LU-VE's strategy: more operational efficiency to support margins
Strategy. Focus on areas such as China or the Middle East against the EU's economic weakness. New factory in the USA. Share price down over the past year
6' min read
6' min read
On the one hand, expansion, also with new plants, in markets such as China and the Middle East. On the other hand the search for greater operational efficiencies, both in process automation and in the procurement of raw materials. These are among LU-VE's priorities to support the business.
Social Object
.Yes, the business. In terms of product categories, the group divides its revenues into three areas. The first is Heat Exchangers (49.4% of total revenues in 2023). These, in simple terms, consist of a system which, on the one hand - thanks to the passage of fluids through the tubes of a component (e.g. CO2) - transfers, or removes, heat from the environment; and which, on the other hand, constitutes a part of a larger appliance (e.g. refrigerated supermarket counters). The second area is ventilated appliances (46.2% of turnover). This includes heat exchangers combined with fans, which together constitute appliances in their own right. Finally, although residual, there is the third segment: Glass doors for, among other things, refrigerated counters (2.7% of turnover in 2023).
Operational efficiency
.Well, among the priorities - precisely - is the search for greater efficiencies. The group has implemented pilot projects in its factories in Poland and India, which are gradually being extended to the production base. Thus, in the field of Heat Exchangers, the automation of the welding of solutions with dimensions of less than two metres can be mentioned. In the future, the intention is to also operate machines up to four metres. On the other hand, with regard to Ventilated Appliances, next April will see the start of the use of a new system that, with particular types of products, allows for the simplification and greater standardisation of various production stages: from procurement to design to the construction itself. The advantages? Production times can be reduced by up to four weeks. In short: the commitment is significant, so much so that capital expenditure on this front is expected to be around EUR 6 million in 2024 (it had been EUR 3 million in 2023).
But it is not only a question of manufacturing processes. LU-VE aims at the same cost reduction with regard to the supply of raw materials. At present, compared to copper and aluminium - which are the most important commodities used to manufacture the products - procurement in Asia weighs around 20 per cent. The aim is to increase the incidence to around 50%, thus reducing - this is the company's indication - the cost of sales. Those charges, however, should fall - LU-VE also indicates - also thanks to the falling prices of the electronic components that end up in its products.
Internationalisation
So far the theme of efficiency. Another piece in the puzzle of LU-VE's strategy, however, is the continuous geographical diversification of the business. In this respect, it is worth mentioning that a new facility in China is scheduled to come on stream in the second half of 2024. This is an expansion of the production base by approximately 18,000 Mt2 (around 2 million investment), which will enable the group to accelerate sales in the Ventilated Appliances segment. Even with this, the group - which generated around 18 million in sales in the former Middle Kingdom in 2023 - expects turnover in that market to rise by 10-15% in the current financial year. From China to the Middle East. Another area that has recently become relevant is the Arabian Peninsula. In particular: Saudi Arabia and the United Arab Emirates. These two countries are expected to generate a combined turnover of between 15 and 20 million in 2024. This figure, however, does not take into account some large projects for which the group is bidding and which concern the construction of data centres and giga factories. Should even one of these see the participation of LU-VE - the company indicates - the turnover of the area in question could, in the medium term, double.
