Our path to an electric future
Interview with the Executive Board
As a pioneer and partner to the emergency services, we have been leading the way for over 150 years, offering the right solutions for all fire and disaster protection technology challenges. Because we know what really counts when it matters. We are now going one step further and taking responsibility for the future – the answer is electric.
“Rosenbauer City 2030”, Interschutz, the premiere of the PANTHER electric, the complete takeover of the US subgroup, material bottlenecks, cost increases. In an interview, the new Executive Board of the Rosenbauer Group looks back on an exceptionally difficult 2022 financial year.
With this annual report, the Rosenbauer Group is presenting its accounts for the year 2022. How is your balance sheet looking?
Sebastian Wolf The past twelve months have certainly been among the most challenging in Rosenbauer’s 157-year history. The ongoing COVID- 19 pandemic, Russia’s war of aggression against Ukraine, the rising costs of preliminary products, raw materials and energy, the recurring and changing bottlenecks in the supply of materials – all these factors combined created highly uncertain production conditions and massively impacted our vehicle production. The bottom line is that, at € 972.2 million in 2022, we achieved revenues on par with the previous year. However, despite a recovery process in the fourth quarter, earnings were ultimately negative at € -10.5 million due to a number of one-time effects. I am all the more pleased that, despite the multiple international crises and the weaker global economy, incoming orders reached a new record level of € 1,230.0 million last year. The order backlog even reached a historic € 1,469.7 million at year-end 2022.
You moved into the role of CEO last August; before that, you were CFO for five years and in charge of Group finances. What are your plans for the future?
Sebastian Wolf In June, we presented our long-term Group strategy for this decade under the title “Rosenbauer City 2030” at Interschutz, the industry’s leading trade show. Our strategy remains valid and rests on three key pillars: technology leadership, customer intimacy and operational excellence. In the current consolidation phase, my focus is primarily on operational excellence and enhancing efficiency in our core business. This is because the past reporting year clearly showed us the most important limits of our inherently resilient business model. These are the fixed prices in the public tender business and the long lead times for our vehicles from customer order to customer acceptance.
We have to become faster and minimize project risks. The rule is earnings before revenues. At the same time, we must succeed in further expanding the very successful business models in the Equipment, Service and Preventive Fire Protection product areas.
Despite multiple crises, incoming orders in 2022 reached a new record level.“
SEBASTIAN WOLF, CEO
In the third year of the pandemic, the SARS-CoV-2 virus clearly became less of a threat. Then the Ukraine war burst onto the scene, putting renewed pressure on international supply chains.
Daniel Tomaschko The supply chain disruptions and cost increases of the past year have affected virtually all material groups. For example, the cost of energy has risen by 45%, aluminum by 30%, and preliminary products by up to 15%.
However, as a contract manufacturer, we were particularly hard hit by the poor availability of truck chassis. One in five firefighting vehicles in the Rosenbauer Group is built to customer specifications on a series- production chassis from a single manufacturer, whose deliveries in the previous year were temporarily completely canceled due to the war. At other truck manufacturers, waiting times for chassis have increased from 6 to 8 months before the crisis to now 10 to 12 months.
At times, we had more than 90 firefighting vehicle bodies in the yard at our headquarters in Leonding, waiting to be paired with a chassis. There was also extra work in Production because we repeatedly had to take vehicles out of scheduled line production and work them back in for completion at a later date because we didn’t receive parts on time. Material supplies have eased slightly since the end of 2022 and we expect a further normalization during 2023. Purchase prices should also stabilize.
How have you dealt with these uncertain conditions in materials purchasing?
Daniel Tomaschko We have attempted to counter this challenging situation with maximum flexibility and have tried out a lot of new things. The majority of our suppliers are geographically close to our major production sites, i.e. in Europe and North America. Only very few components come from China, for example, which with its zero-COVID policy was a special case until recently.
Nevertheless, there have always been serious bottlenecks. That’s why we sent out “material hunters” who searched for alternative sources of supply and products and scoured the Internet for missing parts. In addition, we took the production of individual components into our own hands again. We started to have critical purchased parts delivered three weeks earlier on average instead of three days before the requirement date as was the case one or two years ago. I would like to take this opportunity to thank our employees, who have always adapted to the new situations at short notice and reacted quickly.
In addition, in the summer we began to build largely standardized stock vehicles at our European locations, based on the US-American model, which can be made available to fire departments at short notice. This allowed us to optimize our capacity utilization.
Our standardized US-style stock vehicles are available on short notice.“
Daniel Tomaschko, CTO
Incoming orders in the previous year exceeded all expectations, and your order books are full to bursting at just under € 1.5 billion. 2023 is off to a promising start.
Andreas Zeller With an annual global volume of just over € 5 billion, equipment for fire departments is an extreme niche market, and one that has proved relatively stable throughout the coronavirus crisis, with the exception of Asia. The developed firefighting markets in Europe and North America, our home markets, recorded particularly strong growth in demand once again in 2022. The Stationary Fire Protection segment also enjoyed significant growth, and the airport business, which we serve mainly via exports, showed the first signs of recovery.
In terms of products, customer service and equipment in particular showed very dynamic growth. These areas tie up significantly less capital than vehicle production and at the same time generate stable margins thanks to shorter lead times.
Fire department demand was also stable during the COVID-19 pandemic.“
Andreas Zeller, CSO
How do you ensure that this volume of orders also translates into positive earnings at the end of 2023?
Sebastian Wolf Our main focus is manufacturing costs, comprising two thirds material costs and one third personnel costs. The cost of materials in particular rose in the 2022 financial year, in some cases significantly, as a result of higher supplier prices. In August, the Executive Board launched the “Refocus, Restart” program, which aims above all to improve our competitiveness and is following on from the previous “Transparency & Efficiency” initiative. Following short-term cost-cutting measures in the previous year, the “Refocus, Restart” program will focus on four priority areas this year. These are increasing efficiency and productivity, reducing purchasing prices, value analyses and price renegotiation with customers.
Our aim is to continuously accelerate production processes by eliminating disruptions and minimizing unplanned rework in assembly. We will introduce our own productivity management system with uniform key performance indicators at our production sites and provide our order managers with new systems and tools as internal deadline and cost managers. We are continuing negotiations with our suppliers to improve our payment terms and will analyze how we can manufacture more cheaply without compromising quality on a product-by-product basis.
In discussions with our customers, we have occasionally succeeded in setting new prices, although there is little room for maneuver here. It is for this reason that the firefighting industry generally has a dynamic pricing structure for the future that, as in the previous year, integrates extreme cost developments and enables a fair sharing of risk between customer and contractor. Such price escalation clauses, such as in the form of indexation, are also quite common in other sectors. Overall, I expect our “Refocus, Restart” program to deliver savings and earnings contributions of around € 30 million in the current year.
You joined the Rosenbauer Group’s Executive Board as a new member in December and have spent the last few weeks gaining an overview. What is important in this consolidation phase?
Markus Richter The Rosenbauer Group is very well placed to be successful again in the future. We remain the world market leader with a very strong brand; we have an unrivaled global network of production, service, and sales locations; we are the only true systems provider with a product portfolio that is fit for the future; we can manufacture in accordance with the safety standards of all major economic areas; we are the first provider with a complete electric line-up for the municipal sector; and our innovations are the definition of “state-of-the-art” in our industry. Our customers are extremely reliable partners, almost exclusively from the public sector, and even during the coronavirus crisis they did not cancel any orders or become insolvent. On the contrary, the public sector often invests counter-cyclically and tries to provide economic impetus, especially in times of crisis.
I think “Refocus, Restart” is a well-balanced program, the measures of which will secure our business model against such massive changes in the environment as in the previous year. The task now is to join forces to drive forward their implementation and closely monitor the progress of the program. Only in this way it is possible to quickly readjust if the expected results do not materialize. We also need transparent communication of our optimization steps in order to secure the trust and support of all relevant stakeholders in the Rosenbauer Group.
What are your priorities for the next twelve months?
Markus Richter Together with my team, my task is to support and drive forward all activities aimed at rapidly strengthening the Group’s earnings and equity situation in the best possible way. We need to quickly become even leaner and more efficient in our core firefighting vehicles business in order to return to a level of profitability that is in line with the market. Looking ahead to the end of 2023, we need to further strengthen equity and reduce net debt again. We will also continue as planned with the Group-wide roll-out of SAP-S/4Hana, which I consider to be a key strategic project for the future of the Rosenbauer Group.
Unlike other firefighting equipment suppliers, Rosenbauer participated in the industry’s leading trade show Interschutz in June 2022. What prompted you to do so?
Andreas Zeller Interschutz is without doubt the leading trade show for the firefighting industry. After being postponed twice, many manufacturers presented their product innovations at other events or, like us, developed their own formats for doing so. Nevertheless, Interschutz is something very special.
We wanted to send two signals by participating. The first, to our customers – the fire departments: We stand by your side as you face your daily challenges. And the second to our employees: Your hard work and dedication are helping us to achieve some amazing results. Our innovation cycle is actually based on time between Interschutz events, and so we finalize and present numerous innovations by the date of the trade show. The absolute highlight was certainly the prototype of the PANTHER electric, which we are now developing to market maturity.
After a year of preparation, we also used Interschutz’s platform to introduce our long-term Group strategy “Rosenbauer City 2030” and the future topics of electric mobility and fighting wildfires. The opportunity to talk to the numerous customers in person again after a long time was, I think, very positive for everyone. After all, around 85,000 visitors were on site during the exhibition week
The key term here is electric mobility. How important is this topic for fire departments?
Andreas Zeller As part of our long-term Group strategy, we have identified alternative drive technologies as one of our strategic areas of activity. Against the backdrop of climate change and political efforts to reduce greenhouse gas emissions from road traffic, we consider electric mobility to be an absolutely key technology. We also want to act as a role model for the fire departments that we serve, many of whom want to follow their own path to electric mobility. As a seller of firefighting equipment, we take this role very seriously.
At Interschutz, we were the first manufacturer to showcase a complete electric vehicle range, consisting of an electric logistics vehicle, an electric aerial ladder, the AT electric and the RT, for the municipal sector. This also reflects our approach to the topic. On the one hand, we will adapt our firefighting vehicle bodies for the electrified chassis of the truck manufacturers, and on the other hand, we will also develop our own new concepts. With its redundant energy supply, the RT is not only a particularly crisis-proof and almost emission-free vehicle concept, but also sets new standards in terms of functionality and ergonomics.
Interest in electric mobility is certainly high. The fact that the Berlin fire department has purchased four more RTs after more than a year of trial operation is a nice confirmation of our commitment. New customers for the RT are now increasingly being joined by works fire departments such as those of the Technical University of Munich.
Rosenbauer International acquired the shares of its partners in the US in 2022, thus taking over the subgroup in its entirety. What are your expectations for the US business?
Sebastian Wolf The Rosenbauer Group has been active in North America since 1995, together with two strong local partners. Until last year, our activities in the form of four production companies were bundled in a joint holding company. The offer from our two partners to take over their half share and thus the US subgroup in its entirety has opened up a strategic opportunity for us to integrate the business more closely into the Group structures and to expand our business by broadening our range of products and services or by exploiting synergies. With an annual procurement volume of over 6,000 vehicles and a uniform standards landscape, the US is the world’s largest single homogeneous market. The market has also developed and grown very dynamically throughout the entire COVID-19 pandemic.
Unlike in the past, Rosenbauer’s market potential now particularly lies in targeting the major cities on the East and West Coasts with their fleets and offering more customer service, components, and equipment in addition to the vehicle business. Until now, we have been present primarily in the interior of the country with our dealer partners. There is also a huge demand for electric vehicles in the US, and we want to take advantage of this. We will continue to develop Rosenbauer America from an investment holding company into a powerful subgroup. With Marc Fusco and Randy Brummel, there are two experienced managers at the helm of the US Group who are also consistently pursuing this path.
A return to solid profitability and improved equity ratios are our main focus.“
Markus RIchter, CFO