We aim to further strengthen our core bottling and packaging equipment segment. For this, we are going to expand our global footprint and increase -international value creation. A key step in this is our new production location in Debrecen, Hungary. There, we plan to assemble components, primarily for conveyor technology, with a 500-strong workforce from the second half of 2019. We will rapidly bring the capacity added at our facility in Taicang, China, to full utilization in the coming years. This will increasingly enable us to supply the Chinese and Asian markets from the region.
Bottling and packaging equipment, as the highest-revenue pillar in the House of Krones, is expected to grow further and will benefit from the increasingly demanding of customer requirements. These primarily relate to high system efficiency and flexibility. Krones is well positioned here with its technologically advanced products.
Krones takes the debate about plastic packaging very seriously. We have con-sequently provided lines for high-quality PET recycling for many years. We have ten systems already in operation at customers, and we continue to expect brisk demand. As well as being a pioneer in PET recycling lines, Krones also leads in the economical utilisation of plastics in the bottle production and the packaging technology.
The process technology pillar of our business is set to grow further in the -medium term with significantly improved profitability. We intend to improve order quality and hence profitability in the high-revenue breweries business. Expanding local capacity will enable us to respond even better to market needs. A further key to this segment’s long-term success lies in expanding its regional structure and establishing international hubs. Medium-sized and smaller orders in particular – which we plan to focus even more in the future – can be met more quickly and more cost-effectively from a regional base. This extends all the way from quotation, purchasing and engineering through to assembly and management. We plan to establish all of these capabilities in our hubs around the world. The acquisitions of W.M. Sprinkman Corp., Trans-Market and -Javlyn in the USA give us a strong presence in this segment in North America. We are well positioned in process technology in China following the acquisition of Shanghai Xiatong Equipment. In the -medium term, we also plan acquisitions to strengthen our presence in other -regions.
The intralogistics part is a further key pillar in the House of Krones and an important element of the digital beverage plant. This is an important area for our customers because it allows them to control better the complexity in their products and optimise material flow management. Intralogistics also helps to manage and distribute the increasing number of different packaging variants.
Krones is well positioned in intralogistics with System Logistics and our in-house specialist for sophisticated intralogistics projects. In order to exploit the market’s strong growth opportunities, Krones intends to further expand both its international reach and its product portfolio in this area.
Actively shaping the digitalisation of the beverage plant
The digitalisation of beverage plants offers huge opportunities in the medium to long term. Krones is in a very strong position as a full-service supplier, as we are able to capture the material and data flows along a customer’s entire production process. The captured data can be used to develop new LCS products and services that create sustained added value for customers. An example is predictive maintenance of machines and systems using sophisticated data analysis. This avoids customers expensive downtime, as production data analysis enables problems with components to be detected at an early stage.
We pool our digitalisation capabilities in our subsidiary Syskron. This now has a workforce of some 180 employees, who use the latest technologies to develop digitalisation solutions for the beverage industry that create measurable added value for customers. Connected Line is an excellent example.
The digitalised line provides both operators and Krones with valuable information round the clock, thus enabling improvements in system efficiency. Our Share2Act platform – a network linking all employees, machines and IT systems involved in production – helps streamline customer processes, shorten lines of communication and reduce downtime.
The company will maintain its high level of investment in digitalisation going forward. Syskron and its agile subsidiaries will continue to develop attractive software solutions and viable digital business models and establish them as quickly as possible in the food and beverage industry.
Price increases and expansion of the company’s global footprint to enhance profitability
We did not achieve our profitability targets in 2018. The main reason for this was the more rapid increase in personnel and material expenses. Expenses for reorganisation and acquisitions also had a negative impact on earnings. Cost of materials went up because the booming economy enabled suppliers to push through substantial price rises. At the same time, selling prices in the markets served by Krones have remained stable for years. To continue delivering innovative products and services at top quality despite increasing material and -labour costs, Krones raised the prices for all bottling and packaging machinery and for process technology by an average of 4.5% as of 1 May 2018. These price rises are necessary in order to partially offset the cost increases.