IR blog: MacGregor's strategy moving forward - interview with Jane Chen
When will the offshore market recover, how is MacGregor planning to return to profitability and what is the direction for years ahead? For many investors and analysts who follow Cargotec, MacGregor's near and long term future is one of the hottest topics on the agenda right now. To provide further insight on the topic, we interviewed Jane Chen, VP, Strategy and Head of China at MacGregor.
One of the most common questions from investors is how MacGregor plans to improve its result. Could you start by sharing the short term plans for 2020 regarding this?
Sure. We have several sources where improvements are expected, but the two most impactful ones - with double digit millions potential - are capitalising on TTS synergies and operational improvements. TTS synergies refer to optimising facilities, roles and positions, as well as cost reduction, supply chain and after sales synergies. Along with the ongoing restructuring in Offshore, we expect these to have a total positive financial impact of approximately 15 million euros in 2020.
Improving our operations entails actions that aim for better customer satisfaction. These are related to, for instance, enhancing on-time deliveries, project management and developing our product engineering footprint in Asia to be closer to Asian customers and to make product development more competitive.
What about other result improvement plans?
In addition, we have a target of expanding our installation base to over 50% of new vessels through providing standard product options, growing our services customer share and commercialising new digital offerings.
What do you see as the greatest risks regarding MacGregor’s result in 2020?
I’ll highlight a few with the most significant potential impact. There is always a threat that the market turns out even weaker than expected, although expectations are not high to begin with (Clarkson estimates 1246 merchant and 115 offshore vessel orders for 2020). Geopolitical shocks, such as Brexit or the US trade war, have not had significant impacts on our business, but this is an area we do keep an eye on. The TTS integration has started on a high note, but naturally it is a huge project where surprises may arise down the line.
Moving to the positives: what are the top opportunities for 2020 to look out for?
I would firstly highlight service growth - especially now that we are able to service the TTS installation base and have a wider service network. Then if you look at some of our key risks like weaker than expected market and challenges in the TTS integration, there is naturally the upside possibility that things could also go better than expected.
MacGregor has been in a tough market situation for quite some time. How do you see the market developing – is this the new normal?
According to Clarkson research, the offshore (oil and gas) market will not recover until 2024 due to overcapacity. In addition to restructuring in this sector, we have responded to the market situation by exploring new opportunities in offshore wind power. This is a growing segment where our existing technology can be applied.
Clarkson has forecast the merchant sector recovery to take place earlier, possibly in 2022. In regards to this being the new normal, I think we need to prepare for the tough market situation not turning around in the near future and adapt to be more successful in this environment.
What about if we look a few years ahead – what are the focus areas of MacGregor’s mid-term strategy?
The most significant opportunities for us during 2020-2022 will be successfully implementing the TTS integration and building on TTS joint ventures, increasing global customer share in Services and Software, capitalising on digital solutions and meeting our customers’ expectation in quality, cost, time and responsiveness.
Based on this, we have identified four must-win-battles to which our organisation is committed to: building on customer centricity, growing in intelligent services, enhancing productivity and engaging and empowering people. I believe that advancing in these areas will help our business recover and develop during the coming years.