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Group structure and business models

Following the acquisition of Bekaert Textiles, the Haniel Group combines four divisions in addition to the financial investment in the METRO GROUP. Franz Haniel & Cie. GmbH functions as a strategic management Holding Company and is responsible for portfolio management. The operating business is in the hands of the divisions which act independently of one another and which each occupy a leading market position.

 

Holding Company designs the portfolio
Franz Haniel & Cie. GmbH is a tradition-steeped German family-equity company whose objective is to sustainably increase the value of its investment portfolio over the long term. Since the family shareholders have provided equity for an unlimited term, Haniel can pursue a longterm investment strategy. This strategy is aimed towards generating returns which permanently exceed the cost of capital. Haniel strives to achieve this economic goal in harmony with ecological and social goals. The Company is pursuing this goal by following the guiding principle of the “honourable businessman”. In addition, capital and management are separated as a matter of principle at Haniel: Although the Company is 100 per cent family owned, no member of the Haniel family works at the Company.

When structuring the portfolio, Haniel concentrates on business models that are supported by global megatrends and therefore have a high potential for increases in value over the long term. Promising markets and business models are analysed continually in order to detect growth opportunities. For example, Haniel identified Bekaert Textiles as a very promising, very suitable fit to Haniel and acquired the company in 2015. Haniel also successfully reduced its interest in METRO AG to 25.00 per cent to improve the balance of its portfolio, but it remains the largest shareholder. At the same time, Haniel successfully placed an exchangeable bond linked to Metro shares with a term until 2020. The proceeds generated from this will be used to further expand Haniel’s portfolio.

Haniel as strategic catalyst
In addition to portfolio management, the Holding Company is also responsible for setting strategic guidelines for the operating divisions – in this respect the Holding Company considers itself as a strategic catalyst. Strategic initiatives are agreed on in discussion with the divisions, and then implemented by the divisions under their own responsibility. The divisional management teams report regularly to Haniel’s Management Board on their progress. The Haniel Holding Company is also responsible for selecting and developing top executives for the divisions and offering the divisions tools and selected services. Due to its high relevance, Haniel is currently reviewing digitalisation options in all divisions and has provided a team of experts to support the implementation of appropriate projects. These activities are bundled in Schacht One GmbH which, with its headquarters in the Zollverein Coal Mine Industrial Complex with a rich tradition in Essen, builds on the earlier dynamic for change and innovative spirit in Haniel’s history. This ensures that all divisions will continue to use their respective business models to contribute to the value enhancement of the investment portfolio in the best manner possible.

Diversified business models
Haniel’s divisions – the 100 per cent holdings Bekaert Textiles, CWS-boco and ELG and the majority shareholding TAKKT (50.25 per cent) as well as the METRO GROUP financial investment (25.00 per cent) act independently of one another in their respective markets. With the exception of Bekaert Textiles, all divisions are headquartered in Germany. The business models differ from one another with respect to their sector, business drivers, customer structure and strategy, which results in the diversification of the Haniel portfolio:

Bekaert Textiles is the world’s leading specialist for the development and manufacturing of woven and knitted mattress textiles. Following its acquisition by Haniel, it has been operated as an independent division since June 2015. The company, headquartered in Belgium, has a global network of nine production facilities in eight countries. Its product range primarily consists of woven and knitted mattress textiles that are sold to mattress manufacturers in the Americas, Europe and the Asia-Pacific region. Bekaert Textiles profits from the continuous growth of the market for mattresses which is driven by sustainable global mega-trends such as population growth, a growing awareness of the positive impact of good sleep on human health and growth in emerging markets.

Bekaert Textiles works together with its customers to develop and produce mattress textiles to the customers’ standard of quality in terms of both design and product features. The centralised development team is constantly working to further refine products in order to enable the company to offer its customer base a broad and innovative product portfolio. Thanks to Bekaert Textiles’ global production network, customers also benefit from extremely short lead times.

The Bekaert Textiles division will continue its growth path as part of the Haniel Group. The company aims to expand its market position in the Americas, in Europe and the Asia-Pacific region. Bekaert Textiles is focussed on continuously improving its product quality, designs and delivery times. Innovations are regularly brought to the market so that mattress manufacturers, the company’s customers, can offer attractive products to the mattress retailers. In addition to organic growth in existing markets, Bekaert Textiles is constantly searching for opportunities to tap into new markets and reviewing potential acquisition targets to accelerate its growth.

Improving operational excellence and optimising procurement are additional focal points. Both initiatives are vital to ensuring that the company will be able to expand its market position in the long term by offering competitive prices while at the same time realising attractive margins. Bekaert Textiles applies lean manufacturing principles to optimise its regional production facilities, which allows the company to act as a “virtual plant” to produce in accordance with uniform standards worldwide. Above all, the procurement initiative will standardise the quality of the yarns to be purchased and centralise their procurement in order to generate economies of scale.

CWS-boco offers end-to-end solutions in the fields of washroom hygiene, dust control mats, workwear and textile solutions. The division is one of the international leaders in this field with activities in 19 countries.

CWS-boco focuses on the rental business. The offerings range primarily from collections of employee clothing to protective and safety clothing, modern hygiene products such as towel, soap and fragrance dispensers, as well as dust control mats. The textiles are properly prepared in the division’s own laundries and the dispensers are regularly serviced, both under long-term service contracts. The rental business is supplemented by the sale of consumables such as soap, disinfectants and paper as well as washroom hygiene products and workwear. In recent years, CWS-boco has also expanded its offering in the cleanroom business. In this field, the company offers customers professional preparation of cleanroom apparel, while satisfying the highest certification standards, particularly with respect to sterility and the absence of particulates. CWS-boco’s customers, companies of various sizes and industries, benefit from a comprehensive service network as well as sustainable products and processes.

CWS-boco is systematically pursuing the sales initiative launched in 2014. In the course, the number of sales employees will be further increased. In addition, new employees will be prepared for their sales work in theoretical and practical training units participating the Sales Excellence programme. The division expects the significant growth momentum from these measures to continue in the future. Beyond that, CWS-boco achieves additional growth potential by taking over regional companies that supplement the existing service network. The integration of these companies will achieve higher, and above all uniform quality and service standards for the benefit of customers. The specialist for washroom hygiene products and textile solutions is also working on the introduction of a new IT system during the course of a multi-year project. In addition, sustainability is a cornerstone of CWS-boco’s business. CWS-boco Germany’s gold rating, the highest award from the international scoring platform EcoVadis, is a testament to the company’s focus on ecological and social responsibility.

The ELG division is a global leader in the trading, processing and recycling of commodities for the stainless steel industry as well as high performance materials such as superalloys, titanium and carbon fibres. With 42 locations in North America, Europe, Asia, Australia and South Africa, the division has one of the industry’s largest global networks. The product line primarily comprises stainless steel scrap and superalloys. Superalloys are high-alloy, nickel-containing scrap and titanium scrap. The superalloys business trades under the name ELG Utica Alloys. ELG’s customers, primarily global stainless steel producers and companies from the aviation industry, receive the material in exactly the composition that they need for further processing – just in time and pursuant to the highest quality standards. Scrap recycling companies in the superalloys business are certified by their customers in order to ensure high product quality. In addition to the classic trade business, the purchase and sale of recycled scrap, ELG’s toll processing business also offers recycling of production waste containing scrap tailored to the customer’s needs, returning this material to the customer within a closedloop cycle.

In order to be able to meet customer requirements in the future as well, the company is continually increasing its international presence. For example, additional procurement sources for stainless steel scrap and superalloys are developed, and new customers are gained in growth markets. In recent years, ELG has used acquisitions and increases in capacity to further expand the superalloys business first and foremost, thus laying the foundation for further growth.

In addition to the trading in and recycling of stainless steel scrap and superalloys, ELG is active in the still nascent and attractive Carbon Fibre business segment, the recycling of carbon fibres. This business unit will be systematically further expanded.

The TAKKT division bundles a portfolio of B2B direct marketing specialists for business equipment in Europe and North America in a single company. Each company follows an essentially comparable business model, but with a different focus with respect to customer groups, product lines, regions or distribution channels. The direct marketing specialists concentrate mainly on the sale of durable, stable-priced equipment to corporate customers. The product range comprises operating and warehouse equipment, office furniture, transport packaging, display products as well as equipment for the retail sales and the restaurant and hotel markets.

In its sales approach, TAKKT follows a multi-brand strategy that comprises multi-channel and web-focused brands. Multi-channel brands are aimed more at medium- sized and larger companies. They combine the classic customer approach using a catalogue with an online offering, active telephone sales and field representatives in an integrated approach. TAKKT’s web-focused brands, whose sales activities focus on digital channels, are aimed at customers that cannot be reached efficiently using the multi-channel approach. When a customer has ordered the desired product via one of the channels, TAKKT offers fast delivery and complementary services.

TAKKT intends to increase its profitability using several paths: it is concentrating on extending e-commerce activities as well as even better dovetailing the various channels in integrated multi-channel sales. In doing so, the current focus is on expanding direct sales using telephone sales and field representatives. Additional growth initiatives include the continual expansion of the product range and increased use of private labels. TAKKT will also push forward with digitalisation in the company along the entire value chain. In addition, the division is fostering the international expansion of existing successful business models and acquiring promising companies to supplement existing business activities.

Haniel holds a financial investment in the METRO GROUP , which is among the most important international retail groups. The METRO GROUP includes the three autonomous sales lines: METRO Cash & Carry, Media-Saturn and Real. METRO Cash & Carry is in the self-service wholesale business and focuses on commercial customers, in particular hotels, restaurants and catering companies. The electronics retailer Media-Saturn sells innovative technology products embedded in a comprehensive service offering under the Media-Markt, Saturn and Redcoon brands. Real offers an extensive and wide-ranging product line in the self-service hypermarkets business. The METRO GROUP’s sales lines distribute their products and services in sales outlets and online to customers in 29 countries across Europe and Asia.

The METRO GROUP’s strategy is aimed at sustainable growth. In order to achieve this objective, it consistently focuses on adding value for its customers and promoting innovation. The company strives for profitable like-for-like growth in all sales lines, while carefully and selectively expanding in selected countries through new openings. To take into account changing buying habits among its customers, METRO Cash & Carry’s delivery service and multi-channel sales function are being further expanded. As part of their multi-channel activities, the sales lines are increasingly dovetailing their retail business with online sales. At Media-Saturn, customers cannot only have the merchandise they order online shipped to them, but they can also pick it up at the nearest store location or use services on-site.

Haniel-Portfolio

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Value-oriented management system
Sustainably increasing shareholder value is at the core of the activities of the divisions and the Haniel Holding Company. In order to ensure that the conduct of all participants is oriented on this goal, financial and non-financial indicators are utilised within the divisions and the Haniel Holding Company. At Group level, the Management Board uses, in addition to revenue, operating profit to assess the development of the divisions. Additionally, the profit before taxes is used as an indicator, which includes the investment result and the result from financing activities in addition to the operating profit.

A benchmark for value contribution in the Haniel Group is the Haniel value added (HVA). This indicator illustrates whether the Haniel Group or its divisions are generating results that at least cover the cost of capital. The cost of capital comprises the yield required by debt and equity providers and reflects the risk attributable to the Company’s business activities. The return on capital employed (ROCE) is also used as a yield indicator in addition to Haniel value added. Recognised investments in non-current assets as well as the Haniel cash flow, in the sense of a cash-earnings indicator, are used to manage liquidity.

The indicators used for Group management are also used in the Haniel Group’s compensation systems.