Carl Modigh, President of Habia Cable, about 2019:
“Focus on offshore“
The highlights of the year were the start of production and delivery of offshore cables as well as the favorable performance of the Polish business, which broke its previous revenues record. The telecom market remains challenging, while defense and industry delivered stable trends.
Summarize your performance in 2019.
The results in our businesses varied. Revenues and earnings increased overall due to our order backlog in offshore as we entered 2019 and our volumes in the defense segment, among other areas. While the industrial economy peaked back in 2018, demand remained stable in 2019.
Tell us more about your performance in offshore.
We secured several major deals in 2018 and continued to secure add-on orders in 2019, which filled our order book. Investments were also made in manufacturing capacity, which meant that we were able to commence volume manufacturing in offshore during the second quarter. Deliveries of the orders we secured in 2018 started during the autumn and were concluded in early 2020. We are now looking forward to these heating cables for pipelines being installed as planned during 2020 and 2021. We believe that this cost-effective technology offers growth opportunities. Naturally, we are thus hoping for more orders and are continuing to focus on technology development in order to develop more product variations and find new applications for this technology.
Habia is involved in numerous project transactions – can you tell us more about them
These are transactions where the customer has a large-scale project for which they need our products – for example, in the construction of nuclear power plants, the building of submarines or in offshore installations. Typically, this means that orders will be received at certain intervals. Although the volumes and margins involved are attractive, it means that order bookings and invoicing will fluctuate over time. Project transactions also place demands on effective production planning since these large commitments need to be adapted taking all our ongoing business into consideration – planning that I believe we have become increasingly skilled at managing.
How have the operations in China been affected by customs and trade restrictions?
One direct effect is that the supply chains between the US and China are changing. Companies are trying to redirect their manufacturing to other countries, which has resulted in more production being moved to India, for example. As a result, production volumes and market shares in Telecom are being shifted around between us and our competitors in a new way. At the same time, the situation is something of a double-edged sword, since trade restrictions can also benefit our industrial cable operations. We have our own production operations in China and stand to benefit from this local production as companies work to reduce their cross-border component trading.
Poland has performed well in recent years – what happened in 2019?
As I said, we have broken our record when it comes to revenues in Poland, up 50 percent compared with 2018. This increase was attributable to our strong growth in demand among existing industrial customers. Another explanation is that we have secured several major project transactions in the defense industry. One of our strengths is that our costs are competitive, and we have a highly competent organization from a technical perspective. Now we are also planning for continued development in Poland. Construction on a new plant will commence in mid-2020 with move-in scheduled for 2021.
Describe the market situation in Telecom.
The weak trend that started during the latter part of 2018 continued in 2019. There were some variations between the quarters, but overall 2019 was still a weaker year than 2018. The market is currently characterized by significant overcapacity and price pressure remains intense, which is affecting profitability. We have unique products with superior technical performance, but as the market has matured, competition has intensified, particularly from manufacturers in China.
What will your focus be for 2020?
The conditions are tough. The telecom market is under pressure and the industrial economy is uncertain. Our focus will be on generating a return on our investments and organizational changes made in recent years. We are prepared to adapt our capacity and costs, and will strengthen our competitiveness by focusing on productivity and efficiency. In the long term, we can see that Habia’s growth potential is greatest in high-tech customer segments, such as defense, nuclear power and offshore.