2015: 'A very good year' for Freudenberg

DETROIT—Freudenberg S.E. is growing again.

The Germany-based conglomerate reported sales growth for the sixth straight year, according to CEO Moshen Sohi. Freudenberg reported record revenue and record profitability in 2016. He added that some market segments had difficult conditions, mainly oil and gas, along with the South American region facing economic challenges.

The executive and other members of the group's management team disclosed the privately-held firm's financial results during a media event in Detroit on April 13.

“Freudenberg had a very good year in 2015,” Sohi said. “It was a year of development, change and brand repositioning for Freudenberg, and it was a successful story altogether. When you put it in the context of the difficult economic situations, it makes it rather more impressive than otherwise.”

Sales increased 7.6 percent to $8.36 billion in 2015, which represents a 34 percent increase during the last five years, when sales were reported at $6.22 billion in 2010. North American accounted for $2.3 billion of that figure, up $100 million compared to 2014. Sohi said most Freudenberg business groups in the region saw growth in sales.

“Sales in North America contributed 26 percent of global Freudenberg Group turnover in 2015,” Sohi said. “With continued investment in sustainably growing our existing businesses in Canada, the U.S. and Mexico and through strategic acquisitions, we are inching toward Freudenberg's established goal of generating one-third of sales in the Americas.”

Employment also increased to 40,474 worldwide, including an additional 190 employees for the firm's research and development activity, bringing Freud-enberg's R&D total to 2,772.

“We have made a concerted effort in the last few years to make ourselves even more innovative and to make even more of an investment in research and development,” Sohi said. “Every year for the last few years, we have increased our spending on R&D and strengthened the team we have in research and development across the globe.”

Bob Evans, Freudenberg North America president and the group's regional representative, said North America performed very well in 2015. The group was slightly ahead of its plan in the U.S., significantly exceeded expectations in Mexico and was slightly below for Canada.

He cited the oil and gas industry's fall-off as causing difficulties for some of the group's business.

“While we turned into a good overall performance, had we had what was more normal business volume in that industry, we would have had a really good year,” Evans said.

Evans leads a group of about 30, overseeing 11 different business groups. His unit, Freudenberg North America L.P., supports and provides core infrastructure services to all of them—such as legal, tax, real estate, corporate communications, public communications, audit, finance, treasury and risk management.

Freudenberg-NOK, Freudenberg Sealing Technologies' Americas joint venture with NOK Corp. was once again North America's biggest contributor. FNOK President Matthew Portu said it represents between 35 and 40 percent of sales generated in the region.

“It's a very important business to the group,” Evans said. “They're a material part of the largest overall business in Freudenberg. We employ about 8,500 employees in North America, 5,000 to 5,500 are Freudenberg-NOK associates. It's the dominant business in the region from an employment perspective.”

Jorg Schneewind, president and CEO of Freudenberg Medical, said the unit grew by more than 10 percent in 2015 compared to 2014. The firm completed its acquisition of Hemoteq A.G., a provider of surface coating technologies and related services for medical devices.

“Freudenberg Medical is now more diverse than just elastomerics,” Evans said. “Now we're looking to grow our component manufacturing work, but to also grow our own intellectual property and become more of a final device producer. Freudenberg Medical is one of the strategic businesses we look to grow over the extended period.”

Schneewind described the acquisition as symbolic of the direction the unit is taking.

“We have a solid foundation of molding, extrusion and different materials, but now we are entering a phase where we want to add technology capabilities that give us a unique position in the market,” he said. “Now we can provide for our customers not just a catheter system and all its components, but also the coating.”

Schneewind has big plans for Freudenberg Medical, citing the medical industries strong projected year-over-year growth and key opportunities in minimally evasive practices designed to improving the overall outcome of surgeries and reducing recover time. He added that the growth varies depending on segments, with some being under higher cost pressure because of sheer demographics.

The unit's target is to exceed sales of $200 million for 2016 and eventually become a $500 million company. The executive said the firm's VestaMed joint venture in Ireland is approaching 400 employees, continues to grow at 25 percent year-over-year and is expected to begin a third expansion sometime later this year. He projects groundbreaking to occur within the next few months. The firm produces thermoplastic extruded parts and specialty catheter systems.

“My vision is to make Freudenberg Medical a significant part of the group,” Schneewind said.

“If you look at the group's strategy to be a technology company in various markets, I think medical is a very natural component of that going forward. It's a market that continues to promise profitable growth in the long term. And second, leveraging technical capabilities that are available in the group to strengthen our position as a technology partner for the medical device OEMs is something no other competitor in our segment can offer.”