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Engel holds steady despite global economic uncertainties

Photo by Caroline Seidel The new Engel e-motion 120 at Fakuma 2018.

Despite a slowdown in North America amid trade uncertainty, Engel Holding GmbH expects global sales to reach around €1.6bn for fiscal year 2018-19, marking a 6% increase in earnings over last year.

Global sales for the 2017-18 fiscal year ending 31 March were €1.51bn, up 11% from the prior year, company leadership said during an 17 Oct news conference at Fakuma.

The Austrian maker of injection moulding presses, robots and automation systems cited Europe as the biggest contributor, making up 53% of the company's sales, followed by the Americas at 24% and Asia at 22%.

"We see kind of a shift from the previous years due to the current economic situation," Christoph Steger, Engel's chief sales officer, said, citing a 2% turnover that shifted from the Americas to Asia.

Continued growth in central and Eastern Europe is balancing out a slowdown in the United Kingdom, where the consequences of Britain's exit, or Brexit, from the European Union are resulting in bouts of uncertainty, the company said.

"People are a bit reluctant with investments at the moment," Steger said of a "certain reservation" the company is seeing in parts of Europe because of confusion surrounding the Brexit strategy.

Germany, specifically, continues to post the highest sales. Over the last five years, Engel has increased its sales by 50% in the country, where it employs 340 people across four locations.

Revenue growth in Asia has been the biggest for the Engel Group and is continuing to grow, Steger said. Stricter quality requirements in the medical and packaging industries are leading to increased demand, with China as the strongest driver of growth in the region.

This past April, Engel said it was investing €10.5m into expanding capacity for its Changzhou, China-based Wintec subsidiary. The investment marked the first expansion since the machinery maker launched the Wintec brand of standardised injection presses four years ago.

Recent economic developments in North America, however, are not as encouraging, the company said. The region is below last year's level of growth for the fiscal year's second quarter. Engel did not provide any specific figures, however.

The company said the slowdown in North America is primarily due to large international conglomerates that are taking a "wait-and-see approach" in response to the latest developments in economic policy.

Recent changes, including the Sept. 30 news that Canada will join Mexico and the United States in a revised North American Free Trade Agreement — now called ? the United States-Mexico-Canada Agreement — in addition to U.S. President Donald Trump's announcement of new tariffs covering another $200 billion in Chinese imports, have been something all machinery companies "have to deal with," Steger said.

But with a "successor solution" to NAFTA on the table, Steger said Engel is "quite happy" and that many of the company's initial insecurities have been reduced.

Tariffs, however, now cover about half of China's imports, with Trump warning China that if it retaliated, he would slap tariffs on another $276 billion worth. Tariffs would cover essentially all of China's imports to the United States and could impact assembly efforts at Engel's York, Pa., site.

Engel, which also has a production plant in Shanghai, announced in May it was resuming the assembly of big injection moulding machines at its Engel Machinery Inc. facility in York, with the goal of ramping up assembly in the U.S. by the end of 2018. The York factory assembles injection presses with clamping forces from 400-4,000 metric tons.

"[That's] not getting pushed back, but we are very cautiously watching the situation," Steger said.

The plan is to have the first machine assembled in the first quarter of 2019, he said.

"Everything is still on track. The question is how the tariffs are going to harm the speed of ramping up the production because when it comes to the casting part, you simply, more or less, just get it out of China," Steger explained. "It makes no sense to import these castings to machine them in the U.S. if I have a 25% tariff on the castings."

Steger said Engel uses several sources for its castings, but the majority of which are in China due to fewer resources in Europe.

"We would love to get more castings out of Europe," he said. "But there are simply no supplies that could support us."

Engel, based in Schwertberg, Austria, employs nearly 7,000 people globally.

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