“We have ambitious growth targets”

GPV is one of the EMS powerhouses in Europe with a global footprint. Despite major challenges along the supply chain, GPV has mastered the year well so far and is not allowing itself to be diverted from its ambitious growth targets. CEO Bo Lybaek and Thomas Kaiser, EVP DACH, in an interview.

Markt&Technik: Two thirds of the year are (almost) behind us: How do you see 2021 in retrospective?

Bo Lybaek: Since Q4 of last year, delivery times have risen sharply, and we are seeing an allocation that seems to be unprecedented in this extent. The headline-hitting topics from 2020 such as Covid-19 or bottlenecks in transport have been with us also this year and of course pose a big challenge for GPV and its entire network of partners.

GPV has twelve locations worldwide. How has the ongoing Covid-19 crisis affected your factories?

Bo: GPV currently operates a total of twelve manufacturing sites in Denmark, Switzerland, Thailand, Sri Lanka, Slovakia, Austria, Germany and Mexico. At all sites, comprehensive safety precautions have been put in place which are being continuously maintained and reviewed to meet European standards and, for example, enable compliance with the two-metre social distancing requirement. We are currently seeing additional challenges at our site in Thailand. And this in spite of the fact that infection rates are comparable to Europe. Yet we are concerned that the local health care system is not as well-developed as here. However, by implementing additional measures, we are able to keep the situation under control.

With twelve production sites, how do you keep track of Covid-19 – is there a special monitoring system that also keeps customers up to date?

Bo: We have monitored the situation very closely and ensured that we provide detailed information both internally and externally. We continue to inform our customers on a bi-weekly basis about any incidents or impacts on our supply chain.

GPV has reported a good first quarter, the results for the second quarter have even attained an all-time high. How do you manage that, in spite of all the challenges I mentioned?

Bo: We certainly benefited from the outstanding order backlog, which also reached an all-time high, driven by increasing delivery times. The results are well above the previous year. Sales increased by DKK 1,504 million, an increase of 11 percent, and EBITDA increased from DKK 108 million in the previous year to DKK 152 million in 2021. For the time being, the year-end outlook is still difficult to predict due to uncertainties in the procurement market, but we have nevertheless increased sales guidance from DKK 2,900 million to DKK 3,000 million.

Thomas Kaiser: Thanks to the implementation of various task forces, we have successfully dedicated ourselves to procuring most of the missing parts. What continues to give us the biggest headache, however, is the so-called decommits, i.e. components that are confirmed but do not arrive on the day of delivery, catching us on the wrong foot overnight and causing massive effort and expense. We are also in close contact with our customers to discuss the numerous price increases caused by the allocation and to find solutions together.

And what is the situation in terms of market segments?

Thomas: Once again, we have seen that GPV‘s well-balanced customer portfolio is a success factor. While we were able to benefit strongly from medical technology in the previous year, the industrial and transportation sectors are now picking up significantly. More than 85 percent of our customers show robust sales growth compared to the previous year and I believe this perfectly reflects the situation of increasing sales across all sales levels.

Bo: Overall, it is pretty hard to predict what a recovery scenario will look like. During a crisis, our customers behave more or less like a “mystery grab bag”. Some enjoy high growth rates and buy more from us, while others hardly buy anything at all. Here we benefit from the fact that we have not tailored our production to a few large product groups or customers. Instead, we are agile and can adapt quickly to serve customers who are experiencing crisis-driven growth. Our many years of experience in the high-mix, low-volume segment is now protecting us from dramatic downturns.

Do you fear a dent in your business performance in the long run, triggered by the prevailing bottlenecks in materials supply as well as the ongoing Covid-19 crisis?

Bo: For GPV and for our owners, Schouw & Co. – which incidentally includes five other international companies – the Covid-19 crisis is a pothole that does not keep us from maintaining our ambitious growth targets in the longer term. We are set to invest continuously to become even better in the future!

Thomas: The materials situation is another matter. Here it is difficult to say when and to what extent the so-called bullwhip effect will reach us and the entire industry. The tendency to build up safety-buffer stocks or generous forecasts and thus ensure availability, only boosts this mechanism. We are therefore in close dialogue with our customers to get a good understanding of their end markets and to work out the best possible solutions together.

How do you currently assess the situation in the EMS industry overall?

Bo: The EMS industry has to step up its pace to become a fully digitally integrated partner within the entire OEM supply chain. The “raison d‘être” for the EMS industry has manifested itself in particular in recent months, where the complexity of a business model has reached its limits.

Do you expect further consolidation of the EMS industry in Europe?

Thomas: In recent years, the market has continuously raised the bar in terms of competitiveness. As our CEO always says, “size matters”; size in fact should not only be considered in terms of economies of scale, but also in terms of technical and general competence. Continuous know-how development and flexibility are a must to survive in the EMS industry. Constant exchange with our customers on future needs is what drives us to find meaningful add-ons to our own business model. So, yes, consolidation will continue. I am very sure of that.

Bo: I am indeed convinced that it makes sense to grow. Our annual sales currently amount to approx. EUR 400 million and our ambition still is to hit the EUR 550 million mark by 2023.

What makes you so sure?

Bo: We are working 100 percent in the high-mix low-volume sector and we have a fantastic customer base, including a wealth of hidden champions. Even though we want to grow bigger, our goal is to maintain customer proximity. In high-mix low-volume, you simply have to be close to the customer. For us, it is important to be agile and to be able to take decisions quickly in spite of our size.

Will GPV fuel its growth ambitions by organic growth or acquisition(s)?

Bo: We are open, but, in our opinion, acquisitions is something you cannot plan for. There is always a seller and a buyer. And at the end of the day, the two of them have to come to an agreement.

You often speak of GPV being one company, how are we to understand that after the integration of CCS?

Thomas: We are fully integrated and we consider it very important to appear on the market as one. Unity means coordinated processes to start with, a willingness to embark on the journey to uniform systems, a uniform market presence and much more. We have achieved this very quickly, both on the market and in our factories.

1. “We have ambitious growth targets”
2. The integration of CCS