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Interview with
the Management Board

Photo: SMS group: The management, consisting of 4 men and one woman, are sitting or standing in a room and discussing

Mr Dahmen, how did the 2020 financial year go for SMS group?

Burkhard Dahmen

The past year was marked by the impacts of the pandemic and presented us with entirely new challenges as a global plant constructor. Nevertheless, we successfully rose to these challenges all over the world. The strong teamwork that forms part of our company’s culture was one of the crucial factors in this regard. I am very grateful to the employees of the entire group for their unwavering commitment. This experience has also taught us that we can grow from crises.

We have learned to make the most of the digital and multimedia tools at our disposal, both in our daily work and during commissioning.

Mr Heising, how is the exceptional nature of this year reflected in the figures?

Torsten Heising

Due to the Covid crisis, there was a sharp drop in order intake, as could be expected. Sales were also down on the previous year’s level. As a result of the pandemic, we closed with a clear loss. By systematically applying targeted measures, we were able to limit the impact of the Covid crisis. Our liquidity position remains solid and we generated a positive cash flow, even in this difficult year. We have continued to invest in growth and quality, for example in our digitalization business and the expansion of our product portfolio.

Mr Rzepczyk, you have global responsibility for project implementation. How do you assess the past year under Covid-19?

Michael Rzepczyk

We witnessed a very strong bond between all our group employees in the respective regions. They stepped in to support each other when certain projects became short-staffed. This is how we successfully completed many projects in spite of the Covid pandemic. In my eyes, this demonstrates our success in putting SMS group on a stable operational footing that will also carry us through a difficult year. Digital tools have proven especially valuable to us in this regard.

Could you tell us more about that?

Michael Rzepczyk

We have been working with solutions such as the digital twin and virtual commissioning for years. Last year the benefits really came to the fore. At Metior in the USA, for example, we exploited the possibilities of augmented reality (AR) for a plant commissioning. This was necessary because the new drive design required supervision and advice from a team of technical experts from Germany. However, it was not possible for them to travel to the USA. Instead, we deployed a local service team from Pittsburgh and equipped them with AR glasses. This enabled the German team to follow the work being performed on site in real time and provide their support wherever necessary.

Portrait photo: SMS group: Burkhard Dahmen, CEO
Burkhard Dahmen,
CEO

We are focusing on new growth areas: innovations, targeted acquisitions, new markets and business segments and the expansion of the high-margin service business.

Burkhard Dahmen,
CEO

What developments particularly defined the past financial year for you, Mr Ferkel?

Hans Ferkel

There were so many. Together with EMG Automation GmbH, we developed the X-Roll® Guide FM system to improve strip guide control in hot strip mills. The associated X-Pact® Sense camera system determines the center position of the strip between the stands with a high degree of accuracy and a fast scanning rate, providing an input signal for automatic leveling control. This greatly reduces the chances of the strip end being damaged during threading, which can lead to roll marks and damage to the strip surface.

ExtruForm stands for a combined casting, rolling and extrusion process that produces electric wire rod and welding wire. By combining several successive stages in the process chain, the ExtruForm line enables a far shorter production cycle than the conventional method of producing wire rod. This significantly reduces operating costs.

Another development project I would like to mention is the new process for recycling lithium-ion batteries. Primobius is a joint venture that we founded with the Australian company Neometals. Primobius has developed hydrometallurgical technologies for recycling lithium-ion batteries in order to recover valuable raw materials in an environmentally friendly manner and return them to the material cycle.

Portrait photo: SMS group: Torsten Heising, CFO
Torsten Heising,
CFO

By systematically applying targeted measures, we were able to limit the impact of the Covid crisis. In spite of the difficult circumstances, we have invested in growth, for example in our digitalization business and the expansion of our product portfolio.

Torsten Heising,
CFO

Mr Dahmen, are you going to continue SMS group’s current strategy?

Burkhard Dahmen

Yes, since our core business will continue to operate below capacity after Covid, our strategy remains the right one. We are consistently focusing on new growth areas: innovations, targeted acquisitions, new markets and business segments and the expansion of the service business. We will continue to build on our commitment as Leading Partner for our customers with product and process innovations.

What will change as a result of the strong expansion of the service business, Ms Windt?

Katja Windt

We are increasingly becoming a systems provider and supporting our clients along the entire value creation chain with integrated service solutions, including electrics and automation and digitalization. In this way, we help our customers to boost their operational performance. After all, we are able to offer these integrated services and plant technologies from a single source. Our offering ranges from classic engineering to outsourcing solutions and new business models.

Is this in line with market requirements?

Katja Windt

Our customers are investing in optimization, service and digitalization as well as new automation solutions for their plants. Our new business models such as Software as a Service and Equipment as a Service are being well received on the market. For example, one customer has commissioned us to supply a powder atomization system for producing high-quality metal powders. Here we are applying an Equipment-as-a-Service model for the first time: we retain ownership of the plant and are paid by the customer based on the volume of stainless steel powder produced.

Portrait photo: SMS group: Prof. Dr.-Ing. Katja Windt, CDO
Prof. Dr.-Ing. Katja Windt,
CDO

We are increasingly becoming a systems provider and supporting our clients along the entire value creation chain with integrated service solutions, including electrics and automation and digitalization, in order to boost their performance indicators.

Katja Windt,
CDO

Mr Heising, SMS group has undergone a global realignment. Can you briefly explain the new organization to us?

Torsten Heising

Our project business thrives on direct, local contact with our customers. We have built on this and adapted our internal structure. Our new organization places the project, and therefore the customer, center stage. We have shifted responsibility for results to the region of our customers, where the projects are initiated and executed. This enables us to act quickly and purposefully in the market and respond better to various regional challenges – such as changes in environmental policy, market conditions or resource availability. We have also set up global Centers of Excellence (CoEs), which are responsible in particular for product development. The CoEs have consistent, global responsibility for their products, irrespective of the companies involved. In the future, the CoEs will only be responsible for handling smaller projects.

Steel production needs to become greener. Mr Ferkel, what measures has SMS group taken to meet these challenges?

Hans Ferkel

In collaboration with our company Paul Wurth, we have developed a roadmap and a toolkit for decarbonizing the metals industry. They enable our customers to implement the CO2 reduction measures that are best suited to their operations. Green Steel is the keyword here. We see it as our responsibility as an enabler to support our customers in the transition to sustainable, climate-neutral materials production. We have already paved the way for this transition in the past. But we are far from reaching the end of the road. One important step is our acquisition of the company Paul Wurth in its entirety. This further strengthens our capabilities as a plant constructor in metallurgy and hydrogen technology.

How will this acquisition affect the organization of SMS group?

Hans Ferkel

We will develop the location in Luxembourg into a group-wide research and development center for decarbonization and the application of hydrogen technologies. To this end, we will bundle the research and development activities of SMS and Paul Wurth in these fields. The future range of services will include all technologies for reducing CO2 emissions in existing steel mills; hydrogen-based, CO2-free direct reduction of iron ore; and Power-To-X technologies for producing synthetic fuels and downstream products.

Burkhard Dahmen

With our broad range of decarbonization technologies, we can support our customers in every phase of the transformation. This applies both to existing plants and to investments in bridging technologies on the road to climate-neutral steel production.

Portrait photo: SMS group: Prof. Dr. Hans Ferkel, CTO
Prof. Dr. Hans Ferkel,
CTO

We see it as our responsibility as an enabler to support our customers in the transition to sustainable, climate-neutral materials production.

Hans Ferkel,
CTO

Last year, SMS received an award from the State of North Rhine-Westphalia for its commitment to transition. What does this award mean for SMS group, Mr Heising?

Torsten Heising

Awards like this demonstrate that we are perceived as a forward-looking company. After all, the awards were presented to organizations that are driving North Rhine-Westphalia’s structural transformation into a strong, future-facing location for business. Of course we are proud to be recognized as one of eleven outstanding companies. We intend to maintain this commitment to continuous change and improvement, in particular by strengthening our capacity for innovation. That’s also why we chose “smart forward” as the motto for this year’s annual report: it’s about growing through smart and sustainable decisions to ensure stable, future-proof development.

Porträtfoto: SMS group: Michael Rzepczyk, COO
Michael Rzepcyk,
COO

We have successfully put SMS group on a stable operational footing that will also carry us through a difficult year.

Michael Rzepczyk,
COO

In Mönchengladbach, the foundation stone has just been laid for the new Campus. What motivated SMS group to build this new premises?

Torsten Heising

With the SMS group Campus, we are creating a new central location on the Rhine. The modern building complex will be the base for our employees in the Rhineland. With the Campus, we are reducing the operating costs of currently five locations in the region while also establishing a platform for creativity, exchange and mutual inspiration. This promotes flexible project and team work, including with international colleagues.

Katja Windt

As well as uniting the relevant technologies and interfaces for our areas of future growth, we are bringing together those experts who will always think one step ahead, and they will give the Campus its shared identity. It is precisely these mutually supportive teams that will make our technology, service and digitalization hub unique and successful. We will therefore install the latest digital infrastructure and efficient digital processes at our new headquarters.