Based on the prevailing macroeconomic outlook and the current expected development of the markets relevant to Krones, the company expects consolidated revenue growth of 3 % in 2019.
In order to achieve its medium-term corporate targets, Krones will continue in 2019 to work towards a global structure fit for the future challenges. The company does not expect any noticeable fall in material procurement prices in 2019; the same applies to labour costs. Krones’ sales price increases on all bottling and packaging equipment and for process technology with effect from 1 May 2018 are likely to have a slight positive effect on earnings in the 2019 financial year. Overall, Krones expects an EBT margin of around 6 % for 2019.
Above all due to the focus on increases in the sales price level, in the current economic and geopolitical climate, Krones sees the achievement of its targets for 2019 subject to greater uncertainties than in the past. For its third performance target, working capital to revenue, Krones expects a figure of 26 %.
Rolf Stangl, CEO of SIG, said: “In 2018 we successfully continued our growth strategy and achieved core revenue growth of 6.4 % at constant currencies, slightly exceeding our target range of 4 – 6 %. We saw growth across our global footprint and are reaping the rewards of our steady expansion into markets outside Europe, where growth in aseptic carton packaging is being driven by mega-trends including demographics, rising disposable income and urbanisation. The Asia Pacific region in particular delivered a strong performance during the year, with robust growth in the liquid dairy segment and growing demand for premium products.
“Our broad international presence continues to provide us with promising growth opportunities. These opportunities come with exposure to currency fluctuations, which in 2018 dampened growth in adjusted EBITDA. At constant currencies, adjusted EBITDA increased by 8 %. The adjusted EBITDA margin increased to 27.5 %, reflecting a positive business mix and ongoing cost efficiency measures. We achieved a significant increase in adjusted free cash flow, while continuing to expand our filler base in growth markets. The cash generative nature of our business underpins our intended mid-term dividend payout ratio of 50 – 60 % of adjusted net income. For 2018, we are proposing a Swiss franc dividend payout in 2019 equivalent to around €100m.”
2018 Annual Report
SIG has published its 2018 Annual Report, which includes the Group’s operating and financial results accompanied by SIG’s audited consolidated and statutory annual financial statements, the Compensation Report outlining the compensation policies of the Group and the Corporate Governance Report. All publications are available for download at https://investor.sig.biz/en-gb/home/.
Acquisition of W.M. Sprinkman Corporation
Krones, the world’s leading manufacturer of filling and packaging technology, has completed the acquisition of W.M. Sprinkman Corporation, Wisconsin, US. Founded in 1929, Sprinkman provides engineered food and beverage processing equipment, specializing in the dairy and brewing industries. Employing over 125 employees at its Waukesha and Elroy, Wisconsin locations, the company serves customers ranging from start-up microbreweries to large multi-national food and beverage producers. Sprinkman generates approximately $35 millions in revenues.
By acquiring Sprinkman, Krones and its other recent acquisitions enhance the capabilities of the “House of Krones” product portfolio in North America, ranging from process technology solutions and bottling and packaging equipment to intralogistics, IT solutions, plastics recycling, and entire lifecycle service support – thereby supporting the entire production supply chain for customers. Sprinkman’s headquarter and management will remain in Waukesha, Wis., with a production facility in Elroy, Wis.
SIG and ProLeiT offer integrated solutions for smart and automated factories
SIG has partnered with ProLeiT, a leading provider of automation and process control systems, to co-create innovative manufacturing solutions for food, beverage and dairy producers.
SIG is one of the world’s leading solution providers for the food and beverage industry within the field of carton packs and filling technology, and with its new partnership with ProLeiT will be able to offer producers advanced production technology and integrated software solutions.
ProLeiT is an expert within the field of Manufacturing Execution Systems (MES), enabling manufacturers to automate and control their production processes. This new partnership will allow both companies to combine their expertise for the joint development of innovative MES products for the food and beverage industry.
SIG’s new strategic collaboration supports its commitment to build smarter, more automated plants as part of its Smart Factory segment. This solution-driven and value-added platform is helping SIG to deliver IoT-enabled systems and technical services that transform filling plants into connected factories securing the highest efficiency, flexibility and quality.
AROL SpA – global point of reference in the design, production and distribution of capping and corking systems – has finalized, on July 21, 2017, the acquisition of UNIMAC-GHERRI, specialist in the production of filling and capping of glass containers with twist-off caps.
The acquisition of UNIMAC-GHERRI confirms the industrial project and the growth strategy of the Group – of which is also part FT System, specialized in non-destructive inspection and quality control both in line and in laboratory – which has the objective of expanding its offer, integrating it with high-tech machines with the aim to guarantee consumer protection.
In fact, AROL designs tailor-made solutions for food, beverage, wine & spirits, household care, personal care, pharmaceutical and chemical sectors. With FT System, the AROL group counts on more than 600 specialists and 14 operational branches in 4 continents. It manufactures over 700 closing systems and more than 500 control systems a year, with over 26.000 machines installed in the world.
“We are particularly pleased to have enriched our offer to our customers with the machines produced by UNIMAC-GHERRI, from over 30 years synonymous of quality and reliability in twist-off closures”, said Alberto Cirio, CEO of AROL SpA. “Thanks to the integration in AROL, we will be able to expand our commercial presence and after-sale all over the world, as well as to carry out quickly the important innovations to develop our systems and implement the digital transformation as required by the ultimate packaging installations”, said Renzo Tavaroli, CEO of UNIMAC-GHERRI.
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The careful handling of raw goods and top quality standards are priorities at VOG Products. To continue upholding these standards in future, the company has made significant investments in the modernisation of its production lines.
