Strategy and Financial Targets
Glaston has reviewed its strategy and updated its financial targets for the strategy period 2018–2021 as a result of its acquisition of Bystronic glass.
The foundation of the strategy remains unchanged; we continue to seek growth in our core business and to win in services through digitalization. Combining the strengths of Bystronic glass and Glaston as well as leveraging the know-how Bystronic glass adds to our business, provides us with unique opportunities to build a strong machinery and services offering as well as the ability to capture new growth opportunities. Implementing a joint operating model will support us in reaching our strategic goals and in realizing the full synergy potential of combining Glaston and Bystronic glass.
Our overall strategic goal remains unchanged: our ambition is to be the industry’s innovative technology leader, realizing its customers’ highest ambitions in glass.
Glaston’s purpose is to build a better tomorrow through safer, smarter, and more energy-efficient glass solutions. The demand for environmentally sustainable and energy-efficient solutions, tightening safety standards as well as growing visual and functional quality requirements of glass, increasingly affect the way our customers operate as well as impact the specifications they require from their glass processing technology partners.
Our strategy is divided into four key themes:
GROWTH IN CORE
NEW GROWTH OPPORTUNITIES
JOINT OPERATING MODEL
UPDATED FINANCIAL TARGETS:
- Annual growth of net sales exceeding market growth* (CAGR)
- Comparable operating margin (EBITA)** above 8% at the end of the strategy period. EBITA excludes amortizations of purchase price allocations.
- Comparable return on capital employed (ROCE)** of more than 14% at the end of the period
*Flat glass market growth over the cycle.
**Calculation of key ratios:
Comparable EBITA excluding amortizations of purchase price allocations: Result before amortization of purchase price allocations +/- items affecting comparability
Comparable return on capital employed, % (Comparable ROCE): (Profit / loss before taxes + amortization of purchase price allocations +/- items affecting comparability + financial expenses x 100) / (Equity + interest-bearing liabilities, average of 1 January and end of the reporting period)
President & CEO's Review
President & CEO Arto Metsänen in the January-September 2019 Interim Report, published on 28 October 2019: A satisfactory quarter, despite weakness in heat treatment market
“Despite weak development of heat treatment machines market, the quarter was satisfactory. Our third-quarter net sales grew by 15% (pro forma) and the comparable EBITA margin was 5.7% of net sales. Total orders received also grew slightly.
The slowdown in the heat treatment machines market has continued in 2019 and this was already the second quarter of a difficult market. Third-quarter orders received in the Heat Treatment Technologies product area decreased by nearly 30% from the corresponding period of the previous year. This was clearly below our expectations and that’s why we reacted to the situation rapidly. In early October, we initiated measures adjusting the Glaston segment’s operations to this lower-than-expected demand.
At the same time, demand for insulating glass machines continued to be strong and the number of orders increased. The benefits of insulating glass, for example in improving the energy efficiency of buildings, are increasing demand for insulating glass machines. Demand for insulating glass and heat treatment machine services was good in the third quarter. The downturn in the automotive glass market continued, and at the beginning of October we also took steps to adjust the Automotive business to a low order book, among other things by introducing reduced working hours at Bystronic glass’ Bützberg location in Switzerland.
The integration of Bystronic glass with Glaston has continued well and we have succeeded in combining our operations faster than expected. During the fall, we have, among other things, merged our sales offices in Singapore and China, eliminated overlapping functions, started integrating various IT and CRM- systems, and enabled the development of a common digital product platform. Thanks to the measures taken, we have already achieved annual cost savings of EUR 2.3 million. This is more than half of those annual cost synergies of around EUR 4 million that we expect to achieve by 2021.
The product development of the Heliotrope project continues, and it is approaching a product that can be industrialized. The development has taken longer than Glaston has expected, mainly due to the complexity of the product’s technical features but also due to the financing of the project. Negotiations regarding financing, in which Glaston is considering participating, are currently on-going. Glaston’s investment would not be considerable. Heliotrope and other smart glass products are getting a lot of interest in the markets. As a result of the Heliotrope-cooperation Glaston has also found other interesting cooperation opportunities with among others other smart glass parties, and discussions are expected to lead to orders shortly.”
Outlook 2019, as in the Q3 interim report, published on 28 October 2019:
GLASTON’S OUTLOOK FOR 2019 UNCHANGED
Glaston Corporation expects that 2019 comparable pro forma EBITA will be at the 2018 level or will improve slightly on it (2018 comparable pro forma EBITA EUR 11.5 million).
At the end of 2018, Bystronic glass had a significant number of orders that were recognized as revenue in the second and third quarters of 2019, thereby improving Bystronic glass’ actual net sales and profitability. Bystronic glass’ fourth quarter net sales and profitability will be significantly lower than in the early part of the year. The Glaston segment’s result is skewed towards the second half of the year.
As in Glaston’s Half Year Financial Report, published on 8 August 2019:
Glaston Corporation expects 2019 comparable pro forma EBITA to be at the 2018 level or slightly improve (2018 comparable pro forma EBITA EUR 11.5 million). As the integration process is at an early stage, more uncertainty than usual is associated with the outlook and the company’s estimate.
At the end of 2018, Bystronic glass had a significant number of orders that will be recognized as revenue in the second and third quarters of 2019, thereby improving Bystronic glass’s net sales and profitability at the beginning of the year. Bystronic glass’s fourth quarter net sales and profitability will be significantly lower than in the early part of the year. The Glaston segment’s lower than 2018 first half order intake and result will affect the segment’s 2019 result. The segment’s net sales and result will be skewed towards the second half of the year and particularly to the fourth quarter, when several orders received at the end of 2018 will be delivered.
Glaston’s Outlook 2019, published on 12 February 2019 in Glaston’s 2018 Financial Statement Bulletin:
The company’s business is seasonal and, historically, the first quarter of the year is generally the weakest and the fourth quarter the strongest. Net sales and comparable operating profit are expected to be low for the first quarter of 2019, due to the low number of new orders received in the third quarter and the beginning of the fourth quarter of last year.
Deviating from Glaston’s disclosure policy and due to the timetable of the Bystronic glass acquisition, Glaston will disclose information on its outlook for the whole of 2019 at a later stage.
As in Glaston’s January-September 2018 Interim Report, published on 31 October 2018:
Glaston’s outlook is unchanged. We expect the full-year comparable operating profit to improve from 2017. (Full-year 2017 comparable operating profit was EUR 5.0 million according to the new revenue recognition standard IFRS 15).
As in Glaston’s Q2 2018 Half-Year Financial report, published on 9 August 2018:
Glaston’s outlook has remained unchanged. We expect the full-year comparable operating profit to improve from 2017. (Full-year 2017 comparable operating profit was EUR 5.0 million according to the new revenue recognition standard IFRS 15).
As in Glaston’s Q1 2018 Interim Report, published on 23 April 2018:
The steady order intake of the previous six months and positive market development create good conditions for profitable growth in 2018. We expect the full-year comparable operating profit to improve from 2017. (Full-year 2017 comparable operating profit was EUR 5.0 million according to the new revenue recognition standard IFRS 15).
As in Glaston’s Financial Statements Bulletin, published on 8 February 2018:
Although the order book at the end of 2017 was lower than the previous year, the good order intake of the second half of the year and positive market development create good conditions for profitable growth in 2018. We expect the full-year comparable operating profit to improve from 2017. (Full-year 2017 comparable operating profit was EUR 5.4 million.)
As in Glaston’s Q3/2017 Interim Report, published on 30 October 2017:
Glaston’s January–September comparable operating result was EUR 2.8 million, i.e. at the same level as the whole of 2016. Previously, the full-year 2017 comparable operating result was expected to improve from 2016.
Glaston revises its outlook and now expects the full-year 2017 comparable operating result to be EUR 4.0–5.5 million. (Previous outlook: We expect the full-year comparable operating result to improve from 2016. In 2016 the comparable operating result was EUR 2.8 million.)
As in Glaston’s Half Year Financial Report, published on 10 August 2017:
After a quiet first quarter, the glass processing market became more active to some extent in the second quarter. The prolonged uncertainty in the global economy and increasing political tensions in some regions are impacting customers’ willingness to invest, and decision-making times have lengthened. There are no visible signs of a permanent change in the market, however. We expect the positive market development to continue.
Good order book at start of the year, positive market development and the cost-saving measures undertaken create good conditions for the development of operations in 2017. We expect the full-year comparable operating result to improve from 2016. (In 2016 the comparable operating result was EUR 2.8 million.)
As in Glaston’s Q1 2017 Interim Report, published on 26 April 2017:
In the first quarter of 2017, the glass processing market was quiet, as anticipated. The prolonged uncertainty in the global economy and increasing political tensions in some regions will impact customers’ willingness to invest, and decision-making times have lengthened. There are no visible signs of a permanent change in the market, however. We expect that positive market development will still continue.
A higher order book than the previous year, positive market development and the cost-saving measures undertaken create good conditions for the development of operations in 2017. We expect the full-year comparable operating result to improve from 2016. (In 2016 the comparable operating result was EUR 2.8 million.)
As in Glaston’s Financial Statements release, published on 10 February 2017:
The development of the glass processing market was positive at the end of 2016. There are currently no signs of a weakening of the market, and positive development is expected to continue. Despite good demand, customers are often taking longer to make their investment decisions due to the uncertain global economy and political developments.
A higher order book than the previous year, positive market development and the cost-saving measures undertaken create good conditions for the development of operations in 2017. For the first quarter, a relatively small number of deliveries are scheduled, as a result of which the comparable operating result for the period is expected to be lower than the corresponding period a year earlier.
Glaston expects the full-year comparable operating result to improve from 2016. (In 2016 the comparable operating result was EUR 2.8 million.)
As in Glaston’s January-September 2016 Interim report, published on 31 October 2016:
In the final quarter of the year, the glass processing market is expected to develop positively and new machine orders to grow markedly compared with the third quarter.
The good second-quarter order intake and the large number of deliveries scheduled for the fourth quarter will increase net sales considerably in the latter part of the year compared with previous quarters. The savings measures undertaken will also have a positive impact on the result.
Glaston revised its outlook on 4 August 2016. Glaston expects 2016 net sales to be approximately EUR 105–110 million and the comparable operating profit to be approximately EUR 2–4 million. (In 2015 net sales were EUR 123.4 million and comparable operating profit was EUR 6.1 million).
As in Glaston’s January – June 2016 Half Year Financial Report, published on 9 August 2016:
In the second half of the year, the glass processing market is expected to remain challenging as economic uncertainty continues.
In Europe, a deterioration of the economic outlook and increased instability in the operating environment will be reflected in customers’ investment decisions. Despite this, Central and Eastern Europe offer growth opportunities. We expect stable development in the North American market. In South America, the market will remain quiet, particularly in Brazil. In the Asian market, we expect cautious growth.
Glaston expects 2016 net sales to be approximately EUR 105 – 110 million and the comparable operating profit to be approximately EUR 2 – 4 million. (In 2015 net sales were EUR 123.4 million and comparable operating profit was EUR 6.1 million).
As in Glaston’s Interim report Q1/2016, published on 28 April 2016:
Glaston still expects the overall market to develop on a cautiously positive note. The North American market and the EMEA area are expected to develop positively. We expect the Asian markets to remain stable at their current level. In China, market activity continues to be low. In South America, market continues to be subdued, particularly in Brazil.
In the heat treatment machines market, no significant changes are anticipated, and we expect demand for heat treatment machines to remain at the previous year’s level. The outlook for the services market continues to be cautiously positive.
Glaston’s outlook remains unchanged. Due to the subdued market situation and the reduced order book, we expect 2016 net sales to be slightly below the 2015 level. We expect the operating profit, excluding non-recurring items, to be at the 2015 level. (In 2015 net sales were EUR 123.4 million and comparable operating profit, excluding non-recurring items, was EUR 6.1 million).
As in Glaston’s Financial Statement Bulletin 2015, published on 11 February 2016: OUTLOOK
In the final quarter of 2015, signs of caution appeared in Glaston’s markets. Looking at 2016, we expect the overall market to develop positively but cautiously.
We expect the North American market to continue to develop well also in 2016. We expect the EMEA area to develop positively. In Asia, we expect the Chinese market to remain stable at its current level, and we expect growth in the Pacific area.
The heat treatment machines market will continue to be reasonably subdued. We expect that demand for new heat treatment machines will be weaker than the previous year during the early part of the year. Despite a challenging market outlook, Glaston’s position in the market is good. Our wide product range corresponds excellently with customers’ needs. As the technology leader, we will continue our goal-oriented development work, in which digitalisation and new technologies will present new business opportunities.
The outlook for the services market is cautiously positive. Our growth objectives are supported by Glaston’s strong market position, comprehensive service network and up-to-date product range.
Due to the subdued market situation and reduced order book, we expect 2016 net sales to be slightly below the 2015 level. We expect the operating profit, excluding non-recurring items, to be at the 2015 level. (In 2015 net sales were EUR 123.4 million and operating profit, excluding non-recurring items, was EUR 6.1 million).
Glaston Corporation develops, manufactures, sells and services glass processing machines, equipment, and technology to glass processors who provide glass products for different needs. Main customers are glass processors in the architectural glass, automotive glass, solar energy equipment and appliance industries. Our operations are divided into Glaston and Bystronic glass operations.
Glaston’s operations consist of a wide and technically advanced range of glass heat treatment machinery, services for maintenance, upgrades and modernizations as well as spare parts for flat tempering, bending, bending-tempering and laminating lines. Glaston also offers digital services, such as remote monitoring, and diagnostics for glass processing machines, as well as consulting and engineering services for new glass technology fields. Glaston has two production centres, one in Tampere, Finland and one in Tianjin, China.
Flat tempering machines are the most significant product group and the FC Series™ tempering line has a strong position in the market. The renewed ProL™ laminating line has been well received by Glaston’s customers. More information about our products is available in the Offering section.
Glaston’s services offering ensures uninterrupted production capacity for our customers and efficient usage throughout a machine’s lifecycle. Our comprehensive service network is one of the most important factors in our competitiveness.
Emerging glass technologies and value-added glass products, such as smart glass, are strongly entering the market. In accordance with our strategy, Glaston is actively seeking new business opportunities in emerging glass technologies and aims to develop and commercialize innovative glass solutions. The Emerging Technologies unit is continually seeking new business opportunities in emerging glass technologies, offering consulting and engineering services for new glass technology fields.
In 2018, the Glaston segment’s pro forma net sales totalled EUR 101.1 million.
Bystronic glass became part of the company on 1 April 2019. Bystronic glass offers services, machinery, systems and software for glass cutting, grinding, drilling, handling and insulating of flat glass globally. Bystronic glass’ offering complements Glaston’s offering.
Bystronic glass has three manufacturing sites: high-end flat glass processing machinery for the architectural flat glass processing market in Neuhausen-Hamberg (Germany), machinery for the flat glass processing for automotive, appliance and display products and solutions in Bützberg (Switzerland) and mid-market segment flat glass processing machinery for the architectural glass market in Shanghai (China).
The offering for the architectural glass market includes integrated solutions and components for complete insulating glass manufacturing lines. In addition, Bystronic glass offers dedicated applications upon request.
For the automotive, appliance and display market, Bystronic glass offers complete standardized or customized solutions for the pre-processing of automotive and appliance glass and the processing of display glass, e.g. for automotive or consumer goods displays. More information about the products can be found here.
Bystronic glass’ pro forma net sales for 2018 was EUR 100.7 million and share of Group pro forma net sales was 49.9 per cent.
Research and Development
Glaston’s technology leadership is based on continuous, customer-oriented product development, enabling us to consistently bring to the market more advanced technology to meet customers’ changing needs.
Our product development is guided by the development of solutions requiring deeper technological expertise and by new business opportunities presented by digitalisation. Our position is particularly strong in developing technologically demanding products. The most advanced glass processing machines developed by Glaston have risen to the status of standards in many countries. We hold patents for all of our key solutions.
The energy saving and energy consumption of tempering machines have been important drivers of Glaston’s product development. This work has yielded results, as a comprehensive analysis made in the autumn showed, for example, that in the low-emissivity glass tempering process, energy consumption has decreased by an average of 30% over the past 10 years.
In 2018, our R&D expenditure was 3.7% of net sales.
Glaston utilises new technology and the opportunities presented by digitalisation to develop products and make them better, more efficient and more reliable. Glaston brings to glass manufacturing new sensor, processing, interface and cloud service technologies. By utilising cloud services and opportunities offered by IIoT, Glaston helps its customers use their equipment as efficiently as possible.
Glaston has been involved in a nanotechnology project in California since the latter part of 2015. Heliotrope Technologies is developing for the market a new electrochromic smart glass technology, which gives end-users the opportunity of regulating, for example, the heat and light transmittance of glass in a building or vehicle, precisely and quickly. A further advantage over solutions already on the market is significantly lower production costs.
In order to step up innovation and create new business opportunities utilising the opportunities presented by digitalization, the company organized in summer 2017 the glass industry’s first start-up event, Step Change. Step Change aims at promoting development of the industry as well as meetings between new innovators, potential partners, customers and investors. The second Step Change event was held in June 2019 in connection with Glass Performance Days conference, which is a forum dedicated to the development of the global glass industry.
Why invest in Glaston
- Global megatrends support demand for Glaston’s products
- Global flat glass market is estimated to grow at +3.4% CAGR for 2016-2021*)
- Competitive advantage provided by complementary positions and offering of Glaston and Bystronic glass
*) Source: The Freedonia Group 2018
- Long history of developing glass processing equipment
- Technology leadership based on continuous, customer-oriented product development, enabling us to consistently bring to the market more advanced technology to meet customers’ changing needs
- At the heart of product development is digitalisation, which facilitates the shift towards automatic glass processing
- The increased size of the company provides the financial backbone for delivering the technology roadmap
- The expanding installed base provide growth potential in lifecycle services
- Bystronic glass acquisition is expected to strengthen the sales mix through higher proportion of service and spare parts revenue streams
- Additional potential in extending the equipment upgrades to 3rd party machinery, in new monetization models, and in potential future increase within emerging technologies
- Strengths of the combined company form the basis for the new strategy
- Anticipated synergies stemming from multiple sources e.g. revenue synergies, cost synergies and general improvements to the business operations
- Improvement potential in best-practice sharing from Glaston to Bystronic glass supporting the cash flow profile going forward
Mergers and Acquisitions
|1981||Tamglass Oy||Acquisition||Kyro acquires the entire share stock of Tamglass Oy, founded in 1970. Exports already account for 93 % of Tamglass’ net sales of FIM 54.7 million and the company has 148 employees. Kyro becomes a diversified company.|
|1985||Tecnomen||Acquisition||Kyro expands its electronics business by acquiring Tecnomen, which supplies Tamglass with automation and control systems. The company also operates in the field of telecommunications.|
|1986||Glaston forest holdings and local electricity network||Divestment||The company sells its forest holdings to Suomi-Salama and its local electricity distribution network to Oy Nokia Ab.|
|1995||Glaston’s forest industry business||Divestment||Kyro sells its forest industry business to Metsä-Serla Oy, amid a major restructuring of the entire sector.|
|1996||Cattin Machines||Acquisition||Cattin Machines, a Swiss manufacturer of safety glass machines, is acquired for the Tamglass Group.|
|2002||Finton Oy||Acquisition||The Tamglass Group’s glass processing business is supplemented by the balcony glazing manufacturer Finton Oy from Lahti Finland.|
|2002||Uniglass Oy||Acquisition||The Tamglass Group’s machine business is supplemented by the flat tempering machine manufacturer Uniglass Oy from Tampere Finland.|
|2003||Z. Bavelloni Immobiliare S.p.A. and Glasto Holding B.V. as well as Suomen Lämpölasi Oy||Acquisition||Kyro acquires Italian Z. Bavelloni Immobiliare S.p.A’s and Dutch Glasto Holding B.V’s all share as well as a majority shareholding in Suomen Lämpölasi Oy. Glaston Technologies, consisting of Tamglass and Bavelloni, becomes the world’s largest comprehensive supplier of glass processing machines, and its glass processing product range becomes the biggest in Finland.|
|2005||Glaston’s hydropower and district heat distribution businesses||Divestment||At the end of the year, the Group sells its hydropower and district heat distribution businesses.|
|2007||Glaston’s Energy Business||Divestment||Kyro sells its energy business area to M-real Oyj.|
|2007||A+W Software AG Group||Acquisition||Glaston acquires the German A+W Software Group in July 2007, after which the Business Area, Software Solutions, is formed.|
|2009||Tamglass Glass’s insulated and architectural glass processing operations||Divestment||Glaston Corporation’s subsidiary Tamglass Glass Processing Ltd. sells its insulated and architectural glass processing operations to INTERPANE Glass Oy.|
|2010||Glass processing operations||Divestment||Glaston’s joint venture, the glass processing company INTERPANE Glass Oy, is sold to Rakla Finland Oy.|
|2013||A+W Software GmbH||Divestment||Glaston sells A+W Software to Constellation Software Inc. acting through its Friedman Operating Group.|
|2014||Glassrobots||Acquisition||Glaston acquires the industrial property rights to all Glassrobots products.|
|2015||Pre-processing machines business||Divestment||Glaston sells 100% of the shares of Glaston Italy S.p.A. to the local management of Glaston Italy S.p.A.|
|2017||Pre-processing machines business in USA and Canada||Divestment||Glaston continues as a reseller of Bavelloni’s Pre-Processing machines in Mexico, Brazil and Singapore.|
|2018||Tools business||Divestment||Glaston sells its Tools business to Italian Bavelloni S.p.A. The sale is carried out through a share deal of Glaston Tools S.r.l in Italy.|
|2019||Bystronic glass||Acquisition||Glaston acquires Bystronic Maschinen AG and Bystronic Lenhardt GmbH and their subsidiaries (“Bystronic glass”) from Conzzeta Group|