Voith Group: Developed a completely new, disruptive concept for CO2-neutral paper production; Megatrends of digitalization and decarbonization open up new business opportunities

Voith Group: Developed a completely new, disruptive concept for CO2-neutral paper production; Megatrends of digitalization and decarbonization open up new business opportunities 

-Investments in new paper lines and rebuilds will continue to fall, deployed ERP system at various locations
-Paper Machine Market analysis 
-In the light of the low economic dynamics, the investment climate in the paper market will continue to cool
-Paper manufacturers around the world suffered under the high material and energy prices, in particular gas

The Pulp and Paper Times:

The Voith Group is a global technology company. With its broad portfolio of systems, products, services and digital applications, Voith sets standards in the energy, paper, raw materials, and transport & automotive markets. With locations in over 60 countries, Voith operates around the globe, maintaining an extensive network of production, service and sales units on every continent on the planet. The operating business of Voith Group, is structured into three Group Divisions: Hydro, Paper and Turbo. 

The Voith Group performed satisfactorily in the 2022/23 fiscal year (October 1, 2022, to September 30, 2023) and proved to be in a robust condition with regard to its operations and finances. The orders received by the Voith Group increased by 19 % to € 6.14 billion. Group sales grew by €625 million or 13 % to € 5.51 billion. All Group Divisions contributed with rising sales to this development exceeding expectations. The Group Division Turbo saw the clearest growth. With sales of €2.24 billion, Voith Paper remained the Group Division with the strongest sales.

The Group Division Paper is a leading full-line supplier as well as a pioneer in the paper industry. Through constant innovations Voith Paper is continually optimizing the papermaking process and facilitating resource-saving and efficient production.

“The megatrends of digitalization and decarbonization open up new business opportunities that we intend to exploit on our way into a more sustainable future. Today, Voith is already undergoing a transformation from a traditional mechanical engineering company to a sustainable technology group with a high level of digital expertise. Digitalization is revolutionizing the manner in which industry produces goods and offers products and services. In this context, artificial intelligence is a significant driver of transformation and innovation at Voith. Dr. Toralf Haag President & CEO at Voith Group said in the annual report for 22-23 (year ended on 30th Sept 23).

Dr Toralf said, “Our strategy also includes a clear commitment to investment in new business segments and markets. With our experts, we are working on strategies and concepts in order to develop marketable technologies from innovative ideas. Alongside the growth initiatives that are being driven forward from within the individual Group Divisions, centrally managed “strategic workstreams” address growth areas that offer Voith a variety of starting points in existing or new fields. These currently include hydrogen technology and energy storage.”

On revealing the Voith’s future course of action, he added, “We initiated the “Future” project aimed at optimizing our processes from end to end. “Future” acts as a binding force between various strategic initiatives, some of which were launched towards the end of the reporting year. The initiatives perform an analysis of how activities can be prioritized and rendered more effective as well as of the complexity and efficiency of processes. One important lever in achieving efficiency gains is a powerful IT systems landscape. Specifically, within the scope of a complex multiyear project, we are continuing to work on the introduction of an ERP (enterprise resource planning) system that integrates a number of business processes on a standardized Group-wide platform. In the meantime, the ERP system has been successfully deployed at various locations; further rollouts are planned for the 2023/24 fiscal year.”

“We assume that the cooling of the paper machine market will continue in the 2023/24 fiscal year. With the expected slight increase in paper production, demand for wear parts and services should, on the other hand, pick up slightly. Thanks to our good market position and our expertise in resource-saving, low-emission paper production, we expect Voith Paper to once again achieve a volume of orders received similar to the good level seen in the reporting year in the 2023/24 fiscal year.” He said. 

Innovation is decisive for the success of industrial companies: New solutions safeguard sustainable competitive advantages and thus the sales and growth of tomorrow. Continuous feedback from customers facilitates incremental innovation, which means that existing products and services are gradually refined. In the reporting year, Voith has now introduced a further, third, pillar for promoting open innovation aimed at reinforcing cooperation with suppliers: As part of the “Supplier Innovation Days”, segment experts and visionaries, not only from within the Group but from the industry at large, are brought together to exchange ideas and to explore the most recent technologies and drive change within society and businesses.  

On the investment front, Dr Toralf said, “Significant investments for the future were once again made in the reporting year. For instance, we increased our investments in property, plant and equipment and intangible assets from €143 million to €188 million and our R&D expenditure from €213 million to €232 million. In this context, the strong orientation of the Voith Group towards industrial sustainability is given high priority along with the associated ongoing strategic and technological enhancement of the Voith product portfolio. Over and above this, we invested in the structures and processes and in particular in the IT infrastructure of our organization. Great dedication continued to be applied to the training and ongoing development of our employees.”

The report stated that growth in the emerging markets is being driven by China and India. After ending its strict zero-Covid policy at the start of 2023, China (IMF forecast for 2023: +5.0%) experienced a surge in growth which, in turn, triggered the corresponding positive signals worldwide. India continued to see great momentum (2023: +6.3%). For the ASEAN-5 countries, growth of 4.2% is forecast for 2023. A welcome surprise was provided by Brazil (2023: +3.1%), where agriculture in particular underwent very good developments. Although this South American country is experiencing weaker growth than most Asian countries.

Paper: slight fall in level of production, significant decline in investments in paper machines 

The paper market covers all areas of paper production: from stock preparation and paper production – including surface refinement by calendering and coating – through to reeling paper webs. The Group Division Paper serves this market for all types of paper: board and packaging paper, specialty paper, tissue and graphic paper. Its range of offers includes new lines and rebuilds, automation technology and digitalization solutions, services and spare parts as well as wear parts such as roll covers and fabrics. These are augmented by the preparation of primary (pulp) and secondary fiber (wastepaper) and water treatment facilities.

In the 2022/23 fiscal year, global paper production was, according to industry analysts, in decline. Paper manufacturers around the world suffered under the high material and energy prices, in particular gas. As was already the case in the previous fiscal year, the European market was impacted most severely as energy and gas are especially expensive here in an international comparison. Of the different grades of paper, graphic papers saw the sharpest decline – a trend that is unlikely to be reversed in the near future due to the progressing digitalization. With all other grades of paper, a return to rising production volumes is expected in the foreseeable future following the decline and stagnation in the 2022/23 fiscal year.

All in all, the earnings position of paper manufacturers deteriorated perceivably. In addition, the commissioning of a large number of new machines and rebuilds built up excess capacities over recent years. Specifically in China, large machines came to a standstill at paper factories once again in 2023. After the recent years of strong investment activity, the market for new lines and rebuilds started to cool. In the light of the challenging and uncertain environment, the investment volume fell appreciably in comparison to the previous year. Demand for wear parts has to date been hardly impacted by the decline on the market for new investments. In addition, demand for services recovered after the end of the pandemic-related lockdowns.

Orders received decreased as expected

In the 2022/23 fiscal year, the Group Division Paper generated orders received of €2,097 million (-7 %). The slight decline on the very high previous-year figure corresponds to our expectations and is attributable to the already explained market cooling after several years of exceptionally strong investment activity, which became increasingly apparent from the beginning of the second half of the reporting year.

In the light of the subdued economic situation, existing excess capacities and a massive rise in costs at the paper manufacturers, investments in paper machines fell around the world. As a consequence, the orders received by our project business (new lines and rebuilds) declined. Over the course of the fiscal year, stagnating paper production and downtimes of numerous machines increasingly also impacted our business with wear parts, spare parts and services.

Innovations

As part of our Papermaking for Life sustainability program we have set ourselves the ambitious goal of realizing CO2-neutral paper production on an industrial scale by 2030. We reached one important milestone on this journey in the reporting year: Voith has developed a completely new, disruptive concept for CO2-neutral paper production. In addition, the concept significantly reduces fresh water consumption and energy consumption throughout the entire production process and does not require any fossil fuels. This has been confirmed in successful laboratory-scale test runs. The research results were transferred to a pilot line at the Voith Heidenheim site in the reporting year. To drive further development of this new process, Voith has entered into a development partnership with Essity, a global hygiene and healthcare company.

Voith has entered into a further development partnership in the field of decarbonization with Koehler, a German manufacturer of specialty papers. The two long-term business partners will work together on new solutions for decarbonizing production lines. As part of optimizing the energy efficiency of its plants, Koehler is evaluating the possibilities of replacing fossil fuels with sustainable CO2-neutral alternatives as heat sources. Voith will perform the corresponding retrofitting work in close consultation with Koehler.

Forecast:

In the light of the low economic dynamics, the investment climate in the paper market will continue to cool. Investments in new lines and rebuilds will, in all probability, continue to fall over the 2023/24 fiscal year in view of existing excess capacities. Assuming that global paper production will, at best, increase only slightly, we reckon with minor growth in demand for wear parts, spare parts and services. The focus of investment activities over the coming years will be on board and packaging due to the long-term market trends. Over the short term, however, market activities will also remain at a low level in this segment, as we see mostly rebuilds under efficiency and sustainability considerations in the 2023/24 fiscal year rather than investments to increase capacity.
 

Web Title: Voith Group: Developed a completely new, disruptive concept for CO2-neutral paper production; Megatrends of digitalization and decarbonization open up new business opportunities