Passing the torch

Estun: vorsprung durch technik?

When German robotics firm, Carl Cloos Schweisstechnik, celebrated its centenary this year, the tagline was “pioneers of welding: a story with a future”.

Its employees now know that much of that future is likely to be shaped in Nanjing rather than their hometown of Haiger in Hesse.

Just a few months after that centenary the family-owned firm announced that it was selling out to Shenzhen-listed robotics company Nanjing Estun Automation and private equity group, China Renaissance Capital.

The price tag was €196 million ($218 million), slightly more than Estun’s Rmb1.46 billion ($207 million) in revenues last year.

The timing has been a surprise to some, given the German government’s commitment to an ‘Industrie 4.0’ strategy designed to reinforce the country’s advanced manufacturing sector. Instead, it looks more like another case of ‘Made in China 2025’ getting the upper hand, with Estun grabbing the German firm in a bid to climb the rankings in the robotics industry.

Chinese investors reacted positively to the takeover: when Nanjing-based Estun resumed trading on September 9, the stock went limit-up. However, social media commentators have been more divided, noting Midea’s disappointing experience with Germany’s Kuka following the latter’s €4.6 billion acquisition in 2016.

In 2018, net profits at Kuka plunged more than 85%. A downturn in the automotive sector – a key client – didn’t help, but the situation was made worse by disputes between Kuka’s Chinese owners and its German CEO, who was subsequently replaced (see WiC459).

“Acquisitions fail,” concluded one of the more disparaging netizens. “Just look at Midea’s acquisition of Kuka.”

Reviewing the Cloos takeover, another added: “If this company is a world leader with a great order book, then it should be a wonderful cash cow. So how can it be acquired by a small Chinese business?”

The German press had questions too, with industry publication Automation suggesting that the sale was initially a surprise because Cloos has been doing so well. Unlike some of its competitors it isn’t as exposed to the auto sector, with a wider portfolio of clients in construction machinery, rail, energy and agriculture.

However, the family decided to sell because the third-generation hasn’t been as actively involved as its predecessors and they wanted to negotiate a good price from a position of strength, Automation concluded.

Estun says that Cloos will maintain its existing management team at its Haiger headquarters. But it will also want to leverage German know-how to boost sales in China’s brutally competitive local landscape, where the emergence of more than 2,400 robotics companies has been putting heavy pressure on prices.

Welding – an area where Cloos specialises – makes up about a quarter of the Chinese robotics market, behind loading and unloading applications at 44%, Georg Stieler, a sector specialist, told Automations Praxis, another industry journal.

The survivors in the sector should profit from a huge increase in demand over the medium-to-longer term. China accounted for 36% of global robotic sales in 2017 but the government wants a ratio of 150 robots per 10,000 workers by 2020, significantly more than the 97 in 2017, according to the International Federation of Robotics.

Another governmental goal is that 70% of those robots come from Chinese suppliers by 2025, compared to a quarter in 2017 (foreign players include FANUC and ABB – with the latter breaking ground this week on a new $150 million plant in Shanghai which will open in 2021 and be able to make 100,000 industrial robots per year).

The figures in China are skewed by the automotive industry, which deploys a higher-than-standard ratio of about 500 robots per 10,000 workers. Other manufacturing sectors such as electronics have a much lower robot penetration – and these are the sectors which are set to witness the sharpest jump over the next few years. However, in the nearer term, the Sino-US trade war and China’s associated economic slowdown are likely to dampen enthusiasm in the domestic robotics sector: another reason why Estun has sought to diversify overseas via its capture of Cloos.

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