Technology group GEA has outlined its new organizational structure, which will be implemented gradually from October 1, 2019 onwards and become effective January 1, 2020. Going forward, GEA will be organized in five divisions with each up to six sub-divisions. These will be based on technologies and be essentially oriented towards existing legal entities of the Group. Each division will be led by a manager directly responsible for the Profit and Loss account (P&L). Central Group functions will be focused on areas featuring the greatest potential for synergies, in particular procurement and production. GEA will continue bundling activities in country organizations, which has proven itself since 2015 and will ensure central points of contact on the ground for customers.
New Executive Board position for procurement, production and logistics
Given the great significance of procurement, production and logistics, GEA will create a new and joint Board level position for these areas. A targeted search to fill the post of this COO position has already been launched. Previously, procurement activities were led separately by business areas or countries. Going forward, they will be bundled in a single global procurement organization. The procurement volume of the entire group amounts to more than EUR 2.5 billion per year.
Executive Board member Martine Snels has decided to not prolong her contract expiring by the end of September 2020 and will leave GEA at her own request at this point of time. The Board will therefore continue to comprise four members going forward. Martine Snels’ current responsibility for GEA’s regions and countries will be split between the remaining Board members following her departure. Responsibility for the five divisions will be split between CEO Stefan Klebert and Board member Steffen Bersch once the new organizational structure has become effective.
“One of the major changes will be the organization of the company along technologies – which is just appropriate for a technology leader. The importance of procurement and production will be reflected in the creation of a new Executive Board position. The division heads will have full accountability for the respective results. Thereby, we are strengthening entrepreneurial responsibility and creating greater transparency. This is the key to increasing our profitability”, commented Stefan Klebert, CEO of GEA Group Aktiengesellschaft.
Five divisions with clear P&L responsibility
The company’s current organizational setup features the two business areas Equipment and Solutions. However, the businesses in these two areas are bundling different technologies with limited potential for synergies. They will be replaced by a clear divisional structure in which the new segments comprise similar or highly complementary technologies. These divisions report the following figures based on fiscal year 2018 (partially pro-forma):
Separation & Flow Technologies
Separation & Flow Technologies comprises all activities related to the manufacturing of process-related components, in particular separators, decanters, valves, pumps and homogenizers.
- Revenue1: c. EUR 1.2bn
- EBITDA before restructuring1/2 : c. EUR 255m (21% margin)
- Return on Capital Employed (ROCE)1/2: c. 33%
- Employees (FTE): c. 4,300
Liquid & Powder Technologies
Liquid & Powder Technologies is a leader in the construction and development of process solutions for the dairy and brewery industry, the foodstuff as well as the chemical industry. Technological focus lies on processing liquids, concentration, drying, processing and treatment of powder as well as emission protection.
- Revenue1: c. EUR 1.6bn
- EBITDA before restructuring1/2: c. EUR 85m (5% margin)
- ROCE1/2: c. 11%
- Employees: c. 5,300
Food & Healthcare Technologies
The offering of the Food & Healthcare Technologies division comprises different competencies in the field of foodstuff and pharma. This includes customer solutions for foodstuff processing and packaging, solutions for the bakery industry, extrusion and milling technology as well as process technology for the pharmaceutical industry.
- Revenue1: c. EUR 1.0bn
- EBITDA before restructuring1/2: c. EUR 80m (8% margin)
- ROCE1/2: c. 1%
- Employees: c. 3,400
Refrigeration Technologies is among the market leaders for industrial cooling technology. The division develops, manufactures and installs technical customer solutions and innovative key components like reciprocating and screw compressors.
- Revenue1: c. EUR 800m
- EBITDA before restructuring1/2: c. EUR 70m (9% margin)
- ROCE1/2: c. 18%
- Employees: c. 3,000
Farm Technologies combines all activities related to integrated customer solutions for profitable dairy production and livestock farming.
- Revenue1: c. EUR 650m
- EBITDA before restructuring1/2: c. EUR 70m (10% margin)
- ROCE1/2: c. 13%
- Employees: c. 2,300
The remaining expenses of the Global Corporate Center after services were charged to the divisions resulted in a charge of approximately EUR 30 million against EBITDA before restructuring in 2018.
Each division will be led by a three-member Division Board consisting of a Division CEO, a Division Chief Service Officer (“CSO”) and a Division CFO. The creation of a CSO function for each division underlines GEA’s commitment to the attractive and stable service business, which contributed about 31% of GEA’s sales in 2018.
Increased financial transparency and improved administration processes
Central steering and administration functions as well as standardized administrative processes will continue to be bundled in a Global Corporate Center (GCC). Moreover, GEA will retain existing structures of the Shared Service Center (SSC) with regards to IT, finance and human resources, while improving this on a continuous basis to ensure smooth administrative processes.
The new organizational structure will significantly increase financial transparency and controllability of GEA. The financial reporting will be simplified and linked to the legal units.
The new organization will be detailed out until the end of September. At beginning of October, GEA will gradually start working in the new organization structure.
GEA will present further details on the Capital Markets Day on September 26, 2019. These will also include benchmarks for the expected future profitability of the divisions, targets for synergies for the global procurement as well as a timeline for the optimization of the production network as well as the realignment of the ERP systems.
1 Revenue, EBITDA before restructuring, ROCE and FTE of all divisions reflect pro-forma figures based on the fiscal year 2018. Division revenue also include intercompany business. This leads to an increase of the revenue consolidation to EUR 400 million comparing to approximately EUR 200 million in the historical Business Area structure (annual report 2018, page 219).
2 EBITDA before restructuring and ROCE follow the current definition of the key performance indicators (annual report 2018, page 28), but after adaption of estimated effects from IFRS 16.