Körber Group: Business Area Tobacco aligns itself to fundamental structural change in the market

Hamburg, 2 June 2015. After a successful business trajectory in recent years, the technology group Körber is repositioning its Business Area Tobacco for a far-reaching and permanently changing market environment. The causes are particularly due to decreasing cigarette consumption worldwide, increasing regulation and the resulting fundamental structural changes on the part of cigarette manufacturers.

After all options for flexible adjustments of production capacities have been exhausted, a major reduction in the workforce involving a total of around 800 jobs worldwide is unavoidable to ensure the long-term safeguarding of the Business Area alongside comprehensive measures for cost reduction and continued intensive R&D activities. Around one third of these cuts will be at international locations. The Executive Board of Hauni Maschinenbau AG informed the employees and the employee representatives about these plans today.

Hauni Maschinenbau AG is the biggest company in the Business Area Tobacco of the Körber Group and its lead company. The plans published internally today tackle the need for a repositioning of the Business Area to meet the challenges of the accelerated, long-term structural change in the market for the manufacture of cigarettes. Alongside Hauni, the brands Borgwaldt, Decoufle, Garbuio Dickinson and Sodim are part of the Business Area.

The widespread health trend in western countries has increasingly also coming to prominence in the growth markets of Latin America and Asia. More stringent regulation worldwide and growing price sensitivity with consumers bring about substantial and long-term changes in the market for classic cigarettes. The Business Area Tobacco as the leading provider for technologies, technical services and consultancy services in the international tobacco industry has to respond to this development.

Furthermore, the Chinese market, which accounts for 40 percent of the global market in cigarette consumption, will also be impacted by increasing regulations and restrictions in the tobacco market. This marketplace will therefore also experience a significant decline.
The structural market change entails that all measures for an even more efficient positioning of the Business Area and adjustment of the cost structures need to be intensified plus R&D activities have to be driven forward in a focused approach. It is also necessary to achieve a reduction in capacities at all locations, although these efforts will be concentrated on Bergedorf near Hamburg and Schwarzenbek in Schleswig-Holstein – also Northern Germany. The final scope and the timescale for announced job reductions will be agreed in the pending negotiations with employee representatives.

“The measures announced today are far-reaching and in part painful, but they are unavoidable. We are aligning our business with the radical changes in the marketplace and repositioning our Business Area for the future. For the foreseeable future, there will be no significant growth in cigarette sales. We will now start talks with employee representatives with the brief to implement all measures fairly and transparently. We are well aware of our social responsibility,” explained Christopher Somm, Chief Executive Officer of Hauni Maschinenbau AG and member of the Group Executive Board at Körber AG. “If you want to be successful in the marketplace, you have to confront the continuous stream of new challenges and be prepared to changes – we have done this in the future and we will continue to chart this course. We are concentrating consistently on the requirements of our customers and at the same time strengthening our investments in research and development in order to make the most of new opportunities presented by the market in the future.”

Furthermore, the option of a sale to a strategic investor is currently being reviewed in each case for two subsidiaries of the Group: the production facility Grevesmühlen of Baltic Metalltechnik GmbH (Business Area Tobacco) and Baltic Elektronik GmbH (Business Area Automation).

The production facility Grevesmühlen of Baltic Metalltechnik GmbH specializes in machining sheet metal, in particular enclosures, and has first-class production facilities. The aim is for this to enable the company to be integrated in a network with a potential new owner and thereby gain a more broadly-based position in the market.

Baltic Elektronik GmbH is part of the Business Area Automation of the Körber Group. In a changing market, the objective is for the provider of Electronic Manufacturing Services to expand its portfolio with additional product and service offers through new ownership. This will enable the company to offer its customers the entire value chain of E2MS – Electronic Engineering and Manufacturing Services. This addition to the existing areas of expertise and access to new markets and customers through a strategic investor are intended to offer the company long-term growth opportunities and therefore contribute to safeguarding jobs for the future.

Press Release June 2, 2015 (pdf)
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