The chemical company Ems has increased sales by a quarter despite a still weak automotive market. The head of the company, Magdalena Martullo-Blocher, is concerned about the sharp rise in inflation in many places. She expects wage increases across the board.
Magdalena Martullo-Blocher, CEO of Ems-Chemie, has a good laugh.
It took courage, but the chemical company Ems invested in the expansion of production even in the crisis year 2020. CEO Magdalena Martullo-Blocher said at the balance sheet media conference for the 2021 financial year that the company was deliberately acting anti-cyclically.
Gained market share again
The plan worked for the company: Thanks to the additional capacity, Ems was able to take over business in the past year that its competitors were unable to handle due to the rapid economic recovery and bottlenecks in material procurement and personnel.
Even if it didn’t appeal to Martullo-Blocher directly, Ems has apparently once again gained market share. The 25 percent increase in sales to a record level of almost 2.3 billion francs is also impressive in that the company’s main sales market, the automotive industry, continued to struggle with headwinds in 2021. The number of cars produced worldwide increased by only 2 percent and was still 14 percent below the level in the last year before Corona, 2019. Ems generates around 60 percent of its sales with customers from the automotive sector.
Further bottlenecks expected in the chip market
According to industry estimates, around 10 million more cars could have rolled off the production lines last year if there hadn’t been such a shortage of semiconductor chips. Even the Ems boss was surprised that the shortage would be so serious. The shrewd entrepreneur is otherwise known for often predicting economic developments with pinpoint accuracy.
As far as the further development in the semiconductor market is concerned, Martullo-Blocher does not expect any relaxation in the near future. Until then, it will probably be 2023, she said.
In general, the manager expects the economy to be rather rough. It is positive that unemployment is at a low level in many places. Anyone who has a job can also afford something. At the same time, like many companies, Ems is concerned about the sharp rise in inflation in most countries. According to Martullo-Blocher’s expectations, many price increases are yet to come. “When energy costs rise, all goods become more expensive,” she said.
No country without wage increases
The longer it goes, the more inflation is likely to set in motion a wage-price spiral. “I don’t think there will be a country where we won’t see any wage increases this year,” said the manager and Graubünden SVP national councilor openly. At Ems, salaries are usually set in May. In Thailand, however, the company was forced to pay its employees an additional monthly wage ahead of schedule. There was no other way.
In the past year, it was not so much rising wage costs, but primarily the massive increase in expenses for raw materials, energy and transport that Ems had to cope with. The company succeeded with flying colours, because the operating result (EBIT) developed almost in step with sales.
Price increase by price increase
The already high EBIT margin fell by just 0.2 percentage points from 28.6 to 28.4 percent. Martullo-Blocher explained the success with the fact that the raw material price increases could be passed on to the customers in a timely manner.
To do so, however, requires strong pricing power. Ems is one of the Swiss industrial companies that have this quality above average. In addition to a high level of delivery reliability, the company has traditionally distinguished itself by its innovative strength. A wide variety of parts are made from the granules that Ems produces for plastics production. The company is often at the customer’s side in an advisory capacity during the conception of the plastic parts.
For the current year, Ems has planned, as usual, to achieve a “slight” increase in sales and EBIT, despite all the uncertainties surrounding economic development. The analysts at Bank Vontobel and Zürcher Kantonalbank agree that this can be read as an increase of up to 10 percent.
The Ems group management is convinced that it will not only benefit from further innovations. It also expects further growth at the expense of competitors. Because two well-known competitors (Lanxess and Solvay) are about to push other businesses, this should enable the company to generate additional income. “We will jump into this breach,” emphasized the company boss.