The Zurich industrial company Dormakaba’s shares are among the biggest winners on the Swiss stock market this year. Under new leadership, extensive cleanup operations are underway.
### An Unexpected Leadership Change
Till Reuter initially intended to serve as a board member for the Zurich-based security technology company Dormakaba. However, just three months after his initial election in October 2023, his colleagues on the board suggested that he take over the executive management. Reuter replaced Jim-Heng Lee at the beginning of 2024, who had held the position for only two years and had not been very successful.
### Investor Confidence on the Rise
Under the guidance of the 56-year-old German, investors seem to have regained confidence in Dormakaba. Since the beginning of this year, the stock price, which had been mostly declining for several years, has increased by half.
Reuter attributes this to the increasing implementation of announced improvement measures. He stated at an investor conference at the headquarters in Rümlang that the market apparently believes that the company can actually achieve what it has set out to do.
### Challenges and Revival Efforts
Dormakaba is one of the top three providers worldwide in the field of locking technology and electronic access systems. However, in recent years, the company has lost momentum. The revenue in the last fiscal year (ending in June 2024) remained at the same level as in the pre-pandemic years of 2018 and 2019, at 2.8 billion Swiss francs.
On the other hand, the company’s profitability has significantly declined. The operating profit margin (Ebit) was only 5.8% recently, compared to 13.3% in the 2018/19 fiscal year.
### Strategies for Growth and Competing with Industry Leaders
Dormakaba’s main competitors, Assa Abloy and Allegion, have been more successful leveraging their leading market positions. Reuter admitted that Dormakaba had fallen behind in the US market, which is particularly crucial due to the industry consolidation and high margins in America.
To catch up with the competition, the company plans to expand in North America and globally increase revenues by 3 to 5% annually. They aim to focus on the main markets of North America, Europe, and the Asia-Pacific region separately, including production.
### Geopolitical Considerations and Cost Management
Growing geopolitical tensions have forced the company to adjust its strategy. This multi-track approach has increased the emphasis on cost-effective production locations. For example, the company plans to expand manufacturing in Bulgaria at the expense of facilities in Germany.
Additionally, Dormakaba intends to increase the use of robots in production to lower costs. Reuter highlighted the cost difference between robot and human labor, indicating that robots are a more economical option.
### Future Outlook and Challenges
Dormakaba aims to maintain a profitability target of 16 to 18% by the next fiscal year, excluding one-time costs such as severance payments. Analysts warn of significant restructuring costs in the current year and acknowledge ongoing challenges for the company.
Despite the positive trajectory, market observers still harbor some skepticism towards Dormakaba’s management due to past disappointments. The company will need to continue demonstrating its commitment to improvement and growth to earn back investor trust.
### Conclusion
Dormakaba’s journey under new leadership signifies a turning point for the company. With strategic changes and a focus on efficiency and growth, the company aims to regain its competitive edge in the global market. By addressing challenges, implementing cost-effective solutions, and staying committed to their goals, Dormakaba is on a path towards sustainable success.
### FAQ
– How has Dormakaba’s stock performance changed under new leadership?
– What are the key strategies Dormakaba is implementing to compete with industry leaders?
– How is Dormakaba managing geopolitical tensions and cost considerations in its expansion plans?