In order to substantially reduce its manufacturing costs, Nilfisk-Advance has embarked on a program of design standardisation across product series and component sharing, thus simplifying user interface. This ‘platform design’ initiative was announced in the company’s first quarter 2011 financial results.
Nilfisk-Advance reported first quarter 2011 organic growth of 5% (nominal growth of 9%), corresponding to revenue of AUD$277 million (1,552 mDKK), compared with a 1st quarter 2010 of 1,418 mDKK. Operational EBITDA increased by AUD$1.6 million to AUD$32.3 million (181 mDKK) compared with a 1st quarter 2010 of 172 mDKK – a result of revenue growth combined with rising raw material prices.
‘In the EMEA region, organic growth of 5% was realised. Excluding the effect of currencies, nominal growth in EMEA was 8.3%, which is considered satisfactory in the light of the region’s general economic development. In the Americas, nominal revenue decreased by 1%. This was primarily due to increased use of leasing contracts, where income is realised on an ongoing basis, and to restraint on the part of dealers and customers in the public sector. The Asia/Pacific region had a nominal increase in sales of 25%. Global market growth is expected to be approximately 2 to 4% in 2011, based partly on developments in Asia and partly on the expected general economic improvement in the US and Europe,’ stated the 9 May report.
‘Gross profit for the quarter was 42.3%, approximately 1% less than last year, as a result of higher raw material prices.
‘To counter this Nilfisk-Advance has raised its prices by approximately 2% at the beginning of the year. To resist further price increases on raw materials, list prices are expected to be raised by approximately another 2% in June 2011. The effect of the price increases is solely expected to counterbalance the rising raw material prices.
‘Fixed costs continued to fall, ending the period on 33.3%, which was 0.3% below 1st quarter 2010.
‘Operational EBITDA margin for 1st quarter 2011 was 11.7% (1st quarter 2010: 12.1%). The strategic target for 2015 is an operational EBITDA margin of 14%. In order to achieve this, Nilfisk-Advance is specifically committed to optimising the ratio of fixed costs to revenue and to reducing complexity.’
PLATFORM DESIGN
Due to organic growth and acquisitions, Nilfisk-Advance consists of many different national production and sales units worldwide. These many units naturally contribute to a high degree of complexity in areas such as product assortment, product names, legal entities, suppliers, IT systems, procedures, etc. This provides Nilfisk-Advance with a wide product range and an extensive service network, which is an advantage for customers and a disadvantage for competitors. But, the company observes, ‘complexity in the wrong places makes it hard to reap all the benefits associated with being a large global company.
‘One strategic aim in the future is therefore to reduce complexity, among other things in the approach to product development.
‘Design will increasingly be standardised across product series and component sharing will be expanded, thereby simplifying user interface.
‘Far greater emphasis will be given to platform design. The full benefits of such standardisation will include increased bulk-buying of components, which will impact positively on purchase price and increase flexibility in the factories by simplifying retooling.
‘Through focus on platform design Nilfisk-Advance expects to reduce product costs substantially over a three to five year period.’